Making joint ventures work

No LNG capital project in Australia can survive without excelling in joint ventures; yet, the practicalities of them are often overlooked. The Australian oil and gas market has some of the most complex joint-venture arrangements in the world, and there is much we can learn from a global perspective about how to make them work. Too often, joint ventures are forced marriages between two or more parties who misunderstand each other and have widely differing aims. Organisations often rely too much on the joint-venture agreement, devote too few resources to the venture itself, and pay scant attention to any warning signs of trouble. The authors see that international oil companies typically have about 30–40% of their portfolios tied up in joint ventures. This is set to grow to about 70–80% during the next 5–8 years as they enter new territories in the hope of securing new resources. Although joint ventures are familiar ground for oil and gas companies, such operators often struggle to make them work. Cost overruns, schedule delays, compliance issues, renegotiations, and erosions of value are common. There are, however, ways to make joint ventures work more effectively, including:knowing what is expected of all parties and monitoring these expectations;improving transparency of information between joint-venture parties;ensuring expectations are realistic and continuing to validate them;paying particular attention in the first year of a joint venture;proactively strengthening existing joint ventures; and,staffing and resourcing joint ventures with care.