Boom to Bust? Boom to Bust?
oil prices having boosted Algerian foreign exchange reserves to a record $127 billion, Sonatrach was
able to shrug off the collapse of plans to engage foreign partners in the development of this project.
Oil wealth has also boosted the reserves of the so-called Sovereign Wealth Funds
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(SWFs) such as Abu
Dhabi’s ADIA (Abu Dhabi Investment Authority), which has resources approaching a trillion dollars.
Some of this wealth has been accumulated from the cash flow of LNG projects and the future may see a
greater recycling of the wealth into new projects – either within or outside their own countries.
Facing an uncertain future
With global financial markets showing huge changes from day to day, it would be foolish to predict
precisely what effect the crisis will have on LNG projects. It is probable in the future that LNG project
financing will take longer, be more expensive, more complex and involve more parties than in the past.
But LNG’s past track record and the nature of the business means that soundly-structured projects will
likely secure debt ahead of other competing demands for finance. It may be more difficult than in the
past to finance the “mega-projects”, but more modest-scale projects using tried and tested technology
should be less affected. Similarly, lenders’ appetite for new technology lacking successful track records
will decrease, so some of the new unconventional and offshore LNG ventures may find their financing
options restricted. New financial vehicles such as Sovereign Wealth Funds may provide some new angles
on the financing of LNG projects.

LBR
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Sovereign Wealth Funds are financial vehicles cash-rich nations have established to invest their wealth in world
markets. The top three SWFs in terms of asset value are those of Abu Dhabi, Norway (Government Pension Fund of
Norway) and Singapore (Government of Singapore Investment Corporation). The majority of SWFs draw their cash
from oil and gas wealth (Singapore being the leading exception).
LNG Business Review - OCTOBER 2008 - WWW.LNGBUSINESSREVIEW.COM 
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