Taking the complexity out of managing the expense line—general and administrative (G&A) cost-management strategies for LNG and CSG projects

Abstract

Cost management is often viewed as a financial issue, but the leading organisations are driving cost-management cultures across their whole businesses. In the world of complex LNG and CSG capital projects, it is those companies that avoid cost escalation and will outperform their competitors. In the early stages of a project, the G&A expense line often gets disregarded as the focus is getting through FEED to FID and beyond. Experience shows that without rigorous processes and systems, G&A costs can grow significantly, often without real transparency of the activity that is driving these costs and from where they are being driven. The lack of transparency in the burdening of G&A costs can lead to an operator having to absorb tens of millions of dollars of un-budgeted expense or the non-op JV’s being burdened with higher costs. This extended abstract highlights some of the leading practices and examines some of the issues facing the LNG and CSG industry: Why do G&A costs get out of control so quickly on major capital projects? What can be done to ensure there are processes and systems in place to support a no-loss, no-gain cost-management philosophy? What are the key enablers to building a cost culture? What key performance indicators can operators use to help manage G&A costs during the major capital projects phase, to first gas and beyond?