PROJECT RISK AND APPRAISAL PRESENTED AT 7TH LNG WORLD, BRISBANE AUSTRALIA, 4TH SEPTEMBER 2012 Dr.

HIMADRI BANERJI

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

SUMMARY OF DISCUSSIONS
Overview of global natural gas and LNG industry
-LNG Pro !"#$ Ar! Mor! Co$#%& T'() E*!r #o D!*!%o+ &vervie' o( mar)et ris)s (or LNG* !outh +orea, -a"an, .ndia and /hina 0LNG D!,()- .$ /($# O0#1ro2.)1 S0++%&
Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

- A$.() LNG D!,()- #o Do03%! 3!#2!!) 2010-2017

1orecastin2 natural 2as and li3ue(ied natural 2as "rices

- LNG Pricing in Asian Markets to rise in link with oil - I)-.( .) M!1( D!(%$ 4or S'(%! LNG 4ro, US 2.#' +r."! (-*()#(1!

Project Risk and A

raisal

Mar)et, (inancial environmental and technolo2ical ris)s Project Evaluation /once"ts, Methodolo2y and 4nalysis Estimatin2 and 5is) 4ssessment in Bi2 6ic)et LNG Project E7"enses* /a"ital, &"erational 8 Maintenance 4 /ase !tudy on Project 4""raisal

.ndia LNG Demand

+ochi LNG 6erminal

!ource 4nalyst Presentation by Petronet #$%%

6hird 6erminal on East /oast

Global LNG /a"acity Most &"timum !cenario mt"a

LNG P5&-E/6! 45E M&5E /&!6L9 6H4N E:E5 6& DE:EL&P

/4PE;<ton o( installed li3ue(action ca"acity has durin2 the last decade made a "ermanent shi(t (rom an avera2e (i2ure belo' =$$ >!D<ton to ty"ical ran2e o( ran2e o( %=$$ ? #=$$ >!D<ton 6he .H! /E54 >"stream /a"ital /osts .nde7 @>//.A sho's more than a doublin2 o( costs in the oil and 2as industry. Ho'ever, due to the uni3ueness o(ten attributed to develo"in2 LNG "rojects, current LNG develo"ment costs e7ceed the avera2e (or the oil and 2as industry 1le7 has consistently communicated a /4PE; ran2e o( >!D ==$07$$ ton<li3ue(action ca"acity. 1or the "roject in PNG 'e e7"ect to be in the lo'er end o( this ran2e.

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

Buality Parameters LNG

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

N>/LE45 5ENN4.!4N/E
4ND 6HE

6HE !&L45 /H4LLENGE

LNG PROJECT RISK MITIGATION MATRIX

T&+! o4 R.$5 Mar)et 5is)s 0&((0ta)e 0 Payment. 6echnolo2y 0 4vailability 0 1acility Desi2n 8 Per(ormance 0 Dama2e 1inancial 0 .nterest 5ate 0 .n(lation 0 17 1luctuation 1orce Majeure R.$5 A%%o"(#!- #o Project /o.<&((0ta)er &((0ta)er<Guarantor EP/ /ontractor EP/ /ontractor Project /o. M.#.1(#.o) !uitable a2reements /redit Enhancement /ontinuin2 !u""ort Guarantee, Warranty .nsurance
Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

Project /o. Project /o. Project /o. Project /o.

Hed2in2,

.nsurances Bac) to bac) clauses o( 42reements

WH46 .! P5&-E/6 4PP54.!4L Project a""raisal is a 2eneric term that re(ers to the "rocess o( assessin2, in a structured 'ay, the case (or "roceedin2 'ith a "roject or "ro"osal. .n short, "roject a""raisal is the e((ort o( calculatin2 a "rojectCs viability. .t o(ten involves com"arin2 various o"tions, usin2 economic a""raisal or some other decision analysis techni3ueD

H&W P5&-E/6 4PP54.!4L

Pro"!$$ %. .nitial 4ssessment #. De(ine "roblem and lon20list E. /onsult and short0list . Develo" o"tions =. /om"are and select Project T&+!$ o4 (++r(.$(% %. 6echnical a""raisal #. /ommercial and mar)etin2 a""raisal E. 1inancial and economic a""raisal /ost0bene(it analysis Economic a""raisal /ost0e((ectiveness analysis !corin2 and 'ei2htin2 . &r2anisational or mana2ement a""raisal =. Environmental .m"act 4""raisal

THE BASIC STEPS..ELABORATED

STEP MAIN PROCEDURES IN BRIEF

1. EXPLAIN THE STRATEGIC CONTEXT

Refer to underlying policy or strategy, e.g. policy statements, statutory requirements, or business plans. Indicate how the proposal is expected to contribute to the relevant strategic aims and objectives. Establish the need for expenditure by:o o

2. ESTABLISH THE NEED FOR EXPENDITURE

analysing the expected demand for services; and identifying deficiencies in current service provision.

Justify and quantify the proposed level of service provision over the appraisal period.

Where funding the non-Govt sectors is in view:Assess Additionality i.e. establish that the proposed assistance is the minimum necessary. 3. DEFINE THE OBJECTIVES AND CONSTRAINTS

Define the expected outcomes and outputs. Specify targets that are SMART i.e.Specific Measurable Achievable Relevant and Timedependent. Include implementation targets e.g. dates, milestones. State the key constraints on the project, e.g. technical, financial, legal, timing etc. Indicate the relative priority of individual objectives or elements of the proposals Provide sufficient detail to enable option generation and option performance assessment.

THE BASIC STEPS..ELABORATED.CONTD

4. IDENTIFY & DESCRIBE THE OPTIONS

Identify and describe a baseline option, usually the status quo, and a suitably wide range of alternative options. Consider variations in scale, quality, technique, location, timing and funding method. Choose a suitable number of options for full appraisal. Where some are rejected before full appraisal, explain reasons for rejection. Detail capital costs, including any refurbishment costs, and annual recurrent costs and benefits of all options. Express costings in total rather than incremental terms, to expose full resource consequences. Include opportunity costs and residual values for all assets employed, whether already owned or not. Assess displacement, and adjust costings accordingly. Adjust for inflation and (where relevant) tax differences. Where cost savings or efficiency improvements are projected, indicate whether they will represent financial savings or redeployment of resources. Consider costs and benefits to other parts of the public and private sectors.

5. IDENTIFY & QUANTIFY THE MONETARY COSTS AND BENEFITS OF OPTIONS

Where funding the non-Govt sector is in view:-Assess CostEffectiveness by reference to relevant ratios such as cost per job, public assistance to project cost, etc.

THE BASIC STEPS..ELABORATED.CONTD

6. APPRAISE RISKS AND ADJUST FOR OPTIMISM BIAS

Prepare a risk log identifying and quantifying the main risks associated with the proposal. Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%# Consider how risks compare under the different options.

Adjust costs, benefits and timing assumptions for optimism bias. Develop suitable risk management and risk reduction strategies.

THE BASIC STEPS..ELABORATED.CONTD

7. WEIGH UP NON MONETARY COST & BENEFITS (INCLUDING SUSTAINABILITY, EQUALITY & LIFETIME OPPORTUNITIES)

Identify all relevant non-monetary costs and benefits - economic, social, environmental and others Quantify them in suitable units where possible. Show how they compare under the different options e.g. "list and describe" in simpler cases; use "impact statement" or "weighted scoring method" in others. Consider need to screen for and/or assess in detail Sustainability, Equality & Lifetime Opportunities. Decide whether any specific types of impact assessment are required e.g health, environmental, transport, equality or integrated impact assessment. Explain assumptions clearly e.g. basis of quantification. Where employed, weights and scores should be explained individually. Interpret the results of the non-monetary analysis. Identify phasing of monetary costs and benefits over suitable time period, adjusted for inflation, optimism bias and (where relevant) displacement and tax differences. Calculate NPV (or NPC) for each option, using correct discount rate. Include spreadsheets detailing the calculations, including disaggregation of cost/benefit items. Show, for each year, the discount factors used, the total NPV for the year, and the cumulative NPV to that year. Identify the price basis and base year for discounting.

8. CALCULATE NET PRESENT VALUES (NPVs) AND ASSESS UNCERTAINTIES

9. ASSESS AFFORDABILITY AND RECORD ARRANGEMENTS FOR FUNDING, MANAGEMENT, PROCUREMENT, MARKETING, BENEFITS REALISATION, MONITORING, AND EX POST EVALUATION

Affordability: Include budget, cash flow and funding statements, phased over time. Management: Give details of proposed personnel, procurement method, timetable, benefits realisation plan, accommodation needs, staffing issues etc. Procurement: Assess alternative procurement options. Marketing: Provide market assessment and marketing plan as appropriate Benefits Realisation: Include draft BRP in OBC and final version in FBC. Monitoring: Indicate how the proposed option will be monitored during and after implementation. Evaluation: Record pre-implementation levels of resource use and service provision. Indicate factors to be evaluated, when, how and by whom.

Where funding the non-Govt sector is in view:-Assess Viability i.e. examine cash flows, management & financial arrangements to ensure that funding is not wasted on proposals that will fail prematurely. 10. ASSESS THE BALANCE OF ADVANTAGE BETWEEN THE OPTIONS AND PRESENT THE RESULTS & CONCLUSIONS

Write up the steps of the appraisal in the order shown here. Give details of assumptions and calculations, using appropriate appendices. Include summary of main results (i.e. NPVs/NPCs, unquantifiables and uncertainties) for each option. Draw out the balance of advantage among options, assess VFM and affordability, and record conclusions and recommendations.

KEY CONSIDERATION IN PROJECT APPRAISAL LNG

P!r$+!"#.*! 6 M.-$#r!(, 6 LNG R!-1($.4."(#.o) /(".%.#.!$ +ey /onsiderations %. LNG (acilities are "art o( lon2 chain com"risin2 o( "roducin2 (ield, li3ue(action "lant, cryo2enic tan)ers, re02asi(ication (acilities and o((0ta)ers ma)in2 contractual structure the )ey consideration. #. Location 0 4vailability o( all season "orts (or LNG recei"t E./onnectivity to evacuation (acilities<"i"elines .No established "ricin2 benchmar) ? mostly cou"led 'ith oil mar)ets =.LNG (acility investment are ca"ital intensive investments are (ront end loaded ? more reliance on debt (inancin2 F.5evenue Model ? 5e02asi(ication char2es usually based on ca"ital cost recovery method. 7. +ey 1inancin2 5e3uirements Presence o( bac) to bac) contract bet'een lin)s o( LNG chain to share "roject ris) amon2 buyers and sellers 6a)e or Pay ty"e o( a2reements both 'ith su""lier, tan)ers and o((0ta)ers.
Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

KEY CONSIDERATION IN PROJECT APPRAISAL LNG

6o attract investors to an LNG "roject, the "rice o( a unit volume o( 2as delivered into a "i"eline must at least e3ual the combined costs o( "roducin2, li3ue(yin2, trans"ortin2, storin2, and reva"oriGin2 the 2as, "lus the costs o( the ca"ital needed to build necessary in(rastructureHand a reasonable return to investors.

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

KEY CONSIDERATION IN PROJECT APPRAISAL LNG

Project investors are relyin2 on t'o sources or re"ayment !tren2th o( s"onsor 0ability to 2et "roject (inanced, constructed and o"eratin2 e((ectively !tren2th o( "roject economics 0de"endable revenue stream

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

KEY CONSIDERATION IN PROJECT APPRAISAL LNG

Project econo!ics are driven by Cost and constructab ! t" #ua! t" o$ o$$ ta%& cr&d ts and contracts Und&r!" n' $actors (Sourc& and )r c& o$ n)uts (Mar%&ts $or out)uts (O)&rat n' r s%s R&'ard!&ss o$ s&ctor* t+&s& ar&as ar& t+orou'+!" r&, &-&d b" cr&d t ana!"sts at rat n' a'&nc &s* bonds and n,&stors
Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

Cost Optimization:.

Lo'er and u""er share o( various cost items in total LNG chain @IA

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

!ource* >! De"artment o( Ener2y, Ener2y .n(ormation 4dministration, The Global Liquefied Natural Gas Market: Status & Outlook, 2003

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

A CASE STUDY ON PROJECT APPRAISAL

4""raisal and Evaluation done (or * @iA an e3uity investment in Petronet LNG Limited @PLLA (or a =. I shareholdin2J and @iiA a "artial credit 2uarantee @P/GA, 'ithout a Government 2uarantee, to su""ort a PLL bond issue o( u" to 5s7 billion, amountin2 in e7"osure terms to 5sE.=#= billion. 6he (unds 'ere to be used to construct and o"erate a li3ue(ied natural 2as @LNGA im"ort and re2asi(ication terminal @the ProjectA 'ith a =.$ million metric tons "er annum @MM6P4A ca"acity at Dahej in Gujarat state. 6he Project 'ould serve 2as users alon2 the #,=$$0)ilometer @)mA HaGira0Bijay"ur0-ad2ish"ur @HB-A "i"eline that covers Gujarat, Western Madhya Pradesh, 5ajasthan, Delhi, Haryana, Western >ttar Pradesh, and >ran, Maharashtra. 4t a""raisal in #$$E, the Project 'as to be (inanced based on a debt0e3uity ratio not e7ceedin2 7$*E$ and achieve an economic internal rate o( return @E.55A o( #E.$I.

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

A CASE STUDY ON PROJECT APPRAISAL

/o0r $#(#! "o,+().!$ Bharat Petroleum /or"oration Limited @BP/LA, .ndian &il /or"oration Limited @.&/A, G4.L, and &NG/ @collectively re(erred to as the s"onsorsAH(ormed PLL to develo" LNG (acilities at Dahej, Gujarat and +ochi, +erala. 6he s"onsors include some o( the lar2est com"anies in .ndia. BP/L is en2a2ed in re(inin2 crude oil, and "roduction and distribution o( "etroleum "roducts. .&/, the lar2est com"any in .ndia in terms o( sales, is en2a2ed in re(inin2 and distributin2 "etroleum "roducts. G4.L is the dominant 2as transmission and mar)etin2 com"any, 'hile &NG/ "roduces the majority o( the natural 2as in .ndia.

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

A CASE STUDY ON PROJECT APPRAISAL

6he "roject (acilities com"rised @iA t'o (ull0containment LNG stora2e tan)s, each 'ith a 2ross ca"acity o( %F$,$$$ cubic meters @mEAJ @iiA recovery system (or re0condensation o( the boil0o(( 2asJ @iiiA send out (acilities, includin2 Kshell and tubeL and Ksubmer2ed combustionL va"oriGersJ @ivA au7iliary (acilities, includin2 a #E0me2a'att @MWA 2as0 (ired ca"tive "o'er "lantJ @vA electrical and utilities "roduction control systemsJ @viA meterin2, (ire, and 2as detection and "rotection systemsJ @viiA a jettyJ and @viiiA initially, a brea)'ater.

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

A CASE STUDY ON PROJECT APPRAISAL

/INANCIAL E7ALUATION Decidin2 on )ey indicators @1inancial 5atios, .55s. Project /ostA Deterministic assessment o( the same 'ith the use o( a (inancial model Per(ormin2 sensitivities on s"eci(ic assum"tions (or the "ur"ose o( 3uanti(yin2 ris) (actors identi(ied. .denti(yin2 the to" %$ variables that have the ma7imum im"act on )ey indicators Probabilistic analysis based on the to" F variables identi(ied /onclusions o( "robabilistic analysis @6he )ey indicators relevant to the analysis include E3uity .55 @Princi"al .ndicatorA, Project .55, D!/5, 4D!/5, LL/5 and PL/5 and Project /ostA
Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

A CASE STUDY ON PROJECT APPRAISAL

1or the "ur"ose o( assessment o( returns to e3uity investors, a deterministic (inancial model 'as made, based on a ran2e o( assum"tions @Lo' /ase,. Base /ase and Hi2h /aseA. 6he Base /ase assum"tions have already been discussed in the "revious /ha"ter. 6he to" %$ variables that have ma7imum im"act on selected indicators @includin2 returns to e3uity investorsA 'ere identi(ied usin2 the 6ornado Dia2ram @an analysis toolA.

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

A CASE STUDY ON PROJECT APPRAISAL LNG SOURCING AND LNG PRICE

PLL si2ned a sales and "urchase a2reement @!P4A 'ith 5as La((an Li3ue(ied Natural Gas /om"any Limited @5as2asA, obli2atin2 PLL to "urchase u" to 7.= MM6P4 o( LNG (or #= years. 6he a2reement had t'o sta2es. .n the (irst sta2e, PLL 'ould ta)e =.$ MM6P4 on a ta)e0or0"ay basis u" to #$$M. 4(ter #$$M, PLL could ta)e the remainin2 #.= MM6P4 subject to the mutual a2reement o( both "arties. 6he "urchase "rice initially 'as set at N#.=E "er million British thermal units @MMB6>A, and it 'ill be rebased re2ularly in accordance 'ith a de(ined (ormula a(ter #$$M.

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

A CASE STUDY ON PROJECT APPRAISAL LNG SOURCING AND S.IPPING

5as2as, a joint venture bet'een Batar Petroleum @7$IA and E77on Mobil @E$IA, has access to the lar2est non0oil associated 2as (ields in the 'orld. 4n international consortium led by Mitsui &!+ Lines "rovided t'o dedicated s"ecial "ur"ose tan)ers 'ith ca"acity o( %EO,$$$ mE each to trans"ort LNG to PLL under a #=0year contract under terms that 'ere commensurate 'ith the 5as2as contract.

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

A CASE STUDY ON PROJECT APPRAISAL MARKET

G4.L @F$IA, .&/ @E$IA, and BP/L @%$IA @collectively re(erred to as the o(( ta)ersA are "urchasin2 2as (rom the LNG terminal. 6he o(( ta)e contract is ta)e or "ay, 'ith terms that are bac)0to0bac) 'ith PLLPs !P4.
Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

6he o(( ta)ers initially 'ere to trans"ort the 2as (rom the PLL terminal to consumers throu2h an e7"anded =#O )m HB- "i"eline system, and eventually throu2h a ne' O= )m "i"eline connectin2 Dahej to >ran. .&/ and BP/L have e7ecuted 2as trans"ort a2reements throu2h G4.L, 'hich is res"onsible (or e7"andin2 the e7istin2 and "ro"osed "i"elines. 6he o(( ta)ers intended to use the 2as (or internal consum"tion, or to sell it under lon20term contracts to industrial users. &ne third o( the out"ut 'ould be consumed by .&/ and BP/L at their re(ineriesJ one third 'ould be sold to lar2e end0use consumers, such as Hindustan Petroleum /or"oration Limited, &NG/, and a (ertiliGer com"anyJ and the balance sold to smaller end0use consumers, such as "o'er and (ertiliGer com"anies that are customers o( G4.L.

A CASE STUDY ON PROJECT APPRAISAL NATURAL GAS PRICE

PLLPs 2as sales "rice to end users is set commercially 'ithout any Government control.
Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

6he "rice consists o( the LNG rate, ta7es and duties, and a re2asi(ication char2e that re(lects actual costs o( LNG su""ly. 4s "resented in the 55P, the 2as "rice 'as estimated to avera2e NE.#7 "er MMB6> at PLLPs delivery "oint n the (irst = years o( o"erationJ and, a(ter the o(( ta)ers add trans"ort char2es and sales ta7, NE.O$ "er MMB6> at the end0user "oint. 6his "rice 'as considerably hi2her than the subsidiGed domestic 2as "rice o( N#.O "er MMB6> bein2 char2ed at the time o( a""raisal, thou2h it 'as commercially attractive due to the substantial demand su""ly 2a" in the mar)et.

A CASE STUDY ON PROJECT APPRAISAL CONSTRUCTION

PLL and a consortium led by .shi)a'ajima0Harima Heavy .ndustries /om"any Limited !i2ned the EP/ a2reement in -anuary #$$%. /onstruction 'as com"leted on schedule, and the "lant 'as mechanically com"lete in December #$$E. 4t the same time, G4.L doubled the ca"acity o( the HB- "i"eline by layin2 a ne' O# )m "i"eline (rom Dahej to :emar, GujaratJ and a =#O )m "i"eline "arallel to the e7istin2 HB- "i"eline (rom :emar to Bijay"ur, Madhya Pradesh. 6he Dahej0>ran "i"eline identi(ied in the 55P 'as not constructed due to delays in the tender "rocess, and com"letion 'as rescheduled to #$$7. 6he (irst shi"ment o( 2as arrived (rom Batar in -anuary #$$ , initiatin2 the commissionin2 "eriod. /ommercial su""ly commenced on schedule in 4"ril #$$ .

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

A CASE STUDY ON PROJECT APPRAISAL PROJECT COST

6he actual "roject cost o( the PLL "lant 'as less in local currency terms than the initial cost estimate in the 55P.
Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

6his cost savin2 resulted (rom a decision by PLL not to "roceed 'ith the construction o( the brea)'ater that had been included in the ori2inal desi2n. @&ri2inally, a FF$0meter brea)'ater 'as included in "hase . to restrict do'ntime durin2 the monsoon "eriod. Based on the mor"holo2ical data collected in the early sta2es o( brea)'ater construction, PLL concluded that the brea)'ater 'as not re3uired. 6he "lant could accommodate any "otential delays arisin2 (rom the lac) o( a brea)'ater by increasin2 stora2e ca"acity, and an additional LNG stora2e tan) 'ould "rovide 2reater o"eratin2 (le7ibility. 4s a result, PLL decided to reallocate brea)'ater (unds to construct a third tan), 'hich 'ill be "art o( the "hase .. e7"ansion that 'ill increase "lant ca"acity to %$ MM6P4 by #$$M.

A CASE STUDY ON PROJECT APPRAISAL FINANCIAL E/ALUATION

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

1inancial "er(ormance has been stron2. .n its (irst year o( o"erations, PLL recorded a net loss o( 5s#O million in #$$ as the "lant ran at =$I ca"acity. .n #$$=, the "lant utiliGed %$$I o( its ca"acity utiliGation and achieved a "ro(it o( 5s%,7== million, more than (ive times the a""raisal estimate o( 5sEE=million. 6his im"rovement in "rojected "er(ormance, 'hich is attributed to lo'er0than0 e7"ected o"eratin2 e7"enses and interest costs, is the reason (or the material increase in the 1.55. !ensitivity analysis o( critical variables, such as the e7chan2e rate and movements in the LNG "rice, indicate that the 1.55 is reasonably robust. Lon20term debt as a "ercenta2e o( total assets does not e7ceed =$I.

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

AD0 REPORT ON PROJECT E/ALUATION PETRONET

A CASE STUDY ON PROJECT APPRAISAL

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

4 /ase !tudy on Project 4""raisal

4 /ase !tudy on Project 4""raisal

PLL si2ned an a2reement 'ith 5as La((an Li3ue(ied Natural Gas /om"any Limited @5asGasA o( Batar (or the su""ly o( =.$ MM6P4 o( LNG (or #= years at a (ree on board @1&BA "rice o( N#.=E "er MMB6> (or the (irst = years o( o"eration, startin2 in #$$ . 4(ter accountin2 (or items such as shi""in2, customs duties, "i"eline char2es, re2asi(ication, and sales ta7, the delivered "rice is N .#= "er MMB6>. 4(ter #$$M, the (i7ed "rice 'ill become a variable "rice (or a F$0month transition "eriod. 6he "artici"atin2 "arties have a2reed to an increase o( N$.%E "er MMB6> (or each N%.$$ increase in the "rice o( oil above N#$ "er BBL. 6his (ormula does not have a ceilin2, allo'in2 the "rice o( LNG to rise to more than NF "er MMB6> i( the "rice o( oil stays at more than N=$ "er BBL. PLLPs delivered 2as "rice 'as very com"etitive initially relative to the HaGira terminal 2as. 5oyal Dutch !hell, 'hich has been "romotin2 its HaGira terminal as a merchant terminal, sourced its (irst LNG consi2nment (rom 4ustraliaPs North West !hel( "roject at a "rice o( NE.7$ "er MMB6>, 'hich is si2ni(icantly hi2her than PLLPs "urchase 1&B "rice. 5.LPs 2as discovery in the +G Basin 'ill a((ect the (uture com"etitiveness o( LNG im"ortsQ

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

INDIA IN MEGA DEALS FOR S.ALE LNG

.ndian com"anies 'ith !hale Gas e7"loitin2 the massive >! shale 2as (ind ac3uirin2 o"eratin2 interests in the terminals.
5.L* E.O Billion Dollar in !hale Gas 4ssets "lus another %.= billion "ro"osed in ne7t (ive years..'ith shale 2as "otential contribution to EB.6 o( N%.#= Billion G4.L has bou2ht #$I sta)e in /arriGio &il 8 GasPs shale assets o( NE$$ million, in tal)s 'ith Mac3uarie Ener2y 'hich o'ns "artly the >! based 1ree"ort LNG 6erminal &NG/ has si2ned a M&> 'ith -a"anPs Mitsui to "ursue jointly the o""ortunities in the entire LNG value chain and source LNG on s"ot and lon2 term contracts
Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

5eliance .ndustries, &NG/ and Gail in e3uity "artici"ation in the east coast based terminals o( "ro"osed seven LNG 6erminals in >!. Potential to shi" 2as to .ndia RLess than N%$ <mmBtu as a2ainst the "resent day su""ort or 4PM "rice o( N .#<mmBtu 5eliance .ndustries, &NG/ and Gail "artici"ates in e3uity in the East coast based terminals o( "ro"osed seven LNG 6erminals in >!. /hea"er than the N%E.#<mmBtu o( the "ro"osed 64P. "i"eline @6ur)menistan04(2hanistan0Pa)istan ?.ndiaA 'ith its o'n Geo"olitical 5is).

"R# $%MA"R% &AN'R(% )PRO('*+ A",%-OR. / -+R0*+0R'" 1%NAN*' %N 'N'RG. %N"0-+R%'- 2O%L3 GA-3 PO4'R5
S 4ssistance to Government 42encies (or im"lementation o( "rojects 'ith "rivate sector "artici"ation throu2h B&&6<B&6<B&& routes. S 4ssistance in "re"aration o( bid documents includin2 relevant contracts and a2reements, evaluation o( bids and selection o( bidder. S 4ssistance to "rivate "arties in "re"aration and submission o( bids (or "rojects throu2h com"etitive biddin2 S 4ssistance in tari(( (ilin2 to 2eneratin2, transmission and distribution com"anies and (ranchisee < restructurin2 and "rivatisation o( !tate Electricity Boards. S Policy advisory to /entral 8 !tate Governments, /entre and !tate Electricity 5e2ulatory /ommissions. S Pre"aration o( Business, .nvestments and 1inancin2 Plan S .denti(ication o( sources o( 1inance and !yndication o( 5u"ee and 1orei2n currency loan.

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

"R# $%MA"R% &AN'R(% )PRO('*+ A",%-OR. / -+R0*+0R'" 1%NAN*' %N 'N'RG. %N"0-+R%'- 2O%L3 GA-3 PO4'R5
S 4dvisory (or rene'able ener2y "rojects 'ith 4dvisory (or Projects under .ndian !olar Mission S 4""raisal o( "rojects in various Ener2y industry sectors. S .nvestment a""raisals (or revie' o( ca"ital bud2etin2 decision "rocess o( com"anies S !ecuritisation and other structured (inance "roducts
Due Dili2ence /a"ital !tructurin2 1inancial Modellin2 5is) 4nalysis 1inancial :iability !tudies Project Develo"ment EP/ /ontract 5is) Mana2ement !u""ort

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

-+A+' -PON-OR'" PRO('*+-) -.-+'M%* 4'A6N'--'- %N 1%-*AL MANAG'M'N+

S 6echnical )no'0ho' in modern (iscal mana2ement "ractices. S /om"rehensive, current in(ormation databases. S 5obust analytical tools and techni3ues that corres"ond to internationally acce"ted standards. S .nte2rated mana2ement in(ormation systems and systematic a""roaches to the (iscal decision0ma)in2 "rocesses. S 6rans"arent, consistent and institutionaliGed (iscal "ractices, re"ortin2 systems, and structures that "romote the desired accountability (or the e((ective and e((icient mobiliGation, allocation and utiliGation o( "ublic (unds.

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

-+A+' -PON-OR'" PRO('*+- %N %N"%A) -.-+'M%* 4'A6N'--'- %N 1%-*AL MANAG'M'N+

.nade3uate (iscal mana2ement e7"ertise and institutional in(rastructure to "er(orm revenue and e7"enditure "rojections and distributional analysis, assess multi"lier and elasticity e((ects, and run "olicy simulation and develo" alternative "olicy scenarios. 6his includes their inability to establish stron2 lin)s bet'een bud2etary outlays and "ro2ram outcomes (or e((icient and to
ensure e((ective delivery o( results, establish debt and investment (rame'or)s to im"rove their 3uality and "ro(ile, and conduct ri2orous "roject a""raisals to ensure selection o( socio0 economically viable "rojects.

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

+O *ON*L0"')
Des"ite s"endin2 lar2e sums o( money, 2overnments and donors in many countries have been limited in their ability to develo" success(ul, sustainable "ro2rams due to the inade3uacy o( (iscal mana2ement e7"ertise and in(rastructure. !uch inade3uacies "revent the "roductive absor"tion o( (unds. 6hey also "revent states (rom e3ui""in2 themselves 'ith the necessary (iscal shoc) absorbers to cushion them a2ainst une7"ected (iscal challen2es 0 some arisin2 out o( discretionary, un"lanned decision0ma)in2 and others as a result o( increased 2lobaliGation. More o(ten than not, these une7"ected challen2es can and have served as the ti""in2 "oints, seriously a((ectin2 the (iscal condition o( even (iscally healthy states

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#

:4L:E !646.&N* 4n LNG 6an)er bein2 (illed...courtesy Germanischer Lloyds

THANK 8OU