Avilability & Pricing of Gas

8/6/2019 Avilability & Pricing of Gas

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Availability & Pricing of Gas

Nitin ZamreHead Oil & Gas


2/26

2

Agenda

Availability of Gas

Impact of regulation and pricing on availability

Sources of Gas Domestic

LNG

Transnational Pipeline

Policy/Regulation

Key issues

way forward


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3

Availability Impact of Regulation and Pricing

Creation of choice of supply for gas buyers

Non discriminatory Access to transportation capacity- critical in

creating choice for both buyers and sellers

Unbundling of transmission & marketing functions Removing conflict

Transportation tariff determination Transparent mechanism

Creation of requisite pipeline infrastructure Access to the markets

Pricing market determined correct pricing signals for investment in

upstream (both domestic as well as imports)


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4

Sources of gas

Domestic

Existing fields

Marginal fields

New offshore - KG Basin & others

LNG

Qatar

Iran

Australia

Others-??

Transnational Pipe Line

Iran

Myanmar

Bangladesh-??


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5

Domestic gas resource - Potential

Source:LTGP-DGH

P rod u c t ion from Ex is ting F ie lds

0

2 0

4 0

6 0

8 0

1 0 0

2 0 0 6 2 0 1 0 2 0 1 5 2 0 2 0

MMcm/day

O N G C P M T G S P C -N iko C a i rn E nergy

Decline in existing

field


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.in Future

Can we produce more domesticgas?


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7

Developed Gas Markets

Source: BP statistical review

Developed

arkets -Rese rves vs Production

0

1000

2000

3000

4000

5000

6000

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Reserves(Bcm)

0

100

200

300

400

500

600

Production(Bcm)

UK

USA

0

2

4

6

8

10

12

14

16

1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

UK

USA

evelo ed mar ets have su orted low R/P ratio over

long eriods


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Exporters

Exporters - Reserves vs Prodcution

0

500

1000

1500

2000

2500

3000

3500

1 98 6 1 98 7 1 98 8 1 98 9 1 99 0 1 99 1 1 99 2 1 99 3 1 99 4 1 99 5 1 99 6 1 99 7 1 99 8 1 99 9 2 00 0 2 00 1 2 00 2 2 00 3 2 00 4

Reserves(Bc

0

10

20

30

40

50

60

70

80

Production(Bc

Malaysia

Indonesia


0

20

40

60

80

100

120

140

1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

Malaysia

Indonesia

Egypt

Netherlands

CanadaExporting countries forced tomaintain high R/Pratios to

support long term contractsespecially LNG


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9

Developing Markets


0

20

40

60

80

100

120

140

1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

Bangladesh

India

Pakistan

Develop ing Marke t - Rese rve s vs Prodcu tion

0

100

200

300

400

500

600

700

800

900

1000

1 98 6 1 98 7 1 98 8 1 98 9 1 99 0 1 99 1 1 99 2 1 99 3 1 99 4 1 99 5 1 99 6 1 99 7 1 99 8 1 99 9 2 00 0 2 00 1 2 00 2 2 00 3 2 00 4

Reserves

(Bcm)

0

5

10

15

20

25

30

35

Production(

Bcm)

India Pakistan B'desh

Sustainedreductionin R/Pratio

Do we need a

more

aggressive

depletion policy

?


10/26


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11

NELPhas shown positive results 20 basins out of26 considered forexploration.

6 basins - Category I basins.

4 basins - Category II basins.

10 other basins -Category III basins.

Spectacularsuccesses during the last 5 years

24 new discoveries 17 by Pvt/JVs

7 by NOCs

Recent activities has resulted in up-gradation

Mahanadi-NEC basin promoted to Cat.II.

Vindhyan basin promoted to Cat.III

Rajasthan & East Coast Deep Water offshore,

to be promoted to Cat. I.NELPVI on the cards


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12

Prospects fornewDiscoveries

- Reserve Accretion

Source:CRISIL Analysis

Could accretion of 100 Bcm/y to 2010 and then 50 Bcm/y to 2020 be expected??

0

1 0 0 0

2 0 0 0

3 0 0 0

4 0 0 0

2 0 0 4 2 0 0 5 2 0 1 0 2 0 2 0

U ltim a te ecoverab le ese rves

Poss ib le ese rves

Specu la tive ese rves

In -P lace as rese rves

BCM


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Marginal Gas Fields

ONGC has 96 marginal fields amounting to 203.6MMT of in-place oiland 120.5 BCMof gas

8 per cent of the total gas in-place fields operated by ONGC

On the offshore front a total number of53 fields of Western OffshoreBasin are being considered for monetization

11 fields are being considered for in-house development by ONGC .

Out of the remaining fields, 19 fields with an expected reserve of29BCMhave been decided to be offered under service contracts

Need for a policy for development of marginal fields


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14

Asia - LNG Price Volatility

Asia LNG prices

0

1

2

3

4

5

6

7

8

1998 1999 2000 2001 2002 2003 2004 2005

$/MMBtu

Korea Japan Taiwan India

Source: Gasstrategiesonline.com


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15

US - LNG Price Volatility

US LNG and Henry Hub Prices

0

1

2

3

4

5

6

7

8

9

10

1998 1999 2000 2001 2002 2003 2004 2005

$/MMBtu

US Henry hub



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16

European - LNG Price Volatility

European LNG Prices

0

1

2

3

4

5

6

7

8

1998 1999 2000 2001 2002 2003 2004 2005

$/MMBtu

Belgium(Algeria) Turkey(Algeria) Turkey(Nigeria) Spain(Trinidad) Spain(Algeria) France(Algeria)



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17

LNG Liquefaction Capacity Likely?

0

100

200

300

400

500

600

2005 2010 2015 2020 2025

Al

i

t Li

t

i

l

i

i

i

i i

Angol

nezue l

uss i

! est " Aus t

li

B

une i

Indonesi

M

l

si

uss i

st # SA Peru Abu D$

bi

O %

n Q

t

r Iran Yemen

M PA



18/26

18

LNG Regasification Capacity - Forecast

0

100

200

300

400

500

600

700

800

2005 2010 2015

MTPA


India to import around 20MTPA??

Will Indian market be attractive forLNG

Suppliers?


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19

Transnational Pipeline Imports Transnational pipelines

Gas from Iran-possible routes

Pipeline through Pakistan-Political talks ?

Geo Political Challenges Gas from Myanmar

Land Pipeline to West Bengal

Concerns about reserves for domestic markets

Under-Sea pipeline

Huge

Uncertainties


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20

Gas at what price?GasPrices

4.84

4.023.67 3.5

2.793.27

4.013.67

4.26

3.514.02

4.84

0

2

4

6

FO Pa rity (IPP @

Crude - $35/BBl)

FO Pa rity (EPP @

Crude - $35/BBl)

P MT Ir an- LNG MOU P et rone t LNG P et rona s - NTP C

Bid

$/MMBtu

Basic Pri ce (CIF) Regasification Cost Duties and Taxes .

Source:CRISIL AnalysisGovernment has successfully not put any price

control on new gas!


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21

LNG to remain the marginal supplier

Gas to Gas competition unlikely to emerge by 2010

LN

G would continue to dictate the prices in the market?

Prices would continue to be driven by:

Alternate fuel parity

Affordability of the end use sectors

Netbacks from otherLNG markets


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Key Issues Regulatory issues

What is the depletion policy? Can it help extract more domestic

reserves?

Can we bring gas from our marginal fields to the market? Will the requisite transportation network be set up? Who will set

up common infrastructure? clear rules needed

Will the supplier have non-discriminatory access to

infrastructure? needed urgently - increase choices

Separation of marketing & pipeline businesses remove

conflict

Can the additional supply obtain market prices? - clarity needed

on pricing for additional volumes from existing fields

Clarity on powers to the regulator - will he regulate prices?


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Key Issues Market issues

Clear long term policies for consuming sectors power,

fertilizer

Price discovery mechanisms through long term contractsonly?

Long term sustainability - what are the Affordable prices for

consumers?

Financial issues

Credit risk Gas sector credit quality only as good asconsuming sectors

Concerns over credit quality of power, fertilizer sectors

Stability of regulation how do lenders get comfort?


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Way forward

Regulatory Issues - Government to

Expedite Petroleum Regulatory Bill

Bring clarity in powers of regulator and define rules of the game

Increase choices for buyers & sellers Markets Issues Government to

Expedite reforms in consuming sectors

Clearly define long term policies in gas as well as consuming

sectors

Financial Issues

Implementation of reforms to improve credit quality in consuming

sectors

Stability of regulatory provisions/policies for long term call on

investments


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Thank You

Contact Details:

Phone: +91 (22) 56441801- 09

Fax: +91 (22) 56441830

www.crisil.com


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26

Gas prices

0

1

2

3

4

5

6

7

1 98 4 1 98 5 1 98 6 1 98 7 1 98 8 1 98 9 1 99 0 1 99 1 1 99 2 1 99 3 1 99 4 1 99 5 1 99 6 1 99 7 1 99 8 1 99 9 2 00 0 2 00 1 2 00 2 2 00 3 2 00 4

US$/mmbtu

Japan Eu&

opean Union'

if UK USA Canada

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