GAIL (India) Ltd a Maharatna Company

GAIL (India) Ltd A Maharatna Company

IGU Task Force 2 Meeting India Case Study

. Seventh largest country by area . Second most populous country with more than 1.3 billion people . A federal republic governed under a parliamentary system and consists of 29 states and 7 union territories . One of the world's fastest-growing economies • Third-largest economy by purchasing power parity (PPP) • Sixth-largest economy by market exchange rates (Nominal GDP) • Low GDP per capita compared to other major economies

15-04-2019 © GAIL (India) Limited 2 India Economic outlook is expected to remain strong in coming years

. India is currently the fastest-growing G20 US 19.39 China 12.24 economy growing over 7.3% Japan 4.87 Germany 3.68 . Indian economy has become world's sixth-biggest UK 2.62 Indian GDP was half of economy (nominal) in 2018 suppressing France India 2.61 France 10 year’s ago France 2.58 . India’s economic growth begins at low level of Brazil 2.06 Italy 1.93 GDP 2017 (USD Trillion) resources utilization and GDP growth can be Canada 1.65 raise by better employment of excess resources 0.00 5.00 10.00 15.00 20.00 25.00 with existing technologies. Per capita consumption ($) . According to a 2019 Standard Chartered report, 59532 38428 44470 39720 38477 45032 Indian economy is expected to become 2nd biggest 31953 8827 1940 9821

overcoming US by 2030 US China Japan Germany UK India France Brazil Italy Canada . Investment and exports, supported by the India’s growth has been driven by an increasing smoother implementation of GST are becoming share of investment and exports, with a large major growth engines contribution from increased consumption

Source: World Bank 2018/ Industry Report/ Forbes Study 15-04-2019 © GAIL (India) Limited 3 Indian Energy basket is heavily fossil fuel dependent

World (2017) India (2017) Fuel type 13,511 MMTOE 754 MMTOE

Oil 34% 29.47% 62 86% Coal 28% 56.3% % Natural Gas 23% 6%

Hydroelectricity 7% 4%

Nuclear Energy 4% 1%

Renewables Source: BP Statistical Review4% of World Energy June 2016, BP Energy Outlook 2018 3% BP Statistics 2017 data

Fuel Consumption India’s Global Rank in 2017-18 . India’s primary energy consumption rose 5.7% CAGR in last 10-years Coal 2nd . 5.6% share of global energy consumption 3rd Oil . Energy mix dominated by fossil fuels Hydel / Nuclear / Renewables 7th Natural Gas 14th

Source: BP Statistical Review 2018 15-04-2019 © GAIL (India) Limited 4 India Energy Sector remained one of the key driver of global growth

60% 57.9% 56.2% 56.3% Growth Rate: Primary energy consumption growth - 4.6% 50% Coal consumption growth - 4.8%, Largest increment in the world 40% 30.1% Electricity generation growth - 5.6% 29.5% 30% 28.6% Renewables power growth - 20%, its largest increment ever, 5th largest contributor to the 20% global growth in renewables 6.0% 6.2% 10% 6.1% 4.0% 2.9% 1.3% 4.4% 1.9% 1.1% 4.1% 1.2% 2.5% 0% Oil Natural Gas Coal Nuclear Energy Hydro electric Renewables

Energy mix 2015 Energy mix 2016 Energy mix 2017

Source: BP Statistical Review 2018 15-04-2019 © GAIL (India) Limited 5 India’s Energy Outlook for 2040 projects India in centre of global demand

. India's demand growth of 165%, nearly +165% 11% +184% three times the overall non-OECD growth Growth in India’s Share of Global Growth in India’s of 61%, also outpaces each of the BRIC energy Consumption energy consumption energy production countries: China (+41%), Brazil (+60%), in 2040 and Russia (+6%) 22% . Share of coal in the energy mix falls from 57% in 2016 to 50% by 2040, while the Share of renewables in share of renewables rises from 3% to 13% total production in 2040 . Power consumption more than trebles India’s energy consumption fastest among all the (+241%) & while coal remains the dominant major economies by 2040 with coal contributing most fuel source, its share of generation drops to meeting this demand followed by renewables from 77% in 2016 to 64% in 2040 as . India’s energy consumption to grow by 4.2% p.a., faster renewables rise from 5% to 23% than all major economies in the world . Energy production as share of consumption . Renewables to become 2nd largest source of domestic to increase from 56% in 2016 to 60% by energy production overtaking gas & then oil by 2020. 2040 while imports rise by 141%

Source: BP Energy Outlook 15-04-2019 © GAIL (India) Limited 6 Indian Gas Sector & GAIL

15-04- © GAIL (India) Limited 7 2019 Overview: GAIL (India) Ltd

India’s No. 1 Natural Gas & Youngest Maharatna Company with presence across gas value chain

• 11,500 Km of network • 2 Petrochemical plants • 6 Gas Processing • Participation in 11 • 118 MW Wind Power (206 MMSCMD) across India Plants producing LPG, blocks (operator - 2) Plant and 11 MW Solar Propane, Pentane, Power Plant • Konkan LNG (5 MTPA) • Sales : 1 MTPA+ • Presence in Myanmar Naphtha etc. • Participation in RGPPL • Long-term Import • Domestic market share • Shale asset in US ~ 15% • LPG Transport Capacity (Capacity 1967 MW) Portfolio: 24 MMTPA 3.8 MMTPA (2038 Km.) • Domestic portfolio: 15 MTPA

Operates Contribute s more Produces Responsible for Produces every Supplies gas for Supplies gas for Operating more than than about about 3/4th 1/6th 1/6th 21st 2/3rd 3/5th 3/5th 3/4th of the total NG of the polyethylene of India’s total LPG LPG Cylinder of India’s total CNG transmission in India of the natural gas produced in India transmission in India of India’s fertilizer of India’s gas based stations through sold in India produced power alliances 15-04-2019 © GAIL (India) Limited 8 GlobalGlobal Presence Presence

USA CHINA China Gas . GAIL Global (USA) Inc MYANMAR . Eagle Ford Basin EGYPT . A1 & A3 E&P Blocks

. Equity in 2 Retail Gas GAIL Global (USA) LNG LLC . Myanmar- China Gas Companies . Dominion Cove Pipeline (SEAGP)

. Sabine Pass . Office in Yangoon SINGAPORE GAIL Global (Singapore) Pte. Ltd

9 15-04-2019 © GAIL (India) Limited 9 Subsidiaries and JVs

Subsidiaries Joint Ventures

CGD JVs (10) Other JVs (6)

. GAIL Gas Ltd. . IGL . Petronet LNG Ltd . Brahmaputra Cracker and . MGL . RGPPL Polymer Limited . Avantika Gas Ltd. . BGL . Konkan LNG Pvt. Ltd . GAIL Global Singapore . Central UP Gas Ltd. . GAIL China Gas Global . GAIL Global USA . Green Gas Ltd. Energy Holdings Ltd. . MNGL . GAIL Global (USA) LNG LLC . OPaL . TNGCL . Vadodara Gas Ltd . TAPI Pipeline Co. Ltd . Bengal Gas Ltd . Talcher Fertilizers Ltd 15-04-2019 © GAIL (India) Limited 10 Indian Natural Gas Consumption and its share in Energy Mix

10.5% 10.1% Vision of Indian Government 9.7% 8.9% 7.9% 7.1%

6.6% 6.2% 6.0% Increase share of Natural Gas in 165.8 India’s Energy basket 147.7 142.5 134.2 139.1 144.0 132.4 128.6 130.7 94.6 Create infrastructure to support higher consumption of Gas in India

FY09 10 11 12 13 14 15 16 17 18 Establish a transparent and vibrant Natural Gas market in India Gas Consumption (MMSCMD) % of Energy Mix

15-04-2019 © GAIL (India) Limited 11 Gas consumption pattern (2017-18) shows dominance of anchor sectors i.e. Power and Fertilizer

Sector-wise Break-up Gas-wise Break-up Volume in MMSCMD

40, 28% 48, 33% Fertilizer Others 73, 51% 71, 49%

Fertilizer

Power

CGD Domestic 33, 23% RLNG 23, 16% Others Power CGD Gas consumption during FY (2017-18), ~144 MMSCMD

Power and Fertiliser - Anchor Markets Source: PPAC Industrial and City Gas - Growing Markets

* Others includes Refinery, Petrochemicals, LPG, IC and Manufacturing etc. © GAIL (India) Limited 12 LNG has found place in price sensitive Indian market

180 60% 162 160 155 50% 51% 144 50% 45% 144 140 134 139 128 126 12441% 128 120 112 113 38% 40% 104 103 100 94 29% 28% 27% 30% 79 30% 80 74 74 73 73 22% 22% 69 68 70 71 58 60 20% 49 51 42 40 36 40 30 29 32 10% 20

0 0% 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

Total Sales Domestic gas Available for sale LNG Import Share of LNG

15-04-2019 © GAIL (India) Limited 13 Global LNG Trade and India

Exporting countries 18 Importing countries 36 Global liquefaction capacity (MTPA) 369 Global liquefaction capacity under construction (MTPA) 92 Global R-LNG facility (MTPA) 935 Global LNG Trade in 2017 (MT) 293 Spot/ Short term Trades ~ 30% (MT) 88 LNG demand in Asia (73% of global trade) 214 Global LNG shipping vessels 478

India is 4th largest LNG importer ( 21 MTPA or 7.2% of global trade )

Source: GIIGNL 15-04-2019 © GAIL (India) Limited 14 Gas pipeline infrastructure in India in still in growing stage

Pipeline Under constn. Existing Length (kms) & Approved

All India P/L length ~ 16,900 12,800

GAIL P/L length 11,400 5,300

15-04-2019 © GAIL (India) Limited 15 Re-gasification Terminals in India (Existing and Upcoming)

5 mmtpa Existing LNG Terminal 5 mmtpa MUNDRA Upcoming LNG Terminal DAHEJ DHAMRA 15 mmtpa CHHARA HAZIRA 5 mmtpa 5 mmtpa DABHOL KAKINADA Regasification Capacity (MTPA)

JAIGARH 3 mmtpa Under 1.5 + 3.5 mmtpa Existing Planned Construction ENNORE 26.5 21.5 8.0 3 mmtpa 5 mmtpa Total : 56 MTPA / 200 MMSCMD

5 mmtpa KOCHI 15-04-2019 © GAIL (India) Limited 16 Initiatives for providing energy access for all

15-04- © GAIL (India) Limited 17 2019 Govt. focus on Natural gas: increase share of gas in Energy basket to 15%

. Bidding of additional cities for CGD . 100% allocation of domestic gas for domestic PNG and CNG segments for faster roll out . Extension of CGD programmes to Smart Cities . Infrastructure development through VGF, assured throughput, better tariff mechanism . Doubling of regasification capacity by 2022 . Development of Gas Infrastructure in Eastern part of the country . Huge investments planned across Indian Natural Gas value chain (~ $ 22 billion .) • Creation of NGG ~ $ 8.5 billion with additional 12,800 kms of pipelines • LNG terminals: $ 3.5 billion (capacity ~ 56 from 27 MTPA). • Fertilizer Plants (4 revival units, 1 expansion unit, 1 greenfield): $ 4.5 billion • City Gas Distribution : $ 5.5 billion in ~ 170 GAs

15-04-2019 © GAIL (India) Limited 18 15% Share of Gas in Primary Energy Mix – What it Translates to

 As per projections from BP Energy Outlook, IEA and IESS 2047, gas consumption is likely to grow at CAGR of around 6% from 2015 to 2030 with marginal change in share in primary energy basket

 Consumption will increase from ~144 MMSCMD in 2017 to ~350 MMSCMD in 2030

 To achieve gas share of 15% in primary energy mix, a CAGR of 10% in gas consumption needs to be achieved which implies >600 MMSCMD consumption of gas by 2030

IESS : India Energy Security Scenarios 19 Steps taken for increasing domestic gas production

. Introduction of Hydrocarbon Exploration and Licensing Policy (HELP)/ Open Acreage Licensing Policy (OALP) replacing NELP/PSC . Introduction of Discovered Small Field Policy (DSF) Policy for early monetization of un-monetized discoveries of National Oil Companies (NoCs) . Introduction of New Domestic Natural Gas Pricing Guidelines, 2014 to market link price of domestic natural gas to the international prices . Marketing freedom including pricing freedom for the gas produced from discoveries in High Pressure-High Temperature (HPHT), Deepwater & Ultra Deepwater in 2016 subject to a ceiling price on the basis of landed alternative fuel. . Pricing and marketing freedom to producers of natural gas from coal seams (CBM) in 2017 . Market based pricing of domestic gas is being proposed by virtue of creation of Natural Gas Exchange /Hub

15-04-2019 © GAIL (India) Limited 20 Demand simulation in downstream sectors

. Policy for pooling of gas in Fertilizer (Urea) Sector . Support from Power System Development Fund (PSDF) for operationalization of stranded gas based generation for 2015-16 and 2016-17 . 10 million households to PNG by 2020 . Promoting CGD to divert LPG from urban to rural areas • 9th and 10th round of CGD bidding covering 136 GAs covering 50% of India’s population and 42% of the area . Construction of LNG terminals in Eastern Coast of India . Construction of Jagdishpur-Haldia-Bokaro-Dhamra pipeline (JHBDPL) with capital subsidy – project popularly known as Urja Ganga with an investment of USD 1.9 Billion . Formation of Indradhanush Gas Grid Ltd, to develop North East India Gas Grid of about 1656 Km with an estimated investment of USD 1.3 billion

15-04-2019 © GAIL (India) Limited 21 Creation of gas infrastructure - National Gas Grid

Pipelines KM Timeline

GAIL existing Pipelines 11400 Operational

Others existing P/L 5500 Operational

Total Existing P/L 16900 Operational

Under Construction - 5681 2021-22 GAIL & JV Under Construction - 1656 2022-23 Indradhanush (NE grid) Pipeline authorized by 7756 Beyond 2022 PNGRB

Envisaged Pipelines 3270 Beyond 2022

By 2022- 23 Total NGG 35263 GAIL existing P/L & beyond Others Existing P/L GAIL & JV Under Const. P/L Arterial Grid expected to be in place Bid out P/L authorised by PNGRB by 2023 & beyond Envisaged P/L 15-04-2019 © GAIL (India) Limited 22 End consumer connectivity through CGD

% Area of India % Population of India Geographical Areas (GAs)

80 250 228

70 70 200 178 60

50 53 150 46 40 92 86 35 100 30 79 80 62 20 54 45 36 39 20 50 30 17 17 18 15 10 13 (GAs) AREAS GEOGRAPHICAL CUMULATIVE 11 9 10 10 11 9 10 10 CUMULATIVE % OF AREA and POPULATION OF INDIA POPULATION and AREA OF % CUMULATIVE 3 3 3 4 6 7 0 0 Pre-PNGRB Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8 Sec. 42 Round 9 Round 10 (2009 (Oct '08) (Feb '09) (Jul '10) (Sept '13) (Jan '15) (Oct '15) (Jun '16) (Nov '16) (Mar '18) (Apr '18) (Nov '18) Onwards)

As on September, 2018 Domestic PNG Connections 4,674,168

Commercial PNG Connections 26,468

Industrial PNG Connections 8,114

Total PNG Connections 4,708,750

CNG Stations 1,450

Pipeline Infrastructure (Inch-km) - Steel 46,755

Pipeline Infrastructure (Inch-km) - MDPE 105,245

Gas consumption in CGD 23 MMSCMD

Natural Gas Pipelines  In Operation : 16,900 km

 Under Construction : 12,800 km

LNG Terminals

 Existing Capacity – 26.5 MMTPA

 Under Construction – 21.5 MMTPA 1) Mundra 2) Ennore 3) Dhamra 4) Dabhol Expansion & Break-water 5) Jaigarh

 Planned – 8 MTPA a) Kakinada FSRU b) Chhara 15-04-2019 © GAIL (India) Limited 25 Prime Minister Ujjwala Yojana (PMUY) for BPL households

. In 2016, out of 240 million Indian households, about 100 million households relied on biomass as primary fuel for cooking 714 Districts . PMUY launched in May, 2016 with an aim to provide covered additional 50 million LPG connections to BPL (bellow poverty line) families . Initial budget: USD 700 million. Target was revised 72 Million PMUY to 80 million LPG connection with revised budget of connections USD 1.1 billion released . Scheme added 72 million consumers across 714 LPG districts in India penetration increased . 3 states and 5 Union territories become Kerosene from 62% in (SKO) free 2016 to 90% . Guinness record in Direct Benefit Transfer (DBT) of LPG subsidy - PAHAL 15-04-2019 © GAIL (India) Limited 26

‘Saubhagya’ - Electricity for All by 2018

. PM ‘Saubhagya’ scheme was launched in on 25th Sep 2017 with an investment of USD 2.3 billion to electrify nearly 30 million homes . The scheme aims to provide 24X7 electricity to all willing households . Central government to provide funds to states and union territories to undertake electrification of all areas . Families eligible for free electricity connection were identified using Socio-Economic and Caste Census (SECC) 2011 data . Households not covered by SECC data and are un-electrified are provided electricity connections under the scheme on payment of ~7 USD, which was recovered by DISCOMs in 10 instalments through electricity bill . Under this scheme, a subsidy on equipment like transformers, meters and wires shall also be provided . Under this scheme, 25 states had brought electricity connections to 100% of their households

. Fall in domestic production from ~125 to ~70 mmscmd from 2011 in 2017 Domestic gas . No large domestic discovery in recent years supply

. Low pipeline utilization (48% pan India), New pipelines additions slow Infrastructure . Acquisition of RoU/RoW

. Polluting fuels - Fuel Oil, Pet Coke, Coal more affordable Demand . ~15 GW gas based power assets stranded

. Natural gas is outside GST (FO/Petcoke under GST regime) Fiscal & . VAT varies from state to state from 0 to 26% regulatory . Additive tariff mechanism across transmission systems

. Expeditious implementation of Uniform Tariff in pipelines Fiscal & 1 . Inclusion of Natural Gas under 5% GST for competitiveness Regulatory . Regulated Tariff and Open access for LNG terminals

. Incentivize p/l infrastructure developers for ensuring assured returns 2 Infrastructure . Support on RoUs, environmental/ forest clearances

. Integration of gas based power with renewable power sources . Factor True Cost of Public Health in pricing Coal based power dispatch . Peaking power policy for purchase of gas power by DISCOMS 3 Power Sector . Export of gas based power (apart from Renewables) to neighboring countries . Waive cross-subsidy surcharges for gas based power

. CNG to be exempted from excise duty (14.5%) . Government land for creating critical CGD infrastructure. . Include PNG/CNG under GST or peg VAT rates with subsidized LPG. City Gas . Include capital investment on CGD networks under Section 35 AD of Income 4 Distribution Tax Act. . Mandate use of gas based generators for commercial establishments /hospitals etc. in CGD GAs

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