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The Changing LNG Paradigm 2015-20 Gastech 2014 March 25 Peter Thompson © Gas Strategies 20141.

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The Changing LNG Paradigm 2015-20 Gastech 2014 March 25 Peter Thompson © Gas Strategies 2014 1
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Page 1: The Changing LNG Paradigm 2015-20 Gastech 2014 March 25 Peter Thompson © Gas Strategies 20141.

© Gas Strategies 2014 1

The Changing LNG Paradigm 2015-20Gastech 2014

March 25

Peter Thompson

Page 2: The Changing LNG Paradigm 2015-20 Gastech 2014 March 25 Peter Thompson © Gas Strategies 20141.

© 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

Page 3: The Changing LNG Paradigm 2015-20 Gastech 2014 March 25 Peter Thompson © Gas Strategies 20141.

© Gas Strategies 2014 3

Our perspective – and our clients

Page 4: The Changing LNG Paradigm 2015-20 Gastech 2014 March 25 Peter Thompson © Gas Strategies 20141.

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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

Page 5: The Changing LNG Paradigm 2015-20 Gastech 2014 March 25 Peter Thompson © Gas Strategies 20141.

© 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

Page 6: The Changing LNG Paradigm 2015-20 Gastech 2014 March 25 Peter Thompson © Gas Strategies 20141.

© 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

Page 7: The Changing LNG Paradigm 2015-20 Gastech 2014 March 25 Peter Thompson © Gas Strategies 20141.

© 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?

Page 8: The Changing LNG Paradigm 2015-20 Gastech 2014 March 25 Peter Thompson © Gas Strategies 20141.

© 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?

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© 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

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© 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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