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Merlin's Services
Project Due Diligence

LNG projects are extremely capital intensive; requiring a very long period of capital expenditure during the design, procurement and construction phases before there is any income. Due to size and complexity, they are almost always multi-participant ventures. Since the large investment exceeds the internal funding capabilities of all but the very largest oil companies, it is very common for ventures to turn to project financing.

The main source of comfort to investing or financing participants are project's firm long-term Sales and Purchase Agreements. But these alone are not adequate. The producer must be able to meet its sales commitment with agreed upon quality LNG and the buyer must be able to pay for the product. In between, the shipping arrangements must be able to deliver the product in an expeditious and reliable manner. The loan's only collateral value is essentially the sales revenue generated after the plant begins operation.
  • Technical due diligence assesses the likelihood of an on-time project start-up as well as its subsequent reliability and production capability, which is of particular interest when new technologies are being introduced;
  • Merlin's LNG ShippingTM model evaluates the adequacy of transportation arrangements; and
  • Our commercial knowledge can assess the quality of contract terms in the Sales and Purchase Agreements and the ability of the buyer(s) to perform.
This is an invaluable service for the financial community and venture shareholders. Merlin is happy to present conclusions in your offices.

 

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