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Lng project risk and appraisal 2012 final 03092012

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Presented by Dr LNG World Marc September 2012 PROJECT RISK AND APPRAISAL PRESENTED AT 7 TH LNG WORLD, BRISBANE AUSTRALIA, 4 TH SEPTEMBER 2012 Dr. HIMADRI BANERJI r. Himadri Banerji at the 7th cus and Evans Brisbane 4th 2
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PROJECT RISK AND APPRAISAL

PRESENTED AT 7TH LNG WORLD, BRISBANE

AUSTRALIA, 4TH SEPTEMBER 2012

Dr. HIMADRI BANERJI

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SUMMARY OF DISCUSSIONS

�Overview of global natural gas

and LNG industry-LNG Projects Are More Costly Than Ever to Develop

� Overview of market risks for LNG: South Korea, Japan, India and China

-LNG Demand is Fast Outgrowing Supply

- Asian LNG Demand to Double between 2010-2017

Forecasting natural gas and liquefied natural gas prices

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� Forecasting natural gas and liquefied natural gas prices

- LNG Pricing in Asian Markets to rise in link with oil

- India in Mega Deals for Shale LNG from US with price advantage

�Project Risk and Appraisal� Market, financial environmental and technological risks

� Project Evaluation Concepts, Methodology and Analysis

� Estimating and Risk Assessment in Big Ticket LNG Project Expenses: Capital, Operational & Maintenance

� A Case Study on Project Appraisal

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India LNG Demand

Kochi LNG Terminal

Source Analyst Presentation by Petronet 2011

Third Terminal on East Coast

Global LNG Capacity Most Optimum Scenario mtpa

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2LNG PROJECTS ARE MORE COSTLY THAN EVER TO DEVELOP

� CAPEX/ton of installed liquefaction capacity has during the last decade made a permanent shift from an average figure below 500 USD/ton to typical range of range of 1500 – 2500 USD/ton

� The IHS CERA Upstream Capital Costs Index (UCCI) shows more than a doubling

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2Index (UCCI) shows more than a doubling of costs in the oil and gas industry. However, due to the uniqueness often attributed to developing LNG projects, current LNG development costs exceed the average for the oil and gas industry

Flex has consistently communicated a CAPEX range of USD 550-700 ton/liquefaction capacity. For the project in PNG we expect to be in the lower end of this range.

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Quality Parameters LNGP

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THE SOLAR CHALLENGE

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AND THE

NUCLEAR RENNAISANCE

LNG PROJECT RISK MITIGATION MATRIX

Type of Risk Risk Allocated to Mitigation

Market Risks-Off-take- Payment.

Project Co./Off-takerOff-taker/Guarantor

Suitable agreementsCredit Enhancement

Technology- Availability

EPC ContractorEPC Contractor

Continuing SupportGuarantee, Warranty

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2- Availability- Facility Design &Performance- Damage

EPC ContractorProject Co.

Guarantee, WarrantyInsurance

Financial- Interest Rate- Inflation- Fx Fluctuation

Project Co. Project Co.Project Co.

Hedging,

Force Majeure Project Co. InsurancesBack to back clauses of Agreements

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Project appraisal is a generic term that refers to the process of assessing, in a structured way, the case for proceeding with a project or proposal. In short, project appraisal is the effort of calculating a project's viability.

It often involves comparing various options, using economic appraisal or some other decision analysis technique[

WHAT IS PROJECT APPRAISAL

Process

1. Initial Assessment2. Define problem and long-list3. Consult and short-list4. Develop options5. Compare and select Project

Types of appraisal

HOW PROJECT APPRAISAL

Types of appraisal

1. Technical appraisal2. Commercial and marketing appraisal3. Financial and economic appraisal

• Cost-benefit analysis• Economic appraisal• Cost-effectiveness analysis• Scoring and weighting

4. Organisational or management appraisal5. Environmental Impact Appraisal

STEP MAIN PROCEDURES IN BRIEF

1. EXPLAIN THE STRATEGIC CONTEXT • Refer to underlying policy or strategy, e.g. policy statements, statutory requirements, or business plans.

• Indicate how the proposal is expected to contribute to the relevant strategic aims and objectives.

2. ESTABLISH THE NEED FOR EXPENDITURE • Establish the need for expenditure by:-

o analysing the expected demand for services; and

o identifying deficiencies in current service provision.

• Justify and quantify the proposed level of service provision over the appraisal period.

Where funding the non-Govt sectors is in view:-

THE BASIC STEPS..ELABORATED

Where funding the non-Govt sectors is in view:-

Assess Additionality i.e. establish that the proposed assistance is the minimum necessary.

3. DEFINE THE OBJECTIVES AND CONSTRAINTS • Define the expected outcomes and outputs.

• Specify targets that are SMART i.e.Specific Measurable Achievable Relevant and Time-dependent.

• Include implementation targets e.g. dates, milestones.

• State the key constraints on the project, e.g. technical, financial, legal, timing etc.

• Indicate the relative priority of individual objectives or elements of the proposals

• Provide sufficient detail to enable option generation and option performance assessment.

4. IDENTIFY & DESCRIBE THE OPTIONS • Identify and describe a baseline option, usually the status quo, and a suitably wide range of alternative options.

• Consider variations in scale, quality, technique, location, timing and funding method.

• Choose a suitable number of options for full appraisal.

• Where some are rejected before full appraisal, explain reasons for rejection.

5. IDENTIFY & QUANTIFY THE MONETARY COSTS AND BENEFITS OF OPTIONS

• Detail capital costs, including any refurbishment costs, and annual recurrent costs and benefits of all options.

• Express costings in total rather than incremental terms, to expose full resource consequences.

THE BASIC STEPS..ELABORATED….CONTD

• Include opportunity costs and residual values for all assets employed, whether already owned or not.

• Assess displacement, and adjust costings accordingly.

• Adjust for inflation and (where relevant) tax differences.

• Where cost savings or efficiency improvements are projected, indicate whether they will represent financial savings or redeployment of resources.

• Consider costs and benefits to other parts of the public and private sectors.

Where funding the non-Govt sector is in view:-Assess Cost-Effectiveness by reference to relevant ratios such as cost per job, public assistance to project cost, etc.

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6. APPRAISE RISKS AND ADJUST FOR OPTIMISM BIAS • Prepare a risk log identifying and quantifying the main risks associated with the proposal.

• Consider how risks compare under the different options.

• Adjust costs, benefits and timing assumptions for optimism bias.

• Develop suitable risk management and risk reduction

THE BASIC STEPS..ELABORATED….CONTDP

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• Develop suitable risk management and risk reduction strategies.

7. WEIGH UP NON MONETARY COST & BENEFITS (INCLUDING SUSTAINABILITY, EQUALITY & LIFETIME OPPORTUNITIES)

• Identify all relevant non-monetary costs and benefits - economic, social, environmental and others

• Quantify them in suitable units where possible.

• Show how they compare under the different options e.g. "list and describe" in simpler cases; use "impact statement" or "weighted scoring method" in others.

• Consider need to screen for and/or assess in detail Sustainability, Equality & Lifetime Opportunities.

• Decide whether any specific types of impact assessment are required e.g health, environmental, transport, equality or integrated impact assessment.

THE BASIC STEPS..ELABORATED….CONTD

• Explain assumptions clearly e.g. basis of quantification. Where employed, weights and scores should be explained individually.

• Interpret the results of the non-monetary analysis.

8. CALCULATE NET PRESENT VALUES (NPVs) AND ASSESS UNCERTAINTIES

• Identify phasing of monetary costs and benefits over suitable time period, adjusted for inflation, optimism bias and (where relevant) displacement and tax differences.

• Calculate NPV (or NPC) for each option, using correct discount rate.

• Include spreadsheets detailing the calculations, including disaggregation of cost/benefit items.

• Show, for each year, the discount factors used, the total NPV for the year, and the cumulative NPV to that year.

• Identify the price basis and base year for discounting.

9. ASSESS AFFORDABILITY AND RECORD ARRANGEMENTS FOR FUNDING, MANAGEMENT, PROCUREMENT, MARKETING, BENEFITS REALISATION, MONITORING, AND EX POST EVALUATION

• Affordability: Include budget, cash flow and funding statements, phased over time.

• Management: Give details of proposed personnel, procurement method, timetable, benefits realisation plan, accommodation needs, staffing issues etc.

• Procurement: Assess alternative procurement options.

• Marketing: Provide market assessment and marketing plan as appropriate

• Benefits Realisation: Include draft BRP in OBC and final version in FBC.

• Monitoring: Indicate how the proposed option will be monitored during and after implementation.during and after implementation.

• Evaluation: Record pre-implementation levels of resource use and service provision. Indicate factors to be evaluated, when, how and by whom.

Where funding the non-Govt sector is in view:-Assess Viability i.e. examine cash flows, management & financial arrangements to ensure that funding is not wasted on proposals that will fail prematurely.

10. ASSESS THE BALANCE OF ADVANTAGE BETWEEN THE OPTIONS AND PRESENT THE RESULTS & CONCLUSIONS

• Write up the steps of the appraisal in the order shown here.

• Give details of assumptions and calculations, using appropriate appendices.

• Include summary of main results (i.e. NPVs/NPCs, unquantifiablesand uncertainties) for each option.

• Draw out the balance of advantage among options, assess VFM and affordability, and record conclusions and recommendations.

KEY CONSIDERATION IN PROJECT APPRAISAL LNGP

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Perspective – Midstream – LNG Re-gasification Facilities

Key Considerations1. LNG facilities are part of long chain comprising of producing field, liquefaction plant,cryogenic tankers, re-gasification facilities and off-takers making contractual structurethe key consideration.2. Location - Availability of all season ports for LNG receipt3.Connectivity to evacuation facilities/pipelines4.No established pricing benchmark – mostly coupled with oil markets5.LNG facility investment are capital intensive investments are front end loaded – more

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5.LNG facility investment are capital intensive investments are front end loaded – morereliance on debt financing6.Revenue Model – Re-gasification charges usually based on capital cost recovery method.7. Key Financing Requirements� Presence of back to back contract between links of LNG chain to share project

risk among buyers and sellers� Take or Pay type of agreements both with supplier, tankers and off-takers.

KEY CONSIDERATION IN PROJECT APPRAISAL LNG

To attract investors to an LNG project,

the price of a unit volume of gas delivered into a

pipeline must at least equal the combined costs of

producing, liquefying, transporting, storing, and

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producing, liquefying, transporting, storing, and

revaporizing the gas, plus the costs of the capital

needed to build necessary infrastructure—and a

reasonable return to investors.

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KEY CONSIDERATION IN PROJECT APPRAISAL LNG

Project investors are relying on two sources or repayment

⎯Strength of sponsor -ability to get project financed, constructed and operating effectively

⎯Strength of project economics -dependable revenue

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⎯Strength of project economics -dependable revenue stream

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KEY CONSIDERATION IN PROJECT APPRAISAL LNG

Project economics are driven by

� ⎯Cost and constructability

� ⎯Quality of off take credits and contracts

� ⎯Underlying factors

� −Source and price of inputs

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� −Source and price of inputs

� −Markets for outputs

� −Operating risks

Regardless of sector, these areas are thoroughly reviewed by credit

analysts

at rating agencies, bonds and investors

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Cost Optimization:.P

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Lower and upper share of various cost items in total LNG chain (%)P

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Source: US Department of Energy, Energy Information Administration, The Global

Liquefied Natural Gas Market: Status & Outlook, 2003

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A CASE STUDY ON PROJECT APPRAISAL

� Appraisal and Evaluation done for : (i) an equity investment in Petronet LNG Limited (PLL) for a 5.4% shareholding; and (ii) a partial credit guarantee (PCG), without a Government guarantee, to support a PLL bond issue of up to Rs7 billion, amounting in exposure terms to Rs3.525 billion.

� The funds were to be used to construct and operate a liquefied natural gas (LNG) import and regasification terminal (the Project) with a 5.0 million metric tons per annum (MMTPA)

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Project) with a 5.0 million metric tons per annum (MMTPA) capacity at Dahej in Gujarat state.

� The Project would serve gas users along the 2,500-kilometer (km) Hazira-Bijaypur-Jadgishpur (HBJ) pipeline that covers Gujarat, Western Madhya Pradesh, Rajasthan, Delhi, Haryana, Western Uttar Pradesh, and Uran, Maharashtra.

� At appraisal in 2003, the Project was to be financed based on a debt-equity ratio not exceeding 70:30 and achieve an economic internal rate of return (EIRR) of 23.0%.

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A CASE STUDY ON PROJECT APPRAISAL

Four state companies

Bharat Petroleum Corporation Limited (BPCL),

Indian Oil Corporation Limited (IOC),

GAIL, and

ONGC (collectively referred to as the sponsors)—formed PLL to develop LNG facilities at Dahej, Gujarat and Kochi, Kerala.

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Gujarat and Kochi, Kerala.

The sponsors include some of the largest companies in India. BPCL is engaged in refining crude oil, and production and distribution of petroleum products. IOC, the largest company in India in terms of sales, is engaged in refining and distributing petroleum products. GAIL is the dominant gas transmission and marketing company, while ONGC produces the majority of the natural gas in India.

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A CASE STUDY ON PROJECT APPRAISAL

The project facilities comprised

(i) two full-containment LNG storage tanks, each with a gross capacity of 160,000 cubic meters (m3);

(ii) recovery system for re-condensation of the boil-off gas;

(iii) send out facilities, including “shell and tube” and

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2(iii) send out facilities, including “shell and tube” and “submerged combustion” vaporizers;

(iv) auxiliary facilities, including a 23-megawatt (MW) gas-fired captive power plant;

(v) electrical and utilities production control systems;

(vi) metering, fire, and gas detection and protection systems;

(vii) a jetty; and

(viii) initially, a breakwater.

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A CASE STUDY ON PROJECT APPRAISAL

FINANCIAL EVALUATION

Deciding on key indicators (Financial Ratios, IRRs. Project Cost)

Deterministic assessment of the same with the use of a financial model

Performing sensitivities on specific assumptions for the purpose of

quantifying risk factors identified.

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quantifying risk factors identified.

Identifying the top 10 variables that have the maximum impact on key

indicators

Probabilistic analysis based on the top 6 variables identified

Conclusions of probabilistic analysis

(The key indicators relevant to the analysis include Equity IRR (Principal Indicator), Project IRR, DSCR, ADSCR, LLCR and PLCR and Project Cost)

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A CASE STUDY ON PROJECT APPRAISAL

� For the purpose of assessment of returns to equity investors, a deterministic financial model was made, based on a range of assumptions (Low Case,. Base Case and High Case). The Base Case assumptions have already been discussed in the previous Chapter.

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2already been discussed in the previous Chapter.

� The top 10 variables that have maximum impact on selected indicators (including returns to equity investors) were identified using the Tornado Diagram (an analysis tool).

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A CASE STUDY ON PROJECT APPRAISAL

LNG SOURCING AND LNG PRICE

� PLL signed a sales and purchase agreement (SPA) with Ras Laffan Liquefied Natural Gas Company Limited (Rasgas), obligating PLL to purchase up to 7.5 MMTPA of LNG for 25 years.

� The agreement had two stages. In the first stage, PLL would

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2� The agreement had two stages. In the first stage, PLL would take 5.0 MMTPA on a take-or-pay basis up to 2009. After 2009, PLL could take the remaining 2.5 MMTPA subject to the mutual agreement of both parties.

� The purchase price initially was set at $2.53 per million British thermal units (MMBTU), and it will be rebased regularly in accordance with a defined formula after 2009.

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A CASE STUDY ON PROJECT APPRAISAL

LNG SOURCING AND SHIPPING

� Rasgas, a joint venture between Qatar Petroleum (70%) and Exxon Mobil (30%), has access to the largest non-oil associated gas fields in the world.

� An international consortium led by Mitsui OSK Lines

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� An international consortium led by Mitsui OSK Lines provided two dedicated special purpose tankers with capacity of 138,000 m3 each to transport LNG to PLL under a 25-year contract under terms that were commensurate with the Rasgas contract.

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A CASE STUDY ON PROJECT APPRAISAL

MARKET

� GAIL (60%), IOC (30%), and BPCL (10%) (collectively referred to as the off takers) are purchasing gas from the LNG terminal. The off take contract is take or pay, with terms that are back-to-back with PLL’s SPA.

� The off takers initially were to transport the gas from the PLL terminal to consumers through an expanded 528 km HBJ pipeline system, and eventually through a new 485 km pipeline connecting Dahej to Uran.

IOC and BPCL have executed gas transport agreements through GAIL, which is

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� IOC and BPCL have executed gas transport agreements through GAIL, which is responsible for expanding the existing and proposed pipelines.

� The off takers intended to use the gas for internal consumption, or to sell it under long-term contracts to industrial users.

� One third of the output would be consumed by IOC and BPCL at their refineries; one third would be sold to large end-use consumers, such as Hindustan Petroleum Corporation Limited, ONGC, and a fertilizer company; and the balance sold to smaller end-use consumers, such as power and fertilizer companies that are customers of GAIL.

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A CASE STUDY ON PROJECT APPRAISAL

NATURAL GAS PRICE

� PLL’s gas sales price to end users is set commercially without any Government control.

� The price consists of the LNG rate, taxes and duties, and a regasification charge that reflects actual costs of LNG supply.

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� As presented in the RRP, the gas price was estimated to average $3.27 per MMBTU at PLL’s delivery point n the first 5 years of operation; and, after the off takers add transport charges and sales tax, $3.80 per MMBTU at the end-user point.

� This price was considerably higher than the subsidized domestic gas price of $2.84 per MMBTU being charged at the time of appraisal, though it was commercially attractive due to the substantial demand supply gap in the market.

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A CASE STUDY ON PROJECT APPRAISAL

CONSTRUCTION

� PLL and a consortium led by Ishikawajima-Harima Heavy Industries Company Limited

� Signed the EPC agreement in January 2001. Construction was completed on schedule, and the plant was mechanically complete in December 2003.

� At the same time, GAIL doubled the capacity of the HBJ pipeline by laying a new 82 km pipeline from Dahej to Vemar, Gujarat;

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2At the same time, GAIL doubled the capacity of the HBJ pipeline by laying a new 82 km pipeline from Dahej to Vemar, Gujarat; and a 528 km pipeline parallel to the existing HBJ pipeline from Vemar to Bijaypur, Madhya Pradesh.

� The Dahej-Uran pipeline identified in the RRP was not constructed due to delays in the tender process, and completion was rescheduled to 2007.

� The first shipment of gas arrived from Qatar in January 2004, initiating the commissioning period. Commercial supply commenced on schedule in April 2004.

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A CASE STUDY ON PROJECT APPRAISAL

PROJECT COST

� The actual project cost of the PLL plant was less in local currency terms than the initial cost estimate in the RRP.

� This cost saving resulted from a decision by PLL not to proceed with the construction of the breakwater that had been included in the original design. (Originally, a 660-meter breakwater was included in phase I to restrict downtime during the monsoon period. Based on the morphological data collected in the early stages of breakwater

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the morphological data collected in the early stages of breakwater construction, PLL concluded that the breakwater was not required. The plant could accommodate any potential delays arising from the lack of a breakwater by increasing storage capacity, and an additional LNG storage tank would provide greater operating flexibility.

� As a result, PLL decided to reallocate breakwater funds to construct a third tank, which will be part of the phase II expansion that will increase plant capacity to 10 MMTPA by 2009.

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A CASE STUDY ON PROJECT APPRAISAL

FINANCIAL EVALUATION

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Financial performance has been strong. In its first year of operations, PLL recorded a net loss of Rs284 million in 2004 as the plant ran at 50% capacity. In 2005, the plant utilized 100% of its capacity utilization and achieved a profit of Rs1,755 million, more than five times the appraisal estimate of Rs335million. This improvement in projected performance, which is attributed to lower-than-expected operating expenses and interest costs, is the reason for the material increase in the FIRR.Sensitivity analysis of critical variables, such as the exchange rate and movements in the LNG price, indicate that the FIRR is reasonably robust. Long-term debt as a percentage of total assets does not exceed 50%.

A CASE STUDY ON PROJECT APPRAISAL

ADB REPORT ON PROJECT EVALUATION PETRONET

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A Case Study on Project AppraisalP

rese

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PLL signed an agreement with Ras Laffan Liquefied Natural Gas Company Limited (RasGas) of Qatar for the supply of 5.0 MMTPA of LNG for 25 years at a free on board (FOB) price of $2.53 per MMBTU for the first 5 years of operation, starting in 2004.

After accounting for items such as shipping, customs duties, pipeline charges, regasification,and sales tax, the delivered price is $4.25 per MMBTU.

After 2009, the fixed price will become a variable price for a 60-month transition period. The participating parties have agreed to an increase of $0.13 per MMBTU for each $1.00 increase in the price of oil above $20 per BBL.

A Case Study on Project AppraisalP

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increase in the price of oil above $20 per BBL.

This formula does not have a ceiling, allowing the price of LNG to rise to more than $6 perMMBTU if the price of oil stays at more than $50 per BBL.

PLL’s delivered gas price was very competitive initially relative to the Hazira terminal gas. Royal Dutch Shell, which has been promoting its Hazira terminal as a merchant terminal, sourced its first LNG consignment from Australia’s North West Shelf project at a price of $3.70 per MMBTU, which is significantly higher than PLL’s purchase FOB price.

RIL’s gas discovery in the KG Basin will affect the future competitiveness of LNG imports?

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INDIA IN MEGA DEALS FOR SHALE LNG

� Indian companies with Shale Gas exploiting the massive US shale gas find acquiring operating interests in the terminals.� RIL: 3.8 Billion Dollar in Shale Gas Assets plus another 1.5 billion proposed

in next five years..with shale gas potential contribution to EBIT of $1.25 Billion

� GAIL has bought 20% stake in Carrizio Oil & Gas’s shale assets of $300 million, in talks with Macquarie Energy which owns partly the US based Freeport LNG TerminalONGC has signed a MOU with Japan’s Mitsui to pursue jointly the

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� ONGC has signed a MOU with Japan’s Mitsui to pursue jointly the opportunities in the entire LNG value chain and source LNG on spot and long term contracts

� Reliance Industries, ONGC and Gail in equity participation in the east coast based terminals of proposed seven LNG Terminals in US.

� Potential to ship gas to India @Less than $10 /mmBtu as against the present day support or APM price of $4.2/mmBtu

� Reliance Industries, ONGC and Gail participates in equity in the East coast based terminals of proposed seven LNG Terminals in US.

� Cheaper than the $13.2/mmBtu of the proposed TAPI pipeline (Turkmenistan-Afghanistan-Pakistan –India) with its own Geopolitical Risk.

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DR. HIMADRI BANERJI :PROJECT ADVISORY & STRUCTURED

FINANCE IN ENERGY INDUSTRIES (OIL, GAS, POWER)

• Assistance to Government Agencies for implementation of projects with private sector participation through BOOT/BOT/BOO routes.

• Assistance in preparation of bid documents including relevant contracts and agreements, evaluation of bids and selection of bidder.

• Assistance to private parties in preparation and submission of

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2• Assistance to private parties in preparation and submission of bids for projects through competitive bidding

• Assistance in tariff filing to generating, transmission and distribution companies and franchisee / restructuring and privatisation of State Electricity Boards.

• Policy advisory to Central & State Governments, Centre and State Electricity Regulatory Commissions.

• Preparation of Business, Investments and Financing Plan

• Identification of sources of Finance and Syndication of Rupee and Foreign currency loan.

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DR. HIMADRI BANERJI :PROJECT ADVISORY & STRUCTURED

FINANCE IN ENERGY INDUSTRIES (OIL, GAS, POWER)

• Advisory for renewable energy projects with Advisory for Projects under Indian Solar Mission

• Appraisal of projects in various Energy industry sectors.

• Investment appraisals for review of capital budgeting decision process of companies

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2decision process of companies

• Securitisation and other structured finance products

Due Diligence

Capital Structuring

Financial Modelling

Risk Analysis

Financial Viability Studies

Project Development

EPC Contract Risk Management Support

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STATE SPONSORED PROJECTS:

SYSTEMIC WEAKNESSES IN FISCAL MANAGEMENT

• Technical know-how in modern fiscal management practices.

• Comprehensive, current information databases.

• Robust analytical tools and techniques that correspond to internationally accepted standards.

• Integrated management information systems and

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• Integrated management information systems and systematic approaches to the fiscal decision-making processes.

• Transparent, consistent and institutionalized fiscal practices, reporting systems, and structures that promote the desired accountability for the effective and efficient mobilization, allocation and utilization of public funds.

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STATE SPONSORED PROJECTS IN INDIA:

SYSTEMIC WEAKNESSES IN FISCAL MANAGEMENT

� Inadequate fiscal management

� expertise and institutional infrastructure to perform revenue and expenditure projections and distributional analysis,

� assess multiplier and elasticity effects, and run policy simulation and develop alternative policy scenarios.

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simulation and develop alternative policy scenarios.

� This includes their inability to establish strong links between budgetary outlays and program outcomes for efficient and to� ensure effective delivery of results,

� establish debt and investment frameworks to improve their quality and profile, and

� conduct rigorous project appraisals to ensure selection of socio-economically viable projects.

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TO CONCLUDE:

� Despite spending large sums of money, governments and donors in many countries have been limited in their ability to develop successful, sustainable programs due to the inadequacy of fiscal management expertise and infrastructure.

� Such inadequacies prevent the productive absorption of funds.

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� They also prevent states from equipping themselves with the necessary fiscal shock absorbers to cushion them against unexpected fiscal challenges - some arising out of discretionary, unplanned decision-making and others as a result of increased globalization.

� More often than not, these unexpected challenges can and have served as the tipping points, seriously affecting the fiscal condition of even fiscally healthy states

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VALVE STATION: An LNG Tanker being filled...courtesy Germanischer Lloyds

THANK YOU

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