Pace Global

Natural Gas

Long-Term Supply Assessment for Independent Natural Gas Producer

Client Need:

One of the largest independent natural gas producers in the Michigan Basin and a leading developer in the Marcellus Shale was looking to position itself in the Northeastern gas market.

Our Role:

Pace Global was retained to perform an independent analysis of the Northeastern gas market to advise the client on how to best position itself given changing market conditions.  Pace Global evaluated the marketing and transportation options available to the client and provided expert advisory services related to market, commercial and regulatory developments, producer strategy and infrastructure development.

Results:

Pace Global developed a recommendation and tactical plan for entering the Northeastern gas market that aligns with the company’s long-term interests.

U.S. LNG Export Facility Due Diligence and Market Assessment

Client Need:

A major international fund was looking to invest in a proposed U.S. liquefaction facility.

Our Role:

Pace Global was retained to provide an expert evaluation of global LNG supply and demand dynamics, pricing mechanisms, and project competitiveness (including feedgas, liquefaction and transportation costs).  Contracting and re-contracting risks and potential contracting vehicles were also evaluated.

Results:

Pace Global’s analysis was critical in determining the client’s decision to invest $1.3 billion of equity funding in the proposed U.S. liquefaction facility.

Liquefaction Plant EPC Cost Review and Negotiation

Client Need:

A major global natural gas producer was seeking independent expert analysis of a planned LIG plant in northern Russia.

Our Role:

Pace Global performed a review and benchmarking of a number of EPC costs for specific pieces of equipment during the open book tender process.  Pace Global’s role also included reviewing module designs and steel estimates and providing feedback on module optimization to reduce cost and increase the speed of development.

Results:

The project was successfully initiated under a tight schedule to meet the client’s requirements ahead of its final investment decision.  Pace Global’s analysis also provided the client with a number of provided critical cost-saving recommendations.

U.S. Shale Cost Analysis

Client Need:

Expert analysis of the economics of shale gas exploration and development in the U.S.

Our Role:

In support of our clients, Pace Global provides regular reporting, reviews and briefings on economic, environmental and political developments concerning shale gas in the U.S.  Pace Global evaluates the true all-in costs of acquiring, finding, developing and producing natural gas and associated liquids.  These studies provide ongoing assessments of the operational and financial performance of major shale players, including the natural gas price level required to sustain development.

Results:

As shale gas development has generated a high level of media attention over the past few years, our international clients are very interested in whether shale gas will truly be a “game changer” that will fundamentally alter the global gas and LNG industry.  There are several critical questions regarding shale gas production in the U.S. and around the world that our clients are interested in, including:

  • Are current natural gas prices in the U.S. adequate for sustainable production of shale gas?
  • How will evolving commodity (gas, oil) prices affect shale development?
  • Will the U.S. market rise to a level that will make LNG deliveries in the U.S. economically attractive again?
  • How will environmental opposition affect expanded shale development?

 

Regulatory Advisory for a U.S. Export Facility and Associated Natural Gas Pipeline

Customer Need:

A major U.S. interstate pipeline company was seeking FERC approval to expand its system to allow for the receipt and delivery of natural gas for liquefaction and export.

Our Role:

Pace Global provided regulator advice and support related to the client’s FERC application for system expansion and LNG export.  Pace Global presented various rate design options for consideration and developed all cost and rate exhibits for the FERC section 7(c) certificate application.  In addition, Pace Global assisted with developing and drafting responses to FERC data requests related to the certificate application.

Results:

Pace Global’s efforts were instrumental in the client gaining FERC approval.

LNG Total Life-Cycle Emissions Assessment

Client Need:

A North American LNG trade association was interested in assessing the total greenhouse gas (GHG) emissions from the LNG export supply chain (i.e. from the wellhead to end-use in a foreign power plant) and comparing those with GHG emissions from the coal-fire generation.

Our Role:

Pace Global evaluated the GHG emissions (in CO2 equivalent) for each segment of the LNG supply chain: from the well head, to the liquefaction plant, aboard a tanker for export, and as end-use for power generation, to provide a comprehensive and detailed evaluation of the full range of emissions. Pace Global interacted with a wide range of industry stakeholders to gain the most up-to-date and accurate information on the specific processes analyzed. In parallel, Pace Global undertook the same analysis across the coal life-cycle: from mining through to cross-country transport, export via ocean-vessel ships, and final use in power generation.

Results:

Pace Global’s study was used as educational reference material by the association as well as to guide public policy discussions in favor of developing a support framework for LNG’s contribution to the U.S. economy.

Small Scale Liquefied Natural Gas case studies

LNG-in-Mining Study for a U.S.-Based Infrastructure Development Company

Customer Need:

A major U.S. investment and infrastructure development company was seeking a fuel supply strategy to support its investment in a mining complex in the southwestern U.S.

Our Role:

Pace Global evaluated the economic and logistical feasibility of using LNG at a mining complex in Nevada.  As part of this engagement, Pace Global leveraged its extensive expertise in natural gas, small-scale LNG (SSLNG), and mining markets and technologies to develop a comprehensive fuel supply strategy that would provide the most benefit in terms of low-cost and low-emissions fuel. The supply plan looked at a variety of potential natural gas applications (e.g., LNG, CNG, pipeline gas, etc.) with the goal of minimizing operational disruption, maximizing fuel supply reliability, and reducing fuel costs. Pace Global leveraged its access to the technical expertise, equipment knowledge, and cost information of Siemens Oil & Gas Solutions to develop a robust and cost-effective fuel supply solution.

Results:

In 2015, the client kicked-off the opportunity with a year-long test pilot of LNG-fueled mine hail trucks.

Potential for Small-Scale LNG (SSLNG) on Inland Waterways and Major Ports in Northern Europe

Client Need:

A major European port consortium was seeking to evaluate the potential for SSLNG along the Rhine corridor.

Our Role:

Pace Global was retained deliver an EU-funded market assessment and supply chain study for ports along the Rhine corridor. Utilizing Pace Global’s in-house SSLNG economic and logistical models, Pace Global evaluated the potential for LNG fuel-switching and forecasted LNG fuel adoption curves for various sectors, including marine, heavy-duty vehicles, and the industrial sector.

Results:

Pace Global’s analysis was used by the consortium to inform its decision to fund an LNG fuel-switching initiative.

Small-Scale LNG Market Opportunity for a North American Gas Supplier

Client Need:

A leading North American integrated natural gas utility with significant LNG assets was interested in developing a market-entry strategy in the emerging LNG-for-transportation market.

Our Role:

Pace Global developed and evaluated strategic options for entry into emerging small-scale LNG (SSLNG) markets including heavy-duty trucks, marine, rail, and high horsepower fixed engines.  Pace Global provided detailed analysis of diesel displacement markets, developed LNG adoption forecasts, and prepared demand growth scenarios based on key economic, supply, and environmental drivers.  Pace Global evaluated the current status of LNG technologies required to utilize LNG as a fuel in these various SSLNG sectors and estimated the LNG production, transportation, and distribution infrastructure required to support market development.  These analyses were integrated and utilized to develop a market entry strategy and business plan for the development of a small-scale LNG business focused on serving emerging petroleum fuel-displacement markets.

Results:

Pace Global’s client is aggressively building its small-scale LNG business with executed supply contracts and infrastructure in development.  The utility has quickly become a leader at the forefront of the SSLNG emerging market.

Natural Gas Storage case studies

Natural Gas Storage Project Due Diligence

Client Need:

A major natural gas storage company was looking to evaluate a bid for a natural gas storage project in the Gulf Coast.

Our Role:

Pace Global provided comprehensive commercial due diligence and market analysis related to a natural gas storage facility in Texas. As part of the engagement, Pace Global evaluated recontracting risks, optimization opportunities to enhance revenue diversification, and emerging opportunities given changing market dynamics. The due diligence effort included a detailed review of all commercial and operational aspects of the facility, including facility-level and basin economics; storage value with respect to power generation; and an analysis of key market supply and demand drivers, inclusive of LNG export and Mexican pipeline demand. Additional analysis was performed regarding regional competitive forces, forward price curves, and other determinants of economic value.

Results:

Pace Global’s efforts helped to confirm the asset’s commercial viability and future economic potential.

Natural Gas Storage and U.S. LNG Export Analysis

Client Need:

A leading energy company with interests in energy infrastructure, utilities, and related products and services was looking to determine the economic and operational advantages of investing in a Gulf Coast storage facility.

Our Role:

Pace Global provided a detailed analysis of the specific advantages that a natural gas facility in the Gulf Coast region would convey to shippers and offtakers associated with a major U.S. LNG facility.   A significant focus of the engagement concerned the preparation of a compelling case for penalty cost avoidance using upstream pipelines.

Results:

Pace Global reviewed the penalty provisions of upstream pipeline suppliers’ tariffs and calculated the penalties and commercial costs to shippers under various operating conditions.

Natural Gas Storage Market Study and Valuation

Client Need:

A natural gas storage developer was seeking an Independent Market Report (IMR) in support of an equity investment in a Mississippi gas storage facility.

Our Role:

Pace Global developed a finance-quality IMR inclusive of a full regional and national gas market evaluation and commercial analysis.  The IMR considered the full market context of the asset, inclusive of interstate pipeline, power generation, and industrial and export market access and demand. The storage valuation was informed by the asset’s physical features, operating capacity, and Pace Global’s evaluation of seasonal storage and trading values tied to market and basis volatility.  In addition, Pace Global developed a rigorous evaluation of the asset’s hub services value, notably park and loan, wheeling, and other trading support functions.

Results:

Pace Global’s valuation and IMR was relied upon in supporting an investment decision which was implemented in the form of an asset management arrangement.

Natural Gas Storage Independent Market Assessment

Client Need:

A natural gas storage asset acquisition and development company was in need of equity financing for its Wyoming storage facility.

Our Role:

Pace Global provided an Independent Market Assessment Report (IMR) to evaluate the market position and long-term viability of the client’s natural gas storage project. Pace Global incorporated its proprietary market trajectory scenarios to forecast future supply and demand, identify potential customers and competitors, and develop a valuation model that forecasted revenues for firm storage and hub services.

Results:

Pace Global’s report and valuation were used to solicit equity interest in the storage project. Pace Global was later engaged by the client to perform an update of the project’s competitive position and commercial viability in response to a request for additional equity financing.

M&A Advisory for Natural Gas Storage Facility

Client Need:

A major North American natural gas company with access to the WAHA natural gas trading hub in West Texas was looking to determine the strategic value of a natural gas storage facility in support of a potential transaction.

Our Role:

Pace Global was retained by the company to perform an independent assessment of key market drivers and a due diligence review of a high deliverability, multi-turn salt cavern natural gas storage facility in the Permian Basin. Pace Global utilized sophisticated and well-developed in-house modeling techniques to provide a robust and comprehensive market and competition assessment to determine the strategic significance of the asset.

Client Results:

Pace Global provided analysis and recommendations that included a forecast of expected storage rates, a detailed contracting strategy, and an assessment of revenue enhancement opportunities, all of which were used to support a market transaction in 2014.

Gulf Coast Natural Gas Storage Market Assessment

Client Need:

A natural gas storage developer was seeking market advisory and valuation services for natural gas storage facilities on the U.S. Gulf Coast.

Our Role:

Pace Global provided an independent market assessment and long-term firm and hub services rate forecast for a set of four natural gas storage facilities located on the U.S. Gulf Coast.  The engagement included a detailed natural gas market assessment for both the regional Gulf Coast market and the broader interconnected North American market in order to provide a framework and context for forecasting the facilities’ storage rates. Pace Global developed a reference case revenue forecast, framed by two sensitivities, for each of the four assets utilizing its proprietary storage valuation and hub services model.

Results:

The in-depth market analysis provided by Pace Global was particularly important in light of the precipitous and ongoing changes in North American natural gas markets as a result of shale gas production and expected LNG export demand. Pace Global’s work assisted the client from a commercial and business perspective to better understand the changing natural gas storage market and identify where current and future sources of value can be found.

Portfolio Restructuring and Optimization for a Mid-Size Local Distribution Company

Client Need:

A diversified natural gas holding company was looking to optimize its asset portfolio in light of its acquisition of a Mid-Western natural gas utility.

Our Role:

Pace Global provided commercial advisory services to a diversified natural gas holding company that owns and operates local distribution companies (LDCs) in the Midwest. Pace Global was hired to analyze the client’s historical supply decision process; evaluate its combined asset base inclusive of natural gas transportation, storage, and gas supply; forecast system supply and demand requirements; evaluate firm capacity re-contracting risk in light of increased market competition; and recommend a modified asset mix (inclusive of gas supply portfolio options) based on a forward view of gas prices.

Results:

Pace Global worked collaboratively with the client to refine its asset portfolio and gas supply options, including assisting with the final selection of assets, implementation and integration planning, and the securing of approvals from the client’s Board, the Public Utility Commission, and other key stakeholders. The client depended on Pace Global’s commercial and technical experience to evaluate and identify the most reliable and economical set of assets (both new and existing) that would meet its strategic needs as the U.S. natural gas market continues to undergo near-unprecedented change due to shale gas development and the associated transformation of North American infrastructure.

Natural Gas Midstream Market Analysis Case Studies

M&A and Strategic Advisory for an International Pipeline Company

Client Need:

An international pipeline company was looking to make an equity investment in a major natural gas pipeline located in the western U.S.

Our Role:

Pace Global performed expert advisory services related to the client’s opportunity to make an equity investment in the Ruby Pipeline in 2014. Critical to the value provided was Pace Global’s assessment of the long-term value of the pipeline in West Coast energy markets, including the provision of gas supply for mining and LNG export demand. Pace Global also provided recommendations on bidding strategy and an assessment of the key upside drivers and recontracting risks being driven by changing market dynamics and basis differentials.

Results:

Pace Global’s fundamental market assessment and strategic recommendations were instrumental in the client’s decision not to invest in the pipeline.

Commercial Advisory Services Related to Infrastructure Acquisition

Client Need:

A Mid-Atlantic Local Distribution Company (LDC) was seeking to evaluate potential midstream gas assets for investment.

Our Role:

Pace Global was hired on a retainer basis to identify and evaluate the economic and strategic advantages of investment in natural gas gathering facilities, NGL processing facilities, CNG midstream facilities, and gas pipeline laterals that serve heavy industry and/or power generation demand.

Results:

Pace Global was instrumental in helping the client to targets assets that are geographically and operationally strategic to its business objectives, including determining the strategic value of the target asset, originating dialogue between the client and asset owner, and devising a purchase plan.

Assessment of U.S. Pipeline Capacity Value

Client Need:

A major natural gas pipeline partnership was seeking to ascertain the strategic value of moving Rockies’ gas to eastern markets

Our Role:

Pace Global was retained to value the projected capacity utilization of an interstate pipeline, originally proposed to move Rockies gas eastward to an interstate pipeline interconnection point in Ohio.  Pace Global’s analysis of the pipeline’s potential capacity value and utilization included a tailored application of the Gas Pipeline Competition Model (GPCM) reflective of Pace Global’s market assumptions for regional gas supply, demand, and resulting flow and capacity utilization levels under different scenarios.

Results:

As a result of Pace Global’s analysis, the risk of Marcellus and Utica shale gas production and flow potential from an east-to-west direction was quantified and the resulting potential capacity value of the proposed utilization plan was determined to be as less likely than alternative paths in yielding a maximum valuation.

Natural Gas Liquids Market Analysis case studies

Midstream Infrastructure Assessment for Leading NGL Producer

Client Need:

A leading NGL producer in the Permian Basin with an aggressive capital investment plan was looking to invest in NGL pipeline, processing, and fractionation infrastructure.

Our Role:

Pace Global evaluated the supply and demand for NGL infrastructure capacity in the Permian and Eagle Ford shale plays. As part of this engagement, Pace Global constructed a gas transportation supply-demand model that enabled analysis at the country and state levels. Existing and prospective pipelines and power plants were individually modeled to allow for sensitivities in capacities and in-service dates.

Results:

Pace Global’s analysis provided the client with insights on the expected capacity utilization of the pipelines and a deeper understanding of the NGL market.

Eagle Ford NGL Market Assessment

Client Need:

A U.S. midstream company was seeking to invest in NGL infrastructure in the Eagle Ford shale.

Our Role:

Pace Global was retained to evaluate investment in midstream NGL infrastructure in the context of significant development in the Eagle Ford shale. As part of this engagement, Pace Global evaluated the regional competitive environment, including the outlook for regional processing, fractionation and takeaway capacity, commodity pricing (oil, gas, and purity products), and upstream production. Pace Global assessed potential contracting options for both the existing and expansion projects to highlight the opportunity and risks associated with the investment and also facilitated discussions with the management team and investor over the course of the due diligence process.

Results:

Pace Global’s efforts allowed the client a more detailed understanding of project-level economic as well as key value drivers.

NGL Storage Valuation and Expert Witness Support

Client Need:

An NGL storage investor was seeking to convert a former liquids storage site to a natural gas storage facility.

Our Role:

Pace Global served as expert witness and strategic advisor regarding a former liquids storage site in Louisiana.  Pace Global provided both valuation expertise and commercial advisory on multiple aspects of natural gas and liquids storage utilization, including development costs, pipeline access, storage service contract structures, and the key risk elements associated with commercial structuring, financing, operations, and other value drivers.

Results:

Pace Global’s work supported the client in justifying the strategic and commercial value of the facility conversion.

NGL Storage Valuation and Rate Basis

Client Need:

An independent developer and operator of liquid storage facilities was seeking to determine the value of providing regulated services to a monopoly customer in Mexico.

Our Role:

Pace Global undertook a comparative evaluation of regulated and market-based rates across three midstream asset classes in Mexico, including evaluating their respective regulatory rate treatment in comparison to natural gas pipelines and storage facilities. The work included an assessment of cost-of-capital differences among the asset classes based on the expected level of market competition, key market risks, and other contributing factors.  As part of this analysis, Pace Global compared the nature of commercial services offered by the alternative asset classes by preparing peer group studies and benchmarking various pipeline and gas storage facilities against the observed pricing allowed for liquids storage.

Results:

Pace Global’s analysis was used to support the case for a greater cost and risk premium associated with a less competitive liquids storage facility based on comparisons made to U.S. market and project performance and observed return levels.

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