How Best to Finance Canada's Ambitious LNG Mega-projects?

LONDON, September 17, 2014 /PRNewswire/ --

LNG projects are among the largest and most challenging energy projects, requiring billions of dollars - and in some cases tens of billions of dollars - of investment. Few companies can afford to finance such projects from their balance sheets. So it has become common practice to use non-recourse or limited-recourse project financing. 

In a recent exclusive interview we spoke to Bank of Tokyo Mitsubishi UFJ's Head of Project Finance, Ko Ooshima, who explained what can be expected in terms of project financing for the various LNG export projects that are under way in Canada:

"Project financing entails a formidable set of risks. It is the role of the project finance advisor, the project sponsor and other participants to structure the financing in such a manner to mitigate these risks - namely, sponsor risk, construction risk, and off-take risk."

Mr Ooshima pointed out that while expectations are very high for the Canadian LNG projects, the challenges facing project developers are significant too:

"Assessing and managing environmental and social risks in project financing is always a challenge, especially for green-field LNG projects. Also, we may want to look at what happened over in Australia, and put that into local context and decide what lessons can be taken from there. For example, we need to keep a close eye on labour shortage and inflation, which may result in cost over-runs. Cost competitiveness among the increasingly crowded LNG market is another focal point. The significant capital requirement for pipelines, liquefaction facilities and development of the upstream gas fields is a factor when considering that these projects will have to compete with brown-field projects in the US, along with Australian projects which are closer to Asian markets."

Canadian export project proposals now number 14 plus - of which most will not be built. To become successful, every project that will reach Final Investment Decision (FID) will need to prove to lenders that revenue streams will be protected and their risks mitigated as much as possible.

With so many projects now reaching this critical stage of development, the 3^rd annual Canada LNG Export Conference & Exhibition will return to Calgary between 19^th and 21^st May 2015 to once again bring together government representatives, operators, investors and engineers to realize ambitions for Canada's LNG export future.

For further information please visit: http://www.canadalngexport.com

Neill Howard, Senior Marketing Manager, [email protected], +44-(0)203-772-6080

SOURCE Canada LNG Export