09-29-2014, 03:31 AM
'Relker' pid='50107' datel Wrote:In the 19th century a famous English economist, Ricardo, said: Corn is not high because the rent is paid but an rent is paid because corn is high. In other words Oil companies are calculating the break even price of the future projects.The cheapest projects get priority. Total considers the E/A field as a cheap project and was willing to pay a high license fee to IOC. Ever since the deal was closed, the gasprice went down considerable. It remains to be seen if Oilsearch/XOM are still eager to realize a large expansion.
Yes, you're hitting a few important notes here. However, the declining gas price in Asia is the spot price while these projects are usually underpinned by long-term supply contracts relating to the oil price (which is also off, but not nearly as much as the spot natural gas in Asia).
And funny enough, part of the decline in the spot price in Asia has been caused by the Exxon plant coming online early, so they sold a few tankers on the spot market, as I understand it.
Also keep in mind that extensions of existing facilities are likely to be considerably cheaper than building new plants, depending a bit on circumstances.