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Introduction to LEAP (Leadership for Energy Automated Processing) The Role of Leadership in Driving Automation & Standardization in our industry Gary Spengler.

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Presentation on theme: "Introduction to LEAP (Leadership for Energy Automated Processing) The Role of Leadership in Driving Automation & Standardization in our industry Gary Spengler."— Presentation transcript:

1 Introduction to LEAP (Leadership for Energy Automated Processing) The Role of Leadership in Driving Automation & Standardization in our industry Gary Spengler VP Center of Excellence & Business Services, Chevron and LEAP Co-Chair © LEAP 2011 November 16, 2011

2 2© LEAP 2011 Leadership Drives Automation LEADERSLAGGARDS Other industries are leading the way – where do we want to be?

3 Leadership Drives Automation (cont) 3© LEAP 2011 Major IT Milestones in FedEx History 1978 : Fred Smith, who founded FedEx in 1971, declares: "The information about a package is as important as the package itself. Major IT Milestones in FedEx History 1978 : Fred Smith, who founded FedEx in 1971, declares: "The information about a package is as important as the package itself. Source: ComputerWorld.com FedEx Ground's hubs sort 3.5 million packages a day without human intervention, helping the courier win market share : FedEx launches a centralized computer system designed to track packages, routes, weather, vehicles and employees : Implements a dispatch system that allows customers to electronically request pickups : Introduces a PC-based shipping system : Introduces a handheld bar- code scanner.

4 Whats Holding Back Our Industry? 4© LEAP 2011 LEAP is the enabler to do this.

5 © LEAP 2011 LEAP Leadership for Energy Automated Processing Benefits of automation: Accuracy & Timeliness Managed Risk Consistency Regulatory Credibility Efficiency LEAP was formed in 2006 with the mission to: Promote efficient and reliable transaction processing within the energy trading industry by means of automation and standardization. Our founders are a group of oil majors, banks and independent traders. Better Access to Customers, Capital and Profitability! 5

6 © LEAP 2011 The LEAP Board of Directors Co-Chair: Gary Spengler Chevron, US Co-Chair: James Murdoch Shell, UK Treasurer: David Porter Glencore Secretary: Karen Mikkelborg Nexen Jim Brush Goldman Sachs Cesar Covarrubias PMI Gordon Fraser Morgan Stanley Tom Lullo BP Kevin Masucci Hess Carolien Ruiter Mercuria Jone Slutas Statoil Mary Dortenzio Glencore (as D. Porter designee when required) Joann Bonanno Chevron, US (as G. Spengler nominee when required) Patty Giedris Shell, US (as J. Murdoch nominee when required) 6

7 © LEAP 2011 Members of the Executive Committee Co-Chair James Murdoch Shell, UK Co-Chair Gary Spengler Chevron, US Cesar Covarrubias PMI David Porter Glencore, US John Herd Glencore, UK David Knipe BP, UK Blandine Lewine Glencore, US Karen Mikkleborg Nexen, Calgary AB Tone Vaila Statoil 7 LEAP EC

8 © LEAP LEAP DELIVERY JAN-06 | JAN-09 | JAN-08 | LEAP Settlements White Paper draft Pipeline Contracts Master 1.0 ISDA adopts v2, creating U.S. Crude Oil and Refined Petroleum Products Annex First physical oil match on ICE eConfirm LEAP Master 2.0 adds US crude Navarik contributes electronic Inspection Data standard JAN-07 | JAN-10 | JAN-11 | Annex C Marine Annex 1.0 Canadian Addendum 2.3b LEAP Accomplishments – A Brief History Canadian Addendum 2.2 LEAP Master 2.1 ICE eConfirm for Physical Crude Oil in Canada

9 LEAPs 2011 Key Initiatives © LEAP 2011

10 The LEAP 2011 Initiatives LEAP Prime Initiatives NW European Barge Contract (Annex) Pipeline Bookouts RINs GT&Cs Broker Matching eDocs (Electron ic Cargo Docs) NA Rail / Truck Contract (Annex) Secondary Initiatives Contract Matching Redesign Inspection Data Standardization Dodd Frank: Issues and Impact Automated OTC Margin Matching Settlement Matching 10

11 © LEAP 2011 Other Potential LEAP Initiatives Contract Matching Redesign Inspection Standards Dodd Frank Implications & Impacts Automated OTC Margin Matching Settlement Matching 11

12 12© LEAP 2011 How To Get Involvement Several levels are available Take a test run as a non-LEAP member Join LEAP as a Full Member (fee is prorated) - Actively participate, vote in the Work Groups, assign a representative to the LEAP Board, become a member of the Executive Committee decision process Levels of Involvement: As a non-member: You are invited to observe the Work Group process, but not actively participate in the meeting dialog or direction As a LEAP member: The option of Board membership is available (a commitment of 2 hours a month) Active participation in a Work Group (Initiative) A commitment of resources is expected to staff your Work Group The pay-back is direct influence in the direction of the Initiative and Work Group effort Participation Identify areas of interest (initiatives) that best suit your org Make a participation commitment Next Steps

13 QUESTIONS Where to find out more about LEAP © LEAP 2011

14 Appendix © LEAP 2011

15 US Pipeline Bookouts Automate the current manual process for US refined product pipelines Create a standard communication process Leverage Transport4, the de facto standard transaction hub for 12 US pipelines since 1997 Objectives Automatically identify trades that can be offset against one another Find more complex bookouts & minimize product shipped (save $) A clear method for communicating changes to the book or conversions to physical delivery Creation of an audit trail maintained by a disinterested third-part (T4) Applicable to other petroleum types (crude, NGL) and markets (cargo, non-US), assuming user participation is gained Benefits Development activity: parameters are well understood, production level software would be ready in 11 months; Require critical mass of users, operational consensus, funding and compliance with Dodd Frank Recent / Current Activity To save companies money by minimizing product shipped by pipeline via an automated solution Provide an audit trail where none exists today LEAPs Goal 15

16 © LEAP 2011 RINs (Renewable Identification Number – as applies to Renewable Fuel Standard Program ) There is a need for clear interpretation and standardization of RINs trading the need for a set of balanced GT&Cs that at a minimum, address indemnifications, clarification of RFS2 standards and compliance, risk protections Objectives Current annual renewable fuels volume is 13 Billion gallons and is mandated to increase to 36B Gals by 2022, developing a set of balanced GT&Cs now will greatly benefit all companies involved. Benefits Annual Renewable Volume Obligation (RVO) is set yearly by the EPA for each RFS participant organization RINs are used to verify each party has met its annual RVO BP and Morgan Stanley are key participants of this Initiative. Recent / Current Activity To develop a set of balanced GT&Cs that will address RINs. Involvement to include Non-LEAP members LEAPs Goal 16

17 © LEAP 2011 Broker Matching Broker Confirms are often the primary vehicle for trade verification Match broker trade details timely and accurately Matching Canadian activity - currently being done on derivatives, US physical products and crudes. Objectives Minimize human error; prompt detection of trade discrepancies; improve accuracy Improve Process Efficiency: Average 5 mins to process a trade, ~10% contain discrepancies Spend work time resolving discrepancies rather than checking correct trades Benefits Brokers (US and European) have been signing up at rate of 1 per month Recent / Current Activity Progress this Initiative, we are seeking additional participation and development LEAPs Goal 17

18 © LEAP 2011 eDocs (Electronic Cargo Documentation ) Industry Adoption of electronic documents to replace existing manual, multi-copy, and paper based process Reduce lost time in document generation, transport, tracking, validation, and (ultimately) invoicing Objectives Overall document accuracy, speed in cargo ownership transition and validation Reduced demurrage, reduced need for LOIs, allows for timely invoicing, trade transparency (regulatory interest here) Reduces incurred working capital costs when indemnities are required Benefits Support of several large integrated Oil Companies already exists Pilot activity is already underway. Recent / Current Activity LEAPs goal is to accelerate, expand, and automate the process Progress this Initiative: We are seeking adoption of standardized electronic documentation across the industry (oil companies, ship owners) LEAPs Goal 18

19 © LEAP 2011 NA Rail / Truck Contract - Annex Publish a Trade Annex based on the LEAP Master Agreement Work with vendors to implement electronic matching, and to encourage voluntary adoption within the Industry of these agreements Objectives Reduction of manual effort, errors, and a savings of time & costs Allows the capture of economies of scale Benefits V2.1 Pipeline Master published V2.3a Canadian Addendum published V1.0 US Marine Annex published NWE ARA Barge contract Master drafted and reviewed User Guide published Recent / Current Activity Gain better understanding of the roadblocks to adoption Leverage the knowledge gained in past NA contract work Progress adoption and the use of electronic contract matching LEAPs Goal 19

20 © LEAP 2011 NW European Barge Contract - Annex Publish a Trade Annex based on the LEAP Master Agreement Work with vendors to implement electronic matching, and to encourage voluntary adoption within the Industry of this agreement Objectives Standardization of terms Reduction of manual effort, errors, and a savings of time & costs Allows the capture of economies of scale Benefits V2.1 Pipeline Master published V2.3a Canadian Addendum published V1.0 US Marine Annex published User Guide published Recent / Current Activity Gain better understanding of the roadblocks to adoption Develop common wording acceptable to all Progress adoption and the use of electronic contract matching LEAPs Goal 20


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