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Round Table discussion Gas Pricing in India – A New Paradigm?

Round Table discussion Gas Pricing in India – A New Paradigm?. 7th June 2004. Demand - Supply and Pricing in India. Demand Break up. Supply Break up. Demand Supply snapshot. Indian Gas Market Demand Supply. Indian Gas Market Current Prices. The Paradigm Shift!!.

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Round Table discussion Gas Pricing in India – A New Paradigm?

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  1. Round Table discussionGas Pricing in India – A New Paradigm? 7th June 2004

  2. Demand - Supply and Pricing in India

  3. Demand Break up Supply Break up Demand Supply snapshot Indian Gas MarketDemand Supply

  4. Indian Gas MarketCurrent Prices

  5. The Paradigm Shift!!

  6. 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

  7. 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

  8. Impact on Market?

  9. 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

  10. 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

  11. 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

  12. 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?

  13. 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?

  14. 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

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