Project considerations 9 Dec 2012 21:12
Gasol will source LNG from a global trading house and sell to a country gas supplier.
 It will be leasing an FSRU, rather than buying it. This will lead to relatively lower capital costs but higher operating costs. For our modelling, we assume a relatively small FSRU with flow rates of 150mmscfd. We note that press reports (Jakarta Globe, August 2012) indicate that the Nusantara Regas (capacity 400mmscfd) will have a day rate of $190k.
 Capex will be limited to costs outside of the FSRU, including the setting-up of jetty facilities, breakwaters, pipelines, dredging, environmental studies and control systems. Capex will therefore vary depending on the level and complexity of the construction of these facilities. In benign environments, where waters are generally calm (or harbour facilities already exist) and an existing gas pipeline to customers is nearby, the capex will be low. We believe approvals and permits on any necessary work will be approved relatively quickly given the government involvement in approving the LNG regasification project in the first place.
 We have assumed a 10-year contract term – a standard duration within the industry. Save from extreme cases, FSRUs are not the cheapest long-term solution. If countries require gas supply without the possibility of native gas supplies or imported piped gas, onshore facilities will likely be cheaper over multi-decade timescales. Contracts can always be renewed if required, although we have not assumed this in our modelling.
 Gasol will buy LNG in the market, the price of which is assumed to be linked to the prevailing oil price (in this case Brent). Sales prices will be negotiated, but are likely to be constrained by prices of alternatives (in the case of West Africa, fuel oil/petrol/diesel) and competitive pressures. As discussed above, this current price margin is significant and opens the opportunity for LNG re-gas projects. The company has said it will not take pricing risk on the LNG, so we would expect it would enter long-term contracts for the supply of the LNG too, at a discount to the prevailing spot market.
 Gasol was reported in Proactive Investors that a potential deal is open within the Middle East. It has signed an MoU “with a national government to begin providing gas in the first quarter of 2014”. The company also stated that it is in advanced negotiations with an African government to...........
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