Europe

Several German cities plan to ban diesel-powered vehicles from city districts – further bans will follow throughout Europe. Stricter sulfur and carbon dioxide limit values on the North and Baltic Seas, as well as later in the Mediterranean, are forcing the ship-owners to make extensive retrofits. And so, the diesel gradually fades from roads and sea routes.

LNG could benefit from it. The burning of liquefied natural gas produces only a fraction of the pollutants compared to diesel, gasoline or heavy fuel oil – and the range is greater. But it lacks the value chain – from liquefaction to transport fueling the entire supply-chain is missing, preventing the fuel’s final breakthrough in the gas station business. How this can be achieved was a subject of the recent LNG conference organized by Wisdom Events in Hamburg.

Wisdom gathered the who-is-who of the industry: representatives of ENI, Elengy, Gas Natural Fenosa, Uniper, Fluxys, Linde subsidiary Nautricor, Baker Hughes and NASA were present to discuss the chicken egg problem: If the decrease of LNG in large quantities is not secured, nobody will run a gas station. As long as LNG prices fluctuate, a freight forwarder will shy away from switching its fleet to LNG. Without the critical mass of demand, an LNG supplier will not offer the gas on long-term contracts with reasonable pricing.

Creon Capital is ready to invest in projects along the value chain for small and mid-scale LNG through the Creon Energy Fund. “We believe in strong medium term growth in this segment,” said Florian Willershausen, BD Director of the Luxembourg Private Equity Fund. “Banks are hesitating to finance because of the high volatility in the market. As a consequence, an equity partner like us is more than ever needed to realize the projects.” Creon Capital is currently evaluating several potential LNG projects and technology providers in Europe.

The US is likely to replace Eurasia as the world’s largest gas producer by the end of 2018. Within ten years, US companies have been able to keep developing their fracking technology. As a result, the country is not only able to meet domestic demand through domestic gas production, but also to gain a foothold in exports.

America’s LNG market was the subject of a conference organized by CREON’s partner Wisdom Events partners on 27 and 28 February in Houston, Texas. Creon Capital was on board as silver sponsor. Florian Willershausen, Director of Business Development, Marketing & Communications, discussed the LNG market and current challenges in a panel discussion with representatives from GE, Red Box, SNC Lavalin and Monkey Island LNG.

There are many challenges for the US gas market, though. It is not a coincidence, that in the past two and a half years no final investment decision has been made for the construction of new large-scale export terminals: The US manufacturers have difficulties to find customers for their hydrocarbons, given the current oversupply of gas. Since the good utilization of the terminals is crucial for banks and equity partners in the context of project financing, many projects are on hold.

Over the next few years, Australia will bring more gigantic quantities of liquefied natural gas onto the world market. At the same time, Eurasia is increasing its export of gas in the form of LNG and pipeline supplies. Nonetheless, analysts expect China’s rapidly growing demand to rapidly absorb additional available volumes.

In general, the Creon Energy Fund is also holding back on the financing of the large-scale LNG infrastructure. Instead, Creon Capital, as a fund manager, is examining entry into technology companies that make the handling and transportation of LNG more efficient. An entry into small scale LNG projects, especially in Europe, can also be an attractive topic for the Fund. The latter are aimed primarily at the supply of decentralized power plants, as well as the refueling of ships and truck fleets. These are growth markets that CREON keeps a clear eye on.

You have any questions, remarks or project ideas? Please contact us: fw@creoncapital.lu

LNG event in Hamburg: How to shape the value-chain of LNG

Creon Capital joined US LNG conference in Houston