The LNG industry is investing huge sums to meet the world’s hunger for natural gas, expected to exceed the demand for oil by 2030. Billions are being poured into pipelines, liquefaction, shipping and receiving, terminal infrastructure, and technology, as both traditional and new players strive for promising opportunities worldwide.
Risk management is critical to success in this capital intensive, technologically evolving, and politically unpredictable business. Risk management for LNG is all the more complex, given the financial codependency from the wellhead, across the oceans, and to the receiving terminal. For each proposed transaction or investment, risk management requires that each risk be identified and understood, quantified or assessed meaningfully, and mitigated to reduce potential financial exposure. Once a project is found to meet safety criteria, the financial exposure and the potential costs of business interruption must be properly analysed and managed.
The range of risk management solutions runs the gamut of creative business solutions. It requires analysis of the design of infrastructure, its location, insurance, contract risk allocation, adoption of alternative physical movements, and even managerial or organizational reform.