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The New Oil and Gas Industry Supply Chain Code of Practice ADD TITLE AS APPROPRIATE.

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Presentation on theme: "The New Oil and Gas Industry Supply Chain Code of Practice ADD TITLE AS APPROPRIATE."— Presentation transcript:

1 The New Oil and Gas Industry Supply Chain Code of Practice ADD TITLE AS APPROPRIATE

2 Initially developed by a work group established by ILT / PILOT under the Progressing Partnership banner (PPWG) The Supply Chain CoP is one of over 10 initiatives launched by PILOT and outlines a set of best practice guidelines First adopted by the industry in 2002, signatories undertake to work towards full compliance with the Code Signatories include major purchasers (operators and principal contractors) and suppliers (providers of goods and services) The Code is endorsed by PILOT, the Industry Leadership Team and the key Trade Associations In July 2005 the PPWG SCCOP Work Group was disbanded and replaced with a new Supply Chain Steering Group which reports directly to ILT / PILOT Supply Chain Code of Practice

3 Supply Chain Steering Group (9) Supply Chain Managers Network (50+) PILOT Industry Leadership Team Major Purchasers and Suppliers Operators Supply Chain Steering Group ILT (Supplier & Operator)2 DTI1 Standard Contracts1 FPAL1 SCMN2 UKOOA / LOGIC1 Marketing / Communications1 Work Group DELIVERY SCCOP Industry Involvement Supply Chain Managers Network Operators30 Trade Associations6 Major Contractors10 Industry Groups6 SCCOP Work Group Work Group SCCOP Work Group Operators2 Major Contractors4 Industry Groups3

4 To make the UKCS the safest place to work in the worldwide oil and gas industry Production at 3bn BOE per day in 2010 UKCS capital investment sustained at £3Bn per annum Prolonged self-sufficiency in Oil & Gas Supporting up to 100,000 more jobs than there otherwise would have been by 2010 A 50% increase in oil and gas exports by 2005 £1 billion per annum additional revenue from new business The PILOT 2010 Vision

5 Supply Chain CoP Access to Infrastructur e CoP Commercial CoP Subsea Effectiveness Technology Progressive & Innovative Licensing Decommissioning UK Norway Co- operation Wells Share Initiative Stewardshi p The Fallow Process Step Change in Safety Workforce Capacity & Capability Supply Chain Efffectivenes s PILOT Initiatives

6 Increased UKCS Supply Chain competitiveness through improved efficiency and reduced waste Improve working practices, commercial behaviours and purchaser / supplier relationships Regular and detailed forecasting of activity levels. Enhance and simplify the bidding process. Prompt payment. Active two-way relationship management. Code of Practice Objectives

7 1.Commercial Stage - Forecast/Planning all activity up to the point of tender 2.Commercial Stage – Tendering all activity up to the point of contract negotiations, including elimination of bidders 3.Commercial Stage - Negotiation agreement of contract terms 4.Commercial Stage - Implementation and review through the life of the contract and at the end of the contract 5.Commercial Stage - Monitoring and Evaluation of Code 6.Implementation and Adoption of the Code The original Code comprised 6 sections … commitment received from 80+ Operators and Major Contractors Supply Chain Code of Practice

8 Code of Practice for Suppliers was developed in 2003 … commitment received from 300+ suppliers and contractors Stage 1Forecasting and Planning – To provide more effective business cycle planning. Stage 2Tendering – To reduce the cost of bidding. Stage 3Negotiations – Cut waste and reduce unnecessary paperwork. Stage 4Implementation and Review – Getting the job done right. Stage 5Monitoring and Evaluation of the Code – Assuring process is in place. Supply Chain Code of Practice

9 The Code is endorsed by: PILOT, Industry Leadership Team, Supply Chain Steering Group, Supply Chain Management Network, DTI, EIC, FPAL, IMCA, OCA, UKOOA, WSCA … it has significant sign-ups already … its a real achievement for the Industry For latest information see PILOT Website

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11 New clean and simple format Signed by CEO and Supply Chain Manager Simplified structure New features include Industry Model ITTs Fair contracting principles Value based contracting More efficient Code implementation survey Drafting party represented all industry groups PLANCONTRACTPERFORM & PAY Supply Chain Code of Practice

12 PLAN Communication of forward plans to industry Provide support for Share Fairs FPAL purchaser profiles Suppliers to make use of information provided CONTRACTPERFORM & PAY Supply Chain Code of Practice

13 PLANCONTRACTPERFORM & PAY Restricting bidders to FPAL registered companies Eliminate duplication of data by using FPAL Providing debriefs Using standard contract forms Payment in 30 days Use of industry Model ITTs Supply Chain Code of Practice

14 IADC analysis of Rig ITTs undertaken Highly fragmented approaches evident Extensive duplication of FPAL data Patchy use of standard contracts ITT quality extremely variable Tender compilation slow and expensive THE OPPORTUNITY Supply Chain Code of Practice

15 Create a standard ITT structure Simple, logical organisation Easy buy-in Standard documents for those that want to go further Aimed at ease of production A quality ITT A swift offer A trouble free evaluation THE SOLUTION Supply Chain Code of Practice

16 Guidelines on completion ITT Index Tendering instructions Technical Sections Commercial Sections Contractual Sections Supply Chain Code of Practice

17 Templates are clear, simple and pragmatic Focus is on principle not prescription Uses industry documents where they exist Nomenclature is standard Modular design gives flexibility Designed to allow substitution Supply Chain Code of Practice

18 ITTs are Easier, Faster and Cheaper to issue Bids are Easier, Faster and Cheaper to return Simplifies the contracting process Code recommendations incorporated Creates a vehicle to introduce better practices Operators can decide their own scale and pace of adoption Creates step out opportunities with Well Services, Operational and Construction ITTs Supply Chain Code of Practice

19 Model Rig ITT currently available on FPAL website, is now in use and is easy to access ……. Supply Chain Code of Practice

20 Model Rig ITT currently available on FPAL website and now in use Well Services suite of Model ITTs Marine Construction Model ITT Platform services, plant and equipment Model ITTs ITT drafting groups launching Model ITTs in 2006 Supply Chain Code of Practice

21 Easier method of surveying Code adherence Use of FPAL Type III feedback uses existing industry scheme and little additional effort Input now verified 3 additional elements CODE OF PRACTICE SURVEY METHOD Supply Chain Code of Practice

22 Include performance Indicators in all significant contracts Provide and receive FPAL performance feedback via Type 1 and Type 3 mechanisms PLANCONTRACTPERFORM & PAY Supply Chain Code of Practice

23 Submit complete and valid invoices Pay all valid invoices within 30 days Adopt a prompt payment policy for own suppliers PLANCONTRACTPERFORM & PAY Supply Chain Code of Practice

24 Why does the Code of Practice matter to Contractors? WSCA 2005 Report Revenue increasing The Industry still cannot afford non-value adding costs in Supply Chain Management processes Profitability decreasing PLANCONTRACTPERFORM & PAY Supply Chain Code of Practice

25 …… work on sign-ups continuesCode covers in excess of 80% of UKCS expenditure (on an operated reserve basis) Supply Chain Code of Practice


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