New “LNG handbook” a roadmap for African gas deals, says US government

20161205 100648Catalysing Africa’s abundant natural gas resources while simultaneously enabling  greater regulatory control underpins the recent launch of a US government “LNG Handbook”

The US Department of Energy’s Natural Gas (LNG) Handbook, announced in September, will help foster shared understanding between government officials and private companies on the factors influencing successful LNG projects in Africa.

Speaking at the SPE/AAPG Africa Energy and Technology Conference in Nairobi, Kenya on 5 December, Christopher Smith, assistant secretary for fossil energy, U.S Department of Energy, revealed that a 250-word document is now available in draft form. 

He asked, “How do we help governments create regulatory capacity to think about the process of negotiating with [gas] companies?” Adding that there was a desire to deconstruct processes that, in some cases, can take 20 years or more to get to the negotiation stage with investors.

Regulators, he says, have a common understanding of terms that will help to streamline negotiations. 

A series of sessions bringing together experts from Africa, US and Europe in the fields of financing, regulatory reform and banking helped shape the handbook.

The launch of the LNG publication follows  an original handbook produced by the Department of Commerce focusing on structuring power purchasing agreements, including terms and clauses.

“The aim was to create a common language, a common sense of terms shared by regulators and companies coming in to [Africa] make investments – It will not only enable companies to make investments but help governments to make good decisions responsive to the populations the government serves,” Smith explained.

Its methodology includes a look at three commercial models:  integrated and merchant targeting upstream developments, and tolling, whereby a natural gas supplier pays a toll to the liquefaction facility to run gas through the plant.

Smith added: “One of the things the government has to look at is what are the risk factors involved in these models? How do we think about partner alignment, regulatory complexity, finance and marketing?”

The idea he says, was not about advocating one solution, rather, raising familiarity of the models and working with different entities to decide on a solution.

“This is helping governments to make decisions to ensure that are projects are being commissioned and investments are being made,” Smith  concluded.

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