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Risk management for a GTL proposal


A multi-national consortium was in the early stages of investigating a proposed gas-to-liquid (GTL) project. It had to decide whether it would be worthwhile to submit a bid to the national oil company (NOC) that owned the rights to the gas. We facilitated a series of workshops with the aim of:

  • Identifying and analysing the main uncertainties associated with the project
  • Contributing to the tollgate submissions and approvals processes of the consortium partners
  • Enhancing the quality and focus of bid preparation
  • Providing a forum for communication and enhanced understanding between the partners.

The first workshop was held shortly after the consortium was formed in response to the announcement of the project by the NOC. Subsequent workshops expanded the risk register and the action plans as new information was acquired.

The workshops did not examine operational threats and opportunities in detail unless they were important for the tollgate process. Additional workshops were envisaged should the consortium decide to bid, and again if any bid were successful.

The workshop process followed the steps in the international standard ISO 31000 Risk management – Principles and guidance. This was compatible with the risk management processes of the consortium partners.

Background: the GTL process

GTL processes convert natural gas into longer-chain hydrocarbons that are suitable for vehicle fuels such as gasoline and diesel. A common GTL process uses the Fischer-Tropsch catalytic reaction to convert carbon monoxide and hydrogen to liquid hydrocarbons.

The process is summarised in Figure 1.

  • Natural gas is pre-treated to produce methane (CH4). As well as methane, other outputs from the pre-treatment include liquid hydrocarbons (condensates), sulphur and water.
  • Air is separated cryogenically to produce oxygen (O2).
  • The methane and oxygen are combined to form synthetic gas (‘syngas’), a mixture of carbon monoxide and hydrogen. Heat is recovered from the reaction.
  • The syngas is catalysed in the Fischer-Tropsch unit to form long-chain hydrocarbons.
  • The long-chain hydrocarbons are cracked (reduced in length) to form products for the market, including naphtha, gasoline, diesel and other fuel and lubricating oils. An important characteristic of hydrocarbons derived from this process is their very low sulphur content.

Figure 1: Fischer-Tropsch process schematic

Establishing the context

The context stage of the risk assessment was completed prior to the first workshop and summarised in a briefing note for participants.

The proposed work was an integrated project, in that it included upstream field development as well as downstream GTL processing. This was reflected in the set of key elements that provided the basic structure for identifying threats and opportunities in the workshops (Table 1). The elements were intended as a guide for brainstorming only, not a formal classification of project issues.

Table 1: Key elements


Description, notes



Rationale, strategic fit, country risks, stakeholders, overall economics, benchmarks, exit strategy


Gas reserves

Security of title, geology, structures, reserves, timing


Field development

Field development plan, capital, schedule, operations


Drilling and upstream

Drilling plan, surface facilities, capital, schedule, operations



Capacity, schedule, operations, tariff


Gas pre-treatment

Gas pre-processing and pre-treatment, purification, sulphur recovery


Air separation

Air separation unit



Syngas generation unit



Fischer-Tropsch reactors, tailgas recovery



Control systems, steam, power, heat recovery, water, reaction and effluent water, product storage, flare systems, fire systems


Project execution

Overall project approvals and licenses, execution plan, risk management



Contract term, terms and conditions, competitors, taxes, foreign exchange restrictions



Supply and demand, customers, price, volume, marketing arrangements, shipping



Financing requirements, risk allocation, guarantees, tax, foreign exchange

Initial risk identification

An initial threat and opportunity register was created prior to the first workshop. It was based on risk registers for related projects in the country and risks generated from desktop research on the GTL process. However, the items in the register were not all documented clearly, and many were distinctly operational in focus and hence largely irrelevant to the project at this early stage of its development (although of direct relevance should the consortium submit a successful bid).

The initial register grouped threats and opportunities into the key element structure in Table 1. This consolidated register was used as the starting point for risk identification in the first workshop.

Assessment workshops

Workshop process

Each workshop involved brainstorming, with two passes. In the first pass, for each key element in Table 1, the participants:

  • Briefly reviewed the area covered by the element, to ensure everyone was using a common set of definitions and assumptions, and reviewed the threats and opportunities that had been identified already
  • Noted existing controls relating to each threat and opportunity
  • Assigned consequence and likelihood ratings, given the controls
  • Established initial risk ratings.

In the second pass, the participants reviewed and confirmed the risk rating for each threat and opportunity, and allocated a risk owner for each one.

Analysing threats and opportunities

When analysing threats and opportunities, the scales in the risk management process of the lead consortium partner were used. Consequences of risks were evaluated in terms of the following criteria:

  • Change in shareholder value
  • Change in net present value (NPV) of the investment
  • Health and safety
  • Natural environment
  • Social and cultural heritage
  • Community, government, reputation
  • Legal.

In the workshops, the participants chose a description that provided the best fit to the most likely consequence, using scales related to the criteria above. Where there was more than one relevant consequence criterion, they chose the highest level and the corresponding scale rating. The shareholder value and NPV criteria were rated in terms of the aggregate impact on the consortium.

Likelihoods were analysed using an agreed scale, and consequences and likelihoods were combined using an agreed process.

Limited time and lack of an approved economic model (in the absence of a contract structure for the project) precluded the detailed estimation of potential exposures at this stage. Potential exposures were to be estimated when the project economics had been established more precisely.

Summary of high-priority risks

The primary outcomes from the workshops were progressively updated risk registers for the project, with agreed priorities and assigned responsibilities.

There were 21 high-priority threats and three high-priority opportunities after the first iterations of risk assessment. The most important uncertainty was associated with the energy price environment and potential rises or falls relative to the assumptions used in the economic base case. Other high-priority risks were concerned with in-country relationships, commercial matters, gas field development, project execution (particularly the effects of delay), and technical matters associated with the GTL process and technology.

Treatment, monitoring and review

Risk coordinators were nominated in each consortium company, with responsibility for reviewing and maintaining the risk register, coordinating changes to the register across the companies, and ensuring each company was working from the same register.

A list of ‘fatal flaws’ or ‘show-stoppers’ was prepared. This list contained the risks that had to be addressed successfully for the project to be taken forward for approval. It covered the fatal flaws from the perspective of each of the consortium partners, as failure by one would be a failure for all. While everyone was aware of the fatal flaws in broad terms, fleshing them out in more detail was very useful; by specifying explicit targets and hurdles, project activities could be focussed on what was absolutely critical for moving through the next approval gates.

Risk owners were tasked to develop treatment plans for the high-priority threats and opportunities, and their effects were incorporated in the risk register. In particular, detailed bow tie analyses were conducted to identify and evaluate treatment options for the major risks (Figure 2). Many of the action plans related to due diligence activities and acquiring additional information to reduce uncertainty.

Figure 2: Bow tie analysis

The agenda for weekly meetings was adjusted to include a review of the risk register and the status of treatment plans. The company risk coordinators provided the support for this.


An important lesson from this case study is that project plans do not need to have been developed in great detail for risk assessment to be valuable. The iterative assessment process used here demonstrated this. Each risk assessment provided a summary of the main current uncertainties, and these guided the team’s project development and their information gathering activities. In a project like this, where decisions had to be made under time constraints, it was beneficial to be able to defer detailed examination of areas of the project where there was little uncertainty until additional resources were available.

The focus on opportunities as well as threats allowed additional benefits from the project to be recognised and captured more readily.

The risk register had a high level of detail, within the constraints of limited information. This was a deliberate choice, to facilitate detailed management of specific risks in the development of the proposal. However, further analysis and consolidation of the risk register was necessary before final documents were prepared for project tollgate approval.

For project approval it was decided to identify and present for discussion the main ‘headline’ risks associated with the project, with each headline risk incorporating a range of more specific matters. The headline risks were associated with:

  • Development of the gas field and associated infrastructure
  • Upstream legacy matters associated with existing wells and facilities
  • The development status of the GTL technology and the team’s confidence it would work as intended
  • The relationship between the upstream and downstream components of the integrated project
  • Project execution, for both the upstream and downstream components
  • The legislative environment and commercial matters that depended on it, including tax arrangements
  • Environmental and community matters, including greenhouse gas emissions
  • Project economics.

The benefits of consolidating the risk register for the tollgate approval process were:

  • A distillation of the detailed register into a set of more general headline risks that senior managers could comprehend and address easily
  • Avoidance of detail that would clutter the decision-making processes for high-level approvals
  • A concise representation of the main issues facing the consortium with, at most, one or two pages of background per headline risk
  • Confidence amongst the senior management team that the detail existed and had been addressed within the project team.
Multi-national consortium of oil and gas companies
Middle East and North Africa
Oil and gas
Services included:
Risk treatment
Risk assessment and risk treatment
Project risk management