Indian Spot LNG Trade

Transcription

1 Indian Spot LNG Trade How Indian Buyers Set New Ceiling for Spot LNG Price in 2008 & Emerging Trends for 2009 Kamlesh Trivedi Associate Editor Gas Matters (South Asia & Middle East)

2 Domestic Gas Sources Total Current Demand & Supply Gap estimated at around 50 to 60 million cu mt/day and domestic production approximately at 88 million cu mt/d and 29 million cu mt/d of LNG supply as against demand estimate of around 170 million cu mt/d Major Sources of Domestic Production : 60.8 million cu mt/d combined Onshore and Offshore Production from ONGC 6.4 million cu mt/d Oil India Ltd 17.5 million cu mt/d by BG India, ONGC and Reliance Industries Ltd operated Panna Mukta Tapti (PMT) Offshore Gas Project & 4 million cu mt/d from Cairn, Niko etc LNG Imports: Current Supply consists 34 million cu mt/d of LNG through Shell Hazira Terminal & Dahej Terminal of Petronet LNG

3 Gas Production Present & Future in MMSCMD Present* By ONGC OIL 6.4 JVC/PVT (RIL: 80) LNG Pipeline imports - - Total

4 Gas Consumption in India * Present consumption Short supply Fuel conversion/ stranded/ closed assets Greenfield projects Power Fertilizer Industry 9.0 N.A N.A Captive/LPG Petrochemica ls Transport/do mestic Sponge iron units 4.0 Misc N.A Total Cumulative Supply by

5 Gas Pipeline Network Existing Gas Pipeline Network: 7,000 km. Additional 10,000 km under development 1400 km long 48 cross-country pipeline to carry Krishna Godavari Basin gas from East Coast to West Coast to be commissioned in March 2009 More extensive pipeline network is scheduled in parts of South & East India

6 GSPC Mundra (5 MMTPA) Existing Gas Infrastructure

7 Spot LNG Deals during 2008 Burgeoning economic growth during last decade pushed the demand for natural gas at an unprecedented level resulting into steep rise in demand for Spot LNG from the Indian buyers in 2008 Over 35 Spot Cargoes reach Indian coast at Petronet LNG Dahej Terminal & Shell Hazira Terminal respectively Petronet LNG ran Dahej Terminal at over 100 percent capacity saddled with firm demand With its unique status of being the first & only merchant terminal of India, Shell Hazira was benefited the most.

8 Spot Ceiling Gas Retailer GSPC and Steel Major Essar Steel paid as high as over $22/MMBtu Eventually, when steel prices crashed Essar Steel deferred cargo in October 2008 putting an end to almost 8 to 9 months long rush for spot LNG Fertilizer Company KRIBHCO too deferred a cargo contracted at as high as over $29/MMBtu At a point of time, Shell India had two to three spot cargoes lined up. With the buyers deferring, it resulted into distress sale of most of the high priced spot LNG

9 Octo08-Jan09 Deals Spot/Short Term Deals KRIBHCO $29 PLL BP $13.5 GAIL Shell Deal 0 Oct-08 Nov-08 Dec-08 Jan-09

10 Spot LNG import through Shell Hazira Terminal India during 2008

11 2009 & Beyond: Spot Trade in India Jan 2009: Some activities in LNG spot market again. GAIL approaches Shell for a cargo but the deal does not click March 09 puts Indian buyers back in the limelight with as many as seven Spot cargoes lined up for the month GSPC GAIL imported two by 15 March, expecting two more by the end of March through Shell Hazira Shell Hazira expected to deliver commissioning cargo for Dabhol terminal by the third week of March Petronet expected to receive cargo from Petronas by March end Commissioning cargo for Dahej terminal new capacity delivered during second week of March

12 Buyers Options in 2009 The spot prices started downward slide for two reasons- 1) In the first place, Spot LNG market turns into a buyers market to a certain extent. 2) Indian buyers show some maturity with insisting for NBP netback basis price as against previous trend of Brent or JCC April 09 expected to remain volatile with strong demand for spot LNG but the potential buyers will also have options. Three Options with the Buyers: 1) Krishna Godavari basin gas by Reliance Industries where volume is not fixed but it is expected to be around 10 Million cu mt/d to begin with. It will increase further to 20 Million cu mt/d and eventual capacity of 80 Million cu mt/d by Dec 2009 as promised by RIL. 2) New 5 million mt/yr capacity of Petronet LNG at Dahej commissioned in second week of March. Petronet has started with regasification unit and filled the tanks with commissioning cargo 3) New 2.5 million mt/yr capacity to be commissioned at Dabhol terminalcommissioning cargo expected this month

13 Limiting Factors RIL KG Supply: Target may sound ambitious considering the limitations at the receiving end to accommodate such large volume Dabhol Terminal : Terminal would not be able to function during monsoon due to the lack of breakwater facility. Dabhol may have to stop operations during monsoon in early June Dahej terminal also slows down due operations during monsoon as sea gets rough between June till end of August every year near Dahej terminal

14 Impact On Price: 2009 Improved Availability of spot LNG may put pressure on price during April-May June onwards spot price may firm up during monsoon due to widening supply demand gap. Improved LNG supply could change situation for the Indian buyers during second half of 2009.

15 Lessons Learnt Post 2008 Two leading buyers of spot LNG in 2008 in India GSPC and Essar group learnt lessons from their experience and decided to have their terminal on priority basis. GSPC float separate subsidiary for LNG business called GSPC LNG zeroed down on Mundra in Gujarat for its own dedicated regasification terminal and storage facility with 6.5 million mt/yr capacity Similarly Essar floated its own LNG subsidiary Essar LNG and considering options like floating terminal for quick commissioning Both the companies for the time being considering use of terminal on merchant basis

16 LNG Terminals Rated Capacity Company/ Location Petronet- Dahej Shell-Hazira RGPPL- Dabhol Total

17 Atlantic Basin& Middle East LNG capacity Country - Project Expected Start Date Capacity (MMt/Yr) Algeria Skikda Libya Brega Angola Angola LNG Algeria Gassi Touil Subtotal Atlantic Basin 17.4 Qatar Qatargas II Yemen Yemen LNG Qatar RasGas III Qatar Qatargas III Qatar Qatargas IV Subtotal Middle East 53.5

18 Pacific Basin LNG capacity Russia Sakhalin LNG Indonesia Tangguh LNG Peru Camisea Australia Pluto Subtotal Pacific Basin 26.4

19 US$/tonne 1,800 Capital Expenditures for LNG Projects 1,600 1,400 Projects in operation Projects under construction Projects planned (pending FID) Cost Escalation Algeria(GasiTouil) Australia Browse NigeriaBrasLNG Iran(ParsLNG) Iran(PersianLNG) 1,200 IndonesiaTanguhLNG Algeria(SkikdaRebuilt) Australia(Pluto) Indonesia(Sulawesi) Australias Gladstone AustraliaIchthys PNGLNG 1, Oman(OmanLNG) Trinidad(AtlanticLNG,T 4) Qatar(RasGasT 3 &T 4) Eqypt(Idku) Eqypt(Damieta) EquatorialGuinea Qatar(QatargasI) Australia(NWS,T 5) YemenLNG PeruLNG AngolaLNG 0 Startup