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Journal of Australian Energy Producers
RESEARCH ARTICLE (Non peer reviewed)

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

J. Smith
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KPMG.

The APPEA Journal 52(2) 655-655 https://doi.org/10.1071/AJ11069
Published: 2012

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:

  1. Why do G&A costs get out of control so quickly on major capital projects?

  2. What can be done to ensure there are processes and systems in place to support a no-loss, no-gain cost-management philosophy?

  3. What are the key enablers to building a cost culture?

  4. What key performance indicators can operators use to help manage G&A costs during the major capital projects phase, to first gas and beyond?

Jonathan Smith is a partner in KPMG’s management consulting practice.

He has more than 20 years of experience in systems and process improvement and has worked with many mid-cap and large companies and government agencies in these disciplines.

He has had a particular focus on advising and assisting finance leaders with strategic and operational issues facing their finance functions.

In the past few years, he has done significant work with these functions in capital-intensive industries—specifically LNG, CSG, and mining companies.

He has an Executive MBA from UWA where he achieved a high distinction for his dissertation: ‘The CFOs role in formulating and executing corporate strategy’.

In addition, he has a BSc (hons) in industrial studies from Nottingham Trent University in the UK.

He is a PRINCE2 Practitioner and has a SixSigma Green Belt.

Member: The Institute Chartered Accountants Australia.