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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$#%& T'() E*!r #o D!*!%o+ &vervie' o( mar)et ris)s (or LNG* !outh +orea, -a"an, .ndia and /hina 0LNG D!,()- .$ /($# O0#1ro2.)1 S0++%&
Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#
- LNG Pricing in Asian Markets to rise in link with oil - I)-.( .) M!1( D!(%$ 4or S'(%! LNG 4ro, US 2.#' +r."! (-*()#(1!
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
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 #$%#
Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#
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
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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
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
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
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.
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.
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.
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.
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.
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.
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 #$%#
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 #$%#
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 #$%#
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 #$%#
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.
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.
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.
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 =$I.
Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#
Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#
Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#
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# $%MA"R% &AN'R(% )PRO('*+ A",%-OR. / -+R0*+0R'" 1%NAN*' %N 'N'RG. %N"0-+R%'- 2O%L3 GA-3 PO4'R5
S 4dvisory (or rene'able ener2y "rojects 'ith 4dvisory (or Projects under .ndian !olar Mission S 4""raisal o( "rojects in various Ener2y industry sectors. S .nvestment a""raisals (or revie' o( ca"ital bud2etin2 decision "rocess o( com"anies S !ecuritisation and other structured (inance "roducts
Due Dili2ence /a"ital !tructurin2 1inancial Modellin2 5is) 4nalysis 1inancial :iability !tudies Project Develo"ment EP/ /ontract 5is) Mana2ement !u""ort
Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#
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 #$%#
.nade3uate (iscal mana2ement e7"ertise and institutional in(rastructure to "er(orm revenue and e7"enditure "rojections and distributional analysis, assess multi"lier and elasticity e((ects, and run "olicy simulation and develo" alternative "olicy scenarios. 6his includes their inability to establish stron2 lin)s bet'een bud2etary outlays and "ro2ram outcomes (or e((icient and to
ensure e((ective delivery o( results, establish debt and investment (rame'or)s to im"rove their 3uality and "ro(ile, and conduct ri2orous "roject a""raisals to ensure selection o( socio0 economically viable "rojects.
Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#
+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 #$%#
Presented by Dr. Himadri Banerji at the 7th LNG World Marcus and Evans Brisbane th !e"tember #$%#
THANK 8OU