The new era of financing in LNG – a view from Gastech

In one of the most enlightening sessions of the Gastech conference, global leaders from major banks and finance institutions discussed the challenges and opportunities ahead for financing new gas related projects.

They also addressed the question of the future of natural gas and LNG in comparison to ‘green’ energy projects and what are the forecasts for project CAPEX over the next few decades. Some insights below:

Insight #1

The changing face of LNG and gas projects.

As gas projects shift away from foundation long term customers, funding new projects will require a major economic credit-worthy rationale for the project. Whether it is reserve potential, market destination or some other driver, without major long-term contracts the ability to finance new projects is changing in a big way.

Insight #2

Renewables are impacting investment in gas power generation.

On the back of major government subsidies, renewables have arrived at a cost competitive level and are challenging the demand side for gas. The power market is seeing decreased demand for gas turbine generators and the potential for stranded thermal assets is there.

Insight #3

Growth is expected in new areas such as marine transport to replace heavy fuel oil and emerging southeast Asian countries. New IMO regulations coming into effect in 2020 will limit SOx and NOx emissions and will building the business case for LNG as a marine fuel. Improved bunkering at ports around the world has started this process, and this area has significant opportunity to grow for future demand.

Emerging Southeast Asian markets shifting from coal are considering gas, but the required investment in expensive gas infrastructure such as regasification, pipelines, and gas turbines make investment risky. New deal structures sharing risk with turbine OEMs are starting to come to light to open up these markets.

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