indian gas scenario: emerging business opportunities and
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22nd World Gas Conference Tokyo 2003
KEYNOTE ADDRESS (KA I-7)
Indian Gas Scenario: Emerging Business Opportunities and Environmental Concerns
Mr. Proshanto Banerjee
Chairman and Managing Director, Gas Authority of India
India
June 5, 2003
1
“Indian Gas Scenario: Emerging Business Opportunities and Environmental Concerns”
22nd World Gas Conference, Tokyo 2003‘Catalysing an Eco-Responsible Future’
PROSHANTO BANERJEEChairman and Managing Director
GAIL (India) Limited
GAIL- A Profile
Global Energy scenario
Indian Natural Gas Scenario
Emerging Business Opportunities
Towards An Eco-Responsible Future
CONTENTS
2
Gas Market Share 92 % - Market Leader
Turnover US$ 2.5 Billion (FY 2002-03)
8th among all Indian Companies*
Net Profit US$ 334 Million (FY 2002-03)
6th among all Indian companies*
Market Capitalisation US$ 1.3 Billion
6th among Oil & Gas companies in India*
ROIC (2001-02) 16.2%
2nd Highest Among Global Gas Utilities**
INDIA’S NO. 1 GAS COMPANY
* As per Economic Times ET 500, May 2003 ** As Per Platt’s Global Energy Business Review 2001-02
CUSTOMERS
FERTILIZERS
POWER
INDUSTRIAL
DOMESTIC
TRANSPORT
CUSTOMERS
FERTILIZERS
POWER
INDUSTRIAL
DOMESTIC
TRANSPORT
GAS SUPPLY
DOMESTIC
IMPORTS
GAS SUPPLY
DOMESTIC
IMPORTS
TRUNK PIPELINESTRUNK
PIPELINES PROCESSINGPROCESSING
VALUE ADDED PRODUCTS /
SERVICES
VALUE ADDED PRODUCTS /
SERVICES
PRODUCTION AND MARKETING OF
PETROCHEMICALS
PRODUCTION AND MARKETING OF
PETROCHEMICALS
LPG & ALLIED LPG & ALLIED
LPG PIPELINES
LPG PIPELINES
DISTRIBUTION
PIPELINES
DISTRIBUTION
PIPELINES
AN INTEGRATED GAS COMPANY
TELECOMTELECOM
3
178.12164.3Natural Gas
1899.29124.8Total Primary Energy2001
10.4988.1Natural Gas
463.25206.9Total Primary Energy1971
Developing Asia*
Total WorldConsumption in MMTOE1
4.5 %2.8 %Natural Gas
3.0 %1.9 %Total Primary Energy2025
Developing Asia*
Total World
Avg. Annual % Change2
2001-2025
* Developing Asia includes India, China, S Korea, Thailand, Malaysia, Indonesia, Taiwan and othersSource: 1 BP Statistical review Of World Energy, June 2002
2 EIA Energy Outlook, 2003
GLOBAL ENERGY SCENARIOFrom 1971 - 2001
• Share of Natural Gas in total primary energy basket has grown from 18.9% to 23.7%
• Share of Natural Gas in total primary energy in Developing Asia has grown from 2.2% to 9.4%
Going Forward
• Developing Asia projected to be the fastest growing energy consuming region with significant contribution of Natural Gas to drive the growth
GLOBAL ENERGY SCENARIONATURAL GAS OUTLOOK
Asia share of World Energy Demand to increase
Growing Gas Reserves WorldwideIn 2001- Gas reserves exceeded Oil Reserves by 5% as per IEA study
Inter Regional Gas Trade Flows.(Cross Border)-IEA study2000 : 16% of world Gas
Consumption2030 : 28% of world Gas
Consumption
Expanding Pipeline Network and new LNG Projects will promote Regional and Global market Integration.
Power Sector to drive Global Gas Consumption.
Europe and Asia would emerge as major importers.
Emergence of the Natural Gas Era
Major Importing Countries(Europe,China,Japan,India,South Korea)
Major Supplying Countries(Africa, Middle East, Former Soviet Union, Malaysia, Indonesia)
4
INDIA – A FAST GROWING GAS/ENERGY CONSUMER
Source: (1) BP Global Statistical Review of World Energy, June 2002 (2) International Gas Union Statistics
Gas Vs Energy Growth
INDIA – A FAST GROWING GAS/ENERGY CONSUMER
India – Poised To Climb The Energy Ladder Quickly, Cleanly And Efficiently
Challenges in Energy Sector - India• Ensure supply security
• Enhance self sufficiency
• Diversify traditional energy sources
• Promote clean & efficient energy use
for sustained growth
• Reform & Restructure energy market
to attract Private & foreign investments
• Expand regional trade
•Align with global markets
Gas Vs Energy Growth
Source: (1) BP Global Statistical Review of World Energy, June 2002 (2) International Gas Union Statistics
5
INDIAN NATURAL GAS SCENARIO:GROWTH OVER THE YEARS
Gas in Energy Basket(MMTOE)
0
50
100
150
200
250
300
1980 1985 1990 1995 2001
Oil CoalHydro NuclearGas
1.1%
2.5%
5.8%
7.0%
7.6%
Gas as a % of total energy
Natural Gas Projected To Be The Fastest Growing Energy SourceImproving Its Share From Current 8% To 20% By 2025*
Source:BP Global Statistical Review of World Energy , June 2002
Challenges in Gas Sector - India
• Organize competitive supply– Domestic/ Cross Border
• Price elasticity & demand build-up• Optimal infrastructure development• Reforms in electricity markets• Policy interventions - Planned
deregulation to provide growththrust
• Address environmental concerns
314.8
252.4
193.3
136.9
102.9
* Hydrocarbon Vision 2025
INDIAN NATURAL GAS SCENARIO:CURRENT STATUS
India – Emerging as a multi-source and multi-market destination
Administered pricing mechanism paving way for market determined pricing era
Gas Price
Along East Coast, Southern Regions
** 2800 km Hazira-Bijaipur-Jagdishpur Trunk pipeline
Emerging Supply-Demand Centers
*Prior to deep-sea finds in KG basin in 2002
Western-Northern Corridor Along HBJ**Key Demand CentersAlong Western OffshoreMajor Producing Fields
LNG Imports to commence from 2004Gas Imports68 MMSCMDGas Supply120 MMSCMD Current Demand25 YrsR/P Ratio*29.7 BCM Gas Production (2001-02)763 BCM Gas Reserves (2001-02)
6
Nuclear
Hydel
Naphtha
Natural Gas
Wind
Coal/lignite
Others
ExternalAmmoniaFuel Oil
Naphtha
Natural Gas
Source: MoPNG, Cris-Infac, GAIL
50%
5%
19%
34%
16%
8%
26%40%
2%Power
Fertiliser
Industries
Retail
Others
1985-86
2002-03
49 %
30 %
09 %
10 %
02 %
64 %
01 %
07 %
02 %
23 %
02 %
Power
Power & Fertiliser sector to be the ‘Key anchor market’ with Industries as ‘Developing market’ and Retail Gas (CNG/City Gas/Auto LPG) Emerging Growth market .
Industries include Sponge Iron, PetrochemicalsRetail include CNG, City gas, Commercial, Tea Plantation users Others include LPG shrinkage, Captive consumption
To go up to15% by 2030(IEA Study)
Fertiliser
INDIAN NATURAL GAS SCENARIO:END USAGE TREND
231185 166
313263
216
050
100150200250300350
2006-07 2011-12
HV-2025 Optimistic ADB Gas Master PlanHV-2025 Conservative
MMSCMDPotential Demand Scenarios
India – Potential Growth Hub In Natural Gas Sector In The Region
INDIAN NATURAL GAS SCENARIO:MARKET POTENTIAL
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Domestic Gas Sourcing• New Exploration Licensing Policy (NELP) I, II, III
– Contracts for 70 blocks signed covering a total area of 0.71 million sq. Km
– Estimated investment of US $ 3 Billion which will go up with more discoveries
– 9 discoveries within three years– Initial estimates of reserves > 300 MMTOE oil & oil equivalent gas– World class gas discovery in year 2002 (~7TCF) in KG basin– India established commercially as the latest global destination for
deep water areas• NELP IV
– 24 exploration blocks on offer (11 onshore, 12 deep water, 1 shallow water)
Upstream Reforms- Emergence of New Hydrocarbon Provinces
INDIAN NATURAL GAS SCENARIO:EMERGING SUPPLY SOURCES
Gas Imports• LNG Terminals (Along West Coast)
– Petronet LNG, Dahej – 5 MMTPA– Shell Hazira – 3.5 MMTPA– Dabhol LNG – 5 MMTPA
• Cross Border Pipeline (From East & West)– Iran– Myanmar– Bangladesh
INDIAN NATURAL GAS SCENARIO:EMERGING SUPPLY SOURCES
India – Strategically Located With Favorable Geographic Disposition
8
INDIAN NATURAL GAS SCENARIO:INFRASTRUCTURE CONNECTING DEMAND & SUPPLY CENTERS
National Gas Grid – Clean Energy Corridor
INDIAN NATURAL GAS SCENARIO:KEY FACTORS
Deregulation• Progressive decontrol of gas prices by government• Setting up of Downstream Petroleum Regulatory Board• Introduction of Open Access principle• Framework of Transportation Tariff determination• Unbundling of Transportation and Marketing
Gas Price / Transportation Tariff• Gas To Gas competition: Innovative Pricing Contracts• Concept of pooled pricing • Multiple producer prices and multiple consumer prices for new/regional
markets• Postalised Vs Distance based transmission tariff – Zonal pricing for
high pressure grid and postalised tariff within zone• Tariff methodology moving towards international practices –
From DCF to Cost of services methodology
9
Globalisation• Enhanced Foreign investment in indigenous E&P.• Equity gas from foreign acreage.• Integrated participation across LNG chain.• Regionalisation – Emergence of Pan-Asian pipeline projects reaching
Indian gas market.• Cross -border gas trades to drive price convergence in gas across
regions.
Technology• Increased monetisation of reserves due to advances in deep drilling• Enhanced viability to bring gas due to advances in logistics – LNG,
Deep sea pipelines, CNG by ship, VOTRANS CNG, Coselle, GTL etc• Development of new markets due to developments in end user side –
CCGT Power Generation, Distributed power, Direct gas use in homeappliances, Air conditioners etc
INDIAN NATURAL GAS SCENARIO:KEY FACTORS
Concern For Environment
• Share of Gas to grow in the fuel/feedstock markets across various
segments – Power, Fertiliser, Industries, Transport and Homes due to
sustained thrust from judiciary and policies.
• Emerging carbon trading to provide additional incentive for increased gas
use.
INDIAN NATURAL GAS SCENARIO:KEY FACTORS
10
EMERGING BUSINESS OPPORTUNITIES
1. Gas Sourcing ( Exploration & Production / LNG Supply)• Strategic long term investments
• Alliances and Joint Ventures
• Surveys, Drilling, Design Engineering, Consultation, Operations & Maintenance
• Licensing/Technology partnerships
• Receiving LNG Terminal/Regasification
2. Gas supply Infrastructure• National Gas Grid being planned -7000 km of pipelines
linking multiple sources and multiple markets – Investment : US$ 4.2 billion
• Pipeline supply / laying
• Design and Development
Business Investments Financial Services & Contracts
EMERGING BUSINESS OPPORTUNITIES
11
3. End Use Sector
• Power generation : Capacity additions of 6000 – 7000 MW/year is likely
• Investment opportunities in Gas-Power convergence (Generation, Transmission and Distribution)
• Fertiliser: Capacity expansions
• Other industrial users of gas
4. Gas Retailing (CNG / Auto LPG/Residential)
• Distribution pipelines
• Creation of dispensing stations
• CNG kit / Automobile sector investments
EMERGING BUSINESS OPPORTUNITIESBusiness Investments Financial Services & Contracts
• Long term and short term funding of investments (domestic and foreign currencies)
• Consortium Lending and Financial Advisory services
• Financial Appraisal / Feasibility studies
• M & As – Due Diligence / Valuation studies
EMERGING BUSINESS OPPORTUNITIESBusiness Investments Financial Services & Contracts
12
• Contract consultancy and negotiation
• Legal, Insurance, Advisory and Risk Management Services
• Market Studies
• Training
• Technology partnerships
EMERGING BUSINESS OPPORTUNITIESBusiness Investments Financial Services & Contracts
TOWARDS AN ECO-RESPONSIBLE FUTURE
13
CONCERN FOR ENVIRONMENT
1. Air Pollution is the Key threat to human health
2. Alarming increase in levels of Air Pollution primarily because of Vehicular pollution
3. Alternate Fuels for Vehicles provides a solution; But requires external push and incentives for mass implementation
• Gas Supply to Taj Trapezium:
• To Mathura Refinery
• To Foundries in Agra
• To glass industries in Ferozabad
• CNG for Metros:
• Started in Mumbai (MGL) and Delhi (IGL)
• Bolstered by Judiciary directives (2000) to convert all public road vehicles to CNG in Delhi
• Models to be replicated in most major urban centers
• Auto LPG
• Motor Vehicles Act amended in 2001 to include Auto-LPG as vehicle fuel
Rationale Initiatives to promote Gas/alternate fuels
Environmental concern is a key driving force to promote the usage of alternate fuels for vehicles including natural gas
Per Capita CO2 emission :India: 0.91 MT USA:8.88 MT Qatar: 63.11 MT World Avg: 3.88 MT
70%
25%
5%
Transport Industries Others
AIR POLLUTION IN METROS IN INDIA
Source - CPCB, Delhi
14
INDIA: CNG EXPERIENCE
Successful Introduction of CNG in buses and cabs in New Delhi, Mumbai
Significant reduction in air pollution in Industrial, Residential and Commercial areas- 30% to 99% reduction in Level of pollutants like So2, Nox,
RSPM,SPM and CO. (Source : NEERI, Mumbai /GAIL)Number of registered vehicles in India :11.7 million (Large potential)
(Buses, Taxis, Private Cars, Three Wheelers)Potential in Mumbai/ Delhi alone :1.47 million (Vehicles)
Replication to other cities on the anvil
India ideally placed to share experience with other countries to launch CNG initiatives
CNG StationsNumber of vehicles on CNGCity
4677000Mumbai:10678500Delhi:
ECO-RESPONSIBLE FUTURE:GAIL’S ROLE
• Project Blue Sky• CNG To The Cities Of Lucknow, Agra, Faridabad, Kanpur & Pune
• Project Cost Of ~ US $ 115 Million
• Bhagyanagar Gas Limited• CNG & Auto LPG For The State Of Andhra Pradesh
• Gas value Chain• Expand retail gas operations – Commercial/Small industries, City gas
in major cities across India along with CNG plans• Prevention of denudation of forests by responsible use of plastics
• Global Plans• MoU with IFCO, Iran for CNG Infrastructure• Alliance with Shell for Town Gas and CNG Projects In Egypt• Carried out ADB funded Feasibility Study for CNG In Bangladesh• CNG in Turkey
15
India is emerging as a land of enormous business opportunities in the natural gas sector.
India is committed to creating an eco-responsible future by expanding natural gas usage.
CONCLUSION
Let us work together towards building an eco-responsible business
THANK YOU
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