The senior management of a major LNG JV project were concerned that it may not have been maximising revenue through the commercial operation of its SPAs. The client knew it had diversity of contractual language in its SPAs and a need to review the risk of known inconsistencies between commercial agreements. It wanted to review its approach, the readiness of its people and processes, and improve and establish best practice commercial functions around its SPAs.
Gas Strategies worked alongside the then commercial team, enhancing the “corporate level” view of SPA strategy & portfolio risk and opportunities for enhancing value
Gas Strategies conducted, with a law firm, full commercial and legal reviews of all SPAs in the existing portfolio. The commercial review involved the risk and opportunity assessment and review of the SPAs with particular reference to inter-contract compatibility, gap analysis of administrative processes, business risk, valuation modelling, potential external market scenarios and operational consequences for the business. The work included a series of workshops and general training sessions including a major interactive brainstorming session with the key contract management team which identified over 70 possible improvements
With the results this work, Gas Strategies and the client began a systematic review and re-engineering of operational procedures to ensure the new lessons were applied and properly recorded.
Gas Strategies worked with the Head of Commercial to outline a new “back office” function which could focus on the commercial operation of the contracts. With this team, we reviewed the operational procedures for every contract and interactions between them.
We also developed a new training method called “Commercial Readiness Training” to run the team through key contract events. Scenarios or “war games” were developed and the team worked through them using the new commercial procedures.
Constant review meetings with senior management brought new insight to missed opportunities from the previous operating mind set – as the Finance director told us “thanks to our new appreciation of inherent potential of contracts we just delivered our most valuable ever cargo” – where the entire three year assignment cost was more than paid for through one cargo.
Gas Strategies carried collaboration from the previous phases of work into a final project to create a tool for the back office team to use to manage the procedures more easily. This involved creating a full electronic Commercial Manual to capture and connect the lessons of all reviews and processes.