This guide examines the key issues in the development and project financing of oil and gas fields, gathering systems and pipelines. This volume analyses project feasibility, the evaluation and mitigation risks, project and financing contracts, and financing sources and how they can be harnessed for oil and gas projects.
Case studies detail the experience and lessons to be drawn from the capital markets financing of a pipeline and the financing of a gas field concession in emerging markets.
Table of Contents
Introduction 1
CHAPTER I
Project financing of oil and gas projects
Traditional sources of financing 3
Project financing 3
What is project financing 3
Project parties and their objectives 4
Advantages of project financing 7
Typical structures 8
CHAPTER II
Sources of financing
Equity 11
Mezzanine financing 12
Senior debt 12
Commercial banks 12
Multilateral lending agencies and export credit agencies 13
Capital markets 19
CHAPTER III
Evaluation and mitigation of risks
Project considerations 23
Financial feasibility 23
Feasibility study and reserve analysis 23
credit risk 24
Access, exclusivity and support 26
Engineering and construction risks 27
Operations risks 29
Operating performance 29
Transportation risk 30
Feedstock supply and raw materials 30
Commercial risk 31
Price fluctuation and volatility of earnings 31
Currency risk 32
Legal risk 33
Commercial certainty 33
Enforcement 33
Choice of law and jurisdiction 34
Arbitration 34
Political risk 35
Types of political risks 35
Political risk assessment 36
Protection against political risks 37
Regulatory risks 41
Trends in state involvement in petroleum projects 42
Taxation 43
Environmental regulation 44
Security and support 48
Security and the legal system 48
The nature of security 53
Limits on the usefulness of security in
project finance 54
The value of security in project finance 55
CHAPTER IV
Documentation
Oil and gas project contracts 59
Concession agreements, licenses, leases 59
Construction/development agreements 62
Operating agreements 64
Offtake agreements 64
Other project contracts 68
Financing documents 68
Feasibility study 69
Commitment letter and term sheet 69
Letters of comfort 69
Credit agreement 69
Collateral security agreements 74
Consents and agreement 76
Completion agreements 77
Equity or subordinated loan contribution
agreement 80
Legal opinions 81
CHAPTER V
Case studies
TransGas Pipeline Project and capital markets financing 83
The project 83
Project risks 83
The financing 87
Aguaytia Gas Field Development 90
The project 90
Government license and concession agreements 91
Construction interfaces 91
Project revenue risk 92
The financing 93
Conclusion 95
Bibliography 97
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