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Presentation by John Burley on LNG in Wales
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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%)
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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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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 Agreement
D -12 days
Auction Code
Qualified
D -9 days
D -8 days
D 0 days D +1 days
D +10 days
Deadline for Qualified Bidders to send final bids including signed deal sheet and hard
copy of short term LC Primary Shipper empties tanks at Dragon in order to
accommodate winning bidder LNG cargo
Scheduled Day of Arrival and unloading
of Third Party Shipper’s vessel
Delivery of gas to the third party Customer at the NBP
Auction announced on Dragon website and e-mail sent to Qualified
Bidders with indicative reserve price
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