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Jose LNG Project

Jose LNG Project. November, 2000. Project General Overview. LNG liquefaction, storage, and export facility in eastern Venezuela 2.1 MMTPA capacity Approximately 300 MMscfd of net exports, enough for 2000MW To be located in the existing PDVSA-Gas cryogenic complex at Jose

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Jose LNG Project

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  1. Jose LNG Project November, 2000

  2. Project General Overview • LNG liquefaction, storage, and export facility in eastern Venezuela • 2.1 MMTPA capacity • Approximately 300 MMscfd of net exports, enough for 2000MW • To be located in the existing PDVSA-Gas cryogenic complex at Jose • Adjacent to Enron’s ACCRO LPG facilities. Site large enough for three LNG trains • Gas supply required, 350 MMscfd (compared to 5700 MMscfd produced daily in Venezuela, mostly associated to oil production) • Bought from PDVSA’s associated gas production (no dedicated source or reserve risk) • World only LNG export project with no exploration/production risk or investment • Gas contract with PDVSA at all-in price that includes transportation to Jose • Gas contract and other in-country documents under a PDVSA-Corp guarantee • Target LNG markets: • U.S. East Coast • Elba Island, Lake Charles, Cove Point, Boston and South Florida (ENE project in Bahamas) • Puerto Rico, Brazil and other Caribbean (Dominican Republic) • Portugal/Spain • Estimated all-in capital cost (excluding IDC): $688MM • Enron initial equity of approximately $120-$140MM (65/35 - debt/equity ratio) • Enron 50%, PDVSA 25% and other buyers (UF) 25%

  3. Proposed Project Structure ENE PDVSA ENE to continue sell-down strategy to accomplish off-Balance Sheet treatment and MTM. 75% off-take (225,000MMBtu/d) 25% off-take (75,000MMBtu/d) Off-Take Agreements ENE Net Off-take 300,000MMBtu/d Off-take to be split between ENE & PDVSA 75%-$157MM Equity Financing Debt Financing 25%-$53MM $490MM 70% Equity $210MM 30% Equity Debt from bank and bond market. Basic assumptions are: T-650; 14-y tenor,; fees of 200+75; coverage ratio 1.50x PDVSA EPC Contract Turn-Key LNG Project O&M Contract Turn-Key Turn-key $580MM Approx. 4% of EPC PDVSA-Gas to provide gas supply and site ENRON to provide O&M services to project. Several options available for adding third parties to O&M Contract. Most O&M activities could be contracted to third parties, while keeping a core senior management team at the project level for relationships and expansions EE&CC to provide Turn-Key for the project. EPC price and EPC contract in final negotiation. Other potential EPC options to be explored if necessary. Gas Supply PDVSA-Gas Site & Pier PDVSA-Gas All PDVSA-Gas obligations are backed by parent PDVSA-Corp Guarantee

  4. Key Transaction Documents PDVSA Transaction Documents • Scope of Transaction • Methane Gas Supply to the Plant • Sale of NGL back to PDVSA-Gas • Rights to Plant Site at Jose • Rights to use existing Pier • PDVSA Participation in Project • (equity option, commercial oversight) Documents Involved • Gas Supply Agreement • Final, ready to sign • LNG Sites & Pier Agmt • Usufruct and Servitude Agreements • Both final, ready to sign • PDVSA Parent Guarantee • Final, ready to sign • Participation Agreement • Near final

  5. Price Exposure Analysis LNG Markets HH + Basis MOL EXMAR Leir Hoergh ENA 70% Flat 30% @ CPI Various Hedging Instruments Off-Take ENE-PDVSA Terminal Services 70% Flat 30% @ CPI All inlet gas: Basic price, floor and bonus O&M costs escalation Capital recovery and return (Flat) Pricing to match Jose LNG Project EPC Price Debt Principal/Interest O&M Fee CPI based $ $ 1.00 Flat $ 0.20 @ CPI $0.65 @ HH $0.15 @ flat 1% $0.15 @ CPI Equity Return Basic Price Minimum Price Bonus Structure $ PDVSA Corp. Gas Supply

  6. Project Timeline Nov. 2000 Participation Agreement Completed April 2001 Executed EPC Contract NTP July 2001 Financial Closing PDVSA Option Feb. 2001 Permits Obtained May 2004 Commercial Operations Estimated Key Dates Dec. 2000 Execution all Documents May 2001 Executed O&M Shipping Arrangement Jan. 2002 PDVSA Option - Up to 7 mos - O&M - Cancellation Fees Shipping commitments PDVSA option expires GSA LC - $4MM (pre-construction) ENE’s Commitments Equity commitment - FC may be bridge financing PDVSA equity option starts Off-take final commitment GSA LC - $1.25MM (pre-construction) GSA LC - $20MM (construction) EPC - Cancellation Fees for owner and Completion Guarantee for EE&CC LNG Off-take - structure established/ final commitment before FC GSA LC - $30MM (operations) EPC - Performance Guarantee from EE&CC

  7. General Economic Value Drivers • Off-take agreements will provide a substantial portion of Enron’s income • Currently working on ability to MTM transaction • Next year income will come from both MTM of transaction of the marketing company level and from trading operations • Project company return of approximately 18% (equity at project level) • Excellent return level for equity risk with current structure • Equity sell-downs at promotes are expected to occur before year-end 2001 • Expansion rights will provide Enron w/ tool to manage 3rd party supply • Addition trains a clear possibility under current structure and at much lower cost • Sellable rights w/ project company • Marketing fee for services provide to PDVSA under Participation Agreement • Significant construction profits (assumes EPC by EE&CC) • Expected to be approximately US$39MM, plus contingency • Maximize utilization of Enron’s current positions in Elba Terminal and shipping capacity • Elba capacity is approx. 55% of Jose volume (Jose could use 100% of the capacity) • Depending on routes, a significant portion of Enron’s current shipping capacity could be used to move Jose volumes

  8. Next Steps • 4th Q’ 2000 extremely pivotal. Scheduled to conclude Venezuela in country agreements, permits, and finalize Elba Island documents • Specific near term activities • Complete Jose LNG Venezuela agreements • Finalize Elba Island documents (Doug Arnell and Les Weber) • Advance conversations with El Paso (Cove Point) and CMS (Lake Charles) • Decision on EPC Contractor (EE&CC vis-à-vis third party contractor) • Follow-up with Banks for project financing package (Larry Lawyer and Martin Rees) • Approach possible Equity investors after all key contracts in place(Larry Lawyer) • Internal approval process: • Decision on approach for PDVSA’s Participation Agreement (LNG off-take arrangement) • Obtain MTM treatment for transaction • RAC process

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