How financial management has become a strategic tool for implementing megaprojects

You could call it a paradox for the world’s biggest energy projects over the last two decades: capital is no longer the thing holding development back. The hard part now is to ensure investments are sustainable in the long run, given political risks, shifting regulations, ESG demands, and the ever-more tangled nature of supply chains.
This has been the period during which the industry has developed a new way of thinking about financial management. Rather than viewing finance merely as a means of cost control, it is seen as a system for coordinating strategy, risk, and investment.
Take Raigul Dzhetpisova, for instance. In her senior roles at Chevron and Tengizchevroil, she has been part of projects that can involve investments of tens of billions of dollars. You learn from that kind of work that stability is not so much a matter of how much capital you have put on the table, but whether you can bring liquidity, tax issues, government relations, and contract management under one roof.
For years, the finance side of energy companies was preoccupied with the mechanics of reporting and budgeting. But major projects have a way of exposing the limits of that. By the early 2010s, it was plain to see that the real dangers to a multibillion-dollar venture were not in your financial models, but at the crossroads of public administration, procurement, and logistics. So an integrated method of financial management has started to emerge in the sector. It calls for merging risk and financial planning, factoring ESG into capital allocation, and using scenario modelling for major decisions. It also means using the financial function as a strategic management tool and having a system in place to deal with government bodies.

That is why an integrated approach to financial management has begun to take shape in the industry, which involves:
• combining financial planning and risk management;
• scenario modelling of long-term investment decisions;
• inclusion of ESG factors in capital allocation processes;
• system interaction with government institutions;
• using the financial function as a strategic management tool.

One of the most notable results of this approach has been a change in attitudes towards government regulation and tax policy.

The results are evident in shifts in attitudes towards matters such as tax policy and regulation. Where once a tax regime was just another line in the budget, it is now part of the contest for international capital. You can see this rethinking of investment policy in the way industry voices have been involved in tax reform debates in Kazakhstan and the UK; predictability is what draws investors these days.

In the end, the experience of large-scale international work makes it clear: the future of the energy business will be decided by more than resources or technology. What is growing in importance is the ability to have management systems that can reconcile the state, the investor, and the business in a single model.