Introduction to

Oil & Gas Business

19-June-2018

Shailendra Singh
 Flow of presentation

• Energy stats – World & India

• Oil & Gas value Chain
• LNG value chain
• India’s – Oil & Gas – Production & Consumption
• Natural Gas / LNG infrastructure
• Industry structure-Regulation
What is Energy?
 Energy

• Energy is the ability to do work.

• Energy sources are divided into two broad groups:
– Renewable.
– Non-renewable.
 Fossil Fuels

• Formed over millions of years by the action of heat from

the Earth's core & pressure from rock and soil on the
remains (or fossils) of dead plants & creatures.

– Coal
– Crude oil
– Natural Gas
 World Primary energy consumption (MMTOE)

MMTOE
Source: BP Statistical Review of World Energy 2018
Years
 Share of global primary energy consumption

Percentage
Years
Source: BP Statistical Review of World Energy 2018
 Primary Energy Consumption - India & World

Renew-
Hydro ables Renew-
Nuclear electric Hydro ables
3%
energy 4% Nuclear electric 4%
1% energy 7%
4%

Oil
30% Oil
34%

Coal
28%
Coal
Natural Natural
56%
Gas Gas
6% 23%

India World

Source: BP Statistical Review of World Energy 2018

 Comparative of Primary Energy
Consumption - India

Source: BP Forecast 2017

Oil & Gas Value Chain
 Oil and Natural Gas Value Chain

A value chain is a series of events that takes a raw material and with each step adds value
to it. In the petroleum industry, the value chain is broadly divided into 3 parts.
• Upstream: High Risk & High Return business.
• Midstream & Downstream: Earnings on Infrastructure & Commodity value additions.
 The Exploration & Production cycle

Appraisal;
Exploration; • Defining field size.
• Licence rounds. • Formulating development plan.
• Finding hydrocarbons.

Development;
• Executing the development plan.
• Can be several phases.

Abandonment; Production Operations;

• Removal of production facilities. • Recovering the hydrocarbons.
• Site clean up. • Optimising for maximum reserves.
LNG Value Chain
LNG Terminal
 Natural Gas & LNG (Liquefied Natural Gas)
• Natural gas is the lightest hydrocarbon, with one carbon atom for 4 hydrogen
atoms (CH4). Its combustion is very clean and generates 30% less carbon
dioxide (CO2) than fuel oil and 45% less than coal, with a twofold reduction in
nitrogen oxide (N0x) emissions and very low sulphur dioxide (SO2) emissions.
• Natural Gas is converted into LNG by cooling it to (-162°C), at which point it
becomes a liquid.
• Cooling process reduces the volume of gas by approx. 600 times i.e. LNG
becomes 1/600 volume of natural gas, thereby making it convenient to transfer
by cryogenic vessels.
• It is typically methane (90-95%) with traces of other gases. It is
colourless, odourless, non toxic and in liquid form.
• Gas & LNG Trade: Approx. 70% pipeline & 30% in form of LNG. % of LNG trade
growing much faster.
 LNG Value Chain

Liquefaction Loading
Transfer

Gas Field Storage

Transport Transportation
(Ballasted) (Loaded)

Pumping Vaporised
Unloading LNG to Gas
Consumers
Transfer
Storage Regasification

Source: Petronet LNG Limited

 LNG Value Chain

Source: Oman LNG

 LNG Value Chain : Capital Investment

Estimated investment required in LNG chain of 5 MMTPA is approx.

• E&P and field development - $ 5.0 Billion(Cost - $1.0-3.5 / MMBTU)

• Liquefaction facilities - $ 5.0 -7.0 Billion($ 3.0 -4.0 /MMBTU)
• Shipping - $ 0.2 -0.3Billion($0.5 – $1.0/MMBTU)
• Re-gasification terminal - $0.8 -1.0 Billion ($0.5 – 0.8 / MMBTU)
• Pipeline infrastructure - $ 1.5 – 2.5 Billion
World LNG Trade at a Glance
India’s Oil & Gas-Production &
Consumption
 India’s Oil Prodn. & Consumption

Source : PPAC
 India - Natural Gas Consumption
180 60%
160 49.70% 50.39%
161.46 46% 50%
140 155.02
144.26 41%
133.68 38% 136.11
120 127.98 127.71 144.75 40%
103.85 124.15
98.07 103.03
MMSCMD

100 29% 28% 30%

27% 30%
25%
80 22% 22% 67.64 72.13
58.38
60 48.57 50.78 20%
42.22 39.57
40 32.39 35.32
29.95 28.89
24.73 10%
20
0 0%
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

Total Gas Consumption India (Domestic + RLNG) LNG import LNG as % of Total Consumption

• LNG meets almost 50 % of India’s total NG consumption.

• India imported around 20 MMT of LNG in FY 2017 - 18.
• Govt. of India intends to increase share of NG in the energy basket from 6.5 to 15 % in few years.
• In coming years domestic gas from CBM & Deepwater fields would expand Indian gas markets
many folds.
Source : PPAC *Note: Period for 2017-18 data refers to April 2017– March 2018
Natural Gas-Consumption Pattern (2017-18)
Natural Gas / LNG Infrastructure
 Natural Gas
Infrastructure - India

Mundra

Chhara
Jaffrabad
Dhamra
Dahej Hazira
Dabhol
Jaigarh

LNG Terminal Ennore

Operational
Advanced Stages Kochi
of Construction
Proposed
GSPL - Gujarat Gas Grid
 Low penetration of Natural Gas in India

Per capita Natural Gas consumption in SCMD Kilometres of pipeline per million (Population)

India 0.11 India 12

China 0.30 China 40

UK 2.20 UK 123

Russia 1142
USA 5.90

USA 1481
Russia 8.80

0 500 1000 1500 2000

0.0 2.0 4.0 6.0 8.0 10.0

Source: World Bank Data/ Indexmundi/ EIA.

 Challenges -Infrastructure Development

A few questions with no perfect answers...

• Classical debate on what should be developed first ?
Infrastructure (Carriers: LNG terminals, Transmission Pipelines, CGD’s etc.)
or
Markets (Demand for Commodity).

• Should there be Viability Gap Funding (VGF) by Government ?

Project risk of low returns in initial few years of development.

• How can Infrastructure development bottlenecks be overcome ?

28
# Gas4India: Campaign to promote Natural Gas
Are we at a threshold ?
• GOI has launched campaign #Gas4India
- To increase % of Natural Gas in energy basket from 6.5% to 15% in few years.
• First time ever capital grant extended to a Natural Gas pipeline
- CCEA approved capital grant of Rs.5176 crores for Jagdishur-Haldia & Bokaro-
Dhamra pipeline.
• Development of Gas Infrastructure in Eastern Part
- Concerted efforts to link Infrastructure development (LNG terminal &
pipelines) along with markets (Connecting existing Refineries , Revival of
Fertilizer plants & award of pipelines/CGD’s on nomination basis).

• Beyond Conventional-Small Scale & Retail LNG

- Possible new avenues for growth
29
 LNG Infrastructure - India Story

Feb 2004 – Jan 2013 – Nov 2016 –

Commissio Commissio Trial of 1st
ning of 1st ning of 3rd Jan 2015 – Bus
LNG LNG 1st LNG running on
Terminal Terminal Reloading LNG as Fuel

Apr 2005 – Aug 2013 – Feb 2015 – H 2 - 2018 –

Commissio Commissio 1st LNG Commissioning
ning of 2nd ning of 4th Bunkering of Mundra LNG
LNG LNG Terminal (5th
Terminal Terminal LNG Terminal in
India)
 LNG Infrastructure – India
Status Location Terminal Owner Capacity (MMTPA) Remarks
Expansion to 17.5 MMTPA is
Dahej - Gujarat Petronet LNG Ltd. 15
expected.
Kochi- Kerala Petronet LNG Ltd. 5 Lack of evacuation pipelines
Operational
Hazira - Gujarat Hazira LNG Ports 5 -
Lack of breakwater
Dabhol- Maharashtra RGPPL (GAIL) 5
impacting utilization

Total 30

Advanced Stages Mundra - Gujarat GSPC LNG Ltd. (GLL) 5 Commissioning : H 2 - 2018
of Construction Ennore – Tamil Nadu Indian Oil Corp. Ltd. 5 -

Total 10

Dhamra - Odisha Adani 5 -

Jaffrabad - Gujarat Swan LNG Ltd. 5 -
Planned &
Probable Jaigarh - Maharashtra H Energy 4 -
HPCL - Shapoorji
Chhara - Gujarat 5 -
Pallonji

Total 19
 Gas Transmission Infrastructure - India
NG Pipelines (Existing)
Network/Region Entity Length (Kms) Design Capacity (MMSCMD)
HVJ GAIL 4659.00 53.00
DVPL-GREP upgradation (DVPL-2 & VDPL) GAIL 1119.00 54.00
CJPL GAIL 265.00 5.00
DUPL/ DPPL GAIL 875.00 19.90
Dadri- Bawana-Nangal Pipeline (DBPL) GAIL 834.80 31.00
Dabhol-Bengaluru GAIL 1111.60 16.00
Kochi-Koottanad-Bengaluru-Mangalore (Phase-1) GAIL 48.00 6.00
Assam (Lakwa) GAIL 8.00 2.50
Tripura (Agartala) GAIL 61.00 2.30
Ahmedabad GAIL 133.00 2.91
Rajasthan (Focus Energy) GAIL 151.40 2.35
Bharuch, Vadodara (Undera) including RLNG+RIL GAIL 538.00 15.42
Mumbai GAIL 129.00 7.03
KG Basin GAIL 881.00 16.00
Cauvery Basin GAIL 278.00 8.66
East- West Pipeline (RGTIL) Reliance 1480.00 80.00
Shahdol-Phulpur Pipeline (RGPL) Reliance 304.00 3.50
GSPL network GSPL 2613.20 43.00
Assam Regional Network AGCL, DNPL 816.80 3.24
Dadri-Panipat IOCL 140.41 9.50
Uran-Trombay ONGC 24.00 6.00
Total 16470.21 387.31
Source: PPAC
 Gas Transmission Pipelines –
Under Construction
Design Capacity
Network/Region Entity Length (KMs)
(MMSCMD)
Kochi - Kottanad - Bengaluru - Mangalore (Phase 2) GAIL(India) Ltd. 1056 16.00

Dabhol -Bengaluru (DBPL) Spur Lines, Phase-2 GAIL(India) Ltd. 302 16.00

Surat - Paradip* GAIL(India) Ltd. 2112 74.81

Jagdishpur- Haldia-Bokaro-Dhamra (JHBDPL) (Phase-I,

GAIL(India) Ltd. 2539 16.00
755 Km, 7.44 MMSCMD Capacity)

Mallavaram - Bhilwada* GSPC India Transco Ltd. 2042 78.25

Mehsana - Bathinda * GSPC India Gasnet Ltd. 2052 77.11

Bathinda -Jammu-Srinagar* GSPC India Gasnet Ltd. 725 42.42

Kakinada - Vizag-Srikakulam * AP Gas Distribution Corporation. 391 90.00

Ennore- Nellore* Gas Transmission India Pvt. Ltd. 250 36.00

Ennore-Thiruvallur-Bengaluru-Puducherry-
Indian Oil Corporation Ltd. 1385 84.67
Nagapattinam-Madurai-Tuticorin*

Jaigarh-Mangalore* H-Energy Pvt. Ltd. 635 17.00

Total 13489 548.26

* - Competitive Bidding Source: PPAC

 Battery Limits- Transmission & Distribution

Transmission Distribution
Transmission Line

Distribution Zone

City Gate Station

City Gas Distribution- (Retail Gas Business)
Commercial CNG

Domestic
Industry
Common Acronyms- Gas Industry
New areas of development in LNG
 Evolving LNG Business

The future of LNG will be very different. The industry

is becoming significantly larger, diverse, more
unpredictable and much more complex.

More gas will feature in transportation applications

to displace diesel in rail and trucking as well
as bunker fuel for ocean shipping.

More individual buyers who may purchase more

frequently , smaller volumes favouring shorter
duration contracts.

Increasing number of new LNG buyers helped by new

low cost & quickly deployable FSRUs.
 Few Basic types of Contracts

• Upstream :
– Production Sharing Contracts (PSC)
– Joint Operating agreements
– Service Contracts
• Midstream & Downstream:
– Gas Sales Agreement (GSA)
– Gas Transmission Agreement (GTA)
– LNG Regasification Agreements
– Retail industrial Contracts
– Franchisee Agreements
Industry Structure-Regulation
 Units & Conversions in Oil & Gas

Source : PPAC
 Informative websites

• Ministry of Petroleum & Natural Gas, Govt. of India

• Petroleum Planning & Analysis Cell.
• Directorate General of Hydrocarbons (Upstream Regulator).
• Petroleum & Natural Gas Regulatory Board (Downstream Regulator)
• GIIGNL
• International Energy Agency
• EIA, US
• International Gas Union
• BP statistics
• Web sites of Shell, BP, Exxon, Statoil etc.
• Web sites of GSPC Group, GAIL India, ONGC, Indian Oil, Petronet LNG etc.
Thank you