Oil & Gas Project Finance Training Course

 Topics addressed in depth during the course include:

• Qualitative and quantitative risk analysis
• The mechanics of upstream oil and gas financing
• Understanding the complexities of refinery finance
• Oil and gas transmission and distribution lending
• LNG project finance strategies
• Petchem and gas-to-liquids financing

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Industry Overview/Qualitative & Quantitative Risk Analysis:

• Structure of the international petroleum industry:
  – From upstream to downstream - the hydrocarbon value chain
  – Upstream – exploration, development and production
  – Refining – from raw material to end-product
  – Pipelines – transmission and distribution
  – Liquefied natural gas – a fuel of the future
  – Petchem – beyond the burner-tip
• Different risk/reward objectives of sponsors and lenders
• Structural & pricing drivers in oil & gas lending:
  – Country/political risk
  – Sponsors
  – Reservoir/reserves
  – Technology and construction/completion
  – Sales/offtake
  – Operation & maintenance
  – Abandonment/decommissioning
  – Environmental/regulatory
• Quantitative risk analysis:
  – Key ratios – loan life and project life covers
  – Balancing equity and debt
  – Features and design of oil and gas models
  – Developing an appropriate base case – setting “price decks” and other economic/technical parameters
  – Sensitivity analysis:
         * Choosing/calibrating sensitivities
         * Getting to loan value

Understanding Upstream Oil & Gas Financing:

• Reservoirs & reserves – a technical grounding:
  – From exploration through appraisal to development and production
  – Nature of hydrocarbon reservoirs
  – Estimating volumes
  – Reserve classification – proven/probable/possible: 1P/2P/3P
  – Reserves for banking purposes
  – Due diligence and consultants’ reports
• Field development finance in the early days of the north sea
• Growth of the independent sector
• Emergence of the borrowing base as the tool of choice
• European and North American borrowing bases
• Structural features of the European borrowing base, especially:
  – Balancing development and producing assets
  – Redetermination practices – setting technical and economic parameters
  – Balancing OECD and emerging market assets
  – Adding/removing assets
  – Hedging as revenue protection and debt support
  – Treatment of abandonment/letters of credit for abandonment
  – Payment waterfalls/account structures
  – Typical and variant distribution controls, reps & warranties, undertakings, events of default
• The “War Stories” in north sea single-field finance – examination of the deals that failed
• Recent trends in north sea finance:
  – The “New Wave” of independents
  – The move by larger independents to corporate borrowing
  – The new independents’ needs and the banks’ response:
         * Single-field financing returns
         * “Stretched” borrowing bases
         * Subordinated/mezzanine products

Getting to Grips with Refinery Finance:

• Refinery operations – from topping refineries to complex crackers
• Greenfield or expansion financing?
• Cash flow volatility – the key risk for lenders
• Operational mitigation of volatility risk:
  – “Geographical” margin protection
  – Tolling-based structures
  – Hedging to reduce volatility
• Debt structuring to mitigate lender risk, including:
  – Debt/equity balancing
  – Repayment profile optimisation
  – Cash sweeps
  – Distribution controls and information/other covenants
• Refinery market analysis for lenders:
  – Choosing consultants
  – Scope of work for due diligence studies
• Modelling/sizing debt for refineries
• “Where has it gone wrong?” – a somewhat chequered history

Oil & Gas Transmission & Distribution Lending:

• Trunk pipelines and distribution networks – very different animals
• Oil and gas transmission pipelines – high fixed cost/multi-partner undertakings:
  – Key risk factors – especially upstream supply issues, construction contracts and sale/offtake contracts
  – Balancing the interests of private and public sector players
  – Environmental/social issues – a “make-or-break” factor
  – Analysis of recent oil/gas pipeline financings
• Gas storage & distribution finance:
  – Liberalised/regulated gas distribution has increased financing needs
  – Gas storage in depleted fields and salt caverns - developing tailored financing packages
  – Funding the acquisition and build-out of gas distribution networks
  – Financing gas metering
  – The role of regulation and its impact on financing


Liquefied Natural Gas Finance:

• The growth of the LNG debt market
• LNG liquefaction finance:
  – Risk profile of liquefaction projects, especially:
         * Sponsor/equity issues
         * Construction contracts – structure and risk allocation
         * LNG sale contracts
  – Arabian Gulf LNG projects – a detailed comparison:
         * Typical debt structures
         * Development of structures over time
• LNG regas finance:
  – Structural drivers – especially supply, market, regulatory and regulatory issues
  – Features of recent regas financings in:
         * UK & Europe
         * USA
         * India
• LNG ship finance:
  – The LNG shipping industry
  – Corporate vs. project debt
  – Structural drivers in project-based LNG vessel financing
  – Comparison of project debt structures
• Recent trends:
  – Financing of integrated LNG chains
  – Changing downstream markets and trading patterns
  – Increasing flexibility in LNG sales and financing contracts

Other Downstream Finance – Petchem and Gas-to-Liquids:

• The Petchem “flowchart” – from gas/naphtha-based feedstocks to end-products
• The Middle-Eastern petrochemical wave – adding value to domestic gas resources: 
  – Risk profile of petrochemical projects – especially:
         * Construction – issues and contractual structures
         * Technology – bankability and licensing
         * Feedstocks – volume, price and quality factors
         * Sales/Offtake – agency/licensing issues
  – Financing gas separation & treatment plants – the first step
  – Polyolefin projects – financing crackers and PE/PP plants
  – Increasing sophistication – aromatics and beyond
• Gas-to-Liquids – financing clean diesel projects

Case Study: Two major case studies will be used – one in the upstream sector and one in the downstream – to reinforce the principles taught on the course and to allow projects to be examined with greater granularity.

The training commences with an industry overview and teaching/group work on qualitative and quantitative risk analysis. This is designed to ensure that all participants have a good working understanding of the:

• Basic structure of the international petroleum industry
• Qualitative risk “template” applied by lenders – what risks are “bankable”
• Different risk/reward objectives of sponsors and lenders
• Ratios and other tools used to determine loan values and balance equity and debt

You will then progress to a study of the project financing challenges in the separate branches of the industry, in particular:

• Upstream field development
• Refineries
• Oil and gas transportation pipelines and gas gathering systems
• LNG, liquefaction and regasification
• Petrochemical plants
• Gas-to-liquids
• Gas storage

In each sub-sector analysed, particular emphasis is given to:

• Understanding the particular financing challenges of that industry branch
• Using the risk template and economic modelling to address those challenges and structuring facilities accordingly
• Developing a feel for what is and is not achievable from a financing perspective - and why
• Recognising how structures have changed over time
• Studying where and why structures have not worked