ENERGY CONCLAVE 2006 PRESENTATION ON MULTIPARTY INTERESTS IN THE GAS SECTOR

1. ENERGY CONCLAVE 2006 PRESENTATION ON MULTIPARTY INTERESTS IN THE GAS SECTOR 26TH JULY 2006

2. Indian Gas Sector – A Few Snap Shots Gas Sector Dynamics Issues Presentation outline

3. Indian Gas Sector – A Few Snap Shots

4. Indian Gas Industry Three Distinct Phases: • Before 1995 • 1995 – 2004 • 2005 onwards

5. Indian Gas Industry Before 1995 : • All Sectors were controlled by Govt. of India • Administered Gas Price • Only State Enterprises were involved • Gas Sale was only to designated consumers • Importance of clean fuel • Acceptance of gas as ‘Green fuel’

6. Indian Gas Industry • Acceleration of Industrial Growth • Awareness on Energy efficiency measures • Launch of NELP • Import of gas under “OGL” • Phased Dismantling of APM • Increase in Gas Production • Increasing Demand-Supply Gap • Foreign participation up to 100% • World class gas discovery in year 2002 in KG basin 1995-2004 : REFORM PERIOD

7. Indian Gas Industry Beyond 2005 • Market Driven Regime • Implementation of PNRB Bill • Gas Pipeline Policy • City Gas Distribution Policy • Cross Border Pipeline • Monetization of CBM • LNG Regasification terminal • Procurement of LNG spot cargo

8. Gas Sector Players

9. Gas Sector Regulation In India • Petroleum and Natural Gas Regulatory Board Act, 2006 enacted INDEPENDENT REGULATORY BOARD FOR DOWNSTREAM SECTOR • Open Competitive Bidding • Non-discriminatory Open Access • Uniform Regulated Tariff Pipeline Transmission City Gas Distribution / CNG • Open Competitive Bidding • Exclusivity Period Storage, Regasification, Marketing of LNG / NG • No Licensing ; Simple Registration • Free Market Price • Regulations to be guided by Govt. Policies • 100 % FDI Permitted in • - Pipelines/ LNG/ Marketing & Trading • Fiscal Incentives Under Consideration • 0% Custom Duty on LNG imports • Infrastructure Status for Gas Pipeline REGULATIONS AND POLICIES TO PROMOTE INVESTMENTS AND COMPETITION

10. Gas Sector Dynamics

11. Indian Natural Gas Scenario Potential Demand Scenarios MMSCMD India – Potential Growth Hub In Natural Gas Sector In The Region

12. In 1995 Present ONGC & OIL 40-45 55.0 Joint Ventures 0.0 21.0 Import of LNG 0.0 19.0 Total sale 40-45 95.0 Indian Gas Industry CURRENT SUPPLY SCENARIO MMSCMD

13. Demand - Supply Gap SUPPLY AUGMENTATION AT COMPETITIVE PRICES CREATING INFRASTRUCTURE - KEY FOR DEVELOPING GAS MARKETS IN INDIA

14. DAHEJ I & II 10 mmtpa* HAZIRA 2.5 mmtpa Gas Supply Augmentation TURKMENISTAN IRAN VIJAIPUR BANGLADESH DAHEJ JAMNAGAR KOLKATA HAZIRA BHUBANESHWAR MUMBAI A 1 BLOCK, MYANMAR MYANMAR PUNE VIZAG DABHOL DABHOL 5 mmtpa KAKINADA KRISHNAPATTANAM NEW GAS DISCOVERIES LNG TERM’s- Upcoming LNG TERM’s- Existing TRANS – NATIONAL P/L CBM CHENNAI KOCHI 5 mmtpa TIRUCHCHIRAPALLI KOCHI MANAPPAD

15. LNG Supply Augmentation • LNG share to grow from 11% in 2005-06 to 38.4% by 2009-10 • 12.5 MMTPA of LNG already tied up for20-25 yrs • 10 MMTPA of LNG to be tied up LNG TO BECOME A SIGNIFICANT LONG-TERM SUPPLY SOURCE

16. Govt. incentives Increase in Gas Production & LNG Import Import of gas through pipelines Development of CBM and Coal Gasification Regulatory Bill implementation Unbundling of transmission business Power Sector Reforms Concern for Environment Growth in Auto/City Gas Markets Key Drivers For Emerging Market

17. Turk-Afg-Pak-India Pipeline DAHEJ I & II 10 mmtpa* BHATINDA Iran-Pak-India Pipeline DELHI HAZIRA 2.5 mmtpa LUCKNOW MATHANIA KANPUR GWALIOR KOTA GAYA VARANASI AGARTALA VIJAIPUR BOKARO INDORE JAMNAGAR KOLKATA MYANMAR-India Pipeline BHARUCH A 1 BLOCK, MYANMAR BARODA DAMRA LNG BHUBANESHWAR PUNE MUMBAI DABHOL 5 mmtpa Existing (7.5 MMTPA) KRISHNAPATNAM SOLAPUR DABHOL Upcoming (15 MMTPA , US$ 1.5 Billion) RAJAMUNDRY HYDERABAD KOLHAPUR VIJAYAWADA Transmission Pipelines COCHIN 5 mmtpa Existing (6,300 Kms) BANGLORE Planned (8,400 Kms, US$ 4.5 Billion) HASAN CHENNAI MANGLORE City Gas/ CNG Existing (10 cities) TIRUCHCHIRAPALLI KANJIRKKOD COIMBTORE Planned (28 cities, US $ 2 Billion) KOCHI Gas By Sea Receipt (Likely Location) TUTICORIN LNG Terminal GAS SECTOR INFRASTRUCTURE:CURRENT AND FUTURE – A COMPOSITE PICTURE TOTAL INVESTMENT – US$ 8 Billion BAREILLY AURAIYA AGRA JAGDISHPUR DISPUR PATNA PHOOLPUR JHANSI UJJAIN RAJKOT AHMEDABAD SURAT NELLORE

18. Issues

19. Past (Pre 2004) Present (2005-2006) Future • 100% Government • Controlled • Single Price for • all users and sources • Cost plus basis • 60% Government • Controlled • - Power, Fertiliser, • Small Customers • Multiple Prices (US$ 2 – 10 / MMBTU) • NOC’s – Administered • Private – Market Related • RLNG – Market Related • Free Market Pricing • Competitive to alternatives • Alignment with global trends Gas Pricing: The Changing Phases PRICING – MOVING TOWARDS DEREGULATION

20. Pricing Issues • Demand for Gas is predominantly price sensitive • Major gas consumers end product pricing is either regulated or highly price sensitive e.g. Power, Fertilizer • Substantial gap in APM price ($ 1.75 - 2.10 / mmbtu) and market price ($3.00 - 9.00 / MMBTU) • Gas price should not be under regulation which may dampen new exploration / market discoveries • Selective consumer segments like domestic gas for Below Poverty Line (BPL) could be compensated through State instead of regulated gas pricing

21. Key Issues • UPSTREAM • Incentivize E&P • Restructuring of PSC i.e. Recovery of cost petroleum • Share of Profit Gas • Rationalisation of work commitment • Infrastructure development for monetization of gas • MIDSTREAM • Gas Grid Development • Need for a realistic pricing • Development of gas trading hubs / Storages • DOWNSTREAM • Long term supply commitment • Rationalisation of Tax / Levis

22. THANK YOU