Ten key ways to overcome new LNG supply chain challenges – KPMG

29 April 2015

Improving the supply chain is the key to getting maximum value from liquefied natural gas (LNG) projects, according to a study.

KPMG has outlined how to improve the supply chain for major LNG projects, based on interviews with senior executives from some of the largest oil and gas companies in the world.

The KPMG Global Energy Institute report, Unlocking the supply chain for LNG project success, highlighted what it says are the three biggest LNG supply chain challenges.

These are: the size and complexity of projects, the remoteness and other challenges - political and environmental - of the new wave of projects, and the construction of multiple plants in contiguous locations, leading to bottlenecks and sharply-rising costs of labour and materials.

According to KPMG, the liquefied natural gas (LNG) industry is facing massive challenges with an unprecedented wave of expansion. LNG developers are facing the challenges of lower oil and gas prices, and consequent reductions in capital expenditure, along with more remote and challenging projects.

The report outlines 10 ways to address supply chain challenges:

• Put human resources first
• Adapt learning from other industries
• Collaborate with other operators
• Re-think contractual relationships with suppliers
• Prepare for environmental, ethical and local content supply chain requirements
• Unlock the potential of modularisation
• Consider floating LNG (FLNG)
• Understand the local environment
• Foresee the handover to operations
• Adapt maintenance policy to location.

Hilda Mulock Houwer, partner and global advisory leader of KPMG’s energy and natural resources practice said optimising the supply chain during construction and operations was key to reducing costs and speeding time to market for LNG projects.

“Appropriate use of these approaches can cut costs, reduce construction times, speed start-up and cut environmental impact. In a world in which the economics of new LNG ventures are seriously challenged, projects with the most competitive supply chains have the best prospects for going ahead successfully” she said.

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