The Financing of Gas Projects Enrico Grassi Principal Banker, Natural Resources EBRD.
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Transcript of The Financing of Gas Projects Enrico Grassi Principal Banker, Natural Resources EBRD.
The Financing of Gas ProjectsThe Financing of Gas ProjectsEnrico GrassiEnrico Grassi
Principal Banker, Natural Resources Principal Banker, Natural Resources EBRDEBRD
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EBRD – Who are we?EBRD – Who are we?
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'98 '99 '00 '01 '02 '03
International financial institution, owned by 60 countries and two inter-governmental institutions
Promotes transition to market-based economies in 27 countries from central Europe to central Asia
Capital base of € 20 billion
Cumulative commitments € 21.7 billion
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EBRD facilitiesEBRD facilities
LoansGuarantees Equity
All risk guarantees
Specific risk guarantees(e.g. political)
Commodity-backed instruments
Trade facilitation programme
Non/partial recourse to sponsors
Project specific
Hard/local currency
Medium and long term
Floating/fixed rates
New equity
Privatisation
Quasi-equity
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EBRD Natural Resources portfolioEBRD Natural Resources portfolio
€1.7 billion committed to €10 billion projects
Future portfolio will be more diversified:
– 60% oil / 40% gas
– 20% pipeline and downstream projects
– significant growth in “regional” projects involving several countries
11% 6%
69%
14%
Oil and Gas Extraction
Metal Ore
Mining
Pipeline Transportation
Petroleum Refineries
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The Financing Gas/LNG ProjectsThe Financing Gas/LNG Projects
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Why the world go for Natural Gas?Why the world go for Natural Gas?
Improvements in combined cycle gas turbine power generation drove increase in gas consumption
Environmental concerns
Concerns regarding stable oil supplies
Reduction in investment requested along the whole chain
Big gas reserves in the oil companies books
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How to bring gas to the market How to bring gas to the market which is far?which is far?
The answer is LNGThe answer is LNG
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What are the challenges to the market players What are the challenges to the market players who want to participate in LNG rush? (1)who want to participate in LNG rush? (1)
LNG projects require huge investments and have long payoff periods:
today prices are high but what may happen if they collapse?
High gas prices is good news for the oil companies not for consumers:
will the market reconsider coal and re-evaluate nuclear power?
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What are the challenges to the market players What are the challenges to the market players who want to participate in LNG rush? (2)who want to participate in LNG rush? (2)
LNG prices have been historically indexed to oil but more and more starting being priced against hub gas prices:
how to understand the trend of “new” pricing?
Market see many greenfield projects:
to which extent the financial world will accept the risk and on which terms?
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How LNG market has changed in the How LNG market has changed in the recent years?recent years?
Contracts are characterised today by flexibility in:
destination
volumes
duration
Development of the spot market
Shipping arrangements are moving from DES to FOB
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Why oil companies look for MLA/ECAs Why oil companies look for MLA/ECAs financing?financing?
To share the risk and to receive:
Political cover
Longer maturities
Flexible repayment profile
Leadership in large scale financing
Knowledge of and experience in gas/LNG projects
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What are the classic challenges in What are the classic challenges in financing gas and LNG projects? (1)financing gas and LNG projects? (1)
Construction / Completion Risk
– contractual structure (delays, cost over-runs, etc.)
Operational Risk
– technological integration and experience / viability
Utilisation / Supply Risk
– type of throughput arrangement
– fundamentals (Market/Competition)
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What are the classic challenges in What are the classic challenges in financing gas and LNG projects? (2)financing gas and LNG projects? (2)
Competition / Market
– effect of oil price (linked to gas and oil products)
– regional supply / demand
– impact on tariff
Political & Regulatory Risks
– regulatory intervention (tariffs & export volumes)
– political turmoil / disputes / violence / nationalisation
– discriminatory taxation
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Risks and their mitigationRisks and their mitigation
Economic & financial
– minimised through financial package and due diligence
Technical risks
– reliance on strong and technically competent sponsor
Environmental risks
– sponsor commitment to appropriate guidelines
Political risks
– minimised through involvement of IFI’s and ECA’s
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Available Financing Sources Available Financing Sources
Equity– Strategic investors (oil and gas majors)
– Investment funds (limited scope)
– IFI’s (EBRD, IFC) Debt Financing
– IFI's (EBRD, IFC) (own funds)
– EIB (European portion)
– Commercial banks (participating in IFI B Loans)
– ECAs (Hermes, Coface, JBIC, Exim…) Capital Markets
– Equity (IPO's)
– Bonds
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Debt as Financing Source Debt as Financing Source
Loans
– Tailor made instruments with negotiated conditions
– Bank lenders familiar with different structures
Bonds
– Relatively rapid issuance process
– No covenants for straight instruments
– Tradable instruments
– But lack of flexibility
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Each LNG project consists of a continuous chain of activities linking the gas production to the gas user
Production Oil & Gas field development and
pipelines
Regasification LNG receiving terminal
Shipping LNG tankers
Liquefaction LNG plant and oil & LNG export
terminal
This Project
Sakhalin II Project (1 of 3)Sakhalin II Project (1 of 3)
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Sakhalin II Project (2 of 3)Sakhalin II Project (2 of 3)
Supervisory
Board
Supervisory
Board
100%
25%
Mitsui & Co. LtdMitsui & Co. Ltd
Mitsui Sakhalin Holdings B.V.
Mitsui Sakhalin Holdings B.V.
20%
100%
Mitsubishi Corp.Mitsubishi Corp.
Diamond GasSakhalin B.V.
Diamond GasSakhalin B.V.
55%
100%
Shell Petroleum NVShell Petroleum NV
Shell SakhalinHoldings B.V.
Shell SakhalinHoldings B.V.
Shareholders Agreement
Shareholders Agreement
Production Sharing
Agreement (1994)
Production Sharing
Agreement (1994)
Russian Federation
Sakhalin Oblast
Russian Federation
Sakhalin Oblast
Sakhalin Energy Investment Company Ltd.Sakhalin Energy Investment Company Ltd.Supervisory
Board
Supervisory
Board
100%
25%
Mitsui & Co. LtdMitsui & Co. Ltd
Mitsui Sakhalin Holdings B.V.
Mitsui Sakhalin Holdings B.V.
20%
100%
Mitsubishi Corp.Mitsubishi Corp.
Diamond GasSakhalin B.V.
Diamond GasSakhalin B.V.
55%
100%
Shell Petroleum NVShell Petroleum NV
Shell SakhalinHoldings B.V.
Shell SakhalinHoldings B.V.
Shareholders Agreement
Shareholders Agreement
Production Sharing
Agreement (1994)
Production Sharing
Agreement (1994)
Russian Federation
Sakhalin Oblast
Russian Federation
Sakhalin Oblast
Sakhalin Energy Investment Company Ltd.Sakhalin Energy Investment Company Ltd.
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Sakhalin II Project (3 of 3)Sakhalin II Project (3 of 3)
Poronaysk
Nogliki
Piltun
Okha
Nikolayevsk-na-Amure
Aleksandrovsk-Sakhalinskiy
Yuzhno-Sakhalinsk
SakhalinIsland
Russia
Katangli
DeKastri NyshDetail 2
Detail 1
Boatasyn
Gas Compression(BS#2)
172 km Piltun shoreline to OPF
636 km48” Gas Line
Oil Booster(BS#2)
636 km24” Oil Line
Detail 3
20” Gas Line
LNG Tanker
LNG Plant Oil Export Terminal
36”Loading Line
5.5 km
TLU
Domestic SupplyOff-Take
Detail 3
24” Liquid Line
48” Gas Line
636 km OPF
to OET
Detail 1
20” Oil Line
41 km PA-B to shore
17.5 km PA-A to shore
Boatasyn
PA-B
PA-A14” Oil Line
14” Gas Line
Onshore Tie-in point with pig traps for all pipelines
20” Oil line
172 km onshoreto OPF
Detail 2
Nysh
4.5” glycol return
LUN-A
OPF
BS#1
2 x 30” multiphase
20” Gas line
24” Oil
48” GasPoronaysk
Nogliki
Piltun
Okha
Nikolayevsk-na-Amure
Aleksandrovsk-Sakhalinskiy
Yuzhno-Sakhalinsk
SakhalinIsland
Russia
Katangli
DeKastri NyshDetail 2
Detail 1
Boatasyn
Gas Compression(BS#2)
172 km Piltun shoreline to OPF
636 km48” Gas Line
Oil Booster(BS#2)
636 km24” Oil Line
Detail 3
Poronaysk
Nogliki
Piltun
Okha
Nikolayevsk-na-Amure
Aleksandrovsk-Sakhalinskiy
Yuzhno-Sakhalinsk
SakhalinIsland
Russia
Katangli
DeKastri NyshDetail 2
Detail 1
Boatasyn
Gas Compression(BS#2)
172 km Piltun shoreline to OPF
636 km48” Gas Line
Oil Booster(BS#2)
636 km24” Oil Line
Detail 3
20” Gas Line
LNG Tanker
LNG Plant Oil Export Terminal
36”Loading Line
5.5 km
TLU
Domestic SupplyOff-Take
Detail 3
24” Liquid Line
48” Gas Line
636 km OPF
to OET
Detail 1
20” Oil Line
41 km PA-B to shore
17.5 km PA-A to shore
Boatasyn
PA-B
PA-A14” Oil Line
14” Gas Line
Onshore Tie-in point with pig traps for all pipelines
Detail 1
20” Oil Line
41 km PA-B to shore
17.5 km PA-A to shore
Boatasyn
PA-B
PA-A14” Oil Line
14” Gas Line
Onshore Tie-in point with pig traps for all pipelines
20” Oil line
172 km onshoreto OPF
Detail 2
Nysh
4.5” glycol return
LUN-A
OPF
BS#1
2 x 30” multiphase
20” Gas line
24” Oil
48” Gas
Oil & Gas pipelines stretching the length
of the island
Additional offshore platform
Development of Lunskoye gas field through offshore
platform
Construction of LNG plant and oil export
terminal
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Shah Deniz Project – Overview (1 of 4)Shah Deniz Project – Overview (1 of 4)
Reserves: proven and probable gas-in-place of approximately 31 trillion cubic feet (tcf) – world class reserves; likelihood of an additional 22 tcf
Project: 4-stage development of the Shah Deniz gas and condensate field with Stage 1 cost of USD 2.3 billion
Local participation: State Oil Company of Azerbaijan Republic (SOCAR) also holds a 10% interest in this project (through AzSD: EBRD will part-finance their cash calls)
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South Caucasus Pipeline – Overview South Caucasus Pipeline – Overview (2 of 4)(2 of 4)
Pipeline route: a 690 km gas pipeline starting at the Sangachal Terminal, traversing Azerbaijan and Georgia and connecting with the BOTAS domestic gas distribution system at the Georgian-Turkish border
Construction & timing: SCP’s Right of Way runs parallel to BTC and construction of SCP will occur concurrently with that of BTC
Capacity & cost: a peak capacity of over 20 billion cubic feet (bcf) per annum and will cost over USD 1 billion
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South Caucasus Pipeline – Route (3 of 4)South Caucasus Pipeline – Route (3 of 4)
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SD and SCP Project – Sponsors (4 of 4)SD and SCP Project – Sponsors (4 of 4)
BP (25.5%)
Statoil (25.5%)
TotalFinaElf (10%)
SOCAR (10%)
NICO (10%)
TPAO (9%)
Lukoil (10%)
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Contact DetailsContact Details
Enrico G. GrassiPrincipal BankerNatural Resources TeamEuropean Bank for Reconstruction and Development1 Exchange SquareLondon, EC2A 2JN
Tel. 44 (0)20 7338 6179Fax 44 (0)20 7338 6101Email: [email protected]
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More information: www.ebrd.comMore information: www.ebrd.com