Global Energy Ventures Ltd’s (ASX:GEV) initial economics confirm that a CNG transport supply chain represents a commercially viable alternative to pipeline or LNG for regional markets.
The company’s ‘pipe to pipe’ transportation economics confirm that GEV’s integrated marine transport strategy for compressed natural gas (CNG) is justified.
GEV’s ‘pipe to pipe’ solution encompasses all three components of the transportation supply chain - gas supply and loading, shipping, and unloading and gas sales.
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This will enable GEV to deliver one complete project contractually from the gas supplier’s pipeline to the end customer’s pipeline and utilises the company’s CNG Optimum ships.
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‘Pipe to pipe’ is different to the LNG supply chain, where the different components of liquefaction, shipping and regas/storage are usually owned and operated by different parties.
To facilitate this model, GEV’s preference will be to enter into a gas supply agreement with take-or-pay obligations over a 15-20-year term, ideally matching these obligations with the end-customer at the sales end.
This would minimise the pricing risk across GEV’s transportation chain.
The same model would apply to gas sales agreements, ideally matching the obligations with the supplier.
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GEV is targeting high-priced gas markets, sufficient to fund the GEV transportation chain, as well as providing customers with an attractive and competitive gas price compared to alternative gas options.
An example of the total ‘Pipe-to-Pipe Tariff Fee’ for a 20 year take-or-pay gas supply agreement for an average delivered volume of approximately 200 MMscf/d, at a sailing distance of 400 kilometres and 1,000 kilometres respectively.
Scale advantages
Key observations and scale advantages of the CNG Optimum gas transport solution are:
The capital and operating costs of both the CNG Export Terminal and CNG Import Terminal remain the same regardless of distance.
The number of CNG ships in operation is calculated to maintain an average delivery rate of 200 MMscf/d over the given distance, as well as taking into consideration the gas loading rate, ship speed and gas unloading rate.
GEV considers that its total ‘pipe-to-pipe’ transport fee of between US$2.20–$2.40/MMBtu for 400 kilometres and US$3.00–$3.30/MMBtu for 1,000 kilometres is a very attractive option for gas suppliers and/or gas customers, especially in areas where gas volumes are not sufficient to support development of onshore or floating LNG options, and where distances are regional – justifying the use of CNG rather than LNG transportation.
Financing discussions
The company is in early stage discussions with advisors and potential lenders for project financing.
It is assumed that financing will be arranged as a single facility to fund GEV’s integrated transportation chain, supported by its contracted 15-20-year cash flows.