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Gold/Mining/Energy : Lundin Oil (LOILY, LOILB Sweden)
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To: Tomas who wrote (69)6/25/1997 9:19:00 PM
From: Razorbak   of 2742
 
Tomas: <<The Pandora gas project>>

I agree that this project has a lot of potential, and there are some similarities with the situation at Arakis, especially the need for an expensive pipeline to get the product to market. However, there is also one major difference. This is a gas project, and gas projects tend to move a lot slower than oil projects because of the difficulties inherent in transporting gases.

Most gas projects require a large customer base nearby with a long-term take-or-pay agreement in place to ensure that project economic hurdles are met. The reason is simple. Once the pipeline is built, then the company is committed to the market. In other words, if the original customers stop buying, or simply buy from another supply source, the consortium will have to shut in production. They simply do not have the luxury of being able to load the gas onto a tanker and ship it to another market. If this were an oil project, the situation would be entirely different.

Given the long-term nature of a gas sales contract (often 20+ years), these instruments take a long time to negotiate. Unfortunately the pipeline will probably not get built until the gas sales contract is signed, sealed, and delivered. Hence you need to watch this particular part of the project very closely. And keep in mind that a little patience will do wonders for your demeanor as an investor interested in visible progress on a gas project development.

Razor (been there, done that...)

PS - Do you have any idea why they labelled this the Pandora project? (a serious question; I really don't know the answer)
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