The liquefied natural gas (LNG) industry is venturing into new territory as it approaches an unprecedented wave of expansion. New projects in Western Canada, the US Gulf Coast and East Africa pose particular technical challenges, but more important are the non-technical challenges. The report introduces the breadth of considerations needed to successfully navigate the new terrain."Out of the last 12 LNG projects, 10 went over time and/or budget – many by 40 to 50%."1
Lessons can be learned from recent LNG projects in Australia, many of which encountered budget overruns of up to 50 percent due to escalations in labor costs, increased regulatory burden, complex contractor relationships, lack of coordination on common infrastructure and insufficient 'big picture' government engagement.
Delivering new projects successfully requires holistic project framing from the outset. Governance has to be strong; the operating model needs to go beyond silos to optimizing linkages within the project team and through the supply chain; and stakeholder, regulatory and human resources considerations need to be as central as technical issues to decision-making. A wider range of equity/financial partners, public-private partnerships and synergistic developments with other LNG projects in a region can help align interests and save costs. This is essential to achieve acceptable shareholder returns and win the confidence of LNG purchasers and project financiers.