Fundamentals of LNG trade

byBS Negi

Index• What is LNG• Why LNG• Role of LNG in World Gas Trade• LNG Value chain• LNG production• Process• Economics• LNG regasification• LNG Indian scenario

What is LNG

• LNG means Liquefied Natural Gas• It is colorless and Odorless• It has a temperature of (-)161 Degree Celsius• It is at atmospheric Pressure• Density of LNG 0.5 approx.

Why LNG

• Many countries have large Natural Gas Reserves• Many countries produce more Natural Gas than they consume• Countries want to earn from natural gas trade• International Gas business can be done by:

Pipelines LNG CNG

• Countries connected by pipelines can do business by pipelines and LNG• Countries nor connected by Pipelines do gas business by LNG

During 2010Global Gas Consumption -3169 BCM Total Gas traded -975.22 BCM- 30.85%, (876.54 BCM (29.8%, during 2009) LNG share of Global Trade - 297.63 BCM- 30.5%, (242.77 BCM, 27.7%) During 2009

• Benefits of trade by LNG Large market reach Good, better price realization

• Supplier and buyers need ocean connectivity

Role of LNG in World Gas Trade

• Earning for Gas rich countries• Better realization of value for Gas• Energy Resource for Energy Starved Countries-

Japan, Korea• Economic Growth for both countries

LNG Value chain

• Gas Production Conventional E&P CBM Shale Gas

• Gas Treatment Suitable for Pipeline Transportation Suitable for LNG making (Liquefaction)

• Gas Liquefaction• LNG storage• LNG Transportation (Shipping)• Gas receiving facilities(Marine facilities)• LNG Storage• LNG Vaporization• Gas send-out • LNG By tankers

LNG Production- Process

• Purify Natural gas• Gas Liquefaction Process- to cool Natural Gas to

Liquefaction temperature by expansion ( Joule Thompson effect) and or Refrigeration process ( Heat Transfer Process)

• Process providers• APCI• BHP• Black & Weatch• Cascade• Lurgi

LNG Production- Economics

• Normal plant size- 2.5 mmtpa to More than10 mmtpa• Train size 2.5 to 8 mmtpa• Typical 8 mmtpa plant may cost $800 m to $1000 m• Typical Liquefaction cost may vary from $1.5/mmbtu to

$2.5/ mmbtu• Factors for achieving Economy:

Long term gas sourcing Economy of scale Efficient Liquefaction Technology Marine facilities Matching Storage facilities

LNG Regasification

• Marine facilities Jetty- with or without Break water Loading/unloading arms

• Storage• Regasification• Heating Process-

Fired heaters Sea water heating Air heating Combination vapourisation

• Economic considerations Utilize cold energy of LNG Use condenser water for heating Use Sea water for heating Least use of fired heaters

• Readiness of evacuation system(Pipelines)

LNG Indian scenario• Has 2 operating terminals- Dahej and Hazira with 13.65

combined capacity• Has 3 Long term LNG Contracts- Qatar, Iran, Australia • All with Oil parity pricing• About 40 mmscmd gas used as LNG

• New initiatives: Sourcing from US cheaper than Gulf countries GAIL signed contract for 3.5 mmtpa with Sabine Pass Liquefaction

LLC , a subsidiary of Cheniere Energy Macquarie Energy Freeport Project, 2.0 mmtpa planned

• Status of other terminals

LNG Terminals StatusSN LNG Terminal Owner Capacity Expansion Remarks

1 Dahej PLL 5 5 Commissioned in 2004, Promoters GAIL,BPCL,IOCL,ONGC

2 Hazira Hazira LNG 2.5 1.17 + 1.33 Commissioned in 2005, Promoters Shell=74%, TOTAL =26%

3 Dabhol RGPPL 5 5 Scheduled commissioning 1H, 2012; Promoters are GAIL,NTPC, Maha Genco and Landers

4 Kochi PLL 2.5 2.5 Commissioning 2H- 2012, Promoters GAIL,BPCL,IOCL,ONGC

5 Mundra GSPC+Adani

5 - Commissioning by 2016

6 Pipavav Swan Energy 2.5 - FSRU, Planning Stage

7 Dighi Hiranandani 5 - Planning Stage

LNG Terminals Status..SN LNG Terminal Owner Capacity Expansion Remarks

8 Ennore IOCL + TIDCO 5 - Planning stage, MOU signed

9 Dhamra IOCL, GAIL, PLL

5 - Planning stage, GAIL plans for FSRU

10 Mangalore ONGC + HPCL 5 - Planning stage, MOU signed

11 Haldia SRM Exploration

2.5 - GAIL, GSPC and Hiranandani are also pursuing

12 Gopalpur GAIL 5 - Planning Stage, PLL also interested

13 Okha 2.5 - FSRU, Planning Stage

14 Okhamadhi GVK Power Infrastructure

2.5 - Planning Stage

15 Gangavaram PLL 5 - Planning stage

Total 62 15 By 2012= 21.17

LNG Contract Negotiation• Supplier Facilities• Gas Composition• Gas Quantity• Contract period• Destination for delivery• Change of destination• Price Parity• Pricing Formula• Buyers facilities• Condition precedence• MGO• Make up Quantity• Yearly Scheduling• Payment Mode• Applicable Laws• Force Majeure• Contract Closure• Fore Closure provisions• Penalties• Arbitration

LNG Suppliers* Upcoming

SN Co11untry SN Country

1 Qatar 12 Equatorial Guinea

2 Egypt 13 Norway

3 Algeria 14 Russia

4 Libya 15 Malaysia

5 Nigeria 16 Indonesia

6 Peru 17 Brunei

7 Trinidad & Tobago 18 Australia

8 Alaska (US) 19 Papua New Guinea*

9 Oman 20 Brazil*

10 Abudhabi 21 Canada*

11 Yemen 22 Angola*