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Awaiting authorization, Export-Import Bank eyes expanded role with LNG sector

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Awaiting authorization, Export-Import Bank eyes expanded role with LNG sector

亮点

Bank role could help broaden range of bankable customers

August meeting discussed expanded use of bank's products

Washington — The US Export-Import Bank could become a new source of support for US LNG export projects working to secure long-term contracts and financing, according to industry officials involved in recent discussions with the bank leadership.

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Ex-Im Bank Chairman Kimberly Reed met by teleconference with US LNG trade group officials August 21 to discuss ways the bank could help boost the volume of domestic LNG exports, the bank said earlier in the month.

Whether the bank can successfully expand its role hinges in part on getting attention from Congress to keep the bank fully operating past the end of September when its authorization runs out. It is uncertain whether debate over a variety of proposed reforms and the proper scope of the bank could bog down, leaving the bank hamstrung once again. Only in May did the Ex-Im Bank regain its footing after a three-year lapse in the quorum of three board members needed to authorize transactions greater than $10 million.

Confirmed by Congress in May, Reed has made clear her interest in the Ex-Im Bank becoming more involved in US LNG exports.

LONG-TERM CONTRACTS

Participants in the August 21 meeting discussed the needs of the LNG industry and the possibility of expanding the use of the Ex-Im Bank's products to meet those needs.

One possibility, industry representatives said, is for the Ex-Im Bank to provide support to facilitate US-based projects entering into long-term offtake contracts with a wider array of international buyers, including those that lack investment grade credit favored by banks that might finance the multibillion-dollar projects.

The Ex-Im Bank generally provides finance guarantees and export credit insurance, such as insuring against nonpayment by international buyers.

Aside from those projects that rely on balance sheet financing by deep-pocketed oil and gas majors, developers of new US LNG projects generally need to seal long-term offtake contracts with creditworthy customers in order to secure the bank financing to get to a final investment decision.

Quite a few new importers are from emerging markets without a track record of importing LNG but a high demand for natural gas, one industry official said. He noted the potential for the Ex-Im Bank to provide loan guarantees or credit assurance to developers or financiers to encourage them to deal with buyers that otherwise wouldn't be on their radar.

INDUSTRY INTEREST

Fred Hutchison, president of LNG Allies, said there is great interest among the industry because it could vastly broaden the range of customers considered bankable, he said. A couple of applications to the bank are possible in the coming months.

If this comes to fruition, the bank support could give some lift to the US sector at a time when escalated US-China trade tensions have chilled discussions for months with buyers from China, which is expected to be the largest importer of LNG within a decade.

Separately, the bank can help finance or support downstream infrastructure in international markets, such as to an American firm building an LNG import terminal or a floating storage and regasification unit in an emerging market.

The conversation with LNG industry interests came a day before the Ex-Im Bank board voted to notify Congress that it was considering a $5 billion direct loan to support exports of goods and services for development and construction of an LNG project in northern Mozambique. The borrower would be Mozambique LNG Financing, owned by a group of sponsors including Anadarko Petroleum, which was recently acquired by Occidental Petroleum.

There is also potential for the bank to support domestic works, such as channel dredging to help facilitate US LNG exports.

-- Maya Weber, maya.weber@spglobal.com

-- Edited by Jasmin Melvin, newsdesk@spglobal.com

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