Pakistan s Gas Import Pipeline Projects

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1 Pakistan s Gas Import Pipeline Projects Energy Charter Treaty Meeting on Transit and Trade Brussels October 26 & 27, 2006 Syed Hassan Nawab Managing Director INTER STATE GAS SYSTEMS (PVT) LTD. A Joint Venture of SSGC & SNGPL

2 World Natural Gas Proved Reserves 4,804 Russia 27% Iran 15% 1,547 Rest of the World Top Ten Countries Iraq Qatar 14% Total: 6,351 TCF Venezu ela Algeria Nigeria UAE USA Saudi Arabia 1. More than 75% of world gas reserves are held by the ten countries, which represent 40% of the total natural gas exports through pipeline and/or LNG. 2. Pakistan is ranked at number 30 and represents 0.5% of world gas reserves. Source: BP Statistical Review of World Energy June

3 Reserves-to-Production (R/P) Ratio of Top Ten Countries by Reserves Russian Fed. Iran Qatar Saudi Arabia UAE USA Nigeria Algeria Venezuela Iraq* 1. * R/P ratio for Iraq is undefined because production was not reported 2. Pakistan s R/P ratio is World R/P ratio of natural gas is 65 compared to 41 for oil Source: BP Statistical Review of World Energy June

PAKISTAN Independence August 14, 1947 Population 152 million Macroeconomic GDP / Capita (US$): 717 GDP growth 2004-05: 05: 8.4% Export (US$bn) : 14.41 Imports (US$bn) : 20.

4 PAKISTAN Independence August 14, 1947 Population 152 million Macroeconomic GDP / Capita (US$): 717 GDP growth : 05: 8.4% Export (US$bn) : Imports (US$bn) : Purchasing Power Parity: US$ 2,200 Language Urdu (national) and English (official) Area 794,880 sq. km. Capital Islamabad Government Parliamentary democracy in federal setting 4

5 Real GDP Growth Rate Percentage (%) P Source: Economic Survey of Pakistan

6 Pakistan Energy Overview Crude Oil: Natural Gas: Coal: Power: Energy Supply Per Capita Proven Reserves Production Import Refining Capacity Proved Reserves Production Import/(Export) Proved Res. Production Import/(Export) Consumption Generation Capacity Generation MMBbl 000 Bbl/day Consumption TCF BCF/Year Consumption MM Tonnes MMTOE Giga Watts TWh MMBtu ,345-1,345 3, Source: Pakistan Energy Yearbook

7 Pakistan Primary Energy Mix Trend 60 Percentage (%) Oil Gas Coal Hydro Nuclear MTOE: MTOE: MTOE: MTOE: Source: Pakistan Energy Yearbook

Pakistan Gas Consumption By Sector FY 1999-00 712 BSCF FY 2004-05 1,161 BSCF

7% Transport 2.1% Domestic 14.8% Commerc ial 2.3% Cement 1.2% Fertilizer 24.

8 Pakistan Gas Consumption By Sector FY BSCF FY ,161 BSCF Power 31.9% Transport 0.4% Domestic 19.6% Commerc ial 3.0% Power 43.7% Transport 2.1% Domestic 14.8% Commerc ial 2.3% Cement 1.2% Fertilizer 24.9% Industry 19.0% Cement 1.2% Fertilizer 16.4% Industry 19.5% Source: Pakistan Energy Yearbook

9 Growth in Demand for Energy Primary energy supplies grew at an ACGR of over 5% in the last 5 years Demand for oil and liquid petroleum products declined at an ACGR of around 3% during the same period Pakistan produces nearly 66,000 barrels per day of crude oil, which meets 27% of national crude oil requirement Natural gas supplies grew at an ACGR of 10% over last 5 years The relative share of gas in primary energy supply increased from 40% to 50% in the last 5 years Share of natural gas in primary energy mix is expected to be maintained at around this level in the next 5 years 9

Pakistan Gas Transmission Infrastructure ITEM Transmission, km Afghanistan SNGPL 6,195 SSGC 3,062 TOTAL 9,257 Peshawar Abbottabad Islamabad Jammu & Kashmir Compression, BHP 185,300

10 Pakistan Gas Transmission Infrastructure ITEM Transmission, km Afghanistan SNGPL 6,195 SSGC 3,062 TOTAL 9,257 Peshawar Abbottabad Islamabad Jammu & Kashmir Compression, BHP 185,300 62, ,900 Sales, mmcfd (Avg. Day) Customers, Million 1, , Pakistan Faisalabad Gujranwala Lahore Quetta Multan Bahawalpur India Iran SNGPL : SSGC : Karachi 10

11 Pakistan Natural Gas Market Figures in MMcfd at 1000 btu/scf MMcfd Bcfd 2.8 Bcfd 5.4 Bcfd 8.9 Bcfd SNGPL & SSGC Supplies Independent Supplies Anticipated Supplies FY06 FY08 FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 Demand 3,522 4,434 5,113 5,507 5,819 6,060 6,253 6,538 8,143 10,961 Indigenous Supplies 3,639 4,072 4,284 4,262 4,201 4,067 3,883 3,767 2,738 2,084 Shortfall 117 (362) (829) (1,245) (1,618) (1,993) (2,370) (2,771) (5,406) (8,877) Demand & Supply Data Source: Hagler Bailly Pakistan 11

Pakistan Natural Gas Sourcing Strategy 12000 Figures in MMcfd at 1000 Btu/scf 10000 MMcfd

MMcfd 2 nd LNG (2012): 500 MMcfd 1 st LNG (2010): 500 MMcfd 2000 0 SNGPL & SSGC Supplies

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 FY06 FY08 FY10 FY11 FY12 FY13 FY14 FY15

Supplies 3,639 4,072 4,284 4,262 4,201 4,067 3,883 3,767 2,738 2,084 Shortfall 117 (362)

12 Pakistan Natural Gas Sourcing Strategy Figures in MMcfd at 1000 Btu/scf MMcfd nd Import Pipeline (2016): 3,200 MMcfd 1 st Import Pipeline (2012): 2,100 MMcfd 2 nd LNG (2012): 500 MMcfd 1 st LNG (2010): 500 MMcfd SNGPL & SSGC Supplies Independent Supplies Anticipated Supplies FY06 FY08 FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 Demand 3,522 4,434 5,113 5,507 5,819 6,060 6,253 6,538 8,143 10,961 Indigenous Supplies 3,639 4,072 4,284 4,262 4,201 4,067 3,883 3,767 2,738 2,084 Shortfall 117 (362) (829) (1,245) (1,618) (1,993) (2,370) (2,771) (5,406) (8,877) Demand & Supply Data Source: PWC/Hagler Bailly Pakistan 12

13 Iran-Pakistan-India (IPI) Gas Pipeline Project

14 IPI Route Options IPI-Central Route Jaisalmer IPI-Coastal Route Barmer 14

15 IPI Gas Pipeline Project Central Route Assaluyeh (Iran) to Jaiselmir (India) Assaluyeh to Pak-Iran Border Pak-Iran Border to Pak-India Border Pak-India Border to Jaiselmir Coastal Route Assaluyeh (Iran) to Barmer (India) Assaluyeh to Pak-Iran Border Pak-Iran Border to Pak-India Border Pak-India Border to Barmer Length Km Capital Cost*, $ billion Total off-take volume: 55 Bcma (India: 33 Bcma, Pakistan: 22 Bcma) 2x56 inch, Class 600, X-70, Compression Ratio

16 IPI Gas Pipeline Project Bilateral Iran-Pakistan Joint Working Group (JWG), was constituted and the first meeting was held in December 2003 in Islamabad An MOU was signed on July 7, 2005 to include India in the Project. A Term Sheet was signed between Iran and Pakistan on November 16, The Term Sheet provides for gas supply of 2.1 Bcfd for a period of 30 years Iran would deliver gas to Pakistan at the Iran-Pakistan border, and to India at Pakistan-India border, under supply contracts The project envisages two parallel 56 inch pipelines carrying up to 150 MMcfd (5.3 bcfd) of which 60 MMcfd (2.1bcfd) is for Pakistan and 90 MMcfd (3.2 bcfd) is for India 16

17 IPI Project Status The transaction envisages sale by Iran of Pakistan volumes at Iran- Pakistan border and Indian volumes directly to India at Pakistan-India border Discussions underway on : Gas pricing and GSPA Route selection Project Structure and Inter-Governmental Agreement 17

18 IPI Project Structure M/s. Allen & Overy, the Legal Advisors hired by ISGSL have proposed a trilateral project structure based upon the following principles: Iran would deliver gas to Pakistan at the Iran-Pakistan border, and to India at Pakistan-India border, under a supply contract Supply contract to be backed by Iranian Government Guarantee (NIGEC is currently proposing to offer an NIOC guarantee) Iran does not allow foreign ownership of upstream field development, processing or pipeline assets. It does have buy back arrangements for upstream field development and production The Indians prefer a single ownership structure, under which a consortium should own and operate the whole pipeline in the three countries. Based upon above, the project structure proposed by Allen & Overy is attached 18

19 IPI Separate Pipeline Ownership Owners and ownership Contracts and counterparties MSA Internat Co* 40% SA Iran? 10% Others 50% SA MSA Pakistan 10% 90% Pipe Holdco 90% 10% India Internat Co* BBA Iran (NIOC?) Iran Pipeco Pakistan Pipeco India Pipeco Field / Processing IRAN MSA = Management Services Agreement SA = Shareholders Agreement BBA = Buy Back Arrangement Pipeline PAKISTAN INDIA *Same International Oil Company to be appointed in the three countries 19

20 IPI Way Forward Project planned to be undertaken by private investors on BOOT basis Prefeasibilty study undertaken by PriceWaterhouse Coopers lead Financial Advisory consortium Land/ROW to be acquired by ISGSL/GoP to expedite process ISGSL/GoP to take 10% equity share in pipeline company Lead sponsor/consortium to be appointed to setup pipeline company, to undertake Detailed Feasibility Engineering, Procurement Financing Construction and Operation 20

21 Project Road Map 21

22 Turkmenistan-Afghanistan-Pakistan (TAP) Gas Pipeline Project

23 TAP Pipeline Route Options TAP Jaisalmer Barmer 23

24 TAP Project Technical Highlights Southern Route*: Turkmenistan Segment Afghanistan Segment Pakistan Segment (up to Multan) Total Length, km ,435 Design Features Capacity, Bcfd: 3.2 Diameter, Inches: 56 Pressure, Psig : 1,450 Specifications : Class 600, X-70 Northern route through Mazar-e-Sharif, Kabul, Peshawar and then to Lahore and onward to India is also being considered. This southern route however is shorter, and follows relatively easy terrain Capital Cost US$ 3.3 Billion (Penspen Estimate 2003). Recent estimate close to $4 billion 24

25 Project Overview Aimed to supply gas from the Dauletabad gas fields in Turkmenistan close to the Turkmenistan-Afghanistan border to Pakistan and possibly India Gas Pipeline Framework Agreement between Governments of Turkmenistan, Afghanistan and Pakistan signed by the Heads of States in December 2002 Project envisages a 56 diameter, 1,435 km pipeline up to Multan for a flow of 3.2 Bcfd; shortest cross-border pipeline to Pakistan gas load centers. Feasibility study completed in 2004 needs to be updated; ADB is providing grant funds to update the study 25

26 TAP Project Issues Gas Reserves Availability and Dedication to the Project Russia reportedly claims priority over Turkmenistan gas reserves Security of Pipeline in Afghanistan is a serious concern but could be mitigated through remedial measures Updating of Feasibility Study Indian Participation 26

27 TAP Issues-Gas Reserves Turkmenistan provided an Executive Summary of the 2003 Audit Report of Daulatabad Field Reserve Certification by DeGolyer & MacNaughton (D&M) of USA. Based on the D&M report, the proven plus probable plus possible gas reserves of the field are nearly 1.43 TCM against the TAP requirements of 0.92 TCM over 30 years. Daulatabad gas field has been in production since Cumulative production up to December 2003 is 488 BCM and annual production is 27 BCMA which is reportedly going to Russia The proven and probable reserves can support a production level of 40 BCMA from 2007 to 2014, which then declines to less than 20 BCMA by 2022 TAP requirement of 33 BCMA can not be met after 2017 even at proven plus probable production level At the 9 th SC meeting held in February 2006, Turkmenistan stated that additional drilling at Dauletabad field increased the estimated gas reserves from 1.4 TCM (49 CF) to nearly 4.5 TCM (159 TCF). The production level can also be consequently increased to meet the TAP requirements over its 30 years life Turkmenistan therefore assured Pakistan that it will be able to comfortably meet its commitment to the TAP Project, and invited Pakistan to sign a GSPA 27

28 TAP Issues-Pipeline Security TAP pipeline has to traverse war ravaged Afghanistan. The area faces serious security challenges. A Security Study of the project was undertaken by Pacific Strategies & Consulting of UK in The report concluded that while the TAP Project faces serious security concerns, they can be mitigated by: commitment of considerable resources by deploying additional men and material to patrol the pipeline route innovative physical security measures by employing advanced SCADA systems, satellite surveillance, etc. a dynamic social outreach program by providing employment, vocational training and health services etc, to the inhabitants along the pipeline route Efficient and professional management of Security Administration 28

29 Indian Participation India attended the 9 th Steering Committee Meeting at Ashgabat as an observer India has requested to join the TAP project, and confirmed that it could take around 2.5 Bcfd of gas, totaling nearly 26 Tcf over 30 years Pakistan welcomes Indian participation in principle subject to availability of adequate reserves in the Dauletabad gas fields to meet the combined demand of the two countries 29

30 TAP Feasibility Study Revision Feasibility study was done by M/s Penspen in 2004 Study was sponsored by Asian Development Bank (ADB), which indicated that it has $40,000 left in its budget for the TAP Project. Technical consultant to be hired after dedication of gas reserves and agreement on gas pricing is reached. ADB is arranging funds for the study 30

31 TAP-Way Forward Meeting of Technical Working Group to be held at Ashgabat on November to discuss: the availability and dedication of adequate gas reserves security of pipeline through Afghanistan Updating of Feasibility study Gas pricing offer to be made by Turkmenistan GSPA-Draft tabled by Pakistan 31

32 Thank You

Turkmenistan- Afghanistan-Pakistan (TAP) Natural Gas Pipeline Project. Dan Millison, P.E. ADB South Asia Energy Division November 2006

Turkmenistan- Afghanistan-Pakistan (TAP) Natural Gas Pipeline Project Dan Millison, P.E. ADB South Asia Energy Division November 2006 Background Current cooperation between Turkmenistan, Afghanistan,