Gas Market Presentation 03 12 2009

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Gas Market Presentation 03 12 2009

  1. 1. Unitisation and a Global Market in Gas Spark & Flame Conference - Rotterdam Chris Cook 3 December 2009
  2. 2. Gas needs literally trillions of dollars in investment....
  3. 3. ....but where will this come from?
  4. 4. There are two conventional types of investment: Equity and Debt 02/12/09
  5. 5. Equity – shares with par value (eg £1) in a Joint Stock Limited Liability Company 02/12/09
  6. 6. ....a 19 th Century legal dinosaur 02/12/09
  7. 7. Debt – interest-bearing loans –typically from banks - secured by legal claims 02/12/09
  8. 8. These result in conflicting claims over the same productive asset 02/12/09
  9. 9. But there are new furry animals out there.... 02/12/09
  10. 10. Partnership entities – such as the UK Limited Liability Partnership (LLP) 02/12/09
  11. 11. An LLP is a corporate body with limited liability.... 02/12/09
  12. 12. ...and...errrr...that’s it!... 02/12/09
  13. 13. As far as the Tax Man is concerned it is a Partnership 02/12/09
  14. 14. It’s an Open Corporate enabling partnership working 02/12/09
  15. 15. ... even without a written agreement 02/12/09
  16. 16. A Partnership framework enables direct - Peer to Peer - Investment 02/12/09
  17. 17. Unitisation of gas within a Capital Partnership enables direct P2P investment 02/12/09
  18. 18. Capital Partnership – direct Peer to Peer investment in productive assets 02/12/09
  19. 19. 2002 - Hilton Capital Partnership ( > £1bn) Capital Partnership LLP 10 UK Hotels Gross Revenues Hilton Group Capital User Consortium LLP Capital Provider Bank Property Developer Hotel Specialist % % % % %
  20. 20. Productive assets are held by a “Custodian”.. Assets Custodian Ownership
  21. 21. … Investors put in Financial Capital in money, or money’s worth … Assets Investors Ownership Financial Capital Custodian
  22. 22. … Managers provide Human Capital of time, expertise and experience.... Assets Investors Ownership Human Capital Financial Capital Managers Custodian
  23. 23. ..Users pay for the use of Capital Assets Investors Payment % % Use Managers Users Custodian
  24. 24. Generic Capital Partnership Framework Assets Investors Payment % % Use Managers Users Custodian
  25. 25. Capital Partnership reinvents Equity
  26. 26. Equity Shares - % age shares in revenues or production... 02/12/09
  27. 27. … ..which may be transferred, but never redeemed, since there must always be 100%
  28. 28. Units – redeemable in payment for production eg natural gas, Kilo Watt Hours
  29. 29. Units have a value in exchange
  30. 30. Anyone who understands Air Miles...
  31. 31. … .or proprietary currencies
  32. 32. … .will understand Units
  33. 33. Units - the Value Proposition 02/12/09
  34. 34. Producers - sell Units to investors and consumers 02/12/09
  35. 35. … at a discount to the physical market price 02/12/09
  36. 36. … obtaining an interest-free loan 02/12/09
  37. 37. … locking in a sale price 02/12/09
  38. 38. … but no longer participating in price increases ….or decreases 02/12/09
  39. 39. Investors – hold a direct investment in energy with no return 02/12/09
  40. 40. ....similar to an investment in gold... 02/12/09
  41. 41. ...except that while gold may be pretty... 02/12/09
  42. 42. ....it’s not as useful as gas or other energy 02/12/09
  43. 43. Consumers - lock in the price of future consumption 02/12/09
  44. 44. Units are a simple but radical new hybrid 02/12/09
  45. 45. Units lock in price like a futures contract… 02/12/09
  46. 46. … but there is no right to delivery; no expiry date, and no gearing 02/12/09
  47. 47. Units are similar to an Exchange Traded Fund within a partnership framework…. 02/12/09
  48. 48. … .with the added attraction that they are redeemable in payment for energy 02/12/09
  49. 49. Issue – Liquidity : Investor sellers of Units may not find Investor buyers 02/12/09
  50. 50. No Problem! Consumers will buy if the Unit price falls below physical gas market price 02/12/09
  51. 51. ...because they would profit by buying Units and redeeming them against consumption 02/12/09
  52. 52. Issue – Security : will a Unit be honoured when presented in payment? 02/12/09
  53. 53. No Problem! Sellers and Buyers are members of a Gas Clearing Union 02/12/09
  54. 54. Conventionally, sellers may give buyers interest-free credit –or time to pay Buyer 02/12/09 Credit Value Seller
  55. 55. Banks act as credit intermediaries, to provide trust through implicit guarantee 02/12/09 Bank Seller Buyer
  56. 56. Or sellers enter into forward purchase bilaterally or over the counter Buyer 02/12/09 Forward Sale Seller
  57. 57. Clearing Houses act as risk intermediaries, to provide trust through implicit guarantee 02/12/09 Clearing House Seller Buyer
  58. 58. A Clearing Union guarantees credit from member sellers to member buyers… Buyer 02/12/09 Pool Guarantee Guarantee Seller
  59. 59. ...with a common bond as market participants Buyer 02/12/09 Pool Guarantee Guarantee Seller
  60. 60. Both seller and buyer pay into a Pool for the use of a mutual Guarantee Buyer 02/12/09 Pool Guarantee Guarantee Fee Fee Seller
  61. 61. Buyer settles credit in money, or money’s worth of Value acceptable to seller Buyer 02/12/09 Pool Guarantee Guarantee Fee Fee Value Seller
  62. 62. If a buyer defaults, Pool pays seller, and collects from buyer Buyer 02/12/09 Pool Collects Pays Seller
  63. 63. A service provider sets guarantee limits, handles defaults & manages the system Buyer 02/12/09 Pool Service Provider Services Fee Fee Guarantee Guarantee Fee Seller
  64. 64. The Clearing Union Buyer 02/12/09 Pool Service Provider Services Fee Fee Guarantee Guarantee Fee Value Credit Seller
  65. 65. Risk intermediaries are service providers not middlemen 02/12/09
  66. 66. … managing risk without committing their own capital 02/12/09
  67. 67. Financing – a project to capture flared gas
  68. 68. A Custodian holds the asset Assets Custodian Ownership
  69. 69. Contractors provide money’s worth Assets Contractors Ownership Capital Equipment Custodian
  70. 70. Suppliers - may invest equipment & materials
  71. 71. ... but must invest agreed profit margin, thereby giving a stake in the outcome
  72. 72. Investors - provide risk capital for costs suppliers cannot or will not invest Assets Investors Ownership Risk Capital Custodian
  73. 73. Managers provide Human Capital of time, expertise and experience Assets Investors Ownership Human Capital Financial Capital Managers Custodian
  74. 74. ...and the project is completed
  75. 75. Outcome – micro Gas Pool Gas Pool Unit Investors Consumers Equity Shares Managers, Producers gas $ or Units Redeemed $ Units Units Units
  76. 76. Re-financing of debt-funded LNG train
  77. 77. $2 billion in conventional debt may be refinanced by Qatar
  78. 78. … ..by selling 400 million Units redeemable in payment for 1 MMbtu @ $5.00 each to Japan
  79. 79. Outcome – macro Gas Pool Gas Pool Unit Investors Japan Equity Shares Managers, Qatar gas $ or Units Redeemed $ Units Units Units
  80. 80. Gas Pools are merged within a global Master Partnership framework agreement Master Partnership Financial Capital (Money, IP etc) Clearing Union Custodians % % $ 02/12/09 Human Capital ( Developers, Operators)
  81. 81. Master Partnership transcends borders through consensual agreement 02/12/09
  82. 82. … without adversarial relationships and problematic jurisdictions 02/12/09
  83. 83. ...and without costly, complex and hierarchical global institutions
  84. 84. The Gas Pool is not an Organisation ... 02/12/09
  85. 85. ...it does not own anything, do anything, employ anyone, or contract with anyone... 02/12/09
  86. 86. … .it is simply a framework for cross border investment in gas infrastructure
  87. 87. The Gas Pool may lead the way to a new approach to the Kyoto carbon markets....
  88. 88. ...as invented by Enron...
  89. 89. ...where the Emperor has no clothes
  90. 90. Overheard at a traders’ conference.....
  91. 91. “ If you want to keep a cow healthy, you don’t regulate what comes out of it……”
  92. 92. “…… you regulate what goes in….”
  93. 93. A Gas Pool enables a Carbon currency based upon the intrinsic value of energy…
  94. 94. ..rather than a market in value-less Units of CO2 emissions, imposed by governments
  95. 95. Gas is homogeneous and gas Units would be globally acceptable in exchange 02/12/09
  96. 96. Electricity Units – redeemable in Kilo Watt Hours – would be regionally acceptable
  97. 97. Other Units – redeemable in payment for carbon fuels - may be nationally acceptable
  98. 98. All may be priced against a Unit of measure – an Energy Standard ....
  99. 99. ...a fixed Unit of energy
  100. 100. Producer and consumer nations would massively increase energy prices
  101. 101. ...and compensate populations with Energy Units
  102. 102. Consumers may choose to waste energy and redeem Units in payment
  103. 103. ...or conserve energy and exchange Units for accommodation, food or other value
  104. 104. An Alternative Agenda for COP15 Copenhagen?
  105. 105. How? A Global Energy Clearing Union
  106. 106. Energy Unitisation – a new mechanism to finance the transition to renewables
  107. 107. Dollars priced in energy: not energy priced in dollars
  108. 108. Who? Producers - GECF/Gas OPEC - led by Iran, Qatar, Russia
  109. 109. Who? Consumers - led by China, Japan, EU
  110. 110. Who? Trusted Developer – Norway
  111. 111. Thank You 02/12/09

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