Finance and Economic Modelling for Oil and Gas

COURSE CONTENT:

DAY 1

Introduction to International Trade Finance and Letters of Credit

SESSION 1: LETTERS OF CREDIT and an OVERVIEW of TRADE FINANCE

The Geo-Political Reality of Oil, Risk and Trade Finance.

• A Mechanics overview of all potential contracts in a Letter of Credit
• Applicant/Issuing Bank, Issuing Bank/Advising and/or Confirming Bank, Applicant / Beneficiary

How the Risk is shared in a Letter of Credit. (Analysis of Kazakhstan L/C)

SESSION 2 LETTER OF CREDIT VARIANTS IN PRACTICE.
How Deferred Payment Letters of Credit Work, their Mechanics and Discounting(UAE to Holland)

• Comparing Standby Letters of Credit and Deferred Payment Letters of Credit.
• New Uses for Standby L/C

Pre-Finance L/Cs their mechanics and risks.

• The utilisation of non-operative clauses as a risk mitigation technique, (Highest Risk Countries)
• Back to Back L/C Financing. Securities, Mechanics and Pitfalls.(Bangkok-Russia-Singapore triangle)
• Mechanics of Receivable Financing (Single and Multi-tranche)
• Contemporary Models
• Further mechanics of Discounted Products.
• The value of receivables and how to enhance values and safety.

GROUP WORKSHOP ONE: Who takes the most risk in a Kazakhstani-Austrian Steel L/C and why

DAY 1 SESSION 3: GUARANTEES. All discussed in practical case study of sino-russian oil contract

• Conditional BID BONDS with examples and risk profile.
• Conditional and Unconditional Performance Bonds.
• The Risk profile of Performance bonds with case studies.
• ADVANCE PAYMENT BONDS their use, mechanics and risk profiles.
• Retention Money and Maintenance Bonds.
• Can we look to the underlying contract ? Primary and Secondary views of Bonds and Guarantees.

ICC Uniform Demand Guarantee Rules
When Letters of Comfort end and Guarantees begin….the new Law of finding the Primary Obligor

DAY 2

SESSION 1 GROUP WORKSHOP 2
Bondtrade. With a consignment of Oil at Sea for an emerging market Country, delegates define the main risks and mitigate them.(Madagascar-Luxembourg-Switzerland)

SESSION 2: PRACTICAL STRUCTURED PRE-EXPORT TRADE FINANCE.

TOLLING and PRE-EXPORT4

• Pre-export finance structures.
• Defining the RISK point of entry in pre-shipment finance. (China)
• A comparison of Back to Back, Reverse Factoring, Working Capital and Pre-finance. (Global)
• A Non-L/C solution for revolving uranium major contract. (Australia-China Corridor)
• Oil Buy-Back deals (Planes for Oil Tatarstan, Kenya) Debt Novation.
• Reverse Factoring practicalities for major exporters. In-depth review of mechanics.
• Securitisation of cash flows in soft commodity financing with examples (Bangladesh)
• Timing and Structural risks and risk mitigation feedback
• Escrow Account Mechanics. (Korea)

DAY 3

SESSION 1: COMMUNICATING TRANSACTIONAL DEALS TO CREDIT COMMITTEES.

Often, good, bankable deals can be “lost in Translation” as they make their way through the Credit Committee structure, particularly transactional deals involving energy traders to committees more used to analysing balance sheets for risk answers.
This exercise starts by looking at a Tungsten/Iron Ore Contract (Uganda/South Africa), moves through Risk Location, Identification and Mitigation to a “Spreadsheet” Risk model, which will satisfy the toughest decision makers.

Contemporary Financing via Structured Bonds for Coal and Other Energy Products

• Avoiding the “Joker Brokers” and Fraudsters.

SESSION 2: POLITICAL RISK INSURANCE.

• What is Political Risk?
• Pricing Political Risk in the Primary and Secondary Markets.
• Non-payment & Transfer risks in Loan Agreements by Government and Public Sector Borrowers.
• State Controlled Companies by Definition.
• Foreign Exchange and Inconvertibility Risks.
• Real and “Creeping” Expropriation.
• Political Risk Science v Supply & Demand.
• The Scientific Approach.
• Why do Countries Fail/Reschedule/Impose Moratoria?
• Defining Political acts
• Non-Payment/Transfer Risks.
• Trade Structured Solutions in Oil and Energy Products.
• Political Risk Entry points

Exploration and Production

• Expropriation, Creeping Expropriation and Forced Re-Negotiation (Mongolia, Chile)
• Contemporary Case Studies.
• War, violence and terrorism. Deprivation and Disruption.

DAY 4

SESSION 1: HEDGING. (Case Study Bitumen Finance Morocco and Cobalt DRC) Case Study - the “Put” Option

• Options and Price guarantees.
• Why Futures?
• SWAPS and SWAPTIONS
• Hedging and Speculating.
• Option Strategies Exotics (The Oil Collar)
• Insuring the Risks of Margin Trading.

The Ashanti Margin Mix-Up (Ghana).

SESSION 2: GROUP WORKSHOP - Funding the Pipeline. Delegates, in Groups consider the risk mitigation possibilities of various methods of co-sponsoring a multi-border pipeline.

SESSION 3: ARBITRAGE RISK STRUCTURES.

• What is arbitrage and how it works.
• Case Study- MISSISSIPI OIL BARGES- the cross-over of North Dakotan Crude through St. Louis to Southern Texas to the Gulf of Mexico.
• Main Arbitrage Corridors (Global)
• The impact of Arbitrage on Capital
• Arbitrage Triggers and Figures
• Cross Border Arbitrage
• Futures Arbitrage Principles on Storable Commodities
• Maximizing Storage Efficiency
• Alon's-Goldman Sachs Oil Inventory Financing.

THE NEXT 11 ECONOMY MODELS.

PRODUCT SHARING AGREEMENTS

• Drafting Product Sharing Agreements with Exploration Companies
• Legal Issues in Drafting and the uses of Covenants, Conditions Precedent and all clauses and covenants.