Sunteți pe pagina 1din 11


Sham Sunder Director (Technical) Man Mohan Ahuja Sr. Manager (Technical) Petronet LNG Limited New Delhi Jacques Gautier, (Project Director) Gaz de France, France ABSTRACT LNG IMPORT IN INDIA & PETRONET LNG LIMITED
Natural Gas is emerging as the preferred fuel of the future in view of it being an environmental friendly, economically attractive fuel and feedstock. Recognizing this, Government of India has spelt out the objective of encouraging use of gas in India and ensuring adequate availability by mix of a domestic gas, imports through pipelines and import of LNG. As the availability of indigenous natural gas is far lower than the demand, it has become necessary to go in for import of LNG to supplement the domestically produced natural gas. The Hydrocarbon Vision 2025 has also estimated the demand for natural gas to grow substantially over the coming years. The use of LNG is predominantly for generation of power. Existing installed capacity for Power generation is about 100000 MW. Next ten years the plan is to add 100000 MW within next ten years. To provide needed fuel for this is a great challenge. While use of coal & Hydropower should be maximized for economic reasons, the use of liquid fuel should be discouraged on account of its higher cost and environmental concern. However, natural gas becomes the obvious choice in view of higher efficiencies, lower cost of turbines and concern for environment The timings for developing a LNG import facility are most suitable now for India as the power sector is in urgent need of augmenting the fuel supply and many potential exporters from Oman, Qatar, Australia, and Malaysia etc. are keenly exploring the possibility of supply of LNG to India and China. Also India has strategic advantage because of proximity to Middle Eastern countries as well as ASEAN countries and Australia. Formation of Petronet LNG Limited, with Gaz de France, initially as its strategic partner and subsequently its shareholder and four leading Public Sector Undertakings of India being its promoters is the first step taken in this direction. Thanks to an excellent co-operation between the shareholders of Petronet LNG Limited (PLL), the new LNG chain Qatar-India will provide next year, to the Customer a clean energy source. PLL shall be setting up two LNG receiving terminals on west coast of India In this paper the prospects / challenges of LNG trade in India and the process that has undergone for establishing the first LNG receiving terminal In India are discussed


As India enters into 21st century, OIL & Gas as energy supply sources are going to play an important role. In fact Indias energy demand is one of the fastest growing in the world. In this regards energy management is one of the prime concerns before the country. Mounting pressure to reduce pollutants emissions (be it automotive emissions from diesel vehicles or power plants based on coal or liquid fuels) is potentially creating a willingness to change for the green fuels and pay for the premium quality fuel (NG / CNG or Low sulfur diesel). This is creating more and more pressure on the Gas companies for supply of additional Gas. Here in this paper the subject of LNG import into India and role of Petronet LNG Limited is described. This aspect essentially revolves around How to meet the Gas demand supply gap. Given the significant decline in domestic reserve accretion over the last few years, it is clear that unless reserves in existing fields are significantly upgraded or new fields are discovered and brought on stream, gas production is set to decline from its current level. The new finds so far, at best, have been able to sustain the total production at current level. This calls for concerted exploratory efforts to establish reserves. The declining production profile coupled with the projection of rising demand shows a widening demand-supply gap. The table: 1 below describes the Gas demand supply gap. Table: 1 - Gas demand supply gap ( MMSCMD) Years 2001-02 2006-07 Demand 151 231 Supply 65 65 Gap 86 166 Source: India Hydrocarbon vision 2025

2011-12 313 65 248

The implications of this gap are that exploration efforts need to be stepped up and the feasibility of importing gas be examined seriously. Recognizing this Government of India decided to constitute a group on India Hydrocarbon Vision 2025. The group had a sub-group on development and utilization of Natural Gas, including LNG and alternative fuels in the context of emerging global Oil & Gas scenario. The report prepared by the group titled India Hydrocarbon Vision 2025 has made recommendation with respect to stepping up the exploration & production as well as for development & utilization of Natural Gas in the country. These recommendations include

Exploration & Production

Create a policy environment for developing a vibrant, thriving and world class E&P industry Continue intensive exploration efforts in the producing basins for establishing extension and reevaluation of existing reservoirs and discovery of new resources Aggressively pursue extensive exploration in non-producing and frontier basins including deepwater areas Maximize recovery from currently producing fields/ future discoveries through technology support, improved reservoir engineering and production practices and EOR Develop low cost production systems for marginal fields and take up development of all discovered fields. Identify technology gap and introduce state-of-the-art E&P technology, specific to the requirement of each basin and production process and systems Continue the supportive role of the government in exploration, particularly for high-risk ventures.

Development & Utilization Of Natural Gas

Concrete exploratory efforts to establish reserves Constitution of core group to develop realistic demand scenario

Examine feasibility of importing gas from neighboring countries Keep energy security in mind while considering options Regional cooperation through SAARC, BIMSTEC and other such organizations (ASEAN, Gulf Cooperation) to be expedited for developing regional gas trade. Close examination of LNG option keeping in view large investment, outflow of hard currency and devaluation of Rupee.

LNG In India
The Major consumption for gas in India shall be predominantly for generation of power. Existing installed capacity for Power generation is about 100000 MW. Next ten years the plan is to add 100000 MW within next ten years. To provide needed fuel for this is a great challenge in view of the widening gap between demand and supply. Various options such as gas import through pipeline or LNG route as well as exploiting unconventional sources of gas have been evaluated With respect to gas import through pipeline various options, which have come up, are Iran India, Oman India & Bangladesh India Gas pipelines. A report prepared by South Asia Monitor, a US based journal has indicated that Iran-India pipeline may not be feasible in near future mainly on account of political & security reasons. The gas import from Dhaka although holds promise also does not appear to be a possibility in near future as it would require diplomatic efforts to persuade Bangladesh to sell Gas to India, for which it is currently facing a lot of political resistance within the country. The Oman India pipeline on the other hand faces technical challenges (e.g. deep sea pipeline laying). The efforts for a solution in this area, however, are on. Discussions on energy cooperation are being pursued through the newly organized grouping, BIMSTEC, the members of which are Bangladesh, India, Myanmar, Sri Lanka and Thailand. BIMSTEC has constituted sub-groups for various sectors of cooperation. The sub-group on energy is chaired by Myanmar, which is pursuing the idea of being able to lay on offshore coastal pipeline through Bangladesh waters to India. The route of gas import through pipeline, however, for the time being appears to be non-entity more because of political reasons than other techno-economic reasons. The other unconventional sources of gas being exploited in India are Coal Bed Methane (CBM), Gas Hydrates and Underground Coal Gasification (UCG). Various blocks have been identified in consultation with Ministry of Coal Government of India for exploitation of the CBM. In a few of such blocks ONGC (one of the promoters of PLL) has already started CBM activities. Underground coal gasification (UCG) offers a potential economic means of extracting energy from deep-seated deposits, which cannot be economically extracted by conventional means. There is a potential for around 137 billion tones of nonmine able coal, which can be exploited by such means. UCG has been taken up as National Project for three regions associating relevant scientific research institutions and industry. However CBM and UCG exploration & exploitation technologies are complex and may need time before these are commercially exploited. Considerable work is also being done in the area of gas hydrates. Gas Authority Of India Limited has got prepared a comprehensive report for the purpose of identification of most suitable areas for hydrates prospecting. But in this area also there appears to be a time gap before it can be commercially established. At this time, therefore LNG appears to be the only option for the intermediate period before other routes are established.. The India Hydrocarbon vision 2025 report, on the basis of a detailed analysis, has recommended that in Indian Scenario around 20 30% of total gas import into the country could be in the form of LNG. Assuming that 20 % out of this is based on NG, it shall require yearly addition of about two MMTPA of LNG. The studies have established that LNG import at identified ports in Southern India could probably compete with piped Gas even in the long run. The figure: 1 identifies major ports identified for LNG import in India

Figure: 1






Dahej Pipavav Hazira Nhava Sheva

Vishakapatnam Kakinada


Haldia Paradeep



New Mangalore Ennore


Cochin Tuticorin

The timings for developing a LNG import facility are most suitable now for India as the power sector is in urgent need of augmenting the fuel supply and many potential exporters from Iran, Yemen, Oman, Qatar, Australia, and Malaysia etc. are keenly exploring the possibility of supply of LNG to India and China. The competitive situation has and will continue to help in securing more attractive contractual terms. Domestically also the scenario for gas sector is becoming conducive every day. It is moving from a highly centralized, government controlled business to one that relies increasingly upon reduced regulation, and a more market-responsive pricing climate to encourage foreign and private sector investment. Unlike Crude oil trading, which has many market outlets and is dominated by relatively short-term contractual arrangements, the LNG trade is characterized by very long term contractual commitments. Before first drop of LNG can be consumed, a formidable LNG supply chain has to be put in place from the producing wells to gathering pipeline, to gas treatment and liquefaction plants, to ship, to receiving terminals, to storage tank and to the consumers after regasification. A very high magnitude of investment is required for setting up a complete LNG chain. In fact huge front-end commitment are required for any LNG project. Although a LNG project is implemented through commercial organizations, it is in reality a joint commitment of the Governments of the participating countries. Without strong Government support, a project of such big investment is difficult to materialize. For this matter Petronet LNG Limited (PLL), an Indian company, has been promoted by four leading public sector undertakings of India, viz. Gas Authority of India Limited (GAIL), Oil And Natural Gas Corporation Limited (ONGC), Indian Oil Corporation Limited (IOCL) & Bharat Petroleum Corporation Limited (BPCL) to set up LNG receiving terminals in India. Gaz de France (GDF), which is the largest European importer of LNG and operator of LNG regasification facilities, is the also the shareholder of the PLL. The suppliers of LNG (RasGas of Qatar / MOBIL-EXXON) would also be taking equity in the first LNG terminal being set up by PLL. The association of these companies in the formation of a JV company (PLL) offers a unique advantageous position to PLL due to the experience of these companies in different area. ONGC, for example is Indias largest exploration and production company. GAIL is the largest

natural gas transmission and marketing company in India. GAIL owns and operates a network of over 4,000 Kms of pipeline, including the HBJ pipeline located in Northwestern India. Indian Oil Corporation (IOC) is Indias largest commercial undertaking and is the only Indian Company in the 1998 Fortunes Global 500 listing of the worlds largest Industrial and Service companies. BPCL is the fifth largest refining and second largest marketing company in India with facilities for refining crude oil and marketing of petroleum products. Gaz de France (GDF) is one of the worlds leading operators in natural gas industry and is skilled in both upstream and downstream sectors of the natural gas industry. The company is deeply involved in liquefied natural gas, storage and distribution technologies and has a presence in 20 countries. Association of GDF with PLL imparts the company the technical strength and operation skills. Challenges for LNG Trade in India & Government Initiatives The NG (basically LNG) trade has many challenges that it faces in the Indian market conditions and requires policy intervention to make it succeed. Presently, there are several initiatives for setting up LNG terminals in the country. The LNG has been declared as OGL (Open General License) commodity. LNG can be imported, regasified, distributed, marketed and sold without any restrictions and Government control. Several parties in India have shown interest to develop LNG projects both on West & East Coast locations. There has been practically a flood of probable LNG importers. Few projects have made some or substantial progress. In all developers have proposed 14 projects both in the West & East Coast of India with a total capacity of 45 MMTPA for LNG imports to India as against world LNG capacity of over 120 Million Tones. Table below provides a list of LNG import terminals in India, which have been announced at various times. List of LNG Project s (Announced) in India Location Ennore Tuticorn Kakinada Vizag Gopalpur Dahej Pipavav Jamnagar Hazira Maroli Trombay Dabhol Mangalore Cochin Company CMS/Unocal Indian Gas IOC / Petronas Total / HPCL Al-Manhal/EPICOL Petronet BG Reliance Shell Unocol Tata/Total Enron Finolex Petronet Capacity 5.0 2.5 2.5 2.5 2.5 5.0 2.5 5.0 2.5 2.5 3.0 5.0 2.5 2.5 Projected Start-up 2004 2004 2003 ? 2004 Abandoned 2004 2001 ? ? 2005

A view expressed is that many of the above projects may not finally come-up. Nevertheless the very fact that so many players in the area have shown interest demonstrates the potential in the country for LNG import. With the objective of further promoting the development of the natural gas/LNG sector and to provide for regulation in the monopolistic components of the business such as pipeline transportation and to ensure a level playing field, the Government intends to put in place a gas regulatory framework, which would cover natural gas/LNG sector. Specifically, on the LNG sector, the Government intends to announce an integrated LNG policy covering regulatory, shipping and the taxation aspects. In order to examine the

options for a regulatory framework for the gas industry in India, a study was undertaken by National Economic Research Associates of UK. This report is under consideration of the government of India. Government of India is likely to announce the LNG policy, which has been in consideration for quite some time. Suppliers, Shipping Companies, Importer of LNG, Consumers, lenders and many other in the chain have been eagerly awaiting for this as it has great implication on the cost and funding, and future developments of infrastructure depends on it. The LNG policy is likely to address the issues of rationalization of taxation structure, which constitutes 30-35% of the price and grant of infrastructure status to LNG. The need for policy reforms is proved by the fact that at similar international prices of LNG, other countries like Japan, Korea and many other situated at far long distances from the source of LNG find it attractive amongst other alternative. It may be added that while reduction in LNG price through reduction in liquefaction, shipping and re-gasification costs has taken place during the last decade, it is a continuous process to make LNG a viable fuel. Since India is entering into this business practically for the first time, a careful consideration needs to be given to plan the effective / efficient consumption of LNG to avoid expensive mismatches and the penalties arising out of it. For this purpose a Gas Sales purchase Agreement (GSPA) between Petronet LNG Limited (PLL) and the off-takers of send out gas, which is fundamental document on which the success of whole project depends, must fairly and reasonably (within the operating constraints) address the needs of all parties involved; if it is to endure for the long term. However since no long term contract can address all possible events, which might occur over the time, the parties involved must be committed to working through the various short-term difficulties during implementation specially in India where we have little experience of trade with Take or Pay clauses, which is a typical feature of LNG trade. In this context excellent work is being done to formulate a comprehensive GSPA between Petronet LNG and its Off-takers for utilization of regasified LNG from Dahej terminal. Thanks to the spirit of mutual understanding among the concerned parties that PLL & its Off-takers have successfully finalized the GSPA. Shipping plays a key role in the LNG chain. Development of Indian shipping tankage in this sector is important. Korea is an example in this regard. Petronet LNG has provided an opening for FOB supplies with at least one member of the consortium to be an Indian Shipping Co. Two vessels are now in construction. The use of India flag with similar concessions & incentives as available at ports like Malta, Bermuda etc. need to be extended leading to full fledge FOB imports. LNG Receiving & Regasification Terminals by PLL in India LNG is a highly capital intensive business, the success of which depends to a great degree upon financial commitment and synchronization of activities on the part of supplier, shipper, buyer and end users. Keeping in view the need to meet the large demand of natural gas in the country and the magnitude of investment involved in importing LNG, the Government of India, in July 1997, approved the formation of Joint Venture Company (JVC) for securing competitive LNG supply and for development of facilities for the import and utilization of LNG. As explained above, this JV of leading PSUs is poised to play a significant role in Indian Energy context by contributing towards bringing in additional gas into the country. PLL carried out detailed study report to identify the suitable locations in India, having potential markets for the gas in the vicinity and keeping in view the existing gas infrastructure. Currently in India gas infrastructure exists for production and transportation of about 100 MMSCMD of gas. Most of the transmission infrastructure is installed in the north west of India for transportation of gas to shore from the western offshore fields and the transmission of this gas to end users. By far the largest of the transmission systems is the HBJ (Hazira-Vijaipur-Jagdishpur) line Figure: 2 provides details about the HBJ pipeline system. This pipeline (2,300 km) transverse the states of Gujarat, Madhya Pradesh, Rajasthan, Uttar Pradesh, and Haryana. In addition to the HBJ pipeline, there also exist regional gas grids of varying sizes, in the states of Gujarat (Cambay Basin), Andhra Pradesh (KG Basin), Assam (Assam-Arakan Basin), Maharashtra (Ex-Uran Terminal), Rajasthan (Jaisalmer Basin), Tamil Nadu (Cauvery Basin) and Tripura (Arakan Basin).

Figure: 2

These regional pipelines (about 725 km) were constructed and operated by ONGC, but with the commissioning of the HBJ pipeline in the late eighties, ownership and operatorship of these gas grids were passed on to GAIL. The future requirement of major gas sector infrastructure as well as other facilities would depend upon the mix of modes of gas imports i.e., LNG and pipeline gas. There would be a few permutations and combinations depending upon the mix of LNG and pipeline gas in the total system. Based on this study and the available network of pipelines, two locations namely Dahej in the state of Gujarat (5.0 MMTPA) and Cochin in Kerala (2.5 MMTPA) were finalized. Figure 3 & 5 describe the geographical location of both these terminals.

Figure: 3 (Location Of Dahej Terminal)

Dahej site is a strategic location where many public / private sector companies like GCPTL, IPCL & IndoGulf have developed port facilities. The presence of these facilities offers the advantage of sharing various port related facilities. Also the area, besides having potential for new consumers, has many existing liquid fuel consumers, which are ready to switch over to natural gas. Petronet has awarded the Engineering, Procurement, Construction & Commissioning (EPCC) contract for the Dahej terminal to a consortium led by M/s Ishikawajima- Harima Heavy Industries Japan. Other members of the consortium are M/s Toyo Engineering Corporation Japan, Toyo Engineering India Limited India & Ballast Nedam International Ltd. The construction activities at site are at full swing and the mechanical completion is scheduled for December 2003. Figure: 4 below describe the construction work in progress at Dahej. Figure: 4 (Construction Work of LNG Storage Tank in Progress at Dahej Site)

The terminal at Dahej is unique in the sense that it has a long (2.5 K.M.) jetty due to un-usual bathymetry (a flat beach with the slope being less than 1/600 for first 1700 meters and then suddenly assuming a significant slope of 1/20) and it uses shell & tube vaporizers (using ambient air heat). This is the first time that a base load LNG receiving and regasification terminal will be using ambient air heating of this magnitude for LNG regasification. The use of conventional Open Rack Vaporizers has not been considered on account of long trestle, high tide range & bad quality of seawater where as use of submersible combustion vaporizers (SCV) has been minimized (only for emergencies during cold weather) due to economic and environmental considerations.

Figure: 5 (Location Of Cochin Terminal)

The Cochin site is already a developed port. PLL has already completed various pre-project activities, such as acquisition of land, various approvals from the statutory authorities (including approval from the State pollution control board) and other studies (such as EIA reports, risk assessment, Mathematical & physical modeling). The Detailed feasibility report for the Cochin terminal was prepared by M/s Fluor Daniel & Mitsubishi Heavy Industries. The FEED package has been prepared by M/s Kellogg Brown & Root U.K. (KBR) & M/s Engineers India Limited New Delhi. PLL has currently received prequalification bids for the selection of EPCC Contractor. Gas Supply PLL has followed transparent international competitive bidding process and selected the Ras Laffan Liquefied Natural Gas Company Limited (RasGas) for supply of 5 MMTPA LNG at Dahej & 2.5 MMTPA LNG at Cochin. This selection was based on the strong commercial proposal, which was jointly submitted by RasGas and Mobil LNG Inc. PLL has already signed Sales Purchase Agreement with RasGas for 25 years on FOB basis. The supply alliance with RasGas and Mobil (Now Exxon-Mobil) provides numerous fundamental advantages, which pass through to the consumers. Inherent economic advantages resulting from the geographic proximity of Qatar to India, the cost-effective expansion of existing liquefaction facilities and largest size new LNG trains have resulted in a supply package from RasGas, which could not be matched by any other supplier. Figure 6 demonstrates the distance advantage to Qatar (& other middle eastern countries) to supply gas to India. Besides, the large gas reserves base in Middle East countries gives a greater confidence on reliability of long term supply of LNG to India. The North field in Qatar is one of the biggest gas fields in the world and thus Qatar has a long potential for development of these gas reserves

Figure: 6 Source of LNG Supply - PLL


Ras Laffan Das Island

Qualhat Bal Haf Dahej Cochin MLNG Tiga

1300 Nm


1700 Nm

2400 NM

3050 NM



PLL has decided to go for Time Charter route for meeting the shipping requirement for transporting LNG from Qatar to Dahej & Cochin. A 25 years agreement has been made with the consortium of Mitsui O. S. K. Lines - Japan, NYK Line - Japan, K Line - Korea and Shipping Corporation of India for charter hire of two LNG Tankers of capacity 138,000 M3 for meeting the shipping requirement for Dahej terminal. Additional LNG Tanker shall be charter hired for Kochi terminal. The Mitsui O. S. K. Lines led consortium has executed shipbuilding contract with M/s Daewoo Shipbuilding & Marine Engineering Co. Ltd., South Korea for construction of two LNG Tankers.

Financing of the Project

The financing for the project (Dahej terminal) is in final phase and shall be based on limited recourse project finance basis. With this objective PLL has worked towards having bankable agreements, which allocate the project risks appropriately. PLL has appointed ABN Amro Bank for taking PLL towards financial closure. The construction work for the project has been started based on a bridge loan based on the guarantees provided by the promoting companies.

Operation & Maintenance of the terminal

PLL is considering awarding the initial operation and maintenance of the Dahej terminal to a company with sufficient experience in operation of LNG receiving & regasification terminal. Later when PLL personnel gain sufficient experience the operation & maintenance of the terminal will be taken over by PLL. This methodology is also to satisfy the requirement of the lenders for the project to have the operation & maintenance by an operator experienced in operating similar terminals.

In conclusion it can be said that LNG could be an efficient and environment friendly fuel, which shall go a long way in sustainable development of economic growth for India during the decades to come. The timings for development of LNG import facilities in India are most suitable now with many potential LNG exporters eyeing on most populous states of China and India. The announcement of the LNG policy

(which is expected to happen soon), would give a big confidence to Suppliers, Shipping Companies, Importer of LNG, Consumers, Lenders and many other in the chain those who have been eagerly awaiting for this as it has great implication on the cost and funding, and future developments of infrastructure depends on it. The demand of gas is there in India, supplies are available internationally and the policies that will nurture and encourage gas demand growth are in the offing. What is needed is the concerted efforts and vision to make LNG import in India a success. Creation of Petronet LNG Limited (PLL) is a first step in the right direction and will go a long way in the Indian Energy context. PLL has already done extensive work regarding development of first LNG receiving and regasification terminal at Dahej and pre-project work for the second terminal at Cochin is in progress. PLL has succeeded in organizing these projects in spite of difficulties stemming both from the competitive environment and intrinsic project conditions. In the end the authors would like to suggest that concerted efforts by all the parties involved in the LNG chain, such as seller (RasGas), buyer (PLL), transporters (GAIL), distributors (GAIL, BPCL & IOCL), promoters (ONGC, GAIL, IOC & BPCL) and Gaz de France (initially as strategic partner and now also the equity holder) have resulted in a successful culmination of the efforts in the shape of two receiving terminals. The new LNG chain presents certain typical characteristics such as Technical Design to fit with unusual maritime conditions, Gas Marketing managed by reduced number of off takers, Equity Structure of the JV company shared between major domestic & foreign companies and the Financing based on project financing with the required level of comfort on the project provided to the banks.