Transcript Dragon LNG’s Presentation by John Burley at Ofgem’s LNG

Dragon LNG Terminal Presentation
11 Feb 2009
Agenda
Introduction
Development Overview
Anti Hoarding Mechanism
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Dragon LNG – Shareholders
 Dragon LNG Limited is a single purpose joint venture company
 Dragon LNG Limited will build, own and operate the LNG Import
Terminal
 Shareholders:
− BG Group, UK (50% owner)
− Petronas, Malaysia (30% owner)
− 4Gas,Netherlands (20%owner)
 Primary Shippers
− BG (50%)
− Petronas (50%)
3
Agenda
Introduction
Development Overview
Anti Hoarding Mechanism
4
Development Overview
Development Phase

Initial studies
2001

BG and Petronas joined the JV
2004

Planning Consent and Hazardous Substances consent granted 2004
Implementation Phase

EPC Contract awarded
2004

Construction started
2005

Commissioning
2009
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Agenda
Introduction
Development Overview
Anti Hoarding Mechanism
7
Anti hoarding mechanism: Background
 Dragon granted exemption from regulated TPA February 2005
− Ofgem granted exemption on understanding that Dragon would be “providing facilities for secondary trading and
anti-hoarding mechanisms”
 BG and Petronas as Primary Shippers have right to sell capacity to third parties (secondary trading)
 A “last resort” product - only needed if Primary Shippers not using capacity or bilateral secondary
trading negotiations not concluded
 Primary Shippers involvement is critical given need to empty storage tanks
 Dragon and the Primary Shippers have developed an effective anti hoarding mechanism
− Worked with regulatory consultants to ensure best practice
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Anti hoarding mechanism: Product Design
 FIRM PRODUCT: Consisting of berth slot with equivalent storage and send out
− Each Primary Shipper (BG or Petronas) responsible for managing and auctioning their own berth slots
 BILATERAL CONTRACT: Agreement between relevant Primary Shipper (BG or Petronas) and third
party, avoids 3 way agreement with Dragon.
 SPACE: Primary Shipper will ensure there is sufficient space in the tank to accept a cargo
 DELIVERY: Primary Shipper will take delivery of LNG at the import terminal
 REDELIVERY: Gas will be redelivered to the third party customer at the NBP on a flat basis over a
10 day period after the vessel has completed offloading
− Third party does not need to book UK entry capacity
− Simple pass through of transport related charges
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Anti hoarding mechanism: Main Documentation
 “Plain English” Guide to the Dragon anti hoarding mechanism
− Will be available on the website
− Explains first steps to become qualified
 Confidentiality Agreement / Customer Information Form
− Available on the website
− Required to proceed to qualification
 Auction Code
− Details qualification procedures and auction processes
− Includes Form of Letter of Credit, Form of Final Offer (bid) etc.
 LNG and Gas Delivery Terms and Conditions
− Contract between winning bidder and providing Primary Shipper
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Anti hoarding mechanism: Sales Mechanism
 PRE-QUALIFICATION: Only Qualified Bidders can participate in auctions
− Third Party applicants can become qualified bidders with a Primary Shipper at any time subject to meeting the
Primary Shipper’s criteria (e.g. credit, vessel vetting)
− Information to start qualification process will be available on website
 AUCTION: Qualified Bidders will be notified of an auction at least 12 days before the slot
− Timetable varies according to business days
− Auction specific details including timetable, reserve price, etc. notified to Qualified Bidders
− Each Primary Shipper sets the reserve price for its slots; this takes into account the market value of the slot and
the cost of emptying tanks
 BIDDING: Bidders for a slot will need to specify volumes, quality, vessel, source etc.
 NOTIFICATION: Winner notified at least 8 days before relevant berth slot
“Plain
English
Guide”
Confidentiality Auction Code
Agreement
Qualified
Auction announced on Dragon
website and e-mail sent to
Qualified Bidders with indicative
reserve price
D -12 days
Deadline for Qualified
Bidders to send final bids
including signed deal
sheet and hard copy of
short term LC
D -9 days
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D -8 days
Scheduled Day of Arrival
and unloading of Third
Party Shipper’s vessel
Primary Shipper empties tanks at
Dragon in order to accommodate
winning bidder LNG cargo
Delivery of gas to the third party
Customer at the NBP
D 0 days
D +1 days
D +10 days