3esi enersight 3esi-Enersight LNG oil and gas sun sunset oil rig ocean

Author: Don Merritt, VP Operations, Australia

The LNG industry is currently in an unprecedented phase of competition. Companies in the space, including Shell, Chevron, ConocoPhillips, Sinopec and Origin, have never faced more intense pressure to perform efficiently among an increasing number of peers.

With so many LNG projects now coming on line with production, competition is not only about how companies can construct massive facilities moderately within budget, but how different operators will achieve profitable natural gas production in the context of current low oil prices impacting LNG sale price. So what opportunities do LNG operators have for efficiency in one of the world’s most cost-intensive industries as it comes of age?

Comprehensive planning and scheduling systems for LNG

Working with global leaders in LNG, 3esi-Enersight has observed three critical capabilities of comprehensive planning and scheduling systems required to impact capital efficiency and timely project delivery for global energy companies:

• Accurate forecasting & plan adaptability – ability to forecast accurately and rapidly make decisions based on what-if scenarios run on a comprehensive plan model
• Comprehensive planning with integrated activity scheduling – plan modeling must incorporate all complex factors of production and tie in interdependencies of scheduling
• Company-wide visibility of continuous evolving plans – immediate access to revised plans and schedules across corporate planning, asset planning and operations teams

So what about the LNG industry makes integrated planning and scheduling so critical?

Capex challenge as LNG production ramps up

With a shift underway from LNG facility construction to production including mega projects in Australia, competition ahead will be focused more and more on delivering production from the huge upstream developments. If we leave out regional subsidies that give some players an advantage, worldwide producers face the same capex challenge: How to get LNG to market amid a myriad of ever-shifting and costly production variables along a complex value chain?

Source: Wood Mackenzie

LNG liquefaction capex historical trends 2008 dollars

LNG players are in a race to achieve costs competitive with peers, hit forecast production, and profit overall despite pricing pressures such as the recent drop in oil prices (most LNG contracts are currently linked to oil price). Facing the certain high costs of production, worldwide producers must predict, manage and achieve profitable production at a cost that’s competitive as global supply rises.

Success factors in profitable LNG production

KPMG, in its 2014 analysis Major LNG projects, Navigating the New Terrain, found that successful LNG projects worldwide were defined by their ability to deliver on drivers under their control including:
• Capital efficiency
• Timely project delivery and
• Disciplined and robust processes and systems.

KPMG reports that among the key means operators have to achieve capital efficient and timely delivery of LNG to market, is comprehensive planning and scheduling. Planning and scheduling technology has emerged as a primary method of affecting capital efficiency and achievable project schedules.

LNG complexity puts forecasts at risk

Source: MGM Energy

plan and schedule intro LNG chain complex expensive GAS butane minus propane oxygen nitrogen

LNG operators have particularly complex operations to manage, loaded with risks to achieving forecasts. In order to deliver LNG profitably to market, producers must first:
• Draw production from a large number of wells across huge basin areas
• Keep pace with delivery requirements of sometimes multiple LNG trains.
• Manage dewatering which generates initial large water volumes
• Rapidly ramp-up production to realized returns on LNG plant investments

These requirements are further complicated by the relatively low production rates of typical wells and by the variable nature of gas reservoirs, which are notoriously difficult to model.

Comprehensive planning and scheduling systems help LNG come of age

As global producers look ahead at an increasingly competitive LNG market, the sheer complexity of their business pose great risks in terms of cost overruns and schedule misses.

Industry observers and analysts identify comprehensive planning software with integrated activity scheduling as essential to provide accurate forecasting, steer capital efficient performance and provide plan adaptability in unpredictable markets. Integrated planning and scheduling must also be accessible across corporate planning, asset planning and operations teams.

Comprehensive LNG planning and scheduling technology will be a considerable factor in determining which energy producers outperform the pack.

About the Author

Don Merritt, 3esi-Enersight Vice-President of Operations, Australia, assists customers with full field production forecasting and field development optimization. A mechanical engineer by training, Don began his career as a reservoir engineer with Petro-Canada. He gained experience in developing international oil and gas fiscal models through his leadership positions with Merak’s Asian office and Schlumberger in Australia, Indonesia and Canada.

About 3esi-Enersight

3esi-Enersight is the world leading provider of solutions for integrated strategy, planning and execution in upstream oil and gas. From the field, to the boardroom, in operations across 6 continents, 3esi-Enersight is empowering E&P organizations to maximize the value of their upstream portfolios and stay ahead of the competition. Our solutions help customers work more efficiently across teams and functions and make better strategy and planning decisions based on data they can trust.