Fundamentals of LNG trade

by BS 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 CountriesJapan, 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 Utilize cold energy of LNG Use condenser water for heating Use Sea water for heating Least use of fired heaters

Economic considerations

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 Status

SN LNG Terminal Owner Capacity Expansion Remarks

Dahej

PLL

Commissioned in 2004, Promoters GAIL,BPCL,IOCL,ONGC Commissioned in 2005, Promoters Shell=74%, TOTAL =26% Scheduled commissioning 1H, 2012; Promoters are GAIL,NTPC, Maha Genco and Landers Commissioning 2H- 2012, Promoters GAIL,BPCL,IOCL,ONGC Commissioning by 2016
FSRU, Planning Stage Planning Stage

Hazira

Hazira LNG

2.5

1.17 + 1.33

Dabhol

RGPPL

Kochi

PLL

2.5

2.5

5
6 7

Mundra
Pipavav Dighi

GSPC+ Adani
Swan Energy Hiranandani

5
2.5 5

LNG Terminals Status..

SN 8 9 10 11 LNG Terminal Ennore Dhamra Mangalore Haldia Owner IOCL + TIDCO IOCL, GAIL, PLL ONGC + HPCL SRM Exploration Capacity 5 5 5 2.5 Expansion Remarks Planning stage, MOU signed Planning stage, GAIL plans for FSRU Planning stage, MOU signed GAIL, GSPC and Hiranandani are also pursuing

12
13 14 15

Gopalpur
Okha Okhamadhi Gangavaram Total

GAIL

5
2.5

15

Planning Stage, PLL also interested

FSRU, Planning Stage Planning Stage Planning stage By 2012= 21.17

GVK Power Infrastructure PLL

2.5 5 62

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 1 2 3 4 5 6 7 Co11untry Qatar Egypt Algeria Libya Nigeria Peru Trinidad & Tobago SN 12 13 14 15 16 17 18 Country Equatorial Guinea Norway Russia Malaysia Indonesia Brunei Australia

8
9 10 11

Alaska (US)
Oman Abudhabi Yemen

19
20 21 22

Papua New Guinea*

Brazil* Canada* Angola*