Gas Markets & Infrastructure

BACKGROUND

Gassled is a joint venture that owns gas processing plants and gas pipelines in Norway and other Norwegian markets. The original owners of Gassled were E&P companies that engaged in the infrastructure investments in order to bring gas resources to the European market. Recently, several of the owners of Gassled decided to divest their participating interests (like ExxonMobil in 2009, Total and Statoil in 2011). These ownership interests were sold to financial investors. For these transactions to take place, a detailed valuation of Gassled JV was necessary. The revenue part is tariffs paid by shippers of gas. The most important value driver is future NCS gas production and consequential utilization of Gassled infrastructure.

APPROACH

In UCube Rystad Energy has production profiles of all fields and discoveries in Norway (and the rest of the world). The database also includes estimated volumes from yet-to-find resources (exploration licenses). By allocating all fields, discoveries, and yet-to-find resources to the relevant pipelines in the Gassled system, the throughput of gas can be estimated. Additional elements need to be included: bookings (on an annual basis shippers book more capacity than actually used), capacities in specific pipelines, actual bookings already made, and interdependencies between different parts of infrastructure.

RESULT

The result is a detailed and robust assessment of demand for bookings through the whole system. Finally, this can be visualized through Rystad Energy’s Cube Browser comparing historic production of each field, future production, bookings, and capacities for each part of the system. An example of this is shown to the right.

Area A Stafjord Rich Gas: Assessment of Booking Forecasts
BACKGROUND

In contrast to oil prices, achieved gas prices in a market are not easily accessible. Even though gas is partly sold in the spot markets in UK and the Netherlands, a large portion of gas continues to be sold via long-term contracts between upstream companies and European gas companies (like E.ON and GDF Suez). There are numerous kinds of contracts with different mechanisms to set a specific price. Knowledge on this can be used to understand the current situation and to provide an outlook on gas price development.

APPROACH

Understanding historic and current price mechanisms requires in-depth knowledge about the gas value chain. Firstly, collection and analysis of reported and realized prices of producer sources, government statistics (like the German Border Price) and research papers is undertaken. In particular, Rystad Energy has established regression formulas based on this research to describe a price for gas sold under long-term gas contracts. Secondly, to gain an outlook on gas price development, a market view on gas in the region can be established. This includes looking at indigenous production in the region and piped gas in Norway, Russia, and North Africa.

RESULT

Comparisons can be made between spot gas prices, contracted gas prices, and oil prices. This can be seen in context of, for instance, a financial crisis involving demand destruction and impact on different prices. We can see various prices have moved parallel in some periods and differed in other periods.

Gas Price Development: German Border Price on High Level from 2006, NBP Increasing since January 2010
BACKGROUND

On numerous occasions Rystad Energy has supported clients in their legal proceedings, in which disagreements over the correct value of assets have been the root cause. Rystad Energy has been asked to prepare and document an expected market value assessment of relevant assets at the relevant point in time.

APPROACH

Rystad Energy has a systematic approach when performing market value assessments in retrospect. Reconstruction of historic information flow from assets and/or companies as well as assessment of the historic market situation at the relevant point in time are important elements. Further, information review, judgment of assumptions made and valuations performed by others, and transaction reviews are other key activities. Our own set of scenarios and input assumptions is established and run through our own proprietary DCF valuation models. To move from different scenarios and sensitivities to one expected market value is a qualitative process in which our own best judgment must be applied. The picture to the right illustrates the movement from a “Base Value” from a DCF analysis with base case assumptions to the concluded “Expected Market Value” on one assignment.

RESULT

Legal proceedings require high quality documentation of approach, input assumptions, and end-results as well as simple high level messages. A key issue is to combine the comprehensive, detailed documentation requirements with high level, effective and reliable communication as expert witness in court when presenting and defending the work. Rystad Energy has extensive experience and a long track record in valuation and legal support.

Illustration of Rystad Energy's Approach to Set Expected Market Value (EMV) of an Asset