This involves identifying the parts of the plant that are constraining production and removing the constraint. It might involve increasing the size of some of the pipework, increase the power of the compressors and/or increasing the capacity of the gas treatment units. The modifications will vary from plant to plant and will be specific to that plant. The work is typically carried out during a maintenance shutdown and can often realize an additional 10% of LNG production
Insurance term
The price of LNG was usually linked to the crude price (either international crude prices or specific crude import prices such as to Japan with 3-6 months’ lag. This does not mean a crude oil price equivalent, but rather what is known as the slope.
Namely, the extent to which the LNG price changes in response to changes in the oil price.
The slope of an LNG contract refers to the degree of indexation of the gas price to that of oil and is thus a measure of how much the gas price changes relative to a change in the oil price.
A slope of 16.67% is approximately oil parity.
On average 1 mmbtu of natural gas has about 16.67% of the energy content of a barrel of oil.
In LNG contracts the slope is typically less than oil parity, namely less than 16.67% and could be 14% or 15% but it could even be higher than parity if the buyer were willing to pay a premium over the heat equivalent oil price.
Thus, 1 mmbtu of gas = +/- 16.6% of energy content of 1 barrel of oil (6 to 1 heat equivalent parity)
