Project evaluation using a risk-based approach in JOGMEC and its applicability to CCS business domains

Abstract

Liquefied Natural Gas（LNG）projects has been JOGMEC’s major focus on financially supporting Japanese companies since the 2010s. Various non-technical risks have affected the projects in recent years, for example 1）global issues as geopolitics and climate change, 2）political/economic/environmental/social development issues in resource-producing countries, 3）portfolio strategies of operator companies, sales competition, and financing amid the rise of Sustainable Development Goals（SDGs）and Environmental, Social, and Governance（ESG）investment. Under these circumstances, the Energy Project Department in JOGMEC has been gradually adopting “risk-based approach” to better evaluate non-technical risks among numerous projects.

In the risk-based approach, non-technical risks are challenging to assess because it ranges from qualitative to quantitative measures. One way to strengthen the assessment is to evaluate the risks together with risk factors and control measures. The approach is based on a versatile method that can also be applied easily to non-LNG projects, such as carbon capture and storage（CCS）. The project’s relevance and quality of project management are expected to improve by using the approach. On the other hand, the decision making team must be fully informed of the potential to overexaggerate risks, which could lead to pessimistic thinking.

Regarding CCS deployment, JOGMEC is involved in variety of initiatives, including promoting Japanese Advanced CCS Projects, publishing “CCS guideline”, and holding workshops. In 2023, Energy Project Department held an “internal workshop on CCS business risks” which discussed substantial risks by comprehensively identifying primary risk factors from the supply chain and control measures. However, the discussion did not extend to the possibility of occurrence or impact, which highlights uncertainty in other projects. Given the uncertainty, to make CCS projects spread in the future, JOGMEC will deeply collaborate with Japanese government and companies to assess domestic and international policy trends, business implementation opportunities, business management, and business risks.