Client Letter
Editor’s Letter: IRS MLP Revisions Would Affect Syngas/Methanol Projects
May 19, 2015

In the past two years there have been an explosion of projects in the ammonia and methanol space predicated upon leveraging low-cost North America shale gas to produce higher-value products, which have traditionally been imported in large volumes. In addition to the potential of converting natural gas to liquid fuels like gasoline and diesel, a variety of mechanisms have been utilized to appeal to investors seeking a stable source of regular income. The Master Limited Partnership (MLP) structure is one of these mechanisms. Through the designation of “qualifying income” through an MLP, income derived from such structure is taxed once, at the shareholder level, thus reducing tax outlays of the MLP shareholders. However, new provisions proposed by the U.S. would exempt certain projects previously allowed.

t;MLPs provide investors high cash yields with traditional interest rate driven securities and the opportunity for substantial appreciation, according to a May 1 briefing by professional services network PriceWaterHouse Coopers. According to proposed rules entered into the Federal Register (Vol. 80, No. 87) on May 6, 2015, the IRS is proposing a revised designation of “Qualifying Income”, which, among other things, excludes syngas-based projects, like natural gas-to-methanol facilities....Full Article

Industry Analysis
Pending ‘XTX’ Incentive Plans in Wyoming and Alaska

In late 2013 and early 2015 Shell and Sasol, respectively canceled their large-scale gas-to-liquids (GTL) projects in Louisiana, which, according to statements by management, was largely predicated on uncertainty in commodity markets and possible run-up in labor-related construction costs. Both companies decided to pursue other opportunities while keeping the GTL option on the shelf. ...Full Article

Analysis- GTL Development Series Part Two: Missed Opportunity for Natural Gas-Derived Products?

The latest Henry Hub natural gas price is US$4.63/MMBtu. The prospect of low gas prices continuing in the long-term have stimulated the development of more than 40 gas-conversion projects. All told, U.S. gas-conversion investment alone could represent some US$60 billion in capital expenditure. Following this industry closely, your correspondent reports an average of one new gas-conversion project announcement every two weeks. A recent survey conducted by this publication found 43 gas-conversion projects under development or evaluation in the U.S. Indeed, this time last year there were less than 25. Despite the investment, are energy companies missing the opportunity for gas-conversion? A majority of energy companies are focusing on alternative development routes, instead. In this analysis, we seek to establish the case for gas-conversion as this fledgling industry begins commercialization....Full Article

Feature Articles
Feature- Tracking China’s Coal-Based Products Shift

China’s ambitions to reduce emission of carbon dioxide (CO2) and smog in its coastal cities appears to have advanced in the past year, as it has drastically reduced coal consumption amid a shift from the use of the fuel in power-gen applications to the production of fuels and chemicals. Burning coal produces a tremendous amount of CO2, but a more immediate problem has been it’s effect on local pollution levels, causing smog, acid rain, and other problems, according to Central Government statements. ...Full Article

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Zeus Intelligence Services provides market data and expertise in the areas of World LNG Trade, LNG Fuels, Upstream Natural Gas, and Gasification. We offer (1) topical periodicals and research reports, (2) interactive project databases, (3) conferences & seminars, and (4) consulting services.
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