Presentation on theme: "The Financing of Gas Projects"— Presentation transcript:
1 The Financing of Gas Projects Enrico GrassiPrincipal Banker, Natural ResourcesEBRD
2 EBRD – Who are we?International financial institution, owned by 60 countries and two inter-governmental institutionsPromotes transition to market-based economies in 27 countries from central Europe to central AsiaCapital base of € 20 billionCumulative commitments € 21.7 billion
3 EBRD facilities Guarantees Loans Equity All risk guarantees Specific risk guarantees (e.g. political)Commodity-backed instrumentsTrade facilitation programmeNon/partial recourse to sponsorsProject specificHard/local currencyMedium and long termFloating/fixed ratesNew equityPrivatisationQuasi-equity
4 EBRD Natural Resources portfolio €1.7 billion committed to €10 billion projectsFuture portfolio will be more diversified:60% oil / 40% gas20% pipeline and downstream projectssignificant growth in “regional” projects involving several countriesPetroleum RefineriesMetal Ore MiningPipeline TransportationOil and Gas Extraction
6 Why the world go for Natural Gas? Improvements in combined cycle gas turbine power generation drove increase in gas consumptionEnvironmental concernsConcerns regarding stable oil suppliesReduction in investment requested along the whole chainBig gas reserves in the oil companies books
7 How to bring gas to the market which is far? The answer is LNG
8 What are the challenges to the market players 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?
9 What are the challenges to the market players 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?
10 How LNG market has changed in the recent years? Contracts are characterised today by flexibility in:destinationvolumesdurationDevelopment of the spot marketShipping arrangements are moving from DES to FOB
11 Why oil companies look for MLA/ECAs financing? To share the risk and to receive:Political coverLonger maturitiesFlexible repayment profileLeadership in large scale financingKnowledge of and experience in gas/LNG projects
12 What are the classic challenges in financing gas and LNG projects? (1) Construction / Completion Riskcontractual structure (delays, cost over-runs, etc.)Operational Risktechnological integration and experience / viabilityUtilisation / Supply Risktype of throughput arrangementfundamentals (Market/Competition)
13 What are the classic challenges in financing gas and LNG projects? (2) Competition / Marketeffect of oil price (linked to gas and oil products)regional supply / demandimpact on tariffPolitical & Regulatory Risksregulatory intervention (tariffs & export volumes)political turmoil / disputes / violence / nationalisationdiscriminatory taxation
14 Risks and their mitigation Economic & financialminimised through financial package and due diligenceTechnical risksreliance on strong and technically competent sponsorEnvironmental riskssponsor commitment to appropriate guidelinesPolitical risksminimised through involvement of IFI’s and ECA’s
15 Available Financing Sources EquityStrategic investors (oil and gas majors)Investment funds (limited scope)IFI’s (EBRD, IFC)Debt FinancingIFI's (EBRD, IFC) (own funds)EIB (European portion)Commercial banks (participating in IFI B Loans)ECAs (Hermes, Coface, JBIC, Exim…)Capital MarketsEquity (IPO's)Bonds
16 Debt as Financing Source LoansTailor made instruments with negotiated conditionsBank lenders familiar with different structuresBondsRelatively rapid issuance processNo covenants for straight instrumentsTradable instrumentsBut lack of flexibility
17 Sakhalin II Project (1 of 3) Each LNG project consists of a continuous chain of activities linking the gas production to the gas userThis ProjectProductionOil & Gas field development and pipelinesLiquefactionLNG plant and oil & LNG export terminalShippingLNG tankersRegasificationLNG receiving terminal
19 Sakhalin II Project (3 of 3) Additional offshore platformOil & Gas pipelines stretching the length of the islandDevelopment of Lunskoye gas field through offshore platformConstruction of LNG plant and oil export terminal
20 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 tcfProject: 4-stage development of the Shah Deniz gas and condensate field with Stage 1 cost of USD 2.3 billionLocal 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)
21 South Caucasus Pipeline – Overview (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 borderConstruction & timing: SCP’s Right of Way runs parallel to BTC and construction of SCP will occur concurrently with that of BTCCapacity & cost: a peak capacity of over 20 billion cubic feet (bcf) per annum and will cost over USD 1 billion
Your consent to our cookies if you continue to use this website.