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Oil & Gas Financial Journal: Comparison of Project Structures in an LNG Liquefaction Plant


WASHINGTON, D.C., March 30, 2012 -- In the current issue of Oil & Gas Financial Journal, Baker Botts L.L.P. Partner Tom Holmberg wrote about how the fundamental decision project participants must make when developing a liquefied natural gas (LNG) infrastructure project is how to structure the project.

The structure of a project will affect the risk profile of the project and, as a consequence, the type of financing the project will attract and the ease with which the project may be financed, Holmberg wrote. The final structure elected by the project sponsors will, of course, also depend on various other factors, including the existing contractual relationship among the project sponsors, and local law and tax regimes.

Holmberg’s article compares the three following project structures for LNG liquefaction projects:

-- An integrated project model in which the participants share a unity of interest in the LNG value chain from production of natural gas through the liquefaction of the LNG;

-- A project company (or merchant) model in which the project company that owns the liquefaction facility purchases natural gas as feedstock from a seller (or sellers) and resells LNG to offtakers; and

-- A tolling model in which the LNG plant does not take title to natural gas feedstock or LNG produced at the plant, but provides liquefaction and processing for the owners of the feedstock natural gas.

The complete Oil & Gas Financial Journal article is available here.

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