india lng challenges
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India LNG ChallengesTRANSCRIPT
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2013 Platts, McGraw Hill Financial. All rights reserved.
India LNG; Challenges to and Opportunities for Growth
Stephanie Wilson, Managing Editor, Asia LNG September 02, 2013
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Agenda
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India Opportunities for Gas Growth. Current imports Scope for growth
India Domestic and International Challenges
Price Sensitivity Development of Infrastructure Competing fuels
Spot LNG Market Update
2013; A New Price Curve Emerging
DES West India Methodology and Specification Explained
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India;
Opportunities for Gas Growth
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India; Opportunities for Gas Growth
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Fifth largest LNG importer in the world. Fourth largest energy consumer. First LNG in 2004 from Qatar.
Nearly 25% of the 1.24 billion population does not have access to electricity IEA 2012 estimates
Focus on securing energy sources to meet the needs of its growing economy.
Working towards energy independence by 2030; Increased production Unconventional resources (CBM and shale), Foreign acquisitions by domestic Indian companies Reduced subsidies.
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India; Opportunities for Gas Growth
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Alongside China, India will be the engine driving LNG import demand in Asia through 2035
LNG imports forecast to almost five-fold to 234m cm/day (62m mt/year, currently at 50m cm/day) - Finance Minister P Chidambaram
Power and fertilizer sector make up majority of natural gas demand priority sectors
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India Power Mix (GW)
Coal, 101
Natural Gas, 28.8
Nuclear, 4.8 Hydro, 39.3
2012
Source: India Ministry of Power, World Nuclear Association, BENTEK
Total Installed Capacity: 180.4 GW
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7 Source: GIIGNL & BP Statistical Review
Year GIIGNL y-o-y change
(BCM) (%) 2005 5.69 n/a 2006 7.693 35.2 2007 9.789 27.4 2008 10.326 5.3 2009 11.536 11.91 2010 11.19 -3.2 2011 15.64 37.4 2012 16.78 7.7 0
10
20
30
40
50
60
70
Bcm
of G
as
Gas consumptionDomestic productionimportsTotal gas available
Indian demand vs. domestic production
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India: LNG Demand Forecast vs. Contract Evolution
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0
5
10
15
20
25
30
35
40
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Long
-ter
m C
ontr
acts
(MTP
A)
Australia Portfolio QatarRussia U.S.A. Indian DemandForecast Demand
Source: BENTEK
10.8 mtpa of un-contracted demand in 2020
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India Power Mix (GW) Forecast
Coal, 181 Natural Gas, 47.4
Nuclear, 14.6 Hydro, 39.3
2017
Total Installed Capacity: 282.4 GW
Gas generation capacity grows 18.6 GW (93%) from 180.4GW in 2012 to 282.4GW
Source: India Ministry of Power, World Nuclear Association, BENTEK
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Existing Terminals
Hazira
Dahej
Dabhol
Kochi
FACILITY ONLINE CAPACITY OPERATOR SUPPLY SOURCE Dahej 2004 11 mtpa Petronet LNG Qatar
Hazira 2005 2.5 mtpa Shell India
Australia Malaysia Oman Qatar
Dabhol 2012 5 mtpa Ratnagiri Gas and Power Nigeria
Kochi 2013 5 mtpa Petronet LNG Qatar Source: Platts Terminal Tracker Asia, BENTEK
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Asian Terminal Capacity
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Source: Platts Terminal Tracker Asia, BENTEK
0
20
40
60
80
100
120
140
160
180
200
Japan Korea China India
2012 imports
Planned/Proposed
UnderConstruction
Current importcapacity
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Planned and Proposed Terminals
Hazira
Dahej
Dabhol
Kochi
Gangavaram LNG
Ennore
FACILITY ONLINE CAPACITY OPERATOR SUPPLY SOURCE Dahej 2004 5 mtpa Petronet LNG Qatar
Hazira 2005 2.5 mtpa Shell India
Australia Malaysia Oman Qatar
Dabhol 2012 5 mtpa Ratnagiri Gas and Power Nigeria
Kochi 2013 5 mtpa Petronet LNG Qatar Ennore unknown 5 mtpa Indian Oil Corp TBC Mundra 2016 5 mpta Gujarat state Petroleum Gangavaram LNG 2017 5 mtpa Petronet LNG TBC
Mundra
Source: Platts Terminal Tracker Asia, BENTEK
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India;
Domestic and International Challenges
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India: LNG Demand vs. Prices
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$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
$18.00
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
$/M
MBt
u
LNG
Impo
rts (
met
ric to
ns)
Dabhol Dahej HaziraKochi Regasification Capacity LNG DES West India
Source: BENTEK & Platts data
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Key Challenges of Indian Market - Domestic
Large appetite for gas but high price sensitivity. Administered prices continue to hinder development of gas industry.
The Rangarajan Committee Formula
The Committee proposes a formula based on average netback price of Indian term LNG imports, netbacks to Japanese JCC LNG price and the average gas price at HH and NBP.
Effective from 01 April 2014, the formula will be revised each quarter and the calculation will be based on the average price of the 4 quarters with a lag of 1 quarter; e.g; the price in April-July 2014 will take into account the average price for the last 4 quarters in 2013
ONGC; increase of $1/MMBtu on $4.20/MMBtu could add Rupees 20-21 billion post tax profit.
Oil India; increase of $1/MMBtu on $4.20/MMBtu could add Rupees 4 billion net profit
Already a public Interest Litigation (PIL) has filed by opposition politician. Response of Government and Reliance Industries is expected by 6th Sept.
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Key Challenges of Indian Market - Domestic
Development of infrastructure needed;
LNG terminals
Domestic and transnational pipeline networks
Gas storage
Unbundling of transmission and marketing entities
Competition with alternative fuels and no regulation on burning
5th largest coal reserves in the world
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Key Challenges of Indian Market - International
Competition from global buyers Japan, South Korea, Taiwan high priced markets New, emerging markets Singapore, Thailand,
Malaysia
China key competitor going forward
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DES West India vs. JKM
Industry news, analysis Market Reports 0
0.5
1
1.5
2
2.5
3
3.5
$/M
MBt
u
Assessment Date
Platts JKM - DES West India Spread
5
10
15
20
25
30
35
40
$/M
MBt
u
Platts JKM VS DES West India Platts DES West India Platts JKM
Source: Platts
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Spot LNG;
2013 A New Price Curve Emerging
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Global LNG: Imports in 2012
20 Source: GIIGNL
236 million mt
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H1 2013 vs. H2 2012 Imports
Industry news, analysis Market Reports
Source: BENTEK
0
1000000
2000000
3000000
4000000
5000000
6000000
Brunei Qatar Yemen Algeria Egypt France USA Nigeria
MT
H1 Indian Imports by Supply Source
H1 2012 Imports H1 2013 Imports
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H1 2013 vs. H2 2012 Imports
Industry news, analysis Market Reports
Source: BENTEK
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
Dahej Hazira Dabhol
H1 2013 imports by terminal
Brunei
France
Algeria
Egypt
Yemen
Nigeria
Qatar
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Platts JKM Monthly Average
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2
4
6
8
10
12
14
16
18
20
22
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
$/M
MBt
u
2009
2010
2011
2012
2013
Source: Platts
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Summer in North Asia
Strips deals and short/mid-term LNG contracts reduced spot demand
UQT (Upward Quantity Tolerance) clauses exercised in existing long-term contracts
Nuke outages in Japan and South Korea
Higher-than-average summer temperatures
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Platts JKM VS DES West India
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13
13.5
14
14.5
15
15.5
16
16.5
17
4/16/2013 5/16/2013 6/16/2013 7/16/2013 8/16/2013
$/M
MBt
u
Assessment Date
Platts DES West India Platts JKM
Summer months in North Asia
Jul Jun Aug Sep
Source: Platts
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Coming out of summer in North Asia
Zero nuke power generation in Japan by September
Winter strip negotiations with Atlantic players already on-going
New producer Angola LNG
New trader Koch Supply & Trading
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Key Takeaways
Continues to rely on LNG imports
More investment in infrastructure is required for both domestic and imported gas (both LNG and pipeline).
Proposed NBP/HH/JCC LNG linkage could use review.
Must sign more term contracts if it is to lock in supplies for the end of the decade.
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DES West India;
Methodology and Specification Explained
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Platts LNG assessments cont.
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Phase 1: DES West India launched
January 8 2010. net forward from FOB ME Phase 2: DES West India stand-alone
assessment launched August 1 2011 same month as current JKM and based on MOC methodology.
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How accurate is JKM?
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Quantitative evaluation of historical JKM vs. actual Japanese customs data
Source: Platts
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Thank you
Stephanie Wilson, [email protected]
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Slide Number 1AgendaIndia;India; Opportunities for Gas GrowthIndia; Opportunities for Gas GrowthSlide Number 6Slide Number 7India: LNG Demand Forecast vs. Contract Evolution India Power Mix (GW) ForecastExisting Terminals Asian Terminal CapacityPlanned and Proposed Terminals India;India: LNG Demand vs. PricesKey Challenges of Indian Market - DomesticKey Challenges of Indian Market - DomesticKey Challenges of Indian Market - InternationalDES West India vs. JKMSpot LNG;Global LNG: Imports in 2012H1 2013 vs. H2 2012 ImportsH1 2013 vs. H2 2012 ImportsPlatts JKM Monthly AverageSummer in North AsiaPlatts JKM VS DES West IndiaComing out of summer in North AsiaKey TakeawaysDES West India;Platts LNG assessments cont.How accurate is JKM?Thank you