FINANCING LNG IN A TRANS-PACIFIC TRADED LNG MARKET - THE ISSUES

摘要

The prospect of the development of LNG terminals on the west coast of North America and the ensuing emergence of a genuine trans-Pacific LNG market has generated an ever growing amount of speculation as to its shape and benefits to the wider market. At its best, it would add new liquidity and flexibility to the Pacific LNG trade and make a more traded LNG market a real possibility. But it poses new logistical, commercial and, above all, financing challenges only beginning to be grasped. Key issues have to be addressed to meet these challenges and this paper will examine them. A more flexible trade is more difficult to tie down. To what extent will trade be locked into conventional long term take or pay contracts? How will the flexibility of destination arise and how will it be used? How can shipping capacity be mobilised to allow LNG traders to take advantage of arbitrage opportunities? There is little certainty on any of these issues yet, but examining them from a financing perspective helps to shed some light on what may and may not be achievable. The development of trans-Pacific trading might also impact on pricing, both in Asia, and in California as well if LNG is introduced in sufficient volume. Much will depend on the progress and direction of liberalisation in the Asian markets. Trading can provide a way of bridging these two markets and reducing LNG sellers and buyers risk. If this reduction of risk is perceived by the banks only as upside from a pessimistic base case it is unlikely to have a benefit for financing. Looked at from this point of view, financing Pacific LNG could become more difficult. However, a genuine reduction of risk should make LNG a better financing proposition. The paper explores ways in which the reduction in risk might be translated into easier financing.