1. Manufacturing An Oilfield Services Perspective J. David Rowatt, PhD, PE Research Director 27-Oct-2011

2. Agenda Schlumberger at a glance Manufacturing – Perception & Problems Manufacturing Technology Manufacturing Careers Policy

3. Since the early years of the 20 th century, Schlumberger has been measuring the sub surface. Intellectual curiosity and commitment to research and technology are in our roots. Today Schlumberger is the world's leading supplier of technology, project management, and information solutions to the oil and gas industry. Energy is Our Business

4. Drilling WesternGeco Land and Marine Seismic Wireline Logging Testing Services Schlumberger Information Solutions Data & Consulting Services Smith Bits & Advanced Technologies M-I SWACO Geoservices Drilling & Measurements and Pathfinder Drilling Tools & Remedial Services Dynamic Pressure Measurement Integrated Project Management 4 Areas - 27 GeoMarkets Schlumberger at a Glance Approximately 110,000 People Working in more than 80 Countries Representing 140 Nationalities Revenue: $ 27.4 Billion Net Income: $ 4.2 Billion Total 2011 R&E: >$ 1 Billion 2010 Financial Highlights Deep Industry Knowledge Global Culture Reservoir Characterization Technology Solutions Reservoir Production Well Services Completions Artificial Lift Subsea Schlumberger Production Management

5. Technology R&D – REMS R&D Centers 65Center Locations 700Projects 2,500Products 15,000Employees (6000 Mfg) >$4BInt. Mfg. Rev. Fuchinobe, Japan Beijing, China Sugar Land, Texas, USA Rosharon, Texas, USA Houston, Texas, USA Princeton, New Jersey, USA Edmonton, Alberta, Canada Calgary, Alberta, Canada Richmond, California, USA Oslo, Norway Stonehouse, UK Clamart, France Abingdon, UK Stavanger, Norway Novosibirsk, Russia Gatwick, UK Baden, Austria Engineering Pune, India Singapore Research, Engineering, Manufacturing, Sustaining

6. Schlumberger Manufacturing at a Glance Historical base in the US and France Significant growth through acquisitions Global expansion to support business Multiple manufacturing models Wide variety of activities – Foundry – Machining – Assembly and Test – Sensors – Nuclear Sources – Explosives – Trucks & Pumping Equipment – Marine Vessels Rapidly evolving needs and technologies Mixed perception of manufacturing as a good long term career choice – Manufacturing is seen as being easily commoditized and exported to low cost countries – Innovation is not clearly connected to manufacturing – Lack of career defined career path and technical recognition Looking forward – There are many considerations in manufacturing strategy – Where is the oil and gas industry going? – What are the technology drivers? Platt’s Model

7. Costing Material Costs Raw Materials Purchased components & sub- assemblies Labor Labor cost / hour OT policies Labor productivity Burden Opex costs Capex costs Maintenanc e costs Start up costs Overhead Management structure Re- organization costs Logistics Shipping costs Storage costs Tariffs Production Costs v. Acquisition Costs

8. Manufacturing Technology & Processes Factors to Consider Manufacturing technology & equipment (standard v. custom) Technical support (in-house v. out-sourced) / Co-location of engineering (New Product Development) Manufacturing capacity & global footprint Labor skills & availability including Manufacturing Engineering Automation and process control Quality measures (QA/QC)

9. R&E Investment and Hydrocarbon Resources Underexplored and underdeveloped areas Unconventional oils and gases Increased recovery from producing fields Harsh and hostile environments

10. Industry Drivers Pace of technology development – Is it fast enough? Harsh environments (Temp., Press., Flow, Corrosion, Abrasion, Erosion) Operational timescales - one day to 20+ years Reliability Ease of use & maintainability Operational and energy efficiency Environmental concerns (emissions, hydraulic fracturing, waste materials) Governmental regulation Manufacturing Technology Drivers Advanced Materials – New materials and processing techniques. Alternative Materials – Scarcity or control of traditional and/or strategic materials Managing the environment - Robust design and packaging Miniaturization – MEMS, nano-X Sensing – Embedded sensors, condition monitoring System integration & testing Automation & precision manufacturing Green manufacturing – Emissions, RoHS Flexible manufacturing – adaptable facilities, lot size, DfM Increased reliance on suppliers Industry Drivers & Manufacturing Technology

11. Opportunities & Challenges for US Manufacturing Opportunities – R&E investment areas are well aligned with US natural resources plays – US academic institutions are leaders in R&D of technologies that benefit the energy industry – Manufacturing benefits from co-location with engineering (concurrent engineering) – There is significant technology overlap with other industries Challenges – Deterioration of US as a manufacturing leader – Industrialization of new technologies – The “big” crew change and development of manufacturing talent and expertise – Government policy

12. Education & Hiring Challenges Motivation - Career expectations and opportunities – Manufacturing Careers – Technical Careers Change Management – Fast pace of technology change - Strain on internal expertise in the company – Availability of expertise – Fresh Out vs. Experienced Professional Hire – Hiring a specialist vs. a generalist Knowledge Management – Knowledge capture – Aggregation and organization of knowledge – Dissemination of knowledge across the organization Developing talent – Recognition at the university level of manufacturing as a discipline – A mixture of skills and degree levels is needed Theoretical and applied skills BS, MS and PhD – Graduate level education is vital due to the level of advanced technology – Internal training and development programs demonstrate commitment to people development – External continuing education is vital due to the pace of technology change Academia Professional Societies

13. Manufacturing Careers Clearly defined job descriptions and requirements Career paths in multiple domains Ability to select top job preferences for career planning Competency management + Training & Development

14. SETC Goals Recognition Motivation Retention SETC Pillars Parallel technical and management ladders Decoupling of SETC status from job/position Objective technical evaluation open to all Schlumberger Eureka Technical Careers (SETC) Eureka members SeniorPrincipalAdvisor Schlumberger Fellow Leading locally: Geomarket/ REMS center Leading widely: Area/ Service Segment/ REMS Leading in SLB/Industry Leading at project level: Contributing independently

15. Policy Encourage global partnerships at the governmental, industrial and academic levels. Foster meaningful government /industry partnerships (a Singapore example) – RISC – Research Incentive Scheme for Companies (targeted at Research and Technology activities) – IDS – Innovation Development Scheme (targeted at Development activities) – DEI – Development and Expansion Incentive (targeted at Mfg activities) – SDI – Supplier Development Incentive (targeted at Supply Chain activities) Keep the regulatory environment as simple as possible – Partnership and dialogue for sensible regulations – Need for stability as a means of fostering investment – Partnership in supporting and promoting “green” manufacturing

16. Conclusions The US is the leader in developing Oilfield Services technologies … but it is a global business The US is the leader in innovation … but other countries are aggressive and catching up Industrialization is very important … making the leap from the research to the shop floor. The US must maintain skill and leadership in this area. Manufacturing will locate where the best combination of people, technology, supply base, logistics and cost converge Leveraging technology overlap between industries can give the US a significant advantage due to size and diversity of its manufacturing base The development of manufacturing talent is imperative to the growth and stability of US manufacturing Government policies are important and influential in business decisions on where to locate R&D and manufacturing operations