LNG FROM PNG

[Relker]

Appears the group of 3 has concluded they have enough gas for this first build . Why not tie into Oil Search appraisals and be done and collect the cash . Relker any comments on your appeared use of 18 T's on your model ?!

It is a pity that IOC does not report the assumptions of its calculations. For these type of calulations the following assumptions are very important:

1. Inflation rate

2. Discounting percentage incase of NPV calculation

3. Economical lifetime project

4. Salesprice

5.Interest rate for loan including redemption scheme

6. Leverage percentage

7. Fiscal depreciation scheme

8. Opex

IOC is referring to a study of Wood Mackenzie dated August 2015. However, they were not very open too about the assumptions. Suppose we will have:

1. a production capacity of 6.9 MPTA

2.  a resource of 15 TCF

3. 10% discountfactor

80% of the cash flow will be lowered to less than 10% of the original value.

From an economical point of view this would be very stupid.

[jft310]

Relker- They keep mentioning the plant will be same size as Exxon the 6.9 mtpa .
I wish I knew more about basis of design fundamentals to understand the time they are taking ??
Your 15 T's is a very nice number . Hope that turns into reality
A 10 percent discount rate on cash flow might be high for a company like Total .
The good news with the T count firmed up and cash received , and costs to build the plant determined that will yield proper numbers that can be inputed to reach NPV of the plant by year as construction progresses . Or the FID numbers are critical in value understanding .
My opinion they could stack trains like Cheniere Energy is doing and open a new train every year or so for several years . But best to get the first one done first .

[Relker]

Relker- They keep mentioning the plant will be same size as Exxon the 6.9 mtpa . I wish I knew more about basis of design fundamentals to understand the time they are taking ?? Your 15 T's is a very nice number . Hope that turns into reality A 10 percent discount rate on cash flow might be high for a company like Total . The good news with the T count firmed up and cash received , and costs to build the plant determined that will yield proper numbers that can be inputed to reach NPV of the plant by year as construction progresses . Or the FID numbers are critical in value understanding . My opinion they could stack trains like Cheniere Energy is doing and open a new train every year or so for several years . But best to get the first one done first .

The financial analysts of the world calculate with approx 10% discount. Wood Mackenzie even calculated with 11% in August 2015. Total knows that for the financial evaluation it is not handy to calculate with a lifetime which is longer than 15 years. After 15 years the discounted value becomes very low.  As far as I can see Total did not mention the possible size of the plant. The Yamal plant will be 3*5.5 mpta. It remains to be seen whether the 2nd and 3rd train will be built in the near future. The other day Shell announced to build 6.5 mpta trains in Canada. In other words technical developments plead for larger modular built trains.

[ArtM72]

The financial analysts of the world calculate with approx 10% discount. Wood Mackenzie even calculated with 11% in August 2015. Total knows that for the financial evaluation it is not handy to calculate with a lifetime which is longer than 15 years. After 15 years the discounted value becomes very low.  As far as I can see Total did not mention the possible size of the plant. The Yamal plant will be 3*5.5 mpta. It remains to be seen whether the 2nd and 3rd train will be built in the near future. The other day Shell announced to build 6.5 mpta trains in Canada. In other words technical developments plead for larger modular built trains.

Where this model by financial analysts fails in the big scheme of things is petrochemical resources in the ground do not depreciate nor do they deteriorate.  While prone to fits of boom and bust they, like land, will be as valuable in 15 years as they are today, if not more so.  Not the same with buildings or machinery or computers or clothing or...

Of course, hydrocarbon rich properties can be stolen or confiscated.  Perhaps that is why trillions of cubic feet of natural gas in IOC properties to be extracted 15 years hence has no value.

Sure wish I could reliably get 11% on my money somewhere else.

[jft310]

Actually future financial models will value the gas . It takes monetization an FID for the assets to be placed on the balance sheet in footnote form which allows a basis for the banks to loan money to the Partners to build the plant or take on debt .