GROWTH IN FUTURE GAS CAPITAL PROJECTS.

The industry will see a return to bigger LNG Capital Project sanctions, Wood Mackenzie predicts. Since 2015 these smaller Capital Projects are not sufficient to sustain the existing OEMs, suppliers, engineers and actual resources required to execute them. These include multi-billion barrel project developments such as Mozambique LNG, Canada LNG, expansions in Qatar and Papua New Guinea, according to Wood Mackenzie. As previously forecasted by the same research and consultancy group, 2017 saw a significant recovery in final investment decisions (FIDs), with the number of Capital Project sanctions more than doubling compared to 2016 figures. However, Wood Mackenzie highlighted that Capital Projects that did achieve FID in 2017 were notably smaller scales/values. Wood Mackenzie predicts around thirty (30) major project FIDs for 2018, a similar total to 2017. These projects are, however, expected to be on the smaller side again. So the main challenge now is to prepare for these anticipated Mega Capital Projects well in advance to alert the OEMs, EPC contractors, suppliers, engineers, logistics and financial institutions. Typical project timelines through the capital value process (CVP StageGate) are Concept 12-18 months, Select 6-18 months, Define (FEEDs) 12-24 months, FID deliberations 6-24 months, EPC ITT/ITBs 6-12 months, EPC award & project execution 36-48 months to mechanical completions. All these mega Capital Projects are chasing similar resources and similar materials hence tight competition and possibly higher contingencies in tenders. This will result in the formation of many joint ventures to mitigate any commercial risks associated with potential liquidated damages and/or performance guarantees. With 'The Big Crew Change' in full swing I believe one of the biggest challenges we face is the lack of suitable resources to actually execute these Capital Projects. The time to plan for these is now and not when the FIDs are rubber stamped.

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That's good news.

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I anticipate large shipments of LNG from Qatar into Europe once all the newbuild tonnage hits the water in 2019-2020. Don't be surprised when a new regasification plant goes up in Odessa.  That would be the logical place for it.

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