Enhancing the capital efficiency of LNG/CSG projects

Abstract

More than half of worldwide LNG industry construction activity now takes place in Australia. Based on the $US175 billion presently committed to LNG projects, by 2020 Australia will be one of the largest, if not the largest, LNG producer in the world. LNG project costs in Australia have quadrupled during the past decade. Analysts now believe the combined project costs of the three approved Queensland CSG projects will be 37% higher than the original $US51 billion budget. WA projects may be at the same or even higher risk of cost inflation. To complete Australian projects on time and on budget is proving to be problematic.

The changing nature and uniqueness of the projects (e.g. low performance of CSG wells, intricacy of Barrow Island logistics, etc.) adds complexity to the efficient management of capital. Capital budgets come under pressure, impacting economics, and cash flow. The challenge is for the timely identification of opportunities for proactive cost management, optimising near-term cash spend while delivering project objectives and robust economics.

A proven new proactive approach using rapid and lead indicators affords the ability to deliver the project while optimising use of capital and meeting contractual requirements. This approach:

1. takes an external view of the complex interrelationship between subsurface, field development, and project execution to create a holistic independent view of the major issues.

2. creates, quantifies, and validates hypotheses that will improve capital efficiency and economics;

3. employs a short and sharp timescale;

4. uses robust processes plus operational data analysis, baselines, and comparator insights;

5. guides and empowers leadership to deliver radical change; and,

6. is multidisciplinary in nature with subject matter experts (e.g. business, commercial, surface, subsurface, and plant).