Compressed natural gas export facilities

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Reference no: EM13925343

“Morgan Stanley has quietly filed plans to build and run one of the first U.S. compressed natural gas export facilities, the first sign the bank is plunging back into physical commodity markets even as it sells its physical oil business….. In a 23-page application to the U.S. Department of Energy's Office of Fossil Energy submitted in May, the Wall Street bank outlined a proposal to build, own and operate a compression and container loading facility near Freeport, Texas, which will have capacity to ship 60 billion cubic feet a year of compressed natural gas (CNG)…. The bank plans to ship CNG to countries with which the U.S. has free trade agreements, including the Dominican Republic, Panama, Guatemala, El Salvador, Honduras and Costa Rica, according to the filing, which has not been previously reported. Those countries now mainly use oil for their power plants…."You can collect U.S. gas at $4, it costs you $1 to ship it and gasify it, you bring it in at $5 and the equivalent that they are paying for fuel is $20 plus," said a person familiar with the project. "There is a lot of money to be made."

What risks do you think Morgan Stanley will face with this venture and assuming they wish to mitigate those risks how might they approach hedging or controlling those risks?

Reference no: EM13925343

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