ADI evaluated the commercial viability of replacing heavy oil with LNG for industrial steam production in isolated mining and oil and gas operations. The study established the crude oil price thresholds required for fuel-switching profitability and analyzed the global cost of delivering LNG from multiple supply hubs. Technical assessments included evaluating the potential for carbon credits to further enhance the economics of replacing carbon-intensive heavy fuels.
The client
Independent exploration and production company
The situation
Exposure to high operational fuel costs and reliance on heavy oil production for onsite power and steam generation.
ADI’s contributions
Delivered cost modeling
ADI compared ex-ship costs from Qatar, Australia, and the U.S. to determine the most competitive source for the client’s location.
Fuel-switching sensitivity analysis
Quantification of the oil price threshold provided clear decision support for long-term fuel contracting.
Contract structuring support
Identification of negotiation levers, including price reopeners and spot-market backup commitments, reduced procurement risk.
Supply route analysis
Evaluation of primary and secondary global LNG trade routes identified the most reliable logistical paths for remote delivery.
Key outcomes
- Validation of a fixed-price LNG sourcing strategy to lock in operational savings and mitigate future oil price volatility.
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