Round Table discussionGas Pricing in India – A New Paradigm? 7th June 2004
Demand Break up Supply Break up Demand Supply snapshot Indian Gas MarketDemand Supply
Overview of NTPC Tender • Fuel procurement for proposed expansion of 2600 MW • Quantity – 132 Tbtu p.a. • Contract duration – 17 year • Selection – Through International Competitive Bidding • Bid participation – Keen participation from international and domestic gas players • Lowest quote of LNG + Services compared to that of Natural Gas – NG competed against LNG
Significance of Price discovery • Benchmark for Gas pricing • Approximate $3 per mmbtu delivered price in Gujarat compared to grid entry price of close to $ 3.5 per mmbtu for other marketers • Benchmark for transportation pricing • Approximate $0.5 per mmbtu for transportation over 1400 km as compared to approximate $0.7 per mmbtu postal tariff for HBJ Gujarat • First market discovered pricing through competition • New Pricing Structure • 85 per cent fixed – no linkage to crude oil
Expected volumes from RIL • RIL’s reserves – 14 TCF IP – 9.8 TCF recoverable (assumed 70% recovery) • Committed/being committed reserves • Around 2.4 TCF to NTPC • Around 3.4 TCF for REL Dadri Plant • Balance uncommitted recoverable reserves – around 4 TCF • RIL expected to bring in additional 20 MMSCMD for 15 years
Demand to reach 200 MMSCMD by 2010 from current consumption levels of 70 MMSCMD… Power & Fertilizer would continue to be the dominant end-use sectors. City gas distribution, greater penetration into industrial and transportation segments, to expand the market Demand Projections Source: CRISIL estimates
Demand Supply Outlook Allocated Demand 120 2003 - 04 Unmet Demand: 50 mmscmd 70 Projected Demand 200 2009 - 10 Unmet Demand: 42 mmscmd 58 60 40 Supply - LNG Supply - existing sources Supply -Reliance and other sources Volume in MMSCMD
Issues for debate • Pricing Levels • What is the impact of the new price discovery on other players? • Will the market see different pricing for different consumers & based on what factors? • Pricing Structures • Will there be different pricing structures in the market? • Can LNG players offer similar pricing structures?
Issues for debate • Transportation costs • Is there a need to relook at the existing transportation charges? • Contracts Duration • Will the buyers be willing to enter into long term contracts for LNG? • Market Determined Pricing • Are we moving towards market determined pricing?
Thank You CRISIL Ltd. 9th Floor, Hindustan Times House, 18-20 Kasturba Gandhi Marg,New Delhi 110 001 Tel:(011) 23320980/ 1073/ 1086/ 23721603 Fax : (011) 2372 1605