Date post: | 30-Dec-2015 |
Category: |
Documents |
Upload: | julius-banks |
View: | 216 times |
Download: | 2 times |
BG GroupDelivering The Benefits of Natural GasInfrastructure Challenges
Dr Anthony BarkerDirector – Downstream Business Development, BG India
2
Legal Notice
This presentation includes forward-looking statements. Such statements are only predictions and actual events or results may differ materially. For a discussion of important factors which could cause actual results to differ from the forward-looking statements, please refer to BG Group plc’s Annual Report and Accounts 2005.
Nothing in this presentation constitutes or shall be taken to constitute an offer, invitation or inducement to any person to invest in BG Group plc and no reliance should be placed on the information contained in it in connection with any investment decision or for any other reason. BG Group plc and its affiliates do not make any representation or warranty, express or implied, with respect to the completeness, adequacy or accuracy of the information contained in this presentation
3
Content
• Demand and supply of Natural Gas
• Existing and proposed infrastructure
• The Natural Gas market in South India
• Bulk customer to anchor load
• Natural Gas demand in power, fertiliser and steel sectors
• Distributed generation benefits
• Investment levels
• Direct marketing
• The regulatory environment
4
Demand of Natural Gas Share of segments
Power and fertiliser sectors to continue to be the biggest consumers of Natural GasSource: GAIL Infraline reference book 2006
Demand 2006
Power 36%
Spong Iron 5%
CGD 7%
Others 27%
Fertiliser 25%
Spong Iron4%
CGD6%
Others18%
Fertiliser22%
Power50%
Demand 2012
5
Demand of Natural Gas
Primary commercial resources
% Share of Primary Commercial Resources (2003-04)
8.87%
51.07%
36.39%
2.14%1.53%
Hydro
Nuclear
Coal
Oil
Natural Gas
Tremendous scope for growth of Natural Gas consumption
% Share of Primary Commercial Resources (2031-32)
2.36% 6.31%
44.76%
22.71%
23.86%
Hydro
Nuclear
Coal
Oil
Natural Gas
Share of Natural Gas as a primary commercial resource to grow from 9% in 2004 to 23% by 2032Source: Draft Report on Integrated Energy Policy
6Supply will be less than demand
South India – 26 % share by 2012
North, West India 68% share by 2012
East India – 6% share by 2012
Source: GAIL Infraline reference book 2006
Demand and Supply of Natural Gas Emerging demand and supply centres
Total reserves 985 bcm
Tripura18 bcm
Petronet DahejShell Hazira
Dabhol
Krishna Godavri380 bcm
Bombay Offshore380 bcm
Gujarat82 bcm
Rajasthan4.5 bcm
Source: UBS
LNG ~90 MMSCMD
LNG Terminal
7
Mangalore
Hyderabad
Kochi
Chennai
Infrastructure a critical issue in developing regional markets
Demand(mmscmd)
2006South India
2012South India
Total ~44 ~85
• With availability of KG supply and consumer willingness to pay, South India is poised to become an emerging hub for Natural Gas demand
• Areas for Natural Gas demand – Metro city gas distribution (CGD)
– Bangalore, Chennai and Hyderabad
– Non-metro CGD– Large industrial areas and
special economic zones (SEZs)
– Anchor loads like power, fertiliser and steel to be the bulk of market share
Demand in South India to almost double by 2012
Demand and Supply of Natural Gas Potential markets in South India
8
• Infrastructure to connect demand centers with supply sources
• Infrastructure to develop regional markets –Pipelines connecting Southern states with supply sources –Pipelines connecting Eastern states with supply sources –Pipelines to connect East and West regional markets –Pipelines to connect East and North regional markets –Requires anchor loads e.g. power, fertiliser –State grids to connect major demand centres within states
• National gas market expected to evolve from regional gas hubs once infrastructure is available
Infrastructure Requirement Development of Natural Gas markets
Significant investment requirements and rapidly growing demands are challenges to infrastructure development
9
Delhi
Jagdishpur
Vijaipur
Hazira
Chennai
Dabhol
Uran
Existing and Proposed Infrastructure
Existing
Facilitate development of Southern and Eastern regional markets
Existing Transmission Lines
Planned Transmission Lines
Mangalore
Coimbatore
Kakinada
Bangalore
Kolkata
Kochi
Pune
10Thousands of kilometres of new pipelines will require multi-billion dollar investments
0 200 400 km
Infrastructure RequirementNatural Gas market in South India
Hyderabad
Kochi
Mangalore
Chennai
ANDHRA PRADESH
TAMIL NADU
KARNATAKA
Bangalore
KG Basin Supply
Kakinada
KERALA
11
Bulk Customers to Anchor Load
• Power/fertiliser plants expected to anchor the transmission capacity
• Required to optimise transmission capacity and transmission tariff
• Instrumental in developing CGD network in adjoining areas
• Instrumental in development of intra-state and regional markets
12
• Multi-billion dollar investments necessary to build distribution network in three metros and 20 non-metros in Southern states
• JV promoted by GSPC, IDFC and AP government to invest USD 1.2 billion in 1,500 km network in AP
• USD 25 million needed for CGD network in Noida, Gurgaon and Faridabad
• GAIL identified 22 cities for CGD with investments of USD 2.5 billion
SectorLength(Kms)
Kakinada - Kolkata 1,000
Kakinada - Chennai 580
Kakinada - Hyderabad - Uran 1,035
Bangalore - Chennai 300
Kochi - Kayamakulam - Bangalore 860
Dabhol - Bangalore 850
Mangalore - Bangalore 357
More than USD 5 billion required
Investment Levels
13
• Power
– Environmental friendly – competitive when environmental benefits are considered
– Potential to bridge the peak demand deficit
– Existing Natural Gas based plants running at a low PLF due to shortage of Natural Gas
– AP could emerge as biggest market for Natural Gas based power generating capacity due to proximity to KG Basin
• Fertiliser
– Demand of Natural Gas in fertiliser sector is expected to increase by more than 70% by 2012
– Even high priced Natural Gas attractive for consumers since prices of alternative fuels even higher
– Plants operating on liquid fuel (Naphtha/FO) have potential to convert to Natural Gas
– Eventually prices likely to be benchmarked against LNG
Natural Gas for Power, Fertiliser and Steel
14
• Steel – States like AP and Orissa likely to emerge as key markets
for steel – Demand in steel sector expected to grow to 10 MMSCMD by
2012– Vizag Steel’s expansion plan utilising Natural Gas which
should increase Natural Gas demand by 5 MMSCMD in coming years
• Rise in Natural Gas demand in steel and fertiliser sectors can be attributed to factors like
– Unmet demand in existing plants – New capacities– Expansion of existing capacities – Plants with economic conversion potential
Natural Gas for Power, Fertiliser and Steel
15
• At load centres, rather than at pithead–Synergy with the development of transmission
capacity
• Lower transmission and distribution losses
• Distributed gas-fired generation capacity –Can provide anchor loads for development of
transmission pipelines and CGD networks
• New opportunity – cogeneration–At customer location driven initially by
distribution inefficiencies
Distributed Generation Benefits
16
Direct Marketing – Growth
City Delhi Mumbai Gujarat (Surat/ Baruch/ Ankleshwar
CNG Stations 146 120 16
Vehicles on CNG ~106000 ~169000 ~30000
Average Consumption
(mmscmd)
~1 ~1 0.11
• Delhi is one of the fastest growing CGD markets
• Similar potential in the Southern cities of Bangalore, Hyderabad and Chennai
• Infrastructure availability and supply sources are biggest challenges
17
Direct Marketing – BG India’s Participation
• Distribution business in Mumbai (since 1995) and Gujarat (since 1997)
– Combined customer base of ~570,000 (domestic, commercial, industrial & NGVs)
– Pipeline network of over 3,800 kms– 2.9 MMSCMD supply of Natural Gas; 3.2 MMSCMD third party
transportation• Gujarat Gas (GGCL) – Gujarat
– 65% owned subsidiary of BG India– India’s largest private distribution company– Significant transmission business
• Mahanagar Gas (MGL) – Mumbai– BG India (49.75%), GAIL (49.75%), Maharashtra
government(0.5%)– Strong growth prospects – Leading the CNG revolution in Mumbai
18
Regulation – Recent Developments
• Petroleum and Natural Gas Regulatory Board Act enacted on April 3, 2006
– Main Provisions–Provides for regulatory board (Sec. 3)–Downstream regulator – pipelines and city and local gas
distribution (Sec 11 & 12)–Registration for marketing (Sec 15) and authorisation to lay,
build, operate or expand transmission/distribution (Sec 11) – however, deemed registration and authorization for entities so engaged prior to board appointment date (Sec 16)
–Open access (Sec 20)–CGD exclusivity by board (Sec 20(4))–Affiliate code of conduct (Sec 21(1)) also includes potential
unbundling
19
Regulation – Primary Policy Issues
• CGD policy – Licenses should be awarded through a transparent and objective
competitive bidding process – Conveyance and marketing exclusivity should be provided for – Marketing exclusivity in distribution is a world-wide best practice
followed in over 40 countries allowing optimal distribution networks to be built
• Pipeline policy – Pipeline capacity should be based on aggregate demand with
economic expansion options to serve future capacity needs – An in-built excess capacity requirement will impose added cost to the
primary loads (power and fertiliser) and could make Natural Gas an uneconomic fuel alternative in the power sector
– Adoption of a policy to build to aggregate demand keeps transmission costs lower to the benefit of the end user so the nascent Natural Gas industry can develop to its optimal level
20
• Transmission authorisation– Award transmission through a bidding process with
objective bid evaluation criteria– Authorise pipelines following an open season procedure
using the international best practice that the US Federal Energy Regulatory Commission has created
– Open seasons with the regulator overseeing future expansions based on the market needs will result in an optimal transmission grid for India to the benefit of its expected economic growth
• Tariff– Distance based tariffs for transmission and a revenue-based
model for CGD
Regulation – Primary Policy Issues
21
Thank You