Markets

LNG

 

Your Challenges

Accurately and consistently modelling forward and spot LNG hub prices and oil indexes, and capturing the spread between the variables

Valuing long-term and flexible LNG contracts containing diversion and index optionality

Optimising physical and financial LNG portfolios with diverse constraints and optionality

Determining the optimal shipping schedule (the ‘ADP’) and nominations to buyers and sellers against this program

Understanding, valuing, and maximising the full optionality in an LNG portfolio which contains flexibility in routes and destinations, options to re-gas, store or sell into a gas hub market

Understanding the values derived from the delivery window flex and FOB vs DES sales

We Understand Your Market

LNG markets are transforming at a rapid pace. Increased supply and demand for LNG, and the growth in the number of LNG routes and terminals are creating a desire to move from typical long-term oil indexed agreements to shorter, more flexible contracts with diversion optionality and priced to either a gas hub (like TTF or NBP) or LNG indices (like JKM). This increased market participation is squeezing trading margins but also creating more mature and liquid forward and spot LNG markets. These unique market dynamics underpin the need for a specialised approach across the whole value chain from LNG deal structuring, ADP planning and portfolio optimisation right through to trading and risk management.

Be confident that you are working with specialists that understand your LNG trading, valuation, optimisation and market and credit risk management challenges. With many years of experience, we see your concerns from a practical, real-world perspective.

Our Solution

Lacima offers two solutions for LNG market participants: Lacima Trader and Lacima Analytics – providing a complete solution from structuring and trading to risk management of LNG portfolios.

Lacima’s solutions use the same consistent models and methodologies to capture the unique market characteristics whilst providing the comfort of stress testing and scenario analysis tools to analyse future uncertainty.

Whether you are in Trading, Structuring & Origination or Risk Management, use Lacima’s solutions to accurately value LNG contracts and physical assets and support key decision making by leveraging Lacima’s risk solutions to gain deep insights into the drivers of risk and how they change thru time. Lacima calculates the full range of market and credit risk metrics including Earnings-at- Risk (EaR) and Revenue-at-Risk (RaR), as well as more standard risk management metrics such as Value-at-Risk (VaR) and Potential Future Exposure (PFE), for superior trading and risk management results.

LNG Traders, Originators and Risk Managers can enjoy a range of benefits including:

  • Value and hedge the intrinsic and extrinsic value of an LNG portfolio
  • Undertake comprehensive LNG pre-deal analysis by valuing LNG specific structures and contracts either standalone or in a wider LNG portfolio.
  • Capture optionality and flexibility in deal valuation, including:
    • Indexation to multi-commodities or multi-currencies
    • S-Curves
    • Volume flexibility
    • Multiple exercise conditions, multiple exercise period (weekly, monthly)
    • Destination flexibility
    • Delivery window flexibility
    • Cancellation options
    • FOB vs DES
    • Profit sharing
  • Simulate spot and forward LNG hub prices by utilising Lacima’s single factor, multi-factor and spread models to stochastically model LNG spot and forward prices, fuel costs, transportation costs and other key variables
  • Comprehensively optimise physical operation and financial hedging of a portfolio of LNG cargos, markets, assets and deals, subject to physical and trading constraints
  • Report full risk metrics including VaR, EaR, or Profit-at-Risk or to manage and understand the risks in your LNG portfolio
  • Calculate full distributions: for revenues, costs, profits and volumes
  • Perform scenario analysis for a wide range of user defined parameters, forward curves, portfolio mixes or volatilities and other model parameters.