India’s Energy Challenge June 28 & 29, 2006, Hilton Americas, Houston Panel Session 3B LNG/GTL

1. India’s Energy Challenge June 28 & 29, 2006, Hilton Americas, Houston Panel Session 3B LNG/GTL Amos Avidan

2. Natural Gas - LNG/GTL • Running out of natural gas? • Global supply and demand • India gas market • Sustainable development • The Boom in LNG Construction • How long will it Last? • Cost, Schedule, Quality and Certainty of Outcome • Will GTL follow LNG?

3. World primary energy consumption More of the Same… Coal hydro Nuclear Natural Gas Oil BP Statistical Survey 2005

4. Reserves/Production ratios are steady- The role of technology Consumption, m bbl/d Consumption, bcf/d 259 80 140 63 R/P years OIL Natural Gas year BP Statistical Survey 2005

5. Natural Gas in India • Consumption up 12% to 1.3 Tcf in 2005 • Production from Mumbai High • Reliance discovery of KG in 2002 • LNG and pipelines needed to support high growth: • HBJ pipeline capacity and others • LNG terminals at Dahej, Hazira, Dahbol, others • Dahej price is fixed till 2008 ($4.87) • High spot prices curtail shipments to Hazira • Import gas pipelines?

6. Global Warming Concerns • Global climate is complex but there is scientific consensus that human activity is causing global warming • CO2 increased from 280 to 370 ppm in the past 200 years • It’s hard to balance economic growth with CO2 reduction • new technologies can help • Major CO2 emitters are not bound by Kyoto, but some form of CO2 controls will likely happen

7. The Future • Ecological disaster? • The Fun Future – techno fix? • The Ecotopian Solution? The Future According to Robert Crumb, 1998

8. Liquefied Natural Gas • High LNG demand to continue • Ample and cost-effective, but remote gas reserves

9. But LNG Construction Costs are Increasing $US / ton per annum of capacity 700 600 500 Range of recent proposals and bids 400 300 200 100 0 65-70 70-75 75-80 80-85 85-90 90-95 95-00 01-05 06-10

10. Why the increase? • High cost escalation in the past 3 years • More complex plants in difficult locations • Execution problems on some projects • Several projects being delayed or questioned

11. Cost Escalation • Record high prices for commodities, volatility • Higher shop loads lead to: • Quality concerns • Higher contingencies • Shorter validity periods Typical Price increases from 2003 to 2006 Compressors: 35% Line pipe: 70% Pumps: 55% Switchgear: 20% Exchangers: 42% Structural steel: 52% Columns 52%

12. Shop Loads and Lead Times • Early commitment needed • Typical Lead times, weeks: 20042005 Air coolers 37 53 Motors 22 45 Columns 38 45 Vessels 40 53 Reactors 38 70 Pumps 25 33

13. People Issues Facing the E&C Industry • Aging workforce • Retaining talent • High recruitment • Salaries are rising • Training is more critical • Globalization

14. A Negotiated EPC Model Feasibility FEED EPC • Shorter schedule • Open-book FEED • LSTK or cost plus EPC • Experienced team • Benefits to the owner: • Market advantage • Lock up scarce EPC resources • Highest NPV • Competitive EPC cost • Certainty of Outcome

15. Jamnagar Project Example Reliance Industries Limited • Phase I: 450 TBPD, Integrated Refinery and Petrochemical plant • Over $4 Billion • 44 Process Units • Bechtel Involvement from Project Conception through Operation • Less than 4 Years to “Oil in”

16. What About GTL? • Gas-To-Liquids can produce quality fuels, but at a high cost • 2006 – Startup of Oryx GTL in Qatar (34 TBD at a cost of over $30,000/bbl) • Cost of the proposed 140 TBD Pearl GTL project in Qatar could be over $50,000/bbl • Proposed niche GTL projects: • Qatar (resource driven) • Nigeria, Algeria, Russia – stop flaring, enable oil production

17. Thank You