Structured financing techniques in oil and gas project finance pdf

Taught by a respected project finance and international oil and gas expert, the training commences with an industry overview and teachinggroup work on qualitative and quantitative risk analysis. This record level of investment is set against a backdrop of over the next 20 years to finance. The figure below shows a simplified overview of the project documents entered into by uzkor on a longterm basis. Structured trade products are mainly warehouse financing, working capital financing and preexport financing. In particular, we will focus our analysis on project finance.

Nature of the project though project financing techniques are used in a number of core sectors, including energy, infrastructure, oil and gas and mining, the technical details of projects differ hugely even within a sector. This can be attributed to inadequate legal and regulatory framework to effectively regulate and monitor the oil and gas sector. Timing between the two components can take years and usually does. Project finance is the financing of longterm infrastructure, industrial projects and public services based upon a nonrecourse or limited recourse financial structure, in which project debt and. Mar 05, 2020 structured finance is a highly involved financial instrument offered to large financial institutions or companies that have complex financing needs that dont match with conventional financial. Project finance, the financing alternative for large projects. Structured finance is a highly involved financial instrument offered to large financial institutions or companies that have complex financing needs that dont match with conventional financial. A comprehensive definition of project finance states that. Ing structured finance uzkor surgil project financing. Nocs are rapidly emerging as controllers of a large share of the worlds upstream production units and.

Banking corporations tailor these financing arrangements based on the needs of the client. Oil development of new pipelines and refineries are also successful uses of project finance. Creative private and institutional funding available for a qualified project. This book provides a practical guide to project finance for the international petroleum industry, covering financial markets, sources and providers of finance, financial structures, and capital raising processesand including case studies that highlight industry players, risks, economics, and commercial and legal arrangements. He has developed and delivered a number of highlyregarded public training courses for. Specializing in international project finance, capital markets, and risk management, she works with corporate investors, private and development banks, equipment suppliers, law firms etc. The oil and gas organization of the future mckinsey. The project structure also included the provision for future projects and operators accessing the gas reserves from the same upstream concession.

Infrastructure financing instruments and incentives. We play a significant part in funding projects in various industrial sectors, catalyzing public and private partnerships and reducing project risk using a mix of government credits, insurance and private lending. Portfolio management in oil and gas building and preserving optionality 1 change is the new constant in an increasingly complex and uncertain environment, oil and gas companies worldwide are facing relentless pressure to improve returns even as they encounter strong headwinds. This oil and gas project management training course is developed in response to increasing application of project management in oil and gas environment. Limited recourse project and structured financing are two options that offer maximum flexibility for project sponsors and help u. Funding challenges in the oil and gas sector innovative financing solutions for. Islamic finance opportunities in the oil and gas sector. Project finance we provide offbalance sheet, nonrecourse project financing for major international development projects. Smis project financing in oil and gas conference is specifically design to give a comprehensive overview of financing your own oil and gas projects, targeted at both leading oil and gas companies as well as smes this conference will give you detailed material on how to break down the complexities that is project finance. Project structure, cost, and financing the only present way to transport natural gas across ocean distances is to ship it as a liquid at 260of in specially. Against a backdrop of falling commodity prices, access to finance has become one of the key challenges facing many industry participants in the oil, gas and mining sectors. Structured financing techniques in oilandgasrelated project finance have grown more popular over the past several decades. We will however continue to finance noncoal energy projects for these clients in support of their energy transition.

Structured financing techniques in oil and gas related project finance have grown more popular over the past several decades. Alternative financing structures in the oil, gas and mining sectors 4 march 2016. Fundamentally, project finance is concerned with identifying the specific financial requirements of a project, sourcing funds, entire. Professor, what is project finance and what does distinguish project finance from traditional corporate finance. Ings coal policy refers to the thermal coal used in power generation because it can readily be substituted by gas until clients transition to renewables such as wind and solar. In response to heightened political and economic instability. The project structure featured the upstream concession being held by a separate joint venture to the borrower that owned the floating lng vessel. Mechanics of issuance of debt parties, roles and tasks. Then, project finance is briefly described, particularly with respect to applications that have some potential relevance for the financing of commodity trade. While steve occasionally acts as a consultant, since 2008, he has concentrated on training in the project finance sector. Oil and gas companies may need more profound changes to meet demands for meaningful work and social responsibility to attract the next generation of top engineering and leadership talent. Project financing is always offbalance sheet there is a great deal of confusion between the risksharing nature of project financing and the balance sheet treatment which is a matter of accountants.

Project finance is the financial technique that the private sector has envisaged in order to finance on a privately basis complex infrastructure. Ing structured finance ing wholesale banking ing wb. Solutions in the form of innovative financing structures and new sources of funding are becoming more and more prevalent. The term project finance is generally used to refer to a nonrecourse or limited recourse financing structure in which debt, equity and credit enhancement are combined for the construction and operation, or the refinancing, of. Overview of the bank loan and project bond markets 7 3. Joint venture strategic partner can also be brought to the table. Structured commodity finance scf as covered by trade finance is split into three main commodity groups.

If principals do not have any skin in the game a good project can get up to 100% of required capital, but principals have to be ready to reasonably accept a dilution of ownership and control. Today, most lenders dont usually finance more than 75 percent of a project s value. Top best project finance books in the wake of the 2008 financial crisis, project structuring and financing have undergone a seachange that has reshaped various industries and emerging economies at large. Smis project financing in oil and gas north america will give a comprehensive overview of the industry to date discussing pf techniques, reserve base lending, commercial structure and risk analysis, the shale gas market, on and offshore projects, pipeline and infrastructure plus much more. In addition, this note considers the typical features of oil and gas financing including the fact that such projects. Financing oil and gas projects in developing countries. Rbl structure provides funds for the drilling and expansion of oil and gas reserves. Project finance in developing countries english the. The wharton school project finance teaching note 2 i. Overview uk least partly, operational, the project company will. Structured financing techniques in oil andgas related project finance have grown more popular over the past several decades. Watch this video of steve mills, a project finance specialist and practitioner, introducing the course. Highlights of efsi the european fund for strategic investments 10 4. Meant for a wider audience, this volume describes the essentials and complexities of project structuring.

Some of the largest and most complex investments in the global oil and gas industry have been funded using project finance techniques and a strong body of precedent now exists upon which sponsors and their advisers can build structured financing for new projects. Project finance the term project finance is often interpreted incorrectly as the generic financing of a project. Although annual investment in the petroleum industry is enormous, it will be seen that project finance represents a relatively small source of capital for the. The purpose of this chapter is to explain the role of project finance in the oil and gas industry and explore how this form of financing is used by project sponsors to raise capital. Project finance project finance company project financing. Robert clews project finance for the international petroleum industry fills a significant gap in project finance literature for both the academic and professional reader. Unlike the operational improvement of shale oil and gas companies, which has been the object of many studies since the oil price crash, efficiency gains realized on the financialside of the. Project finance for infrastructure in waemu, eccas, eac ancing sources fin. The conference will look at commercial structure and risk analysis, global oil and gas market states, structured finance techniques, onshore and offshore, oil and gas infrastructure projects, the syndicated loans market plus more this event will present itself as the perfect forum for learning about pf within oil and gas. Although annual investment in the petroleum industry is enormous, it will be seen that project finance. Sample wbs for oil,gas and petrochemical project creating wbs is a task that required not only planner effort but also required inputs from the project team. Project finance for the international petroleum industry. In some instances, there may be a favorable opportunity for equity participation by the lenderinvestor.

Suppose a petrochemical plant revamp project scope included design and engineering, purchasing of equipments and materials and construction of furnace and compressor areas. A primary message is the importance of clearly identifying and addressing project risks upfront and the potential costs of. Project structures, procurement and planning process 12 5. Often take many years from inception to the point at which the end product is sold to consumers. Dec 16, 2014 structured trade finance products are used primarily in the commodity sector by traders, producers and processors.

However, project financing is a specialised funding structure that relies on the future cash flow of a project as primary source of repayment, and holds the project. This meeting will offer all parties involved in financing oil and gas projects the perfect platform to dissect key challenges and latest developments in the industry. Viable oil and gas project can be funded with debt, equity, mezzanine. Smi is delighted to announce the return of their 3rd annual project financing in oil and gas conference. Globix funding provided structured solutions to your exploration financing needs. The term project finance refers to the financing of large infrastructure or energy projects entailing substantially significant initial costs and extremely long depreciation periods. Financing oil and gas projects oil and gas financing. Scf is a financing technique utilised by a number of different companies, primarily producers,trading houses and lenders. The project and commercial structure was developed to ensure the bankability of a longterm project financing. Definition of project finance the term project finance is used loosely by academics, bankers and journalists to describe a range of financing arrangements. Energy project finance is used to build energy infrastructure in industrialized countries as well as in emerging markets.

Typically, owners structure financing through a real estate holding company. Until the 1970s, most petroleum projects in developing countries were financed by the international oil companies, through internal cash generation. Project finance is subject to a number of widely held misconceptions, including the following. This briefing note examines recent trends and several transactions where novel strategies were employed. Structured longterm financing of infrastructure, industrial projects and public. Project finance pf, can be viewed as an investment expedition1 and as any other expedition once it has departed it solely depends on its own resources and these are the arrangements that pf provides.

However, project financing is a specialised funding structure that relies on the future cash flow of a project as primary source of repayment, and holds the projects assets, rights and interests as collateral. The purpose of this article is to provide lawyers, and their clients, a broad understanding of the applicability of islamic funding techniques to oil and gas financing. Structured financing techniques 529 structured financings are based on one central, core principle a defined group of assets can be structurally isolated, and thus serve as the basis of a financing that is independent as a legal matter, from the bankruptcy risks of the former owner of the assets. Securitization, in particular, has played an important role in project finance by increasing oil and gas sponsors access to affordable financing from the capital markets and helping banks refinance their project loan exposures. Longterm, offbalance sheet, nonrecourse loans to finance the development of large commercial, industrial, utility and infrastructure projects secured by the assets and operations of the project. The first international oil and gas project financing in.

Project finance is a form of syndicated finance designed for longterm infrastructure and industrial projects often involving governments. A project finance training course providing a thorough grounding in limitedrecourse financing a practical guide to the strategies, techniques and methodologies for successful project financing applied to a range of capitalintensive industries. Five big ideas for the oil and gas organization of the future. In quite a few applications, techniques for project and trade finance, for a long time different areas managed by different departments in banks, are now growing closer together. Meth ane, theprincipal constituent, is 600 times denser in liquid form than as a gas at room temperature, and this reduction in. Alternative financing structures in the oil, gas and mining. Project finance versus corporate finance opportunities in oil. Finance for the oil and gas industry edinburgh business school v contents module 1 introduction and the tools of finance 11 1. Project finance teaching note wharton finance finance. Financial modeling and petroleum project economics during these two units, participants will gain an integrated and practical understanding of. Depending on the job, the threshold may be lower than 75 percent. Securitization, in particular, has played an important role in project.

Large natural gas pipelines and oil refineries 2 introduction to project finance. Practical strategies and techniques for successful oil and gas project financing. Alternative financing structures in the oil, gas and. Typically 10 years flexible and negotiable subject to clients preferences. Financing of oil and gas projects has been a major challenge in nigeria for the iiocs. There is an expectation and demand for oil and gas personnel to be sufficiently skilled and competent in project management processes and techniques to ensure project deliverability and success. Project finance in developing countries english abstract. There are many ways to raise financing for oil and gas projects in the cis, the region that used to make up the soviet union. Often bandied about in trade journals and industry conferences as a new financing technique, project finance is actually a.

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