The construction of liquefied natural gas plants presents a huge investment opportunity for energy companies in Europe, the Middle East, North Africa and Latin America. The cheapening of technologies and equipment for liquefying natural gas and transporting LNG makes this type of fuel more and more attractive to consumers around the world.
For over 20 years our specialists have been offering financial and innovative solutions in the energy sector for private companies and government customers.
Morgan Stanley research shows that massive investments in new terminals, ships and LNG plants will soon pay off. According to the agency’s estimates, the new capacity will lead to global growth of this market by 50% by 2025.
Viola Funding Limited a renowned GUERNSEY Channel island finance and loan company, offers financing and construction of LNG plants under an EPC contract.
This article tends to teach about the prospects for investments in LNG plants, new technologies for the production of liquefied natural gas, project financing and investment opportunities.
Liquefied natural gas plants production: new investment opportunities
The LNG industry value chain consists of four links:
1) Extraction of natural gas.
2) Purification and liquefaction.
3) Transportation.
4) Regasification.
The resulting product is loaded onto LNG carriers, which are equipped with refrigeration and insulation systems to store and maintain the liquid state of the gas until it reaches the port of destination (LNG terminal).
Liquefied natural gas is a revolutionary fuel that could spur global economic growth over the next decade. It is becoming a more affordable fuel thanks to the development of technologies and the groeth of an extensive infrastructure for the production, transportation and regasification of LNG.
Liquefied natural gas is a non-corrosive, odorless cryogenic liquid made up of 90% methane.
The importance of Liquefied natural gas plants for the global economy
In the late 1990s, concerns about oil shortages arose in developed countries. The emergence of hydraulic fracturing technology, which is used to release gas and oil under high pressure, has radically changed the situation in the energy market.
In recent years, hydraulic fracturing has revolutionized the US energy sector, making the country the largest exporter of energy for the first time.
Experts predict that cheap LNG exports in the coming years will reduce energy prices in Europe and Asia, thereby stimulating the energy sector and commodity markets.
This is despite the fact that in those years it was very difficult to transport and store natural gas, and the main share of gas exports fell on expensive gas pipeline systems.
The situation changed with the advent of LNG: natural gas became liquid and it is now very easy to transport it by tanker trucks or ships. For this reason, experts are talking about big changes in the energy market, opening up investment opportunities for the next few years.
Thanks to the boom in shale gas, coal consumption has fallen in half and CO2 emissions have fallen by 25%.
This is despite the fact that in those years it was very difficult to transport and store natural gas, and the main share of gas exports fell on expensive gas pipeline systems.
Economic implications of increased LNG production
Engineering and construction companies will clearly benefit from the introduction of the new fuel, as multibillion-dollar LNG production, transportation and regasification projects are under way around the world.
Industrial equipment manufacturers receive orders for new equipment and everything related to it. This represents a potential growth of 50% over the next five years over the previous decade.
The switch to LNG could put more pressure on other sectors, including those dependent on coal. Coal carriers may face a 5% decline in revenue in 2020 as more customers switch from coal to gas.
Liquefied natural gas plants offers alternative with lower CO2 emissions compared to solid fuels. It has a positive impact on the environment.
However, the environmental benefits of switching to LNG vary greatlu.
Building new liquefied natural gas plants could forever change the gas market and the energy companies that make money from it.
The LNG industry will affect the following companies:
1) Engineering companies (EPC contractors).
2) Transport companies (including ship owners).
3) LNG equipment manufacturers.
4) European chemical manufacturers.
5) Other gas consumers.
These delays are due to financial, environmental, social, regulatory and political issues. The planning, construction and commissioning times for LNG plants sometimes reach 4-6 years. During this time, the economic situation, demand and production can change significantly, so investors need accurate forecasts.
Estimated cost of building LNG plants
The fact that natural gas is difficult to extract and transport via gas pipelines to the consumer’s boiler has slowed the development of the sector for many years.
It would seem that these disadvantages are not inherent in LNG, since it is transported in liquid form by sea like oil, without pipeline restrictions. But the fact that it must be liquefied and stored at low temperatures makes it difficult to handle and requires strict safety regulations.
Today, we see a reduction in capital costs at all links of the chain, including the production of LNG. This is happening both as a result of improving technologies and increasing capacities, and as a result of increased competition between technology and equipment suppliers, shipyards, etc.
Consequently, the LNG value chain also requires large investments.
Over the past 10 years, the cost of capital per unit of production at liquefied natural gas plants has decreased by 25%, for LNG tankers this figure has dropped by 35%, and at regasification terminals by 20% over the same period.
Building an LNG plant in Norway is not the same as implementing a similar project, for example, in Nigeria. Obviously, the availability of engineers, trained personnel, workshops and logistics services plays an important role.
Building a liquefied natural gas plant or receiving terminal near an existing port is not the same as building tens of kilometers from the sea coast. Floating LNG plants require a specific approach.
On the other hand, when a company is about to open up a new market or cover an emerging shortage in a small market, it makes sense to build a smaller plant with the prospect of future expansion.
Building LNG plants with a lower capacity is more expensive in terms of MTPA.
Thus, a plant with a capacity of 4-5 million tons of LNG per year at the end of the 2000s cost about $ 1 billion.
Due to the reduction in the cost of technology and equipment, the cost of liquefied natural gas plants has dropped significantly, and the scale of projects has increased.
Our services in the field of financing the construction of LNG plants
Viola Funding Limited offers a full range of services in the field of financing and construction, modernization and expansion, maintenance and operation of liquefied natural gas plants in Europe, Latin America, North Africa and the Middle East.
Services include:
• Feasibility study and financial modeling.
• Development of a general project and detailed design.
• Design and manufacture of customized LNG equipment.
• Construction and commissioning.
• Consultations during the operation of the plant.
• Modernization and expansion.
Cooperation with Viola funding limited brings clear benefits to our customers in the form of favorable financing conditions, cost-effective production, high reliability, long equipment life and a quick return on investment.
Viola Funding Limited and her high net-worth- angel investors have helped major energy companies around the world to achieve their goals.
In recent years, the EPC contract has become the most common form of cooperation in the construction of large-scale facilities such as LNG plants and terminals.
The advantage of an EPC contract for investors is that a single professional contractor performs all the work and bears full responsibility for the implementation of the project.
Contact us at any time to learn more about the construction of LNG plants under the EPC contract.
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