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Project Finance for Oil & Gas Workshop

This programme has been tailored to meet the needs of professionals in the oil and gas, banking &
finance, legal and accounting industries who already have experience of project finance or the
hydrocarbon sector and who wish to expand and deepen their knowledge of the limited-recourse
financing techniques used in the different branches of the oil and gas industry.
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;

different risk/reward objectives of sponsors and lenders;
qualitative risk template applied by lenders what risks are bankable; and
ratios and other tools used to determine loan values and balance equity and debt.

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

upstream field development single assets and borrowing bases;

refineries both greenfield and upgrades;
oil and gas transportation pipelines and gas gathering systems;
liquefied natural gas (LNG) liquefaction and regasification;
petrochemical plants;
gas-to-liquids; and
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 what is not achievable from a financing perspective and
recognising how structures have changed over time; and
studying where and why structures have not worked.

Wherever possible interactive methods are used for this sector analysis work. The agenda also
includes a number of taught sessions on particular topics of interest such as upstream reserves
classification and syndication of oil and gas projects given by recognised experts.
Comprehensive course notes and copies of presentations are provided to participants.
Who should attend?
The course is designed to provide focussed, rapid, but, comprehensive training with a view to
moving participants quickly up the learning curve in a cost-effective way. It is likely to be of
particular benefit to:

business development, portfolio management and credit function staff in lending banks;
oil and gas industry executives who need to understand bank facilities / negotiate with
legal professionals with limited prior knowledge of the oil and gas finance sector;
accounting firm staff serving the oil and gas industry as advisers/auditors;
public sector employees from oversight/regulatory organisations;
national oil company staff keen to develop their understanding of asset/cashflow-based
insurance brokers and advisers; and
ECA and multilateral agency staff.

Detailed Course Programme

Industry overview / Qualitative and Quantitative risk analysis.

Structure of the international petroleum industry

o From Upstream to Downstream the hydrocarbon value chain
o Upstream exploration, development and production
o Refining from raw material to end-product
o Pipelines transmission and distribution
o Liquefied Natural Gas a fuel of the future
o Petchem beyond the burner-tip

Different risk/reward objectives of sponsors and lenders

Structural & pricing drivers in oil & gas lending

o Country/Political Risk
o Sponsors
o Reservoir / Reserves
o Technology and Construction / Completion
o Sales / Off take
o Operation & Maintenance
o Abandonment/Decommissioning
o Environmental / Regulatory

Quantitative risk analysis o Key Ratios Loan Life and Project Life Covers
o Balancing Equity and Debt
o Features and design of oil and gas models
o Developing an appropriate Base Case setting price
economic/technical parameters
o Sensitivity analysis

Choosing/calibrating sensitivities

Getting to loan value




Upstream Oil & Gas Financing

Reservoirs & Reserves a technical grounding

o From Exploration through Appraisal to Development and Production
o Nature of hydrocarbon reservoirs
o Estimating Volumes
o Reserve classification Proven/Probable/Possible; 1P/2P/3P
o Reserves for banking purposes
o 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:

o Balancing development and producing assets
o Redetermination practices setting technical and economic parameters
o Balancing OECD and emerging market assets
o Adding/removing assets
o Hedging as revenue protection and debt support
o Treatment of abandonment / letters of credit for abandonment
o Payment waterfalls / account structures
o Typical and variant Distribution controls, Reps & Warranties, Undertakings, and Events
of Default.

The War Stories in North Sea single-field finance examination of the deals that failed

Recent trends in North Sea finance:

o The New Wave of independents
o The move by larger independents to corporate borrowing
o The new independents needs and the banks response:

Single-field financing returns

Stretched Borrowing Bases

Subordinated/Mezzanine products

Refinery Finance

Refinery Operations from topping refineries to complex crackers

Greenfield or expansion financing?

Cashflow volatility the key risk for lenders

Operational mitigation of volatility risk:

o Geographical margin protection
o Tolling-based structures
o Hedging to reduce volatility

Debt structuring to mitigate lender risk, including:

o Debt/Equity balancing
o Repayment profile optimisation
o Cash sweeps
o Distribution controls and information/other covenants

Refinery market analysis for lenders:

o Choosing consultants
o 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:
o Key risk factors especially upstream supply issues, construction contracts and
sale/off take contracts
o Balancing the interests of private and public sector players
o Environmental / social issues a make-or-break factor
o Analysis of recent oil/gas pipeline financings

Gas storage & distribution finance:

o Liberalised / regulated gas distribution has increased financing needs
o Gas storage in depleted fields and salt caverns - developing tailored financing
o Funding the acquisition and build-out of gas distribution networks
o Financing gas metering
o 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:

o Sponsor/equity issues
o Construction contracts structure and risk allocation
o LNG sale contracts

Arabian Gulf LNG projects a detailed comparison:

o Typical debt structures
o Development of structures over time

LNG Regas Finance

Structural drivers especially supply, market, regulatory and regulatory issues

Features of recent regas financings in:

o UK & Europe
o India

LNG Ship Finance

o The LNG shipping industry
o Corporate vs. project debt
o Structural drivers in project-based LNG vessel financing
o Comparison of project debt structures

Recent trends:
o Financing of integrated LNG chains
o Changing downstream markets and trading patterns
o Increasing flexibility in LNG sales and financing contracts


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:
o Construction issues and contractual structures
o Technology bankability and licensing
o Feedstocks volume, price and quality factors
Sales/Off take agency/licensing issues
o Financing gas separation & treatment plants the first step
o Polyolefin projects financing crackers and PE/PP plants
o Increasing sophistication aromatics and beyond
Gas-to-Liquids financing clean diesel projects

Case Studies
Two case studies will be used
o one in the upstream sector; and
o one in the downstream sector.

To reinforce the principles taught on the course and to allow projects to be examined with
greater granularity.