2. Energy Mart 2004 1 FUEL OPTIONS FOR POWER SECTOR PLANNING AND LOGISTICS FOR NATURAL GAS Dr. S.C. Sharma PETRONET LNG LIMITED NEW DELHI-INDIA 21 st January, 2004

3. Energy Mart 2004 2 OVERVIEW  INDIA’S ENERGY REQUIREMENT  GAS A PREFERRED FUEL FOR POWER  PLANNING FOR GAS DEVELOPMENT  LNG IMPORTS  PETRONET LNG LIMITED  CREATING GAS TRANSPORTATION  ISSUES AND CHALLENGES  CONCLUSION

4. Energy Mart 2004 3 INDIA’S ENERGY REQUIREMENT

5. Energy Mart 2004 4 WORLD ENERGY OUTLOOK 2025 SHARE OF NATURAL GAS  World energy demand to grow at 1.8%.  Natural Gas consumption to grow at 2.8%.  Gas consumption for developing Asia at 6.1%.  Growing Share of LNG  New technologies to cut costs  Liquefaction  Shipping  Regasification terminal  LNG to compete with piped gas.

6. Energy Mart 2004 5 WORLD ELECTRICITY CONSUMPTION GROWTH (BUs) Region20052010201520202025Avg % change/yr 2001-25 Industrialized countries 830792001010611030119941.7 Dev. Countries4886596271728555100383.5 Dev. Asia310338514697563466043.7 China154519662428298635964.3 India52866280295811043.4 S. Korea2963724434985523.0 Other Dev. Asia7348501024119213523.1 Cent.& S America7829251081130215773.3 Total World14960171441948222009246732.4 Source : International Energy Outlook-2003

7. Energy Mart 2004 6 ENERGY OUTLOOK FOR INDIA  Large Requirement to fuel economic growth  Energy consumption to grow at 3.2%  Highest growth projected for gas sector  Growth of 6.1% for gas demand  Demand of coal to grow at 2.6%  Oil demand growth at 4%  Energy/GDP elasticity at 0.61  Large scope for efficient utilization of energy. MMTOE Source: International Energy Outlook 2003

8. Energy Mart 2004 7 FUELS FOR POWER GENERATION Coal & Natural Gas  Coal production growth at 2% to increase from current 360 MMTPA to 580 MMTPA by 2025.  Natural gas demand growth at 6.1% from current level of 30 BCM to 96 BCM.  Environment protection major driver for large scale gas use. Coal Demand.(MMTOE ) Source: International Energy Outlook 2003 Gas Demand (MMTOE )

9. Energy Mart 2004 8 PLANNING FOR NATURAL GAS  New Exploration Licensing policy  Large discoveries of gas made  Dahej terminal by Dec.2003  LNG terminal by Shell at Hazira  Revival of Dabhol  Kochi LNG terminal  Replacing liquid fuels by gas  CNG in transport sector

10. Energy Mart 2004 9 SOURCING NATURAL GAS TO INDIA nBlocks awarded for exploration nPipeline gas import projects under consideration. nIran-India nBangladesh-India nTurkmenistan-Pakistan-India nMyanmar-India nLNG import at peninsular locations uDahej uCochin uMangalore uHazira uKakinada uEnnore uMangalore Cochin Dahej Assam BAY OF BENGAL ARABIAN SEA. Ennore Kakinada Iran India Pipeline Bdesh India Pipeline Mangalore Hazira

11. Energy Mart 2004 10 CREATING GAS IMPORT INFRASTRUCTURE LNG TerminalCapacity (MMTPA) Dahej5 Dahej Exp5 Kochi2.5 Shell Hazira2.5 Dabhol2.5 Mangalore5.0 Kakinada2.5 Total25 About 22.5 MMTPA of LNG by next 5 - 10 years

12. Energy Mart 2004 11 NATURAL GAS FOR POWER SECTOR –Low gestation period –Lower capital cost compare to coal base plant. –56% guaranteed gas turbine efficiency. –Cheaper peak load power generation. –Committed supply for power plant life cycle. –Utilization of cold energy from LNG to enhance efficiency by 3 to 4% –Natural gas is the most viable source to meet the power demand

13. Energy Mart 2004 12 POWER GENERATION CAPACITY ADDITION(MW) Capacity (MW) Fuel Supply – Major constrain for power capacity addition Power capacity addition target achieved at About 50% level in 8 th & 9 th plan

14. Energy Mart 2004 13 WHY LNG /GAS IMPORTS TO INDIA ?  Large emerging demand  Location advantage  Environment concerns  Imported Crude prices  Lower share of natural gas  Use of liquid fuels by gas based industries  Focus on shifting from LPG/kerosene to gas  Plan to replace 20% liquid fuels by gas  India imports about 90 MMTPA of crude oil, 20% of of liquid products replaced by LNG can result in saving of 1.5 to 2.0 billion US$ on import of crude oil.

15. Energy Mart 2004 14 PETRONET DAHEJ LNG TERMINAL

16. Energy Mart 2004 15 PETRONET LNG LIMITED  Petronet LNG Limited promoted by large Indian NOCs  Developing LNG terminals at coastal locations  Petronet developing LNG terminal with JV partners in Southern India.  Equity structure of Petronet is –50% PSUs –20% GDF and RasGas –30% Banks, FIIs, ADB, IDFC  Facilitate growth of power & fertilizer sector  Dahej terminal designed to optimize facilities to minimize the costs

17. Energy Mart 2004 16  Supplier selected through ICB process – first time in the world.  LNG SPA signed on 31 st July 1999.  Salient features of the SPA Quantity: 7.5 MMTPA (FOB basis) Term : 25 years supply : December2003 (Dahej) / 2006-07 (Kochi) RasGas is building 4.7 MMTPA of liquefaction Train Biggest single LNG train. LNG SUPPLY TIE UP WITH RASGAS

18. Energy Mart 2004 17 DAHEJ LNG TERMINAL 1 s LNG TO INDIA  Project chain in place  project mechanically completed  First ship to arrive on 29 th January  All agreements in place  Initial supply to existing consumers  Replace crude oil & products  Capacity upgradation of Dahej to 10 MMTPA.

19. Energy Mart 2004 18 LNG TANKS & VAPOURAISERS- DAHEJ

20. Energy Mart 2004 19 VIEW OF JETTY-DAHEJ TERMINAL

21. Energy Mart 2004 20 CONTROL ROOM-DAHEJ TERMINAL

22. Energy Mart 2004 21 UNLOADING ARMS & JETTY-DAHEJ

23. Energy Mart 2004 22 LNG UNLOADING ARMS-DAHEJ

24. Energy Mart 2004 23 Gas Transportation System in India Major cross country grid Local state grid Local CNG Grid Private Companies South Gujarat North Gujarat K G Basin Cauvery Basin Assam Mumbai Delhi Gujarat HBJ Pipeline GAS SUPPLY LOGISTICS INDIA

25. Energy Mart 2004 24 INFRASTRUCTURE FOR LNG/GAS TRANSPORTATION  HBJ pipeline up-gradation to accommodate LNG volumes from Dahej LNG terminal  HBJ capacity enhancement by 23 MMSCMD for Dahej LNG.  Pipeline from Dahej to Uran for LNG supply by Dec.2004  Upgrading pipeline network in Gujarat  Extension of HBJ to further northern states  National gas grid planned to connect LNG terminals, gas producing areas. National Gas Grid LNG Demand Areas

26. Energy Mart 2004 25 MARKET FOR LNG

27. Energy Mart 2004 26 MARKETING OF LNG FROM DAHEJ TERMINAL LNG from Dahej project will cater to –Gujarat consumers –HBJ consumers –Uran consumers.  LNG to be used in refineries  LNG for CNG as a transport fuel  LNG for shortfall consumers.

28. Energy Mart 2004 27 MARKETING OF LNG FROM DAHEJ PROJECT  Requirement of LNG for refineries.  Others by GSPL & C2/C3/C4 extraction –IOC using LNG for 3 refineries –BPCL for Mumbai refinery –HPCL for Mumbai refinery –GSPL requested 1 MMTPA LNG allocations. –C2/C3/C4 extraction –Deficit consumers – 27 MMSCMD Target ConsumersTotal Shortfall (MMSCMD) Shortfall in South Gujarat 3.75 Shortfall along HBJ8.25 Naphtha to LNG Switchover (Fertilizer + Power) 8.40 Shortfall in Uran (Mumbai) 7.05 Total Requirement27.05

29. Energy Mart 2004 28 NATURAL GSREQUIREMENT FOR CNG  CNG fastest growing market due to environment concerns  Currently about 160 CNG filling stations  175,000 Vehicles on CNG  Program to implement CNG in other major cities like Kanpur, Lucknow, Ahmedabad, Vadodara, Faridabad & Hyderabad.  Large incentive on cost of fuel using  CNG Conversion potential of 1.47 million vehicles assessed in Mumbai & Delhi itself  20% replacement will require 10 MMTPA of natural gas/LNG.

30. Energy Mart 2004 29 PRICING OF NATURAL GAS  Price of domestic gas currently controlled by Government  Gas price revision under consideration.  Gas prices moving towards market parity.  PLL had made facilities on most competitive terms.  Price most competitive for new power capacity.  Affordable for fertilizer capacity creation.  Very high affordability for liquid fuel based fertilizer plants.  High affordability to replace MS / diesel / naphtha / FO in transport, domestic, fertiliser and other industries.

31. Energy Mart 2004 30 COST OF POWER WITH LNG Fixed charges Rs/kwh Variable Charges Rs/kwh Total cost Rs/kwh Existing Gas based projects LNG Price $/MMBTU 4.0$ / MMBTU New Projects LNG Price 4.25$ / MMBTU Project-Imported Coal-New 0.60* 0.90* 1.25 1.35 1.25 1.95 2.25 2.50 * Average fixed charges for all the gas based projects HBJ/Gujarat *Fixed charges for new gas based project  Natural gas a viable fuel for power etc.  Higher combined cycle efficiencies  Facilitating peak load power  Lower emissions

32. Energy Mart 2004 31 ISSUES ISSUES Dismantling of Administered prices in phases Setting up of Petroleum Regulatory Board Introduction of Open Access principle Framework of Transportation Tariff Unbundling of Transportation and distribution Multiple producer prices Distance based transmission tariff

33. Energy Mart 2004 32 THANKS DISHA TO PROVIDE RIGHT FUEL FOR LARGE SCALE POWER DEVELOPMENT IN INDIA