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Shell Exploration & Production Copyright: Shell Exploration & Production Ltd. UK Norway Share Fair April 20 th 2006 Ardoe House Aberdeen Alastair Reid.

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Presentation on theme: "Shell Exploration & Production Copyright: Shell Exploration & Production Ltd. UK Norway Share Fair April 20 th 2006 Ardoe House Aberdeen Alastair Reid."— Presentation transcript:

1 Shell Exploration & Production Copyright: Shell Exploration & Production Ltd. UK Norway Share Fair April 20 th 2006 Ardoe House Aberdeen Alastair Reid Supply Chain Team Leader - Projects

2 Agenda Overview - Shell Exploration & Production Global Category Management Selling to Shell E&P in Europe Norwegian Focus Contact us

3 EP Key Locations USA Nigeria Oman Brunei NW Europe Australia Canada Malaysia Shell Exploration & Production

4 Strategic focus: fit-for-purpose strategies for major spend categories. Business integration: Supply Management hardwired in business processes dedicated global matrix organisation, clear accountabilities processes to enable synergy with suppliers & efficient requisition to pay Common approach: common processes, tools & behaviours. Best practice processes, min standards & enabling tools, “one voice” to market Consistent & pervasive performance mgt with credible measures to monitor progress & support delivery of benefits. Valued people: competent professionals working on strategic level. Assuring competence development to meet business needs E&P Supply Chain Strategic Elements

5 Global Category Management Dedicated capability across a majority of third party spend for major market categories Global strategies that support business objectives Making full use of market intelligence Sourcing contracts optimise total cost of ownership Post contract award: continually improve cost and value performance as well as ensuring contract compliance

6 Global Category Management PRODUCTION : boats, helicopters, prod chemicals, Integrated Services, Facilities Management, installed base compression CAPITAL PROJECTS : linepipe, pipelay services, compression, subsea facilities - deepwater, agency manpower SEISMIC, IT, TRAVEL, CONSULTANCY and other SERVICES WELL ENGINEERING: rigs, bits, cementing, OCTGs, completion equip, expandables, liner hangers, fishing/ milling, coiled tubing, ESPs, well control, casing/tubing running, Directional Drlg/Wireline Upstream Business Category Grouping s Regional/OU structure Stakeholders

7 EP Europe 1 Management team 1 Business plan 1 Strategy Aligned policies Aligned procedures Integrated support team Shell Exploration & Production in Europe

8 Approx. 4,500 employees - contributing approx. one third to Shell EP Business. And the prize in each country: – Norway - Est. 70% hydrocarbons still to be produced. – U.K. - just under 50% hydrocarbons still to be produced. – The Netherlands - Over 50% still to be produced. – Ireland - Plans to bring Irish gas onshore – Germany - Successful gas production in Europe’s biggest mature energy market. – Italy - Turn largest onshore oil accumulation in Europe into a legacy position. – Austria - Successful mature operator with growth aspirations. – Denmark - Successful venture with an extended licence period (2042). UNDERPINNING OUR BUSINESS IS LEADERSHIP IN HS&E PERFORMANCE

9 Support Manager SCM Alex de Jager ASSEN Well Engineering SCM ABERDEEN Projects SCM Iain Middelton ABERDEEN Services SCM Marie Marsh ABERDEEN Production SCM Neil MacLean ABERDEEN NOV SCM Clive Bray STAVANGER Jeff Prestwich Supply Chain Manager John Lickvar ABERDEEN Supply Chain Management in E&P in Europe Drilling Well Engineering Capital Projects E&M, Logistics Production Services IM/IT, Geosciences HR, FM Assurance, Process, External relationships Non Shell Operated Ventures

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11 Integrated Service Contractors (ISC) Significant volume of our activity is performed by ISC's Where we have an ISC - generally – Shell contract with 1st tier suppliers – ISC contract with 2 nd tier suppliers Key contacts within the ISC’s are available

12 Supply infrastructure EPE gas/oil fields Norway/Brent “Central”Onegas“Mature” Sigma 3 AKOP AJSWGE LandGroningen GLT Proj LOP(Projects) MultiGas GLT Maint OMC Maintenance only Projects only P + M Shell Exploration & Production in Europe - ISC Overview

13 Integrated Maintenance and Modifications Contract (ISC) Aker Kværner Offshore Partner (AKOP) Integration with and between Stavanger and Kr. sund organisations Project Engineering and Engineering & Maintenance Engineering Services: Mechanical, E&I, etc Support: Procurement, Cost/ Plan, DCC etc Prefabrication Construction: Mechanical, E&I, Structural, Process, Safety, Surface Treatment, Insulation, Scaffolding Maintenance Support: disciplines as above Subcontracts: Surface Treatment, Scaffolding/ rigging, Insulation Process Support: pressure testing, high pressure cleaning, nitrogen purging. Option. Civil: roads, structures, buildings, concrete, drains. Option Material frame agreements: piping, steel, cable trays, nuts and bolts etc. Does not include: maintenance discipline contracts (valves etc – managed directly), front end engineering/ concept. Larger mods/ projects can be run separately

14 Our Value Proposition to Suppliers Relationships It is our aim to work effectively with the industry, and where business needs justify and competitive supply assured, we build long-term relationships based on trust and clear, mutually agreed objectives. We capture the efficiencies of dealing with suppliers, for example through standardising prequalification and terms & conditions. Collaboration We work with suppliers in development and deployment of key technologies. We actively promote the fair sharing of risk between supplier and operator, which is increasingly important as we venture into more technically and commercially challenging environments. Performance Relationships with suppliers who perform to an excellent standard will be nurtured. We measure performance and build differentiating performance into our contracting strategies.

15 Shell E&P in Europe use the oil & gas industry supplier database - Achilles in Norway and FPAL in UK and NL which eliminates the need to maintain our own in-house supplier database. Achiles and FPAL give us a structured way of identifying and selecting potential suppliers & contractors based on the quality of their data in the database. Suppliers interested in working with us should register with Achilies andFPAL and build up an attractive supplier profile by registering as fully and as accurately as possible. Large or Critical suppliers may also be required to undergo FPAL Capability Assessment, to reduce duplication of requests for information in the tender process. Doing Business With Shell Exploration & Production in Europe

16 The Supply Chain Code of Practice outlines a set of best practice guidelines for the UKCS oil and gas industry to: First adopted by the industry in 2002, signatories undertake to work towards full compliance. They include major purchasers (UKCS operators and principal contractors) and suppliers (companies providing goods or services). Transparent planning of contracting activity by major purchasers to improve supply chain capability Streamline pre-qualification, tendering and negotiation processes to reduce billing costs, eliminate waste and value and increase competitiveness Increase feedback dialogue and shorten payment cycles to improve performance Communicate forward plans to the industry Support the annual industry Share Fair Publicise a list of internal contacts Where pre-qualification data is required only invite bids from suppliers registered with FPAL Eliminate supplier data duplication by utilising FPAL Use industry standard ITT Models where appropriate Provide appropriate de-briefing for all bids Use industry standard contract forms Include payment terms of 30days in all contracts Include performance indicators Give FPAL performance feedback Pay all valid invoices within 30 days Track and discuss key contract performance indicators Request and participate in PLAL performance feedback Submit complete and valid invoices Adopt a prompt payment policy for own suppliers Keep FPAL records valid and up-to-date Refer purchasers to FPAL if duplicate information is required Participate in the Industry Mutual Hold Harmless Use standard industry contracts (LOGIC type or company specific global contracts) Review Purchaser plans, FPAL Purchaser Profiles and attend Industry Share Fairs

17 Shell Exploration & Production in Europe expects from vendors Business Principles – Services and products delivered in accordance with Shell General Business Principles HS&E & Quality – Aligned management systems and a very good performance track record Mutual Indemnity Agreement – Undersign the deed Financial – Satisfactory financial position to provide continuity in the market where it operates Technical (product features / vendor business capabilities) – Meet requirements of (inter)national and if required specific Shell / E&P in Europe defined standards

18 Shell Exploration & Production Copyright: Shell Exploration & Production Ltd. Norwegian Specifics

19 Shell E&P Europe - Norway Stavanger Kristiansund Aukra Kristiansund: Aukra: Stavanger: Draugen Field Production Orman Lange Field Production (Oct.2007) Engineering Maintenance 550 staff approx. 30 staff approx. 50 staff approx. Orman Lange Field - Plant & Admin Gas Processing Central Office Well Engineering Exploration Drilling Project Engineering Corporate Functions (FM, HR, Finance)

20 Operations: Mid-Norway and Norske Shell o Office established in Kristiansund 1989 o Operations in Kr. sund in o 1 platform & single train o Shell ownership, skilled offshore staff o Value creation in Mid-Norway seen as target also for Ormen Lange: 40 year perspective

21 E3 D3 Draugen Subsea Layout 2007/8 Activity

22 Draugen Draugen project funnel showing big potential future projects: – new loading buoy – CO2 pipeline supply from the beach and injection into reservoir – re-installing a drilling rig on the platform

23 Trym Trym is a Norwegian gas/condensate development Trym Owners Shell (50%) Statoil (30%) DONG (20%) Tri-lateral subsea well Tied back to Harald (located in Danish sector) via 5 km 8” flow-line. Harald is a DUC owned and Maersk operated platform. DUC = Danish Underground Consortium (39% A.P. Møller – Mærsk AS, 46% Shell, 15% ChevronTexaco). Cross border issues Norway / Denmark Trym Development

24 Plan Rig availability - critical factor Drilling operations: Q1 and Q Marine installations during summer season 2007 Harald platform modifications during Q2 and Q Production start: Q

25 Ormen Lange Location: Gas production: Recoverable gas reserves: Recoverable condensate Water depth: Field investments: Pipelines investments: Operator for development and construction: Operator for production: 120 km northwest of Kristiansund 20 GSm 3 /yr 375 GSm 3 22 MSm – metres Approx 55 bn NOK (2002) NOK bn NOK Norsk Hydro ASA A/S Norske Shell

26 Ormen Lange Production Stair Case 2007 Strategies PDO Organisation Design Recruitment Operability Rev. Contract Strategy Power Commissioning Recruitment IT systems Man systems Procedures Tender Organisation Recruitment Contracts Maint. Systems Emerg Org. Take-over Commissioning Start-UP Transfer of Operatorship Operational Readiness

27 Ormen Lange Maintenance: Outsourcing Level CORE MAINTENANCE 1st Line, Corrective and by Shell Personnel SPECIALIST MAINTENANCE Preventive, Corrective and Condition Monitoring Equipment Suppliers and Other Specialists MAINTENANCE SUPPORT BY ISC Supervision of execution, PMRs, 1 st Line Call-off based on condition monitoring and preventive maintenance routines Support preventive, corrective, shutdowns etc Support 38% Core Maintenance 32% Specialist 30% I.e. Shell ownership retained; outsourcing level: - Stable, - Builds on current organisation

28 Examples of Ongoing and Upcoming Tenders: Ormen Lange and Draugen USCOngoing Draugen Area Tiebacks2007 Frame Agreement for Lifting EquipmentTender Evaluation ongoing Maritime Support/ Tugs – Ormen LangeTender Evaluation ongoing Inspection & Corrosion Monitoring tenderStrategy/ plan for approval Condition Monitoring Services tenderPrequal performed Quantitative Risk Assessment ServicesScreening & Prequal final Control System Support ServicesStrategy/ plan for approval Maintenance of Valves2nd half 2006 FM – Work Environment Q2 2006

29 Contracting future plans – Updated Quarterly – Includes key contacts and timing per activity Selling to Shell overview Shell Group Business Principles Supply Chain Management – key contacts

30 Contact Us …… We have a hard copy listing of contacts available for you For follow up please use our Contact List or contact: Shell

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