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17th INTERNATIONAL CONFERENCE & EXHIBITION

ON LIQUEFIED NATURAL GAS (LNG 17)

MEETING DEMAND CHALLENGES OF

AN EMERGING LNG MARKET: INDIA

By: A K Balyan,

Petronet LNG Limited April 17, 2013

17th INTERNATIONAL CONFERENCE & EXHIBITION

ON LIQUEFIED NATURAL GAS (LNG 17)

OVERVIEW

India’s Energy Consumption

Natural Gas Demand Supply Balance

Gas Infrastructure

Role of LNG & Meeting Demand Challenges

Petronet’s Terminal

2

INDIA – A MAJOR ENERGY CONSUMER

India is the 4th largest consumer of energy

in the world after USA, China and Russia

accounting for around 4.6% of world energy

consumption

The total energy requirement is projected to

grow at 6.5% per year between 2012-13

and 2016-17

While the per-capita energy consumption of

India at present is almost half the global

average i.e. 0.8 mtoe vis-a vis 1.8 mtoe,

with the rising income levels along with

growth in Indian economy, the per capita

energy consumption is likely to see a two-

fold increase in next 10 years

3

21.3%

18.5%

5.6% 4.6%

2.5%

2.2% 2.0%

1.8%

1.6%

1.0%

0.9%

0.4%

37.8%

China USA

Russia India

Germany Brazil

France Saudi Arabia

UK Australia

Thailand Kazakhstan

Rest of World

PRIMARY ENERGY CONSUMPTION (mtoe) - WORLD

Source : BP Statistical Review-June 2012

3519

3901 4059

2217

2982

3724

2157

2501

2954

617 662

791

585 627 599

0

84 195

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2000 2005 2011

Coal

Oil

Gas

Hydro

Renewables

Nuclear

(39%)

(24%)

(24%)

(7%) (6%)

(37%)

(28%)

(24%)

(6%) (6%)

(1%)

(33%)

(30%)

(24%)

(6%)

(5%)

(2%)

PRIMARY ENERGY CONSUMPTION (mtoe) - INDIA

Source : BP Statistical Review-June 2012

171 184

296

38

120

162

23

32

55

17 22 30

0

2 9

4 4

7

0

50

100

150

200

250

300

350

2000 2005 2011

Coal

Oil

Gas

Hydro

Renewables

Nuclear

(68%)

(15%)

(9%) (7%)

(1%)

(51%)

(33%)

(9%)

(6%) (1%)

(1%)

(53%)

(29%)

(10%)

(5%)

(2%) (1%)

PRIMARY ENERGY SOURCES PRODUCTION CAGR

(1970-2011)

Source : Statistical Data 2012 , Ministry of Statistics 6

CURRENT GAS DEMAND & DOMESTIC SUPPLY SCENARIO

Source : Vision 2030, Natural Gas Infrastructure in India

101.1 102.5 111.26 120.63

156.7 172.2

211.79 231.42 227 248

272 307

358

442

625

713.5

0

100

200

300

400

500

600

700

800

900

1000

2012-13 2013-14 2014-15 2015-16 2016-17 2019-20 2026-27 2029-30

Demand Domestic Supply

(8.0) (8.8)

(9.6)

(10.9)

(12.7)

(15.7)

(22.2)

(25.3)

(3.6) (3.6) (3.9) (4.3) (5.6)

(6.1) (7.5)

(8.2)

(mmscmd)

(bcf/day)

7

SECTOR WISE PROJECTED GAS DEMAND

Gas Demand (mmscmd)

Source : Vision 2030, Natural Gas Infrastructure in India

0

50

100

150

200

250

300

350

400

2012-13 2013-14 2014-15 2015-16 2016-17 2019-20 2026-27 2029-30

Power

Fertilizer

City Gas

Industrial

Petchem/Refineries/InternalCons.

2012-13 2013-14 2014-15 2015-16 2016-17 2019-20

Power 86 104 122 139 157 202

Fertilizer 60 60 60 72 97 106

City Gas 15 16 17 18 22 36

Industrial 20 20 22 25 27 35

Petchem/Refineries/Internal

Consumption 38 40 42 44 47 54

Sponge Iron/Steel 7 8 8 8 8 10

Total Realistic Demand 227 248 272 307 358 443 8

INDIA – A MAJOR GAS/LNG CONSUMER

13th largest gas consumer – 61 bcm(~165 mmscmd)

5th largest LNG importer– 17 bcm(~46 mmscmd~13 mmtpa)

Economy growing at CAGR of 6-7% with similar growth in Energy Consumption

Share of Natural Gas in Indian Energy basket to increase from 10% to 20% by 2025

Despite increase in domestic gas production- dependency on imported gas to increase substantially

LNG which currently constitutes 30% of natural gas consumption in country to have a share of more than 50% by 2025

9

SNAPSHOT OF OPERATIONAL, UNDER CONSTRUCTION, PLANNED

& POSSIBLE LNG TERMINALS IN INDIA

2013 2016 2020

Existing

Dahej 10.0 15.0 20.0 Petronet LNG

Hazira 5.0 5.0 5.0 Shell & Total

Dabhol 1.2 5.0 5.0 RGPPL (GAIL & NTPC)

TOTAL 16.2 25.0 30.0

Under Construction

Kochi - 5.0 5.0 Petronet LNG

TOTAL - 5.0 5.0

Proposed

Ennore - 5.0 5.0 IOCL

Gangavaram - 5.0 5.0 Petronet LNG

Mundra - 5.0 5.0 Adani - GSPC

TOTAL - 15.0 15.0

Possible

West Coast - - 2.5 Hiranandani

Jamnagar/Kakinada - - 5.0 RIL-BP

East Coast (FSRU) - 2.5 5.0 Shell/GAIL

TOTAL - 2.5 12.5

Grand Total 16.2 44.5 60.5

mmtpa

10

Dahej LNG

Terminal

Kochi LNG

Terminal

Gangavaram LNG

Terminal

INDIA’S GAS INFRASTRUCTURE

Hazira

LNG

Terminal

Dabhol LNG

Terminal

Existing P/L Network : 11900 KMS (283 mmscmd)

Proposed additional P/L Network :

14000 KMS (540 mmscmd) by 2016-17

LNG SOURCING FOR INDIA

To ensure sustained and continuous availability of RLNG, 70-75% to be tied-up on long term basis , balance through mix of short term & spot

Current Long Term contracts:

Petronet’s Contracts

o Petronet-RasGas 7.5 mmtpa supplies commenced in 2004 o Petronet-Exxon Mobil(Gorgon) 1.5 mmtpa supplies to commence in 2015

Other Contracts

o GAIL – Cheniere Energy 3.5 mmtpa supplies likely to commence in 2018 o GAIL-GAZPROM 2.5 mmtpa supplies to commence in 2020/21 o GSPC-BG 1.25 mmtpa with option of 1.25, supplies to commence in 2015

Other Long Term Opportunities

Middle-East : Qatar, Yemen : Shipping advantage for West Coast of India

Australia : Large capacities: favourable for South & Eastern India

Mozambique : Price, Logistically favourable

Russia : Portfolio & price advantage

US : Price Advantage (indexation to HH etc), portfolio

diversification

12

KEY CHALLENGES OF INDIAN MARKET- DOMESTIC

Large appetite with high Price sensitivity and

competition with alternate fuel

Regulated power and fertilizer end use prices

5th largest coal reserves

Large consumption of liquid fuels like Diesel, FO

Development of Infrastructure

LNG terminals

Domestic and transnational pipeline networks

Gas storage

Unbundling of transmission and marketing entities

Consumers behavior

Long term / short term/ Spot – how much to be

tied-up

13

KEY CHALLENGES OF INDIAN MARKET- EXTERNAL

Competition from Global buyers : Japan, Korea, Taiwan- high paying markets New emerging markets like China, Singapore, Thailand

India becoming a fall back market on spot basis at right prices

Large capital requirements for acquisition of

upstream assets and formation of strategic partnership

Multiplicity of index like JCC/Brent/Henry Hub with

no specific index for emerging markets

14

SOURCE: Indianpetro; DGH; Company annual reports; Expert interviews; McKinsey analysis

311

High Potential

demand,

2015

388

Price of $8-

10 mmbtu

Medium Price of $11-

12/ mmbtu

276

Price of $13-

14/ mmbtu

59

171

Price of $16-

17/ mmbtu

Low

25 19

230

2010 year

end

consumption

Gas demand and supply, 2015

mmscmd, At customer gate prices

LARGE DEMAND BUT SENSITIVE TO PRICE

McKinsey Analysis 2010

1 Based on estimated LNG supply of 8 mtpa in 2015 including RasGas (7.5 mtpa) and 1.5 mtpa from Gorgon LNG in 2015

2 1 3 4

Imports

Domestic supplies

Sectors with

demand

▪ Industries

▪ CNG

transport

▪ Refineries

▪ Industries

▪ Power

cogen

▪ Peaking

power

plants

▪ Baseload

power

▪ New fertilizer

plants

Prices at Crude of $ 100/Bbl

15

SOURCE: Vision 2030. PLL analysis

103

53

156

47

156

28

156

55

156

72119 147

202

303

High Potential

demand,

2015

358

Price of

$11-12

mmbtu

Medium Price of $13-

14/ mmbtu

275

Price of $16-

17/ mmbtu

85

143

Price of $19-

20/ mmbtu

Low

40

228

2012 year

end

consumption

Petronet Analysis 2013 Gas demand and supply, 2016

mmscmd, at customer gate prices

LARGE DEMAND BUT SENSITIVE TO PRICE

Petronet Analysis-2013

2 1 3 4

Imports

Domestic supplies

Sectors with

demand

▪ Industries

▪ CNG

transport

▪ Refineries

▪ Industries

▪ New

fertilizer

plants

▪ Peaking

power

plants

▪ Base load

power

▪ Existing

fertiliser plants

Prices at Crude of $ 110/Bbl

16

32

WAY FORWARD

Development of regional LNG/GAS index to cater growing demand of emerging economies/ Indian sub continent

Robust growth in Infrastructure development

LNG Terminal

Gas Storage

Gas Pipelines on national & transnational basis

Participation by global players in India’s infrastructure development

Government support & creation of Sovereign fund to handle stiff global competition enabling acquisition of overseas upstream assets in stiff competitive environment

Consumers mindset in pricing, supply security needs to undergo change : Market driven

17

PETRONET TERMINALS

DAHEJ TERMINAL Commencement of Operations in 2004 Capacity (mmtpa) : 5.0 10.0 15.0 Truck Loading facility can handle 2500 loadings/ yr. LNG Cargoes unloaded: 1000+ cargoes

KOCHI TERMINAL Set up second LNG Terminal of 5.0 mmtpa capacity at Kochi,

State of Kerala. Tied up 1.44 mmtpa LNG from Exxon Mobil’s Gorgon Project Plant Mechanically completed, scheduled commissioning mid

2013 GANGAVARAM Pre Project activities started for the 3rd Terminal of 5 mmtpa

capacity at Gangavaram, State of Andhra Pradesh with estimated investment of US$1 Billion.

18

DAHEJ TERMINAL – FACILITIES

19

Dahej LNG

Terminal

Kochi LNG

Terminal

Gangavaram LNG

Terminal

CATCHMENT REGIONS

THANK YOU

KOCHI LNG TERMINAL

21