Structured Financing Techniques in Oil & Gas Project Finance: Future Flow Securitizations, Prepaids, Volumetric Production Payments, and Project Finance Collateralized Debt Obligations
Christopher L. Culp
Johns Hopkins University - Institute for Applied Economics, Global Health, and Study of Business Enterprise; Swiss Finance Institute; Compass Lexecon; Risk Management Consulting Services, Inc.
J. Paul Forrester
Mayer Brown LLP
July 3, 2009
ENERGY & ENVIRONMENTAL PROJECT FINANCE LAW & TAXATION: NEW INVESTMENT TECHNIQUES, A. S. Kramer & P. C. Fusaro, eds., Oxford University Press, Forthcoming
Structured financing techniques in oil-and-gas-related project finance have grown more popular over the past several decades. Securitization, in particular, has played an important role in project finance by increasing oil and gas sponsors’ access to affordable financing from the capital markets and helping banks refinance their project loan exposures. We review the economic benefits of using structured finance techniques in oil & gas project finance, and we explain and provide examples of several of the most common types: future-flow securitizations, prepaids and volumetric production payments, and project finance collateralized debt obligations. We conclude with a discussion of the impact of the credit crisis on these products and markets.
Date posted: July 16, 2009