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Australian Energy Producers Journal Australian Energy Producers Journal Society
Journal of Australian Energy Producers
RESEARCH ARTICLE (Non peer reviewed)

Quantifying host nation benefit from LNG developments

Will Pulsford A B and Puneet Goel A
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A Poten & Partners, 9 Havelock Street, West Perth, WA 6005, Australia.

B Corresponding author. Email: wpulsford@poten.com

The APPEA Journal 57(2) 532-535 https://doi.org/10.1071/AJ16220
Accepted: 17 March 2017   Published: 29 May 2017

Abstract

Liquefied natural gas (LNG) project developers invest heavily in evaluating project execution alternatives before deciding to proceed with a development. However, while the technical and economic basis for selecting, for example, a floating (F)LNG concept over an onshore development may be clear for a developer, the host nation which owns the hydrocarbon resources will view the project from a different perspective.

The developer’s project metrics focus on net present value (NPV), return on capital, safety and environmental performance, but the host government’s performance in managing the country’s natural resources is determined by metrics such as tax revenue, employment, industrial development and gross domestic product (GDP) growth. There are areas of clear alignment between the developer and host nation: the more profitable a project is for the developer, the greater the tax revenue from that project. However there are also areas of misalignment and conflict. The issue is brought sharply into focus by cases where FLNG can reduce development costs by replacing an onshore LNG plant with a floating vessel that is often constructed overseas. The host nation must balance the higher tax revenues from the lower cost project against the reduction in local development and employment that would have been stimulated by construction and operation of an onshore LNG plant.

This paper presents a quantitative approach to the assessment of host nation benefit to the national GDP from a natural resource development project. A transparent basis on which to compare the national GDP benefit accruing from competing development concepts, based on internationally recognised metrics and methods, is presented. The technique is applied to a representative comparison of FLNG and onshore LNG development concepts to illustrate the conclusions that can be drawn from its application.

Keywords: FLNG, GDP, onshore LNG, procurement, national benefit, tax.

Will Pulsford began his career with major upstream operators including Shell, Woodside and Chevron as a process and project engineer in upstream oil and gas and LNG export and import projects in Europe and Asia Pacific including North West Shelf, Browse Basin, Gorgon and Bass Strait. In 2006 Will moved into advisory consulting and is currently global upstream lead with Poten and Partners. During his consulting career Will has executed and reviewed asset development plans for Australian domestic gas and LNG projects including NWS, Browse, Wheatstone, Prelude, Abadi and CSG to LNG projects at Gladstone in Australia. Globally he has reviewed oil and gas developments in North and South America, Europe, Africa and Asia. Will holds a Master’s in Engineering Science from Oxford University, is a Chartered member of the Institute of Mechanical Engineers and Engineers Australia and a graduate of the Australian Institute of Company Directors.

Puneet Goel works with Poten and Partners, based in Perth, Western Australia. He has advised on several key strategy assignments including an assessment of national benefit derived for competing development options for the Indonesian regulator. Puneet has deep experience in natural gas market in South Asia (India, Pakistan, Bangladesh and Sri Lanka). Prior to joining Poten, Puneet worked as a senior strategy consultant with IBM Australia, where he was involved in supply chain planning and business and operations improvement studies for the natural resources industry. Puneet has direct experience in the application of rigorous methodologies for organisational capability assessments. Puneet holds a post-graduate diploma in Management, Strategy and Operations from the Indian Institute of Management (IIM), Lucknow, and a bachelor of technology in mechanical engineering from the Indian Institute of Technology (IIT) in Varanasi.