On My Mind: Episode 47: Nov 7 2025. Project Capex Overruns & Growth in FLNGs

On My Mind: Episode 47: November 6 2025In this episode, two recent trends in the LNG industry arediscussed. The first is the increasing acceptance of cost overruns in project capital expenditure. Approximately a decade ago, as the US LNG export industry was developing, many projects targeted capex at $500/tonne or lower. Prior to this, some projects, such as Equatorial Guinea, achieved prices as low as$250/tonne. In recent years, however, announced capex figures have risen to $1500/tonne or higher for many projects across North America and other regions. Factors contributing to this change include rising labor costs, inflation, and higher steel prices. Cost overruns can have significant effects on hostgovernment tax revenues. For example, Australia experienced widespread project cost increases, resulting in minimal tax receipts over a decade of LNG production. In situations where the host government operates under a ProductionSharing Agreement, such as in Mozambique and other locations, cost overruns may be reimbursed by the host government, which can delay profitability and reduceearly tax income. The poorest people in the world will, in essence, pay for cost overruns of the largest companies of the world!   We all need to bring fiscal discipline back and control our costs.The second topic addressed is the development of FloatingLNG (FLNG) projects. Following the initial launch of Shell Prelude in Australia less than ten years ago, FLNG was considered a relatively new and expensive technology. Subsequent successful projects in Malaysia, West Africa, andMozambique have led to new FLNG initiatives in South America, Canada, the US, and elsewhere. FLNG technology remains complex and can be advantageous in areaswith limited or unsafe land access, offshore fields that are distant or small, where where land construction costs are elevated. However, risks remain, particularly if vessels are constructed by less experienced shipyards or operated by companies without the necessary technical or financial resources to address potential issues. Comments always welcome! @onmymind @vivekchandra @gulfstreamlng