An Integrated Decision-Management Process Shortens Time to First Gas

Abstract

This article, written by Assistant Technology Editor Karen Bybee, contains highlights of paper SPE 115251, "Reducing Time to First Gas: Lessons Learned in Expediting and Informing International Investment Chain Decisions," by Deborah D. Resley, SPE, and Christopher Reinsvold, SPE, Decision Strategies, originally prepared for the 2008 SPE Asia Pacific Oil and Gas Conference and Exhibition, Perth, Australia, 20-22 October. The paper has not been peer reviewed. The monetization of gas, particularly in liquefied natural gas (LNG) projects, requires large capital investment in most links of the gas value chain from production to end use. Companies that invest in a single component of the value chain, such as nonintegrated gas producers, must understand the value of and risks inherent in every link in the chain, because gas will be priced in relation to its final point of sale. Final sale price as well as the effects of processing and capacity limitations ripple their way upstream to alter the timing, demand, and viability of the upstream investment. Introduction LNG projects are good examples of complex global gas-development projects with large capital-investment requirements. To build a commercial LNG project from gas production to point of final sale requires investment in and development of several capital projects. These linked or integrated projects serve to produce, treat, transport, and sell the gas in specific markets. These projects are joined in a value chain by at least 16 major commercial contracts, beginning with a production-sharing contract at the wellhead and ending with a gas-sales agreement in the end-use market. The entire set of investment decisions in the LNG chain can be driven by objectives such as the ability to book gas reserves by a certain date, optimizing the entire gas portfolio of assets, and in the case of companies with a portfolio of LNG assets, the potential for arbitrage and the ability to leverage and trade each LNG asset. LNG projects now have even more complex business chains than 10 years ago, involving multiple investors in various parts of each chain. Successfully commercializing gas in integrated LNG projects and achieving acceptable returns requires numerous investment decisions. Building such a chain involves high-level coordination and integration of both technical and commercial processes, the option of reducing costs through increasing throughput, and leveraging economies of scale to reduce plant costs.