ADI’s analysis evaluates the opportunity for an oil and gas company to enhance its operations by switching its fuel source.
The client
An oil and gas company that is evaluating a fuel-switching opportunity to power its operations.
The situation
The company is considering using LNG to produce steam instead of using a third of its heavy oil production. ADI Analytics was asked to assess the opportunity and suggest alternatives for structuring the deal.
ADI’s contributions
Fuel-switching analysis
ADI Analytics assessed the economic viability of the proposed fuel switch based on the price differential between LNG and oil. ADI projected oil prices in the region to assess LNG’s cost competitiveness.
Sourcing and negotiation guidance
ADI estimated the cost of delivering LNG from global sources, providing a breakdown of the costs by component. These components included the cost of feed gas, midstream costs, liquefaction costs, and shipping and regasification costs. ADI also offered guidance for price negotiations based on competing contracts. Their recommendations included volume-based discounts, a price reopener, and seller commitments to supply from spot markets in case of plant disruptions.
Key outcomes
- ADI’s analysis provided the company with key findings regarding the LNG opportunity, helping them to understand the risks and benefits of the fuel switch based on future oil price projections.
- The assessment also provided leverage for future negotiations by highlighting the estimated costs from various supply sources and suggesting specific deal terms to pursue. This information enabled the company to make a more informed decision about securing the LNG contract.
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