South Asia as a market for Russian NG
Natural Gas Demand – General Trends1
Both China and India are emerging as major gas users, although their energy mixes seem certain to be dominated by coal for the foreseeable future. Both countries will be able to import around 30 bcm of LNG within the next few years on the basis of regasification terminals being built and contracts concluded. both could exceed 100 bcm of annual gas consumption in the near to medium term, bigger than any OECD European or Pacific gas user.
Natural Gas Supply – General Trends
Russia, Qatar and Iran are the three most important reserve holders in the world. Together they represent more than half of total proven gas reserves, but so far they account for only 27% of world production and consume 19%.
For Russia, the world’s largest gas reserve holder, the new production area of Yamal will be crucial to maintaining or expanding production and exports; other major new fields, like Shtokman, now look unlikely before 2015.
Qatar is dramatically expanding its gas exports, but its self-imposed moratorium will limit new growth in output until 2015, or even later.
Iran is a very large gas producer and user, but production increments is expected to meet growing domestic demand. Significant exports by pipeline or LNG before 2015 is unlikely.
As of late 2009 or early 2010, Turkmenistan will no longer be as reliant on export routes for Russia with the scheduled opening of a large-volume
November 18 2009
Israel – the New Gateway for Russian NG
to the Far East
export route to China, in addition to the existing smaller capacity link to Iran.
Russian reserves can meet with the growing far east demand. By linking a very big NG potential consumers, India and China, to Russian supply capabilities, the future supply gap could be reduced.
India – NG market overview
As in China, gas plays a small part in India’s energy needs, barely 5% of total primary energy supply. But demand has been growing rapidly, despite being constrained by a lack of gas availability. Since 2003, gas use had increased by more then 60%. Main consumption of NG comes from the fertilizer industry, as well as the power generation sector which represents mor then tow-thirds of total gas demand. Around 700,000 vehicles have been converted to NG, accounting for more than 3% of gas use.
Gas supply is expected to rise sharply in the next few years. doubling of domestic output, and an increase in LNG import terminal capacity from 13 bcm in 2007 to 30 bcm by end-2009, potentially opening the way to a near doubling of gas use in India in the short term. Today, LNG represents around 28% of total demand.
Domestic production has been relatively stable over the past five years. Most of the gas has been produced by Oil and Natural Gas Corporation (ONGC), Oil India and Joint ventures of Tapti, Panna-Mukta and Ravva. Most of the output comes from Western offshore fields while some onshore fields are located in the Assam, Andhra Pradesh and Gujarat States.gas production is expected to increase substantially in the short term, thanks to Reliance Industries’ field Krishna-Godavari, whose production is expected to add 30 bcm supply, doubling domestic gas production over the next few years.
Additional gas production is also expected from six fields under implementation by ONGC although no date has been announced so far.
As gas consumption in India is growing at between 6 to 8 percent a year, the domestic production of NG of 30 bcm could not cover the total demand. The following table shows the growing forcasted demand in India for NG:
Demand (bcm per year) 1999-2000
40.22001-2002
55.12006-2007
84.32011-2012
114.22024-2025
142.7The Indian gevernment has set objectivs to cover the demand-supply gap for natural gas by: creating additional infrastructure for distribution and marketing of gas; and encourage importing LNG and investments in LNG facilities.
Pipeline imports seems unlikely before 2015. The Myanmar-Bangladesh-India pipeline project seems to have been cancelled. The Iran-Pakistan-India pipeline has no real progress, because of Indian concerns over pipeline security in Pakistan. The Turkmenistan-Afghanistan-Pakistan-India is also advancing slowly, and is expected to be operational in 2015.
Regarding LNG importing infrastructure, three LNG receiving terminals are presently active; Dahej (opened in 2004 and expanded to 17BCM In 2009), Hazira (opened in 2005, and expanded to 4.9BCM in 2008) and Dabhol (opend in April 2009, and has a maximum capasity of 6.8 bcm). An additional terminal is currently under construction; in Kochi, and is expected to open by 2010.
As shown in the map above, all LNG import facilities are connected to a land pipeline grid, planed to double its length to 13,000 Km in the next 3 years. In the following years, cities such as Pune, Kota, Indore and Gwalior are planned to be connected to the gas pipeline grid.
LNG Supply – General Trends
Notwithstanding the massive increases in capacity that will be seen in the next few years from projects under construction, very few new projects have been sanctioned in recent years (projects that did not reach FIDs in 2008, as previously targeted include Gorgon and Ichthys, Australia, Nigeria LNG Seven Plus, Brass LNG, and a Flex LNG project, Nigeria).
Unless 2009 and 2010 see a number of new project approvals, there will be a dearth of new capacity in the period after 2012.
Globally and specifically in Asia, there is nearly twice as much regasification capacity operating or well under construction, compared to liquefaction capacity. This imbalance is likely to remain an ongoing feature of the LNG trade well into the medium term.
Country Operation Construction Total
China 9 22 31
Chinese Taipei 28 28
India 22 8 29
Indonesia 0
Japan 244 1 244
Korea 90 19 109
Pakistan 0
Phillipins 0
Singapore 0
Thailand 7 7
Asia total 393 56 449
Region Operation Construction Total
Asia 108 13 121
Middle East 74 62 136
Total 182 75 257
Regasification terminals
Liquefaction terminals
In addition to the substantial LNG producing capacity of Qatar and Iran, LNG to Far East Asian countires is also sourced from the following:
a. Yemen LNG (YLNG) is to ship the first cargo from its first 4.6 bcm train in the beginning of 2010, a delay of more than a year. The second train is expected to begin operation several months later. As its FID was made in August 2005, and construction started in October that year, just before the global EPC market crunch began to plague the industry, the cost overrun for the project is thought to be smaller than those experienced recently at other LNG projects in the world.
About one-third of the LNG is planned to go to Korea with remaining volumes contracted by Total and GDF SUEZ, both of which have multiple outlets for LNG.
b. The Indonesian Tangguh venture has a contract of 3.5 bcm, with the promoters of China’s Fujian terminal. Other long-term sales deals from the venture include two Korean sales (Posco and K-Power –
Baja California. Tohoku Electric, who currently buys 1.1 bcm from Indonesia’s Arun through 2009, signed, in May 2008, a purchase agreement for 0.16 bcm from the Tangguh venture for a period of 15 years from 2010.
c. The Australian Pluto facility has a planned capacity of 6.5 bcm. The Pluto field located in Western Australia was discovered in 2005. Along with the neighbouring Xena field, it holds reserves of 5 tcf (143 bcm).
The FID was taken in August 2007. The project is underpinned by 15- year sales agreements with Japanese Kansai Electric and Tokyo Gas.
The main suppling LNG routes availble for India, are mainly Through the Persian Gulf (can be seen in the map in Appendix 1)
Advantages of Russian Sourced LNG via Israel vis-à-vis Competing Sources The goal of the proposed project is to enable access of Russian natural gas ("NG") to South Asia markets. Delivering Russian NG to South Asia is possible either by land to China, or by sea, through the Indian Ocean. The preferred route to South Asia for natural gas originating in Central and East Russia is through the Middle East and the Indian Ocean.
This project would capitalize on following market situation:
Iran and Egypt are struggling with achieving substantial production for local consumption
Qatar has imposed moratorium on export
Turkmenistan to export to China and Iran
Qatar, Nigeria and Algeria recently experienced incidences of "force majeure" supply problems
Bolsters Gazprom's present position in Asian LNG market (presently exporting to Japan from Sakhalin II Project)
Indonesia has failed to meet LNG supply commitments to Asian customers since at least 2002 as reserves in several fields feeding its existing plants in Bontang and Arun in Aceh province declined faster than expected while domestic demand rose
As energy demands rise and exports from Indonesia and other sources become problematic, LNG importers are looking for alternatives. Russia can supply NG to energy demand regions by using its massive pipeline infrastructure (Appendix 2)
Israel as a route to Asia
Israel can serve as a relatively short land course between the Mediterranean Sea and the Indian Ocean, via the Red sea. The statutory authorized 250km oil pipeline route, connecting Eilat with Ashkelon, can be used as a land bridge, connecting marine pipeline to LNG facility to be located in close proximity to the Red sea.
Tow new gas fields were discovered recently near the coast of Israel, which contain approximately 218 bcm of NG, and will be connected to the Israeli gas grid. These reserves can support the growing demand and become an additional commercial LNG source. The new gas fields discovered, seems to set a very high potential for the area around it. As Charles Davidson, Nobel Energy president and CEO, described the project as the biggest one in the company's history and the high potential of the area, shortly after the field discovery.
The project entrepreneurs had started negotiating with the Israeli project owners, regarding the possibility of future cooperation, including supply of NG from existing fields.
Proposed project
Four main components construct this project:
a. A land pipeline, connecting Russia-Turkey Blue stream pipeline to the mediterranean coast (appr. 400km)
b. A marine pipeline, connecting Turkey's Mediterrenean coast to Ashkelon appr. 650km)
c. A land pipeline, connecting Ashkelon to Eilat region (appr. 250km) d. 20 BCM LNG liquefaction facility on the coast of the Red Sea
The project is expected to be operatinal on 2015-2016.
Appendix 1
Main suppling routes for LNG to India:
Appendix 2
Russian pipeline ifrastructure and production regions:
