China and India’s Energy Policy Directions: Implications for the Global Oil and Gas Markets and Iran Sanctions Presented by Dr. Fereidun Fesharaki Chairman, FACTS Global Energy Senior Fellow, East-West Center Senior Associate, CSIS
July 22, 2010 Washington, DC
1 I. China
2 The Energy Scene
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• Future growth of PCEC is led by gas, Primary Commercial Energy Consumption Forecast for China and Shares of Individual Sources, Base-Case Scenario, 2000-2030 nuclear power, and Coal Share Oil Share hydroelectricity, but 90 Gas Share Hydro/Nuclear Share 80% coal will continue to Solar/Wind/Other Renewabls PCEC 80 70% play the dominant 60% role by 2020. 70 50% • Beyond 2020, there 60
40% Share is a good chance (mboe/d) 50 that China’s coal 30% 40 and oil 20% consumption 30 growths will slow 10% down considerably, 20 0% while gas and 2005 2006 2007 2008 2009 2010 2015 2020 2025 2030 nuclear power Note: 2010-2030 data are projections. continue to the leaders.
3 Who’s Who of the Chinese Oil Industry
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4 Profits of Chinese State Oil Companies
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• Despite China’s price controls for products before 2009 and fluctuations in the international oil prices, the net profits of CNPC, Sinopec, and CNOOC continue to be very strong. Together, the three account for 55-75% of the total net profit of the petroleum and chemical sectors in China.
Profits of Chinese State Oil Companies, 1998-2009 (US$ bn) 50
45 CNPC/PetroChina 40 Sinopec 35 CNOOC 30 Total of All Three 25
20
15
10
5
0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009* *2009 data are estimates.
5 China’s Petroleum Product Demand
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• Petroleum product demand in China reached 8.06 mb/d in 2009, up by 6.3% from 2008. • The demand was hit by the economic downturn in late 2008 and early 2009. However, demand began recovering since the second quarter of 2009. • For 2010, we project that China’s demand growth will be 6.8%, reaching 8.61 mb/d. • China is currently the second-largest oil consumer in the world after the US. The country continues to be the driving force in the region. For the Asia-Pacific region as a whole, China is likely to account for more than 60% of the incremental demand growth through 2030.
6 China’s Petroleum Product Demand (cont’d)
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• The future oil demand growth is robust for China. However, a big uncertainty is expected to emerge after 2020 when the demand growth may be slowing down significantly.
China's Petroleum Product Demand, 1980-2030 16.0 LPG 14.0 Naphtha Gasoline 12.0 Kero/jet Gasoil 10.0 Fuel Oil Others 8.0
mb/d 6.0
4.0
2.0
- 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 Note: 2010-2030 data are projections.
7 Refining Capacity at Present
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• At the start of 2010, China’s total refining capacity reached at least 10.7 mb/d, which included many locally-owned small refineries. • Sinopec 45% • CNPC/PetroChina 31% • Local/Other NOCs 24%. • In 2009, China processed 7.5 mb/d of crude oil, up by 8.2% from 2008. Back in 2000, the crude runs were 4.1 mb/d. For 2010, we expect that China’s refining crude runs will surge to 8.2 mb/d. • At the start of 2010, China’s capacity of sour crude processing was around 2.9 mb/d, which is sufficient to meet demand for now.
8 Future Refining Expansions
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• China’s refining capacity is continuously expanding. • Between the start of 2010 and the end of 2015, 2.1 mb/d of new refining capacity will be added under firm and likely plans. • Between the start of 2016 and the end of 2020, another 2.8 mb/d of new capacity is likely to be added. • Moreover, around 2.2 mb/d of additional capacity is proposed in the meantime by various players, but their status is uncertain at this point in time. • By 2015, China’s capacity for handling sour crudes is expected to increase to 5 mb/d. • Indeed, China may overbuild. This can be assessed from the product balances later on.
9 Oil Product Prices
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• The price regime adopted by the NDRC in May 2009 that is still in effect includes the following features: • Prices under government guidance: • The NDRC set maximum retail prices for gasoline and diesel for each province. Maximum retail prices are set on the basis of imported crude costs. • Retailers may set their own retail prices as long as the prices do not exceed the maximum prices set by the government. • Minimum wholesale-retail differentials are regulated. • Special rules for railway, transportation, and other designated users.
10 Oil Product Prices (cont’d)
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• New Price Regime (cont’d) • Prices set directly by the government applies to gasoline, diesel, and jet fuel that are supplied to state reserves and the construction corps of Xinjiang Autonomous Region. For these products, ex-refinery prices are set. • Frequency and crude price range for product price adjustments. • Frequency: for every 22 working days, if the average imported crude prices goes up or down by more than 4%, price adjustments may be made by the NDRC. • Crude price range: Rules are different when international oil prices are below US$80/bbl, above US$80/bbl, or above US$130/bbl. In the latter case, the government will not raise or if necessary, raise the retail prices by a very small amount.
11 China’s Crude Imports in 2009
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• China’s crude imports are dominated by the Middle East and Africa. In 2009: • Middle East: 48% • Africa: 30% • Asia Pacific: 5% • Elsewhere: 17%
4. Russia 8%
10. Kazakhstan 3% 8. Iraq 4% 3.Iran 11% Others 20% 9. Libya 3% 7. Kuwait 3% 1. Saudi Arabia 21% 5. Sudan 6% 6. Oman 6%
2. Angola 16%
Note: China’s total crude imports: 4.08 mb/d. .
12 Outlook for Oil Imports
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China Will Have a Huge Increase in Crude Oil Imports!
6 3.7 3.8 3.8 3.8 4.0 4.0 4.0 4.0 4 2 0 -2 -4 (3.3) (3.6) (mb/d) (4.1) -6 (4.8) -8 China's crude oil (7.1) imports in 2009 -10 Huge increase by (9.4) 2030: nearly 8 mb/d. (10.5) -12 Crude Production Crude Imports (11.7) -14 07 08 09 10 15 20 25 30 Note: 2010-2030 data are projections.
13 Outlook for Oil Imports (cont’d)
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• China’s refining capacity is likely to be overbuilt with potential exports of products, but there is a huge uncertainty on the demand side.
Uncertainty of China's Future Oil Demand
Product imports 18 may be needed Refining Crude Runs 16 Low Case Demand Potential Base Case Demand product 14 High Case Demand surplus.
12 (mb/d)
10
8
6 08 09 10 15 20 25 30 Note: 2010-2030 data are forecasts.
14 Strategic Petroleum Reserves (SPRs) in China
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• China’s SPR program is mainly to reduce the impact of crude supply disruption. • Phase I (by end 2008): 16.4 million m3 or 103 million bbl (approximately 31 days of net imports or 15 days of total consumption) in four sites (Zhenhai, Zhoushan, Huangdao, and Dalian). Phase I construction was completed and all the tanks were filled by April 2009, with average crude procurement price at US$58/bbl. • Target for Phase II (by 2012/13): Another 26.8 million m3 or 169 million bbl, totaling 272 million bbl (approximately 60 days of net imports or 33 days of total consumption). • Target for Phase III (by 2015/2016): To establish 500 million bbl of SPRs.
15 China’s Overseas Oil Equity Production
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• In 2009, total overseas equity oil output is estimated at 1.16 mb/d, up from 870 kb/d in 2008, 710 kb/d in 2006, 360 kb/d in 2004, and 140 kb/d in 2000. China Overseas Equity Oil Production By Corps kb/d 1,400
1,200
1,000
800 Others Sinochem Sinopec 600 CNOOC CNPC/PetroChina
400
200
0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 16 China’s Overseas Oil Equity Production in 2009
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• Current equity production is mainly in Africa (49%) and FSU (32%, mainly from Kazakhstan).
Chinese Oil Companies' Overseas Oil Equity Production in 2009 kb/d
800
700
600
500
400
300
200
100
0 CNPC CNOOC Sinopec Sinochem Others
Africa Americas Asia Pacific FSU Middle East Atlantic
17 Role of Gas in China’s Energy Use
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• Average annual growth rate (AAGR) of consumption: – 15.4% between 2000 and 2009 – 11.7% in 2009 – 20.6% in 2010 (projections) • 2009 Primary Energy Consumption (PEC) Mix – Coal: 64.1% – Oil: 17.2% – Gas: 3.5% • Gas’ 2020 share is forecast at 7.1% • Gas’ 2030 share is forecast at 9.5% – Hydro: 6.0% – Nuclear: 0.7% – Others: 8.5%
18 Natural Gas Demand
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• Industrial and residential/commercial sectors dominate natural gas use, followed by power generation. China's Sectoral Natural Gas Demand
Power Industry Residential and Commercial Transport Others* 25,000
20,000
15,000 mmscf/d 10,000
5,000
0 2007 2008 2009 2010 2015 2020 2025 2030
*Includes agricultural use, field use and non-specified others; excludes distribution losses. Note: 2010-2030 data are projections.
19 Outlook for LNG Imports
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• China’s LNG imports by 2020 and 2030 could have huge swings depending on the prices of imports and domestic demand.
High, Low, and Base-Case LNG Imports of China (mt)
80
Base Case 70 High Case 60 Low Case
50
40
30
20
10
0 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Note: Data for 2010-2030 are projections. 20 Overall Natural Gas Balances
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• Despite good prospects for domestic production, consumption is poised to grow faster, leading to larger gas imports.
Outlook for Natural Gas Production, Consumption, and Net Import Requirements in China 50 Rapid growth in demand: four 40 Production times higher by Good domestic 2030 30 Consumption production potential but it is insufficient Net Imports 20
10
(bscf/d) 0
-10 The result: Huge import requirements: 46% -20 of the demand by 2030. Both LNG and pipeline gas are needed. -30 2005 2006 2007 2008 2009 2010 2015 2020 2025 2030
Note: 2010-2030 are projections.
21 www.FGEnergy.com
II. India
22 Energy Overview
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• India is the 5th largest energy consumer in the world.
• In 2009, total primary energy consumption (PEC) was estimated at 680 mtoe, up from 356 mtoe in 1990 and 513 mtoe in 2000.
• Per-capita energy consumption is still very modest: 0.560 ktoe vs world average 1.8 ktoe.
• Coal dominates the energy scene (37%), followed by combustibles, renewables, and wastes (CR&W) (32%), oil (22%), and natural gas (8%). Natural gas has been the fastest growing fuel in recent years.
• Oil demand growth: AAGR between 2000 and 2008 at 3.6%; 2009 registered a 4.9% growth. 2010 is projected at 4.7%.
• Overall, the PEC is projected to grow at 4.6% annually through 2015 and 3.4% thereafter till 2020.
23 Oil & Gas Industry Structure
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4.45% 2.42% 8.77% ONGC NTPC IOCL 7.69%
84.5% 78.9% 74.1% 2.4% 4.83%
Government of 51.1% India 57.4% HPCL
54.9% 2.23% GAIL 78.4% OIL BPCL 2.23%
24 Other Key Players
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ONGC Videsh Ltd. 49.98% ONGC Mittal Energy Ltd. (OVL) (OMEL) ONGC Mangalore Refinery and Petrochemicals Ltd (MRPL)
Numaligarh BPCL Refinery Ltd. OIL 26% 61.65% (NRL)
GDF 12.5% International 12.5% Chennai 10% Petroleum 51.89% IOCL Corporation Ltd. 12.5% Petronet LNG (CPCL) Ltd. (PLL) GAIL 12.5%
25 Titles Accorded by Government to Public Sector Units (PSUs)
www.FGEnergy.com • Navaratnas – Established in 1997 to give PSUs greater financial and operational autonomy. There are 16 Navaratnas. These companies can invest up to Rs 10 billion (US$0.22 billion) or 15% of their net worth in a single project without seeking Government approval. HPCL, BPCL, OIL, and GAIL are Navaratnas.
• Maharatnas – Established in 2009. These are identified as potential Indian multi-national companies. These can invest up to Rs 50 billion (US$1.09 billion) or 15% of their net worth in a single project without seeking Government approval. ONGC, IOCL and NTPC are Maharatnas.
• Miniratnas – These are ranked lower than Navaratnas. Miniratnas can invest up to Rs 3 billion (US$0.07 billion) or their net worth, whichever is lower. Miniratnas can also form joint ventures and subsidiaries. CPCL, MRPL, and NRL are Miniratnas.
26 Demand
www.FGEnergy.com • In 2009, India’s total petroleum product consumption was estimated at 2.96 mb/d. • The key stories for demand in 2009 were: –Surge in diesel consumption from June due to poor monsoon that caused drought where the auto fuel was used to run pump sets for irrigation – 50% subsidy on diesel extended to farmers during Q3 and Q4; –Strong growth in gasoline due to double digit y-o-y growth in car sales for consecutive months since February 2009. Y-o-y, gasoline consumption grew 14%; –Increased substitution of naphtha and fuel oil with KG-D6 gas. For 2009 as a whole, fuel oil consumption dropped 15.5%.
27 India Product Demand, 2008 to April 2010
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3,000
2,500
Surge in diesel 2,000 demand in 2H, 2009. Y-o-y diesel consumption grew
1,500 8% in 2009 kb/d 1,000 With entry of KG-D6 gas, y-o-y naphtha consumption 500 dropped 16% in 2009
0
Jul 08 Jul 09 Jul
Jan 10 Jan Jan 08 Jan 09 Jan
Jun 08 Jun 09 Jun
Oct 09 Oct Oct 08 Oct
Feb 08 Feb 08 Apr 09 Feb 09 Apr 10 Feb 10 Apr
Sep 08 Sep 09 Sep
Dec 08 Dec 09 Dec
Aug 08 Aug 09 Aug
Nov 08 Nov 09 Nov
Mar 08 Mar 09 Mar 10 Mar
May 08 May 09 May
LPG Naphtha Gasoline Jet fuel Kerosene Gasoil Fuel Oil
28 Demand Outlook
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• Positive factors that will contribute towards India’s demand growth: • Revival in the industrial and manufacturing sectors due to fiscal stimuli. Work on key infrastructure and construction projects that stalled in 2009 have resumed; • Large-scale transition from lower to middle income class; • Continued double-digit y-o-y growth in passenger car sales; • Automobile manufacturers releasing new car models. • …. And negative factors that will limit or keep a check on demand growth: • Slowdown in GDP growth – due to the global financial crisis; • Substitution of naphtha by natural gas in fertilizer. Potential large-scale substitution of gasoline by CNG and LPG by piped natural gas in major cities; • Improved efficiency in road transport with new engines and cleaner fuels; • Fuel price reforms – move towards deregulation
29 Indian Refining
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120% 2009 overall crude runs = 3.79 mb/d* In May 2010, India’s total refining capacity ~ 3.6 mb/d India’s utilization 115% rates are usually high as refiners 110% have to meet
105% domestic demand. In 2007 and 2008 it 100% was 108% and 106%,respectively.
Refinery Utilization Rate, % Rate, Utilization Refinery 95%
90% Avg utilization rates are expected to be around 105-108% in 2010 * Crude runs of Reliance's newer 580 kb/d refinery are estimated
By 2020, India is projected to add 1.25 mb/d of refining capacity; 0.74 mb/d of capacity is expected by 2015. Total cracking capacity is projected to increase by 0.83 mb/d, while treating and reforming capacity will rise by 0.63 mb/d and 0.16 mb/d, respectively. Key Projects by 2020 www.FGEnergy.com • IOCL’s refinery expansions at Panipat (by 60 kb/d) and Koyali (by 40 kb/d) by Q3 2010, • Focus on improving the diesel quality, distillate yields, and residue up-gradation, • Bina Oman Refinery Ltd’s (BORL) Bina grassroots refinery (120 kb/d): Commissioned but we expect it to achieve a stable production portfolio only by Q4 2010, • Essar Oil’s Vadinar refinery expansion Phase I (150 kb/d): expected in Q1 2012 , • MRPL’s Mangalore refinery expansion (by 64 kb/d) and upgrade: in Q2 2012, • There is a rush among Indian refiners to commission their units before the deadline of March 31, 2012 set by the Government. This will allow them to enjoy a 7-year tax holiday. • 3 projects will struggle to meet this deadline: • HPCL’s Bhatinda grassroots refinery (180 kb/d) – expected in Q1 2014, • IOCL’s grassroots refinery at Paradeep ( 300 kb/d): expected by Q4 2016, • Essar’s Phase II will go ahead partially and will be complete only by Q1 2017 13 Indian cities moved towards Euro IV or BS IV norms on April 1, 2010. The rest of the country moving in a staggered fashion towards Euro III/BS III by October 2010.
31 Strong Case for Price Reform
www.FGEnergy.com Subsidies on Petroleum Products Subsidy Sharing Mechanism in US$ 25 100% Domestic LPG 80% 20 PDS Kerosene Diesel 60% Gasoline *Provisional 15 40% 20% 10 0%
US$ bn US$ ~15 billion ~21 billion ~10 billion 5 -20% 2007-08 2008-09 2009-10* 0 Direct Budgetary support Oil bonds issued to OMCs 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Under-recoveries borne by OMCs Upstream share
1.00 Marketing margin on 0.00 key petroleum (1.00) products is negative. (2.00) (3.00) Fuel retailing in India
US$ (4.00) – not a lucrative (5.00) business! (6.00) (7.00) (8.00) Diesel Gasoline Kerosene LPG Recent Price Reform: Gasoline Deregulated for Now! www.FGEnergy.com
After July 2009 and February 2010, this is the third time within a year that the Government has hiked the prices of gasoline and diesel. Gasoline prices will be market determined both at the refinery gate as well as at the retail level. Gasoline price was hiked by 7.3% to US$1.11/L (US$0.08/L hike). Government is yet to clarify the frequency of price revision for gasoline. Petroleum minister clarified that the Government would step in if required to protect consumers from high volatility in the international oil market. The Government has also not clarified whether state-owned oil marketing companies will be required to all sell gasoline at the same price. Prices of diesel, kerosene, and LPG were hiked but these will continue to remain regulated. Diesel price was hiked by 5.2% to US$0.87/L (US$0.04/L hike), LPG by 11.3% to US$7.51/cylinder (US$ 0.76/cylinder hike) and kerosene by 32% to US$0.27/L (US$.07/L hike) The Government has announced its intention to free up the diesel prices but has not set a date for the same.
33 Overseas Investment
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• OVL has about 40 assets across 16 countries. • Producing assets include: Greater Nile Oil Project and Block 5A in Sudan, Block 6.1 in Vietnam, Al Furat Project in Syria, Sakhalin-I Project and IEC in Russia, PIVSA (IJV), Venezuela, and Mansarovar Energy Project in Colombia. • ONGC, who bought UK-based Imperial Energy Plc this year, is targeting 60 million tonnes of overseas oil and gas production by 2025. • IOCL, HPCL, and BPCL are also engaged overseas via their subsidiaries. • Energy Security – India’s strategy - acquisition of acreages in relatively volatile countries with unstable political and regulatory regimes. • Iran and Nigeria – Substantial efforts and signature bonuses have not amounted to much! • India has set its sights on Africa, Latin America, and Russia. • Indian companies are increasingly getting outbid by their Chinese counterparts in the race for equity in overseas projects. • Loss of rights to develop Iran’s South Azadegan oil field to CNPC of China, and loss of Hassi Bir Rekaiz oil field in Algeria to CNOOC, are some examples.
34 Natural Gas Demand
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4,500 Power Industry 4,000 Residential/Commercial 3,500 Transport Others*
/d 3,000
2,500 MMscf 2,000
1,500
1,000
500
- 1990 1995 2000 2005 2007 2008 2009 2010 2015 2020 2030 * Includes agricultural use, fertilizer use, LPG-C2/C3 extraction and non-specified others; excludes distribution losses.
2009 is estimated and 2010 - 2030 are projections In 2009, natural gas accounted for 7.4% of India’s primary energy consumption. Between 1990 and 2008 the AAGR of India’s natural gas consumption was 9.7%. Outlook for LNG Imports – Demand Scenarios
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mt In India there is a huge unmet demand for gas 50 45 Reliance’s Base-Case High-Case Low-Case 40 KG-D6 gas 35 has 30 opened the doors for 25 gas 20 investment 15 in India and 10 a gas 5 market
0
2011 2020 2029 2007 2008 2009 2010 2012 2013 2014 2015 2016 2017 2018 2019 2021 2022 2023 2024 2025 2026 2027 2028 2030
2010-2030 are projections • India will continue to remain price sensitive. The potential for LNG imports are huge but much will depend on the price and demand. • India lacks gas infrastructure and players like Reliance and GAIL are building pipelines across the country. www.FGEnergy.com
III. Relations of China and India with Iran
37 Role of China in Iran’s Upstream Development
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Despite political pressures on international oil companies, Chinese contractors could invest more than US$10 billion in upstream Iranian oil and gas sector in the in next few years. List of Upstream Agreements Between Iran and China in Recent Years
Signature Contractors Project Type of Contract Estimated Value Remarks Date Exploration and Binding Minimum US$20 million Sinopec committed to invest at least US$20 million for exploration activities of Garmsar Sinopec Development in 2005 Contract for exploration activities Block, but exploration work has not showed any commercial oil reserves in the block yet. Garmsar Block Exploration and CNPC promised to invest at least US$18 million for exploration activity in 2005 and Binding Minimum US$18 million CNPC Development in 2005 completed the exploration work in end 2009. No significant commercial oil reserves in Contract for exploration activities Koohdasht Block Koohdasht is found. Development of the Preliminary CNOOC agreed to invest US$16 billion to develop the North Pars gas fields with NIOC and CNOOC 2006* US$16 billion North Pars Gas Field Agreement construct a 20 mtpa LNG liquefaction plant in Kangan. The project has two phases: phase 1 drilling and exploration and phase 2 production. Production level from phase 1 is expected to be 85 kb/d and that from phase 2 will reach Exploration and Binding 185 kb/d. Peak production is expected to be 300-400 kb/d once fully developed. Phase 1 Sinopec Development of the Contract Dec-07 US$2 billion was originally set on a 59-month schedule, ending in late 2016, but it may be further Yadavaran Oil Field (Buyback) delayed. UK's Petrofac completed the Front End Engineering and Design for the development of the field for Sinopec and NIOC in November 2009. Drilling in the field will CNPCstart soon.is expected to produce 75 kb/d in first phase while Phase II of the development will Binding Development of North US$1.74 billion for the be considered based on the outcome of Phase I. Phase II is envisaged to increase CNPC Contract Jan-09 Azadegan field first phase production of the field to 150 kb/d and the total investment cost will be increase to (Buyback) US$3.5-4 billion. CNPC spudded the first appraisal well in April 2010. CNOOC and China Oilfield Services Limited (COSL, a subsidiary of CNOOC) will undertake drilling Development of Preliminary Malaysian Jun-2009** US$1 billion operations while CNOOC will build the required offshore infrastructure. Malaysian Resalat oil field Agreement Amona Amona is due to increase production capacity from 8 kb/d to 47 kb/d within 41 months.
Preliminary CNPC signed a preliminary agreement with NIOC for the development of phase 11 of the Development of the CNPC Agreement Jun-09 US$4.7 billion South Pars gas field, replacing France's Total. They aim to produce 1.765 bscf/d of South Pars Phase 11 (Buyback) natural gas and other products. MOU for a CNPC and Development of South US$2.25 billioin by CNPC CNPC is to invest US$2.25 billion and Inpex US$0.25 billion for the first phase of Binding Aug-09 Inpex Azadegan field Contract for the first phase development. (Buyback) * CNOOC signed an upstream contract with NIOC in the form of a buyback agreement in 2008 to develop the North Pars gas field. However, the negotiation in downstream section (construction of the LNG plant) has remained in early stages.
** The original buyback contract was signed between Malaysian Amona and NIOC in 2008. Amona finalized negotiations with Chinese companies to join the Resalat development project consortium in July 2009. 38 Role of China in Iran
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• Most of the upstream projects that the Chinese NOCs invested in may face delays not because of reservoir challenges but difficulties of securing the relevant equipments and technologies to undertake those vast projects due to the US sanction. • Iran seems to indicate a greater willingness to provide more benefits to China, while the latter is lured by the attractive contracts offered despite the risky environment. • A review of recent buyback agreements, especially with Chinese companies shows there have been more attractive terms offered to Chinese contractors. • The recent signed buyback contracts with CNPC and Sinopec provides more flexibility in fiscal terms, shorter payback periods, and finally a 3% higher rate of return (ROR) for contractors compared with other regular buyback contracts in the past. 39 Role of China in Iran (cont’d)
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• It should be noted that Chinese companies are not only involved in development of oil and gas fields. They are key suppliers for upstream equipment when Iran faces sanctions for American suppliers. Chinese companies are the most active players in providing upstream well equipment for the South Pars gas projects. • Sinopec is also helping NIORDC to add a 94 kb/d FCC unit and expand the 80 kb/d CDU to 250 kb/d in Iran’s Arak refinery. Sinopec Design Institute and other Chinese companies are also involved in the construction of Iran’s Persian Gulf Star Project (three units of 120 kb/d condensate splitters at the Bandar Abbas refinery). • Chinese corporations are heavily invested in Iran’s domestic sectors.
40 India’s Relationship with Iran
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• With the US and the EU sanctions on Iran, India is cautious about transactions with Iran. It is reluctant to undertake any transaction in US$ or the Euro. • In the name of Energy Security, India has exposed itself to several oil and gas projects in Iran – A question mark hangs over all of them! • SP-12 and Iran LNG Project - 6 mtpa of LNG to India. • Farsi Project – 6.5 mtpa LNG to India - OVL won the bid in 2002, is the operator of the Farsi block with a 40% stake, IOCL and OIL have 40% and 20% stakes, respectively. They have already committed US$85 million in the Farsi block.
US$ Till 2010 2011 2012 2013 2014 2015 2016 2017 Total million 2009 Farsi* 88 125 190 465 1,015 1,275 1,345 965 90 5,558 SP-12 471 769 775 621 - - - - - 2,635 #Iran LNG 1,800 Total 9,993
*Capex phasing based on draft Master Development Plan (MDP) - MDP is yet to be finalized # Year wise cost break up for Iran LNG not available
41 India’s Relationship with Iran (cont’d)
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• ONGC and IOCL were flagged by the US administration for having energy ties with Iran. • OIL ,OVL, and Petronet LNG Ltd signed agreements with Iran in 2009 to develop one of the 28 phases of the giant South Pars gas field and convert the fuel into LNG. • In 2010, Reliance did not renew its term deal with NIOC for crude imports of 90-100 kb/d. Differences over pricing of Soroush and Nowrooz crude were cited as the chief reason. • Several Iran-India projects are either put on hold or cancelled • Iran-Pakistan-India pipeline • LNG deal with Iran signed in June 2005 to import 5.0 mtpa starting 2009 over a 25-year period.
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