LNG Business Fundamentals

What are the Goals?

At the end of this training course, you will learn to:

• Understand the challenges of the energy industry and the LNG business.
• Appreciate the business dynamics and value drivers in LNG business.
• Gain insights from market dynamics to support LNG project appraisals.
• Apply the understanding to support technical and economic decisions.

Who is this Training Course for?

This training course is suitable to a wide range of professionals including:

• Managers and decision makers involved in value creation for the energy business.
• Commercial staff who would like to gain in-depth knowledge of the LNG business.
• Decision makers involved in financing and investment.
• Analysts interested in market insights that support project decisions.
• Researchers and practitioners who aim to broaden their knowledge of the business

Daily Agenda

Day One: An Overview of the Energy Industry

While natural gas markets are regional, the LNG markets are global. We start by introducing the participants to the fundamentals of the oil and natural gas industry. We further discuss principles of value creation.

• The evolution of energy industry
• Energy price changes from the supply and demand dynamics
• Energy commodity markets: crude oil, natural gas, and the role of LNG
• LNG as a midstream business
• Technical challenges of LNG projects

Day Two: Value Creation in LNG Business

According to Adam Smith, markets are “an obvious and simple system of natural liberty”. Our decisions cannot ignore the core features of the LNG business.

• Energy commodity markets and price differences
• The value chain for LNG projects
• Price trends and insights for business decisions
• Value drivers in LNG projects
• Lessons learned from the oil and gas industry: cost and benefit estimation.

Day Three: Uncertainty and Risk in LNG Projects

Most project values are sensitive to price changes. We discuss the common uncertain features of the energy projects and then show analytics that supports this understanding.

• The foundation of value creation in uncertain conditions
• Principles of valuation: Comparisons across time (time value of money)
• Principles of valuation: Comparisons across levels of risk (risk premiums)
• Measures of value: from net-back pricing to net cash flows.
• Sensitivity analysis in project appraisals
• Tutorial: LNG project cash flow modeling in spreadsheets

Day Four: Business Analytics Applied to LNG Projects

We discuss tools that support business models. We further use the power of computers (MS Excel® and its add-ins) to support decisions.

• Modeling uncertainty in natural gas prices
• Risk, and the upside opportunity: integrating technical and commercial aspects.
• Tools of risk management: insurance and hedging using market instruments
• Tornado diagrams, simulation studies, and decision trees to support LNG business.
• Tutorial: Applying business analytics tools to spreadsheet LNG cash flows.

Day Five: Analytical tools and future trends

In the final day of the course, we discuss the emerging trends and more analytical tools to implement the concepts.

• Cost estimation and analysis of cash flows
• The geo-politics of energy and price shocks
• Behavioral aspects of financial decisions: the past challenges in LNG projects
• Heuristics and biases in management decision making.
• Energy and the environment
• Concluding remarks