A Practical Guide to Gas Monetisation

A Practical Guide to Gas Monetisation

13th August 2015

GCA has recently completed its multi-client study “A Practical Guide to Gas Monetisation”.  The study focuses on a review of the key options available for gas monetisation, providing an overview of the benefits and risks of each.  However, unlike many other studies, this report provides not only a solid base of information, but also a defined methodology for the analysis and comparison of gas monetisation options.

Completion of the study has reinforced GCA’s belief that it is simply not possible to make generic conclusions of the type “monetisation option X is better than monetisation option Y”.  Neither is it appropriate to base the selection of the monetisation route on a small number of parameters, such as resource size and distance to market.  Naturally, these parameters will influence the choice of monetisation option, but attempting to base preliminary decisions on just two parameters oversimplifies the numerous factors that influence selection of the most appropriate option.

GCA’s new study advocates a methodology for the comparison and ranking of options based on consideration of a wide variety of influences, including:

  • The nature and location of the gas resource;

  • Capital costs and any uncertainty related to those costs;

  • The market(s) to be targeted and price risks associated with the products generated by the monetisation option; and

  • Any technology maturity/implementation risk.

The methodology is presented in a format such that it can be followed as presented, or can be customised further by each individual user.  It is also largely future proof – whilst views on gas / crude oil prices and the capital cost of the various monetisation options will vary over time, the methodology allows for newer information and projections to be substituted into the process as and when they are available.  This principle applies to variations in external influences (such as crude oil price), but also applies to project parameters that, as the project evolves, ultimately will be defined in a greater level of detail.  The study provides sufficient data to derive a preliminary capital cost estimate for any of the monetisation options reviewed but, naturally, if project-specific information can be applied to the screening process, then this will further enhance the validity of the methodology.

GCA’s work on the study has also shown that the attitude of the gas resource developer to, for example, market, investment or technology risk will be a key determinant over the monetisation route selected.  For example, if the available options for a particular scale of gas resource are assessed, then the optimal monetisation route identified for a company that is adverse to technological risk but is happy to assume some market risk can be very different from, for example, the best option for a company that is more tolerant of technology risk but may have limitations on the availability of capital.

Furthermore, the need for a holistic review of the available options is reinforced by the study’s conclusions and, indeed, by GCA’s experience of such monetisation options in the “real world”.  Take for example GTL technology – at today’s lower crude oil price environment, the economics of this particular option may be challenging in many circumstances.  However, if a particular scenario presents the opportunity to, within the local market, replace high-cost imports of refined products (potentially with elevated delivery costs due to inefficient product distribution infrastructure), then suddenly the appeal of the GTL option is increased.

This is just one very simple example: the difficulties associated with trying to rank gas monetisation options based only on generic cases are often repeated.  Therefore, within GCA’s A Practical Guide to Gas Monetisation, the reader will find no broad-brush statements of the nature “X is better than Y”.  Instead, they will find the basic information and a defined methodology to enable the reader to make statements of the effect “for my particular development and situation, X is better than Y”.

GCA’s A Practical Guide to Gas Monetisation is available for purchase now. Please click here to contact GCA for additional information and pricing options.


A Practical Guide to Gas Monetisation

Richard Poole

Midstream/Downstream Advisor - richard.poole@gaffney-cline.com

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