EWC Scheme - the terms to beat?

[Tree]

'The world now knows what our deal is, what it takes to partner with us'      Phil M. Spring 2011.  He was referring to EWC terms.

EWC SCHEME:

EWC agreed to provide the CAPEX/OPEX  for 14.5% royalty of LNG sales.  No up- or midstream ownership.

LT sales at $15/Mcf, EWC gross is $2.175/Mcf.   IOC and partners split $12.875/Mcf and keep $1.54/Mcf condensates revenue.

$12.875 + $1.54 = $14.414/Mcf.   IOC/partner gross

EWC ROI roughly 30% (assuming CAPEX/OPEX at $1.67/Mcf w/o condensates subsidy)

GENERIC GULF LNG SCHEME:

CAPEX/OPEX for Gulf LNG per recent IOC slides is $1.67/Mcf.  IOC and partners split $13.33/Mcf LNG revenues AND the $1.54/Mcf condenstes revenue.

$13.33 + $1.54 = $14.87/Mcf   IOC/Partner  gross

EWC scheme was a sweetheart option for Gulf LNG and it set the bidder bar high.  IOC kept condensates and all upstream and great LNG %.

A SM won't compete $ for $ with what EWC offered but they WILL have to be competetive.

Sample bid:  $3/Mcf + CAPEX/OPEX of $1.67 - Condensates revenue $1.54 =  $3.13/Mcf.

Will JKM  or PTT or an NOC be shy about a $3/Mcf bid?  Will a SM be shy?  They shouldn't.

Bid mindset isn't how cheap can we buy this resource but how high do we need to bid to win.

That condensate subsidy is going to make all involved a ton of $$.

[johnwgrant]

My memory says that Mitsui was going to pay $35/barrel for condensate.

Since much time has gone by (since the deal was struck), is this still a "fair" or market price for condensate ?

[johnwgrant]

OK - rushing in where angels fear to tread . . . . Note that this discovery is offshore the Falkland islands - not exactly close geographically to PNG or the Far East for that matter !!!

The "punch-line" is that they are using a $1 to $6 per barrel discount when modelling the economics of their discovery. (their condensate has an API gravity of 44.5 to 49°). Anyone know the API gravity of condensate from Elk/Antelope ? Anyone know if our discount should be $10, $20, $30, $40 per barrel ? (with WTI current pricing at about $110, if we are selling at $35 we are allowing Mitsui a $75 discount !!!).

http://www.energy-pedia.com/news/falklands/new-153233

In April last year, Borders & Southern announced that it had made a significant gas condensate discovery with its first well in the South Falkland Basin. The Darwin structure comprises two adjacent tilted fault blocks: Darwin East (which contains the discovery well 61/17-1) and Darwin West (untested). The fault blocks are clearly defined by high quality 3D seismic data. Fluid analysis has revealed that the discovery contains a relatively high liquid content. Initial reservoir engineering studies, suggested that 130 to 250 million barrels of liquid could be recovered, with a mid case of 190 million barrels (split almost equally between the two fault blocks). Subsequent studies have shown that, if there is strong aquifer support, the mid case could be as high as 210 million barrels. The reservoir engineering study has also demonstrated that more liquid could be recovered by gas recycling than by gas depletion.

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A geochemical analysis of the condensate liquid has been undertaken along with a screening level marketing study. Whilst the quantity of condensate available for analysis was limited, and further analysis will be required, preliminary observations indicate that the liquid is typical of an ultra-light crude oil and somewhat heavier than most condensates (API gravity of 44.5 to 49°). A comparison product, albeit slightly lighter, would be Alba condensate, produced in Equatorial Guinea. Closest potential markets for the condensate would be South America, the Caribbean and South Africa. Based on this initial study, the Company believes that the condensate might trade at a slight discount to the Brent crude oil benchmark price ($1 to $6 per barrel).

[johnwgrant]

My last rookie attempt at "google" journalism :>)


This is discussing condensate pricing in the Eagle Ford region of the US. The timeframe was July of 2012. You can see that they define "condensate" as having an API gravity of 50+.


http://eaglefordshale.com/news/eagle-for...te-weaker/
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The average posted condensate to crude discount this year was close to $17/Bbl.
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….there are 3 principal markets for condensate: (a) sale as crude oil, (b) sale as diluent for heavy crude blending, and © processing in a splitter and sold as component products. Refiners find condensate less attractive as a crude oil blend because it produces less of the valuable middle distillate blends. The diluent market is attractive but requires shipment to Canada. Some of the Eagle Ford condensate is being shipped south to Corpus Christi by pipeline and then by barge up the Gulf Coast to St James LA and on up the Capline pipeline to Canada. Midstream players in the Eagle Ford are also developing condensate processing facilities. At the moment, however, we can see from Plains All American posted prices that refiners are paying less for Eagle Ford condensate than they do for crude and then applying a gravity adjustment factor to reduce the price they pay for condensate even further.
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Condensate has an API gravity of 50+ and falls between natural gas liquids and crude oil on the hydrocarbon spectrum.