the changing lng paradigm 2015-20 gastech 2014 march 25 peter thompson © gas strategies 20141
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© Gas Strategies 2014 1
The Changing LNG Paradigm 2015-20Gastech 2014
March 25
Peter Thompson
© Gas Strategies 2014 2
3 Events, 3 Continents, 3 Months, One Question:How is North American LNG reshaping the industry?
− Houston, 12/12/13
− London, 26/11/13
− Singapore, 6/2/14
© Gas Strategies 2014 3
Our perspective – and our clients
© Gas Strategies 2014 4
US LNG and the potential to change global LNG
Source: IEA Source: Gas Strategies
Themes1. The disaggregated Value
Chain
2. Acceleration and Disruption
3. Approach to financing
4. The effect on Global Trade
Source: Gas Strategies
© Gas Strategies 2014 5
A disaggregated value chain
E&P led investors (IOCs etc)Integrated Simultaneous Project Development
Gas cost driven by production economicsPlant a means of monetising gas
Gas producers already producingFragmented infrastructure – much pre-existing
Gas cost local market-price drivenLiquefaction plant an infrastructure play
Offtaker
upstream
midstream
downstream
© Gas Strategies 2014 6
A disaggregated value chain“T
ypic
al”
LN
G
E&P led investors (IOCs etc)Integrated Simultaneous Project Development
Gas cost driven by production economicsPlant a means of monetising gas
Utility and other market-led buyersAggregators
Price linked to end-marketSome destination restriction
DES or FOB
US
LN
G Gas producers already producingFragmented infrastructure – much pre-existing
Gas cost local market-price drivenLiquefaction plant an infrastructure play
AggregatorsSmaller volumes per contract?New entrants seeking volumeFOB, part of the flexible pool?
upstream
midstream
downstream
© Gas Strategies 2014 7
Disruption and Acceleration
Acceleration− Of new technology and contractors− Of entry for new buyers and traders
– but do they have the capability and organisation?
− Of access to volume for niche buyers and additive value chains?
Disruption− To market and marketing for
pre-FID projects− To price (LT contracts and ST)− Of existing contract prices via
PR?
© Gas Strategies 2014 8
Finance: the choke on US expansion?
− How do developers and financiers assess market risk? Which markets?
− Offtakers who do not yet have significant LNG experience?− Is access to NBP an effective mitigant to price risk?
Market risks
Contractual risks
Operational risks
− How robust and aligned are the contracts along the value chain?− Can developers really insulate themselves from market risk?− What happens if offtakers default or walk away from a project?
− Management of capacity holders, sometimes within a single train− Inter-toller arrangements− Responsibility for complete value chain
Construction risks− Equity investors taking construction risk: is it understood?− New Contractors and new technology: how financeable and reliable?
© Gas Strategies 2014 9
Findings and Conclusions
−Effect on Global Trade?
−Uncertainty prevails
−Perception of big opportunity – especially for new entrants
− Finance is key
−Ripples around the world
© Gas Strategies 2014 10
What does it mean …
For developers? − Structuring for finance and educating stakeholders− Operating challenges along the value chain
For offtakers?− Global, and complex, risk profile− Operational / management requirement to deliver the value
chain
For financiers? − Recognise the different risk profile of US LNG and invest on
that basis− Be sure of mitigants
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