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Investor presentationSharjah 2008
Investor TripNovember 2008
Day 2 Engineering & Construction
Introduction
Objectives of investor presentation
– communicate our vision and strategy
– communicate the extent of our service capabilities and our market opportunities
– communicate how we are building a platform for sustainable growth
– provide an opportunity to meet senior management of our Engineering & Construction and Operations Services divisions
Vision & values
Our vision is for Petrofac to become the global oil & gas industry’s premier facilities and infrastructure provider, admired by customers and employees for consistently delivering and rewarding excellence
Achieving this demands that we:
– work to world-class standards
– focus always on customer satisfaction
– respect the environment and sensitive to the communities in which we work
– promote and reward on merit
United by shared values - safe, ethical, innovative, cost-conscious, responsive to customers and focus relentlessly on delivering results
Petrofac today
Petrofac is a successful business that has enjoyed tremendous growth
– doubling of our employee headcount in three years
– significant increase in our operational capability through organic development and acquisition
– strong year-on-year growth in our financial performance
Whilst current conditions create uncertainty, industry fundamentals remain compelling and support long-term growth in demand for our services
Petrofac is well placed:
– focused on geographies with lower capital costs/conventional developments
– significant exposure to National Oil Companies, who may be better able to meet short-term challenges
– strong balance sheet and well-funded
– low operational gearing and cost-effective capability
Industry fundamentals: demand, positive trend
OECD and non-OECD oil demand, 1960-2005
Total World Demand OECD Non OECD
0
10
20
30
40
50
60
70
80
90
1962 1967 1972 1977 1982 1987 1992 1997 2002 2007E
Dem
and
(mbb
ls/d
)
Recessions:4Q'69-1Q'703Q'74-1Q'752Q'80-3Q'801Q'81-2Q'814Q'90-1Q'911Q'01-3Q'01
Source: IEA
Global demand for oil followed positive trend throughout successive recessions
Industry fundamentals: demand led by China, India, ME
105405,200Europe
11,1301,000India
21,3202,600China
121902,200Middle East
151,19017,300OECD
204509,100North America
Oil Consumption Per Capita (bbls)
Population (millions)
2006 Oil Demand (mbbls/year)
Disparity in consumption per capita expected to decreaseTo overtake OECD in terms of total demand for oil, India and China combined need only consume at the rate of 7 bbls per capita, which is less than half of the OECD level
Disparity in consumption per capita expected to decreaseTo overtake OECD in terms of total demand for oil, India and China combined need only consume at the rate of 7 bbls per capita, which is less than half of the OECD level
Source: based on IEA data, World Energy Outlook 2008
Oil consumption per capita in China and India is currently less than 15% of the average level in OECD states
— this disparity is clearly not sustainable
Domestic demand for oil & gas in Middle East also driving growth
Source: Energy Information Administration, 2008
Recent sharp decline in oil price and uncertainty over near term levels has led to general expectation that some marginal projects will be deferred
Industry’s current investment plans in oil sands, challenging deep water and potentially North Sea may be uneconomic in current environment
However, Petrofac’s Engineering & Construction division focused on lower cost markets
0
20
40
60
80
100
120
0 10 20 30 40 50 60 70 80 90 100
Hydrocarbon liquids-millions of barrels per day
16%
RO
CE W
TI p
rice
$ p
er b
oe
Major oils today
Traditional reinvestment (Deep Water & some oil sands)
Persian Gulf OPEC
Unconventional reinvestment(w ith subsidies)
Marginal cost of supply- less efficient oil sands
Oil price-cost curve schematicSource: Credit Suisse research, 2008, arrow, oval and italicised text added
Industry fundamentals: supply/cost curve
Gulf OPEC
Curve likely to move to left as mature fields deplete
Core Petrofac markets
Souce: Norwegian Petroleum Directorate
0
500
1,000
1,500
2,000
2,500
3,000
1967-1971
1972-1976
1977-1981
1982-1986
1987-1991
1997-2001
2002-2006
Discoveries <5 mm Sm3
Discoveries 5-10 mm Sm3
Discoveries 10-15 mm Sm3
Discoveries 50-100 mm Sm3
Discoveries >100 mm Sm3
1992-1996
Million standard m3 oil equivalent (mm Sm3)
Industry fundamentals: supply, easy oil discovered
Industry fundamentals: substantial capex spend required
To satisfy world hydrocarbon demand by 2030 the industry will need to boost reservoir recovery rates, find significant new reserves and invest approximately US$10 trillion
2008 2030
0
20
40
60
80
100
120
Oil
Prod
uctio
n &
Dem
and
(mbb
ls/d
)
Existing Production New Production
Existing production base declining at around 8% per yearExisting production base declining at around 8% per year
Demand expected to grow 1.6% per yearDemand expected to grow 1.6% per year
By 2030, new production capacity of more than 70% of the existing base will be required to meet demand
By 2030, new production capacity of more than 70% of the existing base will be required to meet demand
Source: based on IEA data, World Outlook 2008
Our 2009 reorganisation
Maroun Semaan
Engineering services (W
oking and lower cost
engineering centres)
Offshore Engineering
& O
perations (Facilities M
anagement, Brow
nfield)
Training
Production Solutions (SPD
, Caltec, Eclipse, Dubai)
New
ventures (M
ubadala, Saudi Arabia, IKPT etc)
Sharjah-based
Lump-sum EPC
Energy Developm
ents
Amjad Bseisu
Our 2009 reorganisation
Principal benefits of new reorganisation structure are:
– deliver revenue synergies through greater integration and deployment of multiple services to customers and projects
– deliver differentiated returns through innovative commercial structures that provide for an appropriate share of risk and reward
– deliver consistently through common systems and processes that are both scalable and sustainable
– share knowledge and best practices across the group, avoiding duplication of effort and costs
Our growth, Engineering & Construction
Previous investor trip to United Arab Emirates in November 2006
Engineering & Construction division has grown significantly since that time
Key awards during the year included Kashagan third oil train, Ebla gas plant, Jihar gas plant, KOC gas pipeline
2,116*
1,081
2006 2008
Revenue (US$m)40% CAGR
* Analysts’ consensus estimate for 2008
4,800**
2,700
2006 2008
Headcount33% CAGR
** At October 2008
Our growth, Engineering & Construction
Division now capable of undertaking much larger scale contracts
Strong growth in headcount and revenue, and even stronger growth in net profit
Engineering & Construction remains leveraged to the strong fundamentals of the oil & gas industry
201*
95
2006 2008
Net profit (US$m)46% CAGR
* Analysts’ consensus estimate for 2008
9.5%*8.8%
2006 2008
Net margin
Our growth, Engineering & Construction, personnel
Current employee strength ~ 5,0002008Sharjah 1,771 37%Sites 1,518 31%Mumbai 521 11%Woking 556 11%Chennai 433 9%Moscow 40 1%
(rounded) 4,800
By location
2008Engineering 2,027 42%Construction 2,079 43%Procurement 204 4%Support & others 529 11%
(rounded) 4,800
By class
Manpower Growth
2600
4000
4800
2006 2007 2008
Our growth, Engineering & Construction, personnel
Recruited approximately 1,000 personnel in 2008
Brand reputation and awareness in universities and market place
Employee referral programme implemented
Organisation and Development team fully established focused on competency and career development/progression and succession planning
Identified backup for most key positions
Robust graduate development, 2 year structured programme, leading to “graduation”
E-learning programme being rolled out
Best in class employer, compensation and benefits programme being continually improved
Annualised attrition rate reduced to < 9%
Our growth, Engineering & Construction, infrastructure
Infrastructure – major IT projects
Unified global computer network and e-mail infrastructure under one umbrella (Petrofac.com)
Group wide enterprise business software solution (Oracle ERP)
Business continuity plan, IT disaster recovery
Our growth, the way forward
Consolidate position in current core markets
– Maintain cost competitiveness
– Maintain relations with customers, subcontractors and service providers
Well focused push into:
– Abu Dhabi and Saudi Arabia for EPC opportunities
– LNG
– Offshore engineering and construction
Opportunistic approach to new markets eg. Nigeria, Libya, Iraq
Continued investment in human talent
Future growth drivers and initiatives
Future growth drivers and initiatives
Overview
In spite of global economic events, outlook is optimistic
International oil companies and national oil companies remain focused on investment although a slowing down in some areas (downstream)
Core markets – Middle East and Africa remain strong
Human capital less of a challenge
Future growth drivers and initiatives
Strategies for growth and risk management
Geography - diversification by region
– portfolio of risk: security, political/legal, economic
– five/six core country markets with numerous opportunistic countries
– local presence continues to be a strong differentiator
Customers and product diversification
– diverse: international oil companies, national oil companies and smaller independent operators
Well established and transparent execution model
– FEED / EPC / Operations & Maintenance / Training
Added value, cost and delivery optimisation from synergies across the total business offering, Engineering & Construction, Operations Services, Energy Developments
Future growth drivers and initiatives
Geographic diversification, sales and development focus
Middle East
– Qatar, Saudi Arabia, Kuwait, Oman, UAE
– Iraq (medium term)
– Iran (medium to long term)
Africa
– Algeria, Egypt, Tunisia, Nigeria, Libya
CIS
– Kazakhstan, Turkmenistan, Russia
Future growth drivers and initiatives
Geographic diversification
Objective is to maintain a balanced portfolio by target region
– 2005 Middle East order intake
– 2006 Africa and CIS order intake
– 2007 Africa and CIS order intake
– 2008 Middle East order intake
– 2009 Middle East and Africa
Increased participation in long term initiatives and partnerships
– Petrofac / IKPT (partnership), LNG projects
– Petrofac Emirates (partnership)
– Petrofac Saudi Arabia
Future growth drivers and initiatives
Customer and product diversification
Focus on strong relationships with international oil companies and national oil companies
Mitigate cyclical industry trends by
– LNG, refinery, petrochemical
– balance services over offshore/onshore
Ability to offer differentiated commercial models
Ability to build cost effectively on existing expertise eg. sour gas
Utilities and offsites experience – transcends oil & gas, refinery and petrochemicals
Future growth drivers and initiatives
Customer and product diversification
LNG / GTL
Selective technology positions
– alliances, joint ventures with specialist contractors
Build on local presence
– UAE
– Oman
– Algeria
– Qatar
– Kuwait
– Kazakhstan
Future growth drivers and initiatives
Competition
With the Tier 1 contractors, limited peer competition, increasing Korean competition
Development of differentiated position
– through execution model, services to EPC, operations and training
– through reliability and delivery leading to repeat business, negotiated awards and word of mouth recommendations thereby introducing new customers
– value associated with strong brand
– competitive cost structure
Future growth drivers and initiatives
Petrofac Emirates - new venture in the UAE
Joint venture between Petrofac and Mubadala
Scope of work, EPC in UAE and where Mubadala has participating interest
Major short-term bidding activity
– ADCO, SAS, BAB Compression
– ADGAS, Das Island
– GASCO, Habshan utilities and offsites
Short-medium term
– ADCO, 1.8 expansion
– Conoco Phillips, Shah development, multiple EPC contracts
– Takreer refinery
Future growth drivers and initiatives
Saudi Arabia
Actively bidding for projects eg. Karan utilities & offsites, Yanbu export refinery
Excellent visibility of opportunities 2009-2012 in core oil & gas, refinery and petrochemical
Local legal entity established – essential for in-country execution
Targeted growth plan to establish Petrofac as a major player in the Saudi market
Strong relationships and positioning with key subcontractors
Future growth drivers and initiatives
LNG
Prequalified for Shell LNG projects worldwide, US$5-10 billion greenfield
Bid for world class LNG project, albeit unsuccessful (Algeria)
Currently bidding for other LNG opportunities
Good visibility of short/medium-term prospects
Pursuing strategic alliances with other major LNG contractors
Focused recruitment programme ongoing
Future growth drivers and initiatives
The outlook
Target markets, outlook remains positive
Good visibility of 2009, 2010 prospects for EPC
Acquisitions on a selective basis
Securing and retention of resources is a primary focus
Risk management
Risk management
Risk management
processes
Risk management
processesCorporate support
and guidance
Contract/project risk management
and execution management
Executive risk
management strategy
Risk management strategy
Executive risk management strategy
Focus on areas of principal expertise, lump sum EPC and engineering services
Mitigation through a broad portfolio, countries and services
Strong management control and accountability
Heavy investment in proposal management and project controls
Focus on strengthening risk monitoring and assurance processes
Business continuity planning
Risk management approach
Corporate support and guidelines
Measurement and monitoring of corporate risk exposures, banks, countries, contracts, commodities, and other counter-party risk (vendors, subcontractors) etc
Use of guidelines to establish limits and parameters for risk taking
Common processes for reviewing and assessing corporate risk in new business
Contract risk in Engineering & Construction
CUSTOMER RISKS
PARTNER RISKS
VENDOR/SUPPLIER RISKSSUBCONTRACTOR RISKS
Contracts
Purchase orders
Join venture/Consortium agreement
Subcontracts
COUNTRY RISKS
PETROFAC
Petrofac’s contractual risk policy
Petrofac seeks balanced contractual risk allocation with customers, partners and subcontractors to:
– avoid disproportionate potential liabilities
– eliminate/minimise potential liabilities outside Petrofac control
– allow an equitable allocation of risks amongst parties involved
– contractual risks control and mitigation by party in best position to manage
– promote smooth contractual relationship among involved parties
Contract risk, prequalification cycle
Prequalification phase
Prequalification documents submission
Prequalification documents submission
Prospect identification
Prospect identification
High level execution strategy
High level execution strategy
Assessment of customer risk &
country risk
Assessment of customer risk &
country risk
Assessment & decision to pre-qualify
Assessment & decision to pre-qualify
Choose partnersChoose partners
Contract risk, proposal cycle
Bid/no bid decision phase Review and submission phase
Tender information
sheet distributed
Tender information
sheet distributed
Proposal submission
Proposal submissionBid/no bid
decision
Bid/no bid decision
Proposal preparation phase
Review ITT and key contract
terms
Review ITT and key contract
termsRevisions based on
DRRC, RRC and board directives
Revisions based on DRRC, RRC and board
directivesCheck for
deal-breakers
Check for deal-breakers
Receive ITB
Receive ITB
Technical and commercial
review
Technical and commercial
review
Identify and issue ITBs to vendors & subcontractors
Identify and issue ITBs to vendors & subcontractors
Decision to bid
Decision to bid
Detailed review ITT and key
contract terms
Detailed review ITT and key
contract terms
Divisional risk review committee
(DRRC) Review
Divisional risk review committee
(DRRC) Review
Proposal ready for review
Proposal ready for review
Risk review committee
(RRC) Review
Risk review committee
(RRC) Review
Board approvalBoard approval
Identification of risks & mitigation measures for
presentation to DRRC/RRC/board
Identification of risks & mitigation measures for
presentation to DRRC/RRC/board
Obtaining vendor & subcontractor
Prices
Obtaining vendor & subcontractor
Prices
1 week1st price review
2nd price review
2 - 3 weeks 1 week
Major contractual terms in EPC contracts
Rely upon information
Financial provisions and securities (payment terms, bank guarantees, etc)
Liquidated damages for delay & failure to achieve performance guarantees
Change in law
Maximum aggregate liability of contractor under the contract
Consequential losses/damages
Liabilities, indemnities and insurance
Warranty obligations
Suspension/termination
Force majeure
Contract risk, project cycle
EPC phase Warranty phase
Provisional acceptance
Provisional acceptance
Commencement of EPC contract
Commencement of EPC contract
Warranty period
Final acceptance
Final acceptance
Mechanical completion
Mechanical completion
Commissioning phase
EngineeringEngineering By Petrofac/
customer with support
from vendors
& subcontractors
By Petrofac/
customer with support
from vendors
& subcontractors
Vendors & subcontractors to
meet their
warranty obligations
Vendors & subcontractors to
meet their
warranty obligations
Construction through
subcontractor(s)
Construction through
subcontractor(s)
Subcontractor to achieve
mechanical completion
Subcontractor to achieve
mechanical completion
Procurement
through vendors
Procurement
through vendors
Vendors to meet required
performance guarantee
for their equipment
Vendors to meet required
performance guarantee
for their equipment
CONTRACT RISKS
ProgressFinal acceptance
certificate
Effective Date
Provisional Acceptance Certificate
100%
0% 100%Mechanical completion RFSU
Assess and allow for proposal (perform
ance Tests, rely upon info etc)
Take up with vendors and subcontractors
Identify & align vendors w
ho can meet
requirements
Correct design/ performance test
procedures/ completions checklist
Vendor representatives at site
‘Back to back’vendor
guarantees
Mitigation measures
Proposal phase Execution phase Warranty phaseM
ake
good
Mak
e go
od
Pay
LDs
Pay
LDs
Contract risk, profile
Subcontracts, risk management
PETROFAC
CONSTRUCTION SUBCONTRACTORS
CONSTRUCTION SUBCONTRACTORS
MATERIAL VENDORS/SUPPLIERS
MATERIAL VENDORS/SUPPLIERS
Back-to-back basis with the EPC contract conditions (obligations, payment terms, bonds, liquidated damages, warranty etc)
Back-to-back basis with the EPC contract conditions (obligations, payment terms, bonds, liquidated damages, warranty etc)
a) Pass-through obligations
b) Warranty on a back-to-back basis with the EPC contract
c) Compliance with main contract requirement
a) Pass-through obligations
b) Warranty on a back-to-back basis with the EPC contract
c) Compliance with main contract requirement
Contract risk, large scale projects strategy (1)
CUSTOMER
Joint venture Petrofac – JV Partner
Joint venture Petrofac – JV Partner
PETROFAC JV PARTNER
EngineeringEngineering
Responsible for performance of its work scope
Responsible for performance of its work scope
Responsible for performance of its work scope
Responsible for performance of its work scope
Commercial risks
Schedule risks
Technical risks
Commercial risks
Schedule risks
Technical risks
Commercial risks
Schedule risks
Technical risks
Commercial risks
Schedule risks
Technical risks
Joint & several liability towards customer
Sharing of risks
ProcurementProcurement ConstructionConstruction EngineeringEngineering ProcurementProcurement ConstructionConstruction
E, P & C Scope E, P & C Scope
CUSTOMER
Joint venture
Petrofac – Partner 1 – Partner 2
Joint venture
Petrofac – Partner 1 – Partner 2
PETROFAC PARTNER 1
EngineeringEngineering
Responsible for performance of its work scope
Responsible for performance of its work scope
Responsible for performance of its work scope
Responsible for performance of its work scope
Commercial risks
Schedule risks
Technical risks
Commercial risks
Schedule risks
Technical risks
Commercial risks
Schedule risks
Technical risks
Commercial risks
Schedule risks
Technical risks
Joint & several liability towards customer
Sharing of risks
ProcurementProcurement EngineeringEngineering ProcurementProcurement
PARTNER 2
Responsible for performance of its work scope
Responsible for performance of its work scope
Commercial risks
Schedule risks
Technical risks
Commercial risks
Schedule risks
Technical risks
ConstructionConstruction
Contract risk, large scale projects strategy (2)
Subcontractor risk management
Warranty phase
Commissioning phaseEPC phase
Provisional acceptance
Provisional acceptanceCommencement of
EPC contract
Commencement of EPC contract
Warranty period
Final acceptance
Final acceptanceMechanical
completion
Mechanical completion
Late
mobilisation
Late
mobilisation
Lack of
resources
Lack of
resources
Defective
workmanship
Defective
workmanship
Delay in
progress
Delay in
progress
Non-achievement of
mechanical completion
Non-achievement of
mechanical completion
Incentive
schemes to
subcontractor
Incentive
schemes to
subcontractor
Take out scope of work
and assign to other
subcontractor(s)
Take out scope of work
and assign to other
subcontractor(s)
Additional
resources
by Petrofac
Additional
resources
by Petrofac
Project sponsor, steering committee and executive management:
monitoring and intervention
Project sponsor, steering committee and executive management:
monitoring and intervention
Petrofac control of
subcontractor resources &
lower-tier subcontractor
Petrofac control of
subcontractor resources &
lower-tier subcontractor
Petrofac
construction management
Petrofac
construction managementDirect intervention
by Petrofac
Direct intervention
by PetrofacAcceleration & recovery
measures by subcontractor(s)
Acceleration & recovery
measures by subcontractor(s)
SUBCONTRACTOR RISKS
MITIGATION MEASURES
Warranty period
Vendor/supplier risk management
Commissioning phaseOrder execution phase
Provisional acceptance
Provisional acceptancePlacement of
purchase order
Placement of
purchase order
Mechanical completion
Mechanical completion
VEN
DO
R
RISK
S
VEN
DO
R
RISK
SM
ITIG
ATI
ON
MEA
SURE
SM
ITIG
ATI
ON
MEA
SURE
S
Order of
raw materials/
sub-components
Order of
raw materials/
sub-components
Lack of
resources
Lack of
resources
Defective
workmanship
or material
Defective
workmanship
or material
Delay in
fabrication
Delay in
fabrication
Failure during
factory
acceptance
Failure during
factory
acceptance
Incentive
schemes to
sub-vendors
Incentive
schemes to
sub-vendors
Take out partial scope of work
and assign to other sub-vendors
Take out partial scope of work
and assign to other sub-vendors
Additional
resources
by Petrofac
Additional
resources
by Petrofac
Project sponsor and executive management: monitoring and interventionProject sponsor and executive management: monitoring and intervention
Shop load
status
Shop load
status
Placement
of resident
inspectors
Placement
of resident
inspectors
Outsourcing
test bench
facilities
Outsourcing
test bench
facilities
Lack of capable
site engineers
Lack of capable
site engineers
Slow response in
addressing warranty
issues
Slow response in
addressing warranty
issues
Use of high level pressure
from vendor management
Use of high level pressure
from vendor management
Warranty phase
Air freight/
charter flights
Air freight/
charter flights
Acceleration &
recovery measure
by vendor
Acceleration &
recovery measure
by vendor
Step-up
expediting
efforts
Step-up
expediting
efforts
Final acceptance
Final acceptance
Identification of critical contract
risks and mitigation measures
Careful selection of partners,
subcontractor and vendors
Identification of critical contract
risks and mitigation measures
Careful selection of partners,
subcontractor and vendors
The project cycle
Negotiations with customer to ensure fair and equitable contract
Negotiations with partners,
subcontractors and vendors to ensure a fair
and equitable contractual relationship
Negotiations with customer to ensure fair and equitable contract
Negotiations with partners,
subcontractors and vendors to ensure a fair
and equitable contractual relationship
Ensure strong support &
coordination from partners,
subcontractors and vendors for a goal-
driven unified-approach
Ensure strong support &
coordination from partners,
subcontractors and vendors for a goal-
driven unified-approach
PROPOSAL STAGE AWARD STAGE EXECUTION STAGE
Sound contractual policyDirect intervention by senior managementRegular reporting and reviews
Sound contractual policyDirect intervention by senior managementRegular reporting and reviews
Execution management
Execution management
Phases of a project
Basic components of each phase
Common drivers
Execution management, project phases
Bidding and proposals
Contract realisation
Custody handover
Warranty period
Bid start
Contract award COMM
complete
Performance test
complete
End of liabilities
Execution management, proposal & bidding
Customer
•Vendors
•Subcontractors
•Specialist services
•Technology/licensors
•Vendors
•Subcontractors
•Specialist services
•Technology/licensors
Proposal
Commercial
Technical
Contractual
Execution management, proposal approach
Proposals are the cornerstone of good execution
Manage the proposal as a project
Mobilise the task force for the proposal
Understand, analyse, dissect technical, contractual and commercial requirements
Engage with customer, in clarification
Identify third party involvement and engage them
Develop a good understanding of how the project will be executed
Execution management, proposal approach
Technical
Prepare and submit technical proposal including clear representation of your understanding of requirements
Prepare preliminary execution plans for the realisation phase including organisation, schedule, specifications and data sheets and basis of bid
Detailed review of vendors and sub-contractors submission and engaging them in clarification process - zero on the critical
Prepare technical document register, procurement register, schedule
Align offers of vendors, subcontractors and third parties to the contract requirements where possible
Prepare risk matrix and proposed mitigations, including proposed actions to deal with non transferable risks or liabilities
Execution management, proposal approach
Engineering
Verification and endorsement of the FEED – meets performance guarantees, material deliveries, alternatives, etc
Development of the FEED at the bid stage, as required, to support the detailed estimate, provide early start for all disciplines
Third party verification: for specialist technology domains
Introduction of specialist subcontractors/partners to add value to the bid and execution
Execution management, proposal approach
Contractual
Prepare detailed list of contractual obligation and liabilities - assess criticality/ acceptability and risk associated with each submission
Prepare detailed clarifications and qualifications and engage the customer
Quantify cost where it is possible and prepare alternative proposals
Include clear basis of the proposal in the bid and include alternatives
Support in selection of subcontractors and finalise all contractual commercial issues related to major subcontractors and vendors
Review and analyse cash flow and propose alternative
Prepare risk matrix
Execution management, proposal approach
Commercial proposal
Zero pricing principle (no rules of thumb, no estimation curves)
Issue enquiries and obtain quotations
Engage critical vendors in clarification and negotiations
Evaluate data obtained against in-house recent data from projects
Engage subcontractors and issue BOQ, for obtaining prices
Compare obtained quotes to in-house performed estimates
Review cycles for BOM, BOQ and prices
Comparison to historical data
Execution management, project realisation
Engineering
Project services
HSSE
QA/QC
Project controls
Commissioning
Construction
Procurement
Project management
Execution management, project realisation
Project management principles
Risk - early identification of risks and plans for mitigation
HSSE - safe execution saves time and money
Quality - the most cost effective scenario is do it right first time
Customer satisfaction - create win-win relation with the customer
Budget - set budget, control, report and improve
Target driven schedule – plan, identify risk, be flexible and responsive
Management of interfaces - early recognition of problems means early solutions
Commissioning and construction are the aim of the engineering and procurement
Execution management, project realisation
Project management approach
Task force, with full in-house capability and competence
QA and HSSE are an integral part of the project activities
Construction/commissioning driven schedule
Target driven schedules and plans
Decision making process based on technical and optimum cost solutions
Early procurement of critical material
Bulk orders in phases to meet site requirements
Continuous cost monitoring, reporting and control
Execution management, quality assurance & control
Quality management principles
Customer focused organisation
Leadership and standard setting
Involvement of right resources
Process approach (plan, do, check, act)
Continual improvement
Best practices, lessons learned
Factual approach to decision making
Mutually beneficial supplier relationships
Embedded within execution, not treated as a “bolt-on”
Execution management, HSSE
Management commitment to highest health, safety, security and environment standards
Risk based inherently safe approach
Exhaustive in-house HSSE technical capability for all project phases
Integration of home office and site HSSE organisations
Execution management, HSSE
Construction HSSE programmes including:
– emergency response procedures
– crisis management
– training
– security
– medical resources
Proven capability of world class HSSE performance on projects with
– extreme environments
– low competency manpower
– brownfield operations
– sour gas presence
Execution management, HSSE
Principles/approach
Identify project specifics and risk areas – early and remain focused
Develop programmes and specific plans
Set targets and KPIs across all levels of project staff
Develop plans, monitor, report and improve
Visible leadership
Ensure execution plans embody safety
Ensure method statements and risk assessments cover requirements to execute safely
All team members are responsible for safety
Constructability reviews early and include safety aspects
Execution management, engineering
Full in-house capability and control
Cover all aspects from studies to detailed engineering - Woking, Sharjah, Mumbai, Chennai & Indonesia
High value operation centres (Mumbai, Chennai and Indonesia)
Integrated data centric approach
In-built quality assurance process
Mature procedures and method statements
Schedule tailored to meet construction needs
Established material management system
Feedback through field engineering
Execution management, procurement
Integrated within project task force – buying, inspection and expediting
Worldwide capability - Europe, US, Middle East offices
Terms and conditions that cater for all potential risks and liabilities
Deep understanding of our market/vendors
Use of customer vendor lists
Integrated material management system
Early identification of misalignment and development of contingency plans
Win-win partnership approach with vendors
Execution management, construction and completions
Principles
Construction is generally sub-contracted
Early engagement of construction partner - bidding
Ensure relationship is governed by an equitable contract, that is almost ‘back to back’ with the main contract
Develop a complementary win-win relationship and deal with problems promptly
Mobilise supervision early in the project
Establishment of robust preservation and maintenance team
Integrate with commissioning plans
Execution management, construction
Construction approach
Experienced, hands-on construction management team
– supervision, planning, quality, HSSE, material management
– proper training and exposure
Construction partner (local)
– local materials, logistics, customs clearance, construction resources
– local authorities and regulations
– equitable win-win relation
– identify weakness and bottlenecks through open and frank relations
– minimal reference to contract by creating alignment
– more than one subcontractor per discipline
Execution management, completions
Completion principles
Use in-house resources
Mobilise early enough to involve them in the formal reviews
Input to engineering equipment, model reviews
Input to quality plans of vendors
Early definition of commissioning handover systems/schedule
Identification and alignment with customer start-up/early operations requirement
Include vendor requirements in the purchase inquiries
Identification of specialist equipment and tools early on
Mobilise to site early enough to act as customer for construction
Execution management, warranty
Obtain back-to-back warranties
Plan warranty period activities
Allow provisions
– in-house resources
– third party costs (involve vendors)
– materials
Assign warranty coordinator (continuity)
Responsiveness and problem solving
Develop relations with the plant custodians
Current projects
Current Sharjah projects
Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10
Facilities upgrade, Kuwait
In Salah gas compression, Algeria
Harweel, Oman
Hasdrubal, Tunisia
Salam gas plant, Egypt
Ebla gas plant, Syria
Jihar gas plant, Syria
KOC 40” feed pipeline
Kashagan Train 3
Kashagan constructionmanagement
KOC facilities upgrade
KOC facilities upgrade
Customer Kuwait Oil Company (KOC)
Project type Multi location Brownfield - EPCC- LSTK
Scope Oil processing capacity increase and relocation of all underground hydrocarbon service piping to above ground at sevengathering centres & two booster stations
Award May 2005
Schedule (revised) Progressive - 43 months for last station (GC3)
Value Approx $800 million
KOC facilities upgradeProject description
Project covers seven oil gathering centres (GCs’) and two gas booster stations (BSs’)
Section-I
Crude oil processing capacity increase by addition of HP/LP separators, hydro cyclones (de-oiler) in six GC’s and desalter trains in five GCs’. Capacity increase by about 250,000 barrels/day
New condensate recovery units (compressor systems) for associated gas in three GCs’
Upgrade of all control and shut down systems in six GCs’, and partial upgrade in the rest
Section-II
Relocation of all underground hydrocarbon piping to above ground in all seven GCs’ and two BSs’
KOC facilities upgrade
Engineering from Sharjah
All procurement from Sharjah
Construction through single CMEI local subcontractor Kharafi National
Consistency check and change management across various stations maintained through project engineering management & discipline leads
Sequential shut down, tie-in and re-commissioning of all GC’s and BS’s
Sequential commissioning of new facilities in six GC’s
Harweel field development
Harweel field development
Customer Petroleum Development Oman (PDO)
Project description Harweel field development, enhanced oil recovery (EOR) project
Project type Oil & gas production/treatment
Grass roots/tie-ins
Scope Engineering, procurement, construction,
pre-commissioning, training
Award December 2005
Schedule 34 Months (original)
Ebla gas project surface facilities
Ebla gas project surface facilities
Customer Petro-Canada Palmyra BV
Project Ebla gas project surface facilities
Location Palmyra, Syria
Scope Engineering, procurement, construction,
commissioning and start-up
Commenced March 2008
Completion April 2010
Contract value US$477 MM
Ebla gas project surface facilities
Overview
The scope comprises engineering, procurement, construction, commissioning and start-up of:
– gas treatment plant producing 80 MMSCFD of sales gas
– gas gathering station
– flow lines and pipelines, connecting well sites and gas gathering stations with the gas treatment plant
– gas treatment plant consists of, gas dehydration unit, gas separation using turbo-expander/low temperature separator process, LPG recovery unit, LPG storage facilities and loading facilities, condensate stabilisation and storage
– associated offsites and utilities
Hasdrubal gas plant
Hasdrubal gas plant
Customer BG Tunisia/ETAP
Contractor Petrofac E&C
Project type Gas processing / LPG & Condensate Export
Location Hasdrubal, Tunisia
Scope Engineering, procurement, construction and commissioning
Award November 2006
Schedule Ready for hydrocarbon introduction, 29 months
Contract value US$460 MM
Hasdrubal gas plant, plant capacity
Input 120 MMSCFD of raw gas and gas condensate/oil
Product 15,000 BPD of stabilised condensate and oil
400 TPD butane and propane
98.6 MMSCFD of lean gas
Khalda gas processing plant
Khalda gas processing plant
Customer Khalda Petroleum Company
Project type Gas production/treatment/grass roots
Scope Salam gas trains 3 &4 (SGT 3/4)
Engineering, procurement, construction, commissioning and initial operations
Award October 2006
Schedule 25 months (original)
Value Approx $400 million
Khalda gas processing plant
Key features
Fast-track project, 25 months from award to gas in
Full PDMS plant modelling
Adjacent to existing operating facilities (SGT-1 & 2)
– construction safety
– SIMOPS / (O&M)
High pressure (separation) – 110 bar
Tie-ins from SGT-3 & 4 to existing plant – completed within plant shutdown schedule
In Salah gas compression
In Salah gas compression
Customer ISG (joint venture), Sonatrach 35%, BP 33%, Statoil, 32%
Contractor Petrofac E&C
Project type Compression project
Location Three sites, Teg, Reg & Krechba
600 km from Hassi Messaoud, Algeria
Scope Engineering, procurement, construction,
utilities commissioning, process commissioning assistance,
operations support and training
Award October 2007
Durations 25 months Teg, 26 months Reg, 35.5 months Krechba
Value $600M
In Salah gas compression
Reg and Teg
Addition of further field separation and cooling
Two parallel trains of gas turbine driven compression
Associated utilities, air compressor package, nitrogen package, HP flare system, 3.8MW GTUG)
Krechba
Addition of further field separation and cooling
Single train of VSD electric motor driven compression
Power requirements will be met by the addition of a third RB211 gas turbine generator
Engineering services
Engineering services
Successful delivery of
– consultancy
– FEEDs
– detailed engineering
– PMC/EPCM
A differentiated offering to Engineering Services customers based on Petrofac’s unique combination of LSTK EPC, operations management, training and asset management capabilities
Engineering Services, structure
>500 personnel
Consultancy
FEED
Detailed design
PMC/EPCM
Woking Mumbai Chennai
>500 personnel
Detailed engineering support to Sharjah
>400 personnel
Detailed engineering support to Sharjah, Wokingand Aberdeen
Engineering services, Woking
Currently occupying four office locations, allowing capacity for >800 personnel
Extend offering for engineering and project management services in other geographic regions such as Middle East, North Africa, West Africa, and CIS
Continued expansion into higher volume market areas eg. LNG, refinery
Continue to improve competitive position by maximising use of resources from lower cost centres
Engineering services, current project, Karachaganak
Project Karachaganak Phase III FEED, Kazakhstan
Customer KPDL
Duration October 2006 – December 2008
Scope Front end engineering design (FEED)
FEED for the construction of new facilities for the Phase III expansion project of the Karachaganak field. Particular challenges included location, transport and installation strategies taking into account the remote location and harsh, sour gas environment.
The largest FEED contract to date executed by Woking office - 1.1million hours over 2 years.
Engineering services, current project, Kharyaga
Project Kharyaga Phase III project
Customer Total E&P Russia
Duration December 2007 – December 2008
Scope Front end engineering design (FEED)
Basic Design (TEO-C)
The Phase III development will ensure the facilities maintain oil production at the present rate and provide de-mercaptinisation of the crude oil and gas sweetening and dew pointing to achieve the sales gas specification and remove the requirement for flaring. Execution of the project is across Woking, Chennai, Samara and Moscow.
Petrofac also executed the EPC contract for Phase II between 2000-2003 which increased oil production to 30,000 BOPD.
Engineering services, Mumbai and Chennai
Supports delivery of proposal and project work for Sharjah, Woking and Aberdeen
Centre of excellence for detailed engineering and 3D modelling
Operates with the same business management system as Sharjah andWoking – certified to ISO 9001
Strong resource bases with plans for continued growth
Offshore engineering
Offshore engineering, introduction
Enhanced service line offering for 2009
Market research and customer surveys indicate Petrofac can readily build on excellent E&C reputation to participate in $10billion pa offshore capex market
Based in Woking - synergies and resource share with existing E&C engineering
Currently recruiting additional specialist and offshore project management leaders from industry
Build on Petrofac’s brownfield, offshore operations and Energy Developments’ offshore projects experience
Offshore engineering, strategy
Leading offshore engineering team in Woking will be grown and supported by E&C engineering, offshore operations and brownfield engineering.
More intensive business development and marketing programme Q1 2009
Pursue reimbursable FEED engineering projects
Build capability and competence from Energy Developments and external IOC projects
Reimbursable low risk
Higher risk/reward
Concept/FEED EngineeringDetailed design
Programme managementCapital lump sum projects
Offshore engineering, strategy
We will consider cost effective strategic acquisition opportunities to accelerate growth and build competency/specialist expertise
Utilise Petrofac lower cost engineering centres
EPC projects effectively lead to additional negotiated business opportunities for Petrofac functions; commissioning, operations,maintenance and brownfield engineering plus training
Utilise E&C cost effective processes and existing full service capability
Market differentiation is our ability to optimise projects using our in-house offshore operations experience and access to E&C cost effective engineering and procurement systems as well as leveraging marketrelations
Offshore engineering, market
Focus is on international oil and gas companies and national oil companies
Major offshore projects
– brownfield (field development)
– greenfield (new build/conversion)
– abandonment/decommissioning
Specific regions
– North Sea
– Middle East
– South East Asia
– West Africa
Offshore engineering, projects
Petrofac Energy Developments offshore project, examples
– Cendor Phases I and II, Malaysia
– West Don and Don Southwest, UK North Sea
Offshore engineering
Acquisition date, 2004
Partners, Petronas Carigali, Kufpec, PetroVietnam
Petrofac working interest, 30% and operator
Field description:
– Location offshore Peninsular Malaysia (Block PM304)
– Formation, miocene
– Reservoir depth 1,600 metres TVD, average well depth 2,900 MD
– Reserves, 24.6 MMBO (P90)
Development concept:
– Rate, daily production 14,000 bpd declining over 8 years
– Sales, oil to FSO, marketed by Petronas
– Cost, US$52.5 million (capex only)
– Schedule, first oil achieved in September 2006
– Further development phases planned
West Don and Don Southwest
Offshore engineering
Offshore engineering – West Don and Don Southwest
Petrofac as licence holder and field operator has managed every element of the project delivery from subsurface evaluation and concept development, through regulatory engagement to detailed engineering, drilling, execution and ultimately operation of the field
The field development plans for both fields were sanctioned by BERR (now DECC) in May 2008
Northern Producer refurbishment completed, and unit installed in field November 2008
First production well on West Don drilled to target depth on prognosis
All pipelay and trenching and majority of subsea construction activities completed
Offshore engineering - summary
Natural market progression for Petrofac
Utilise extensive and differentiated in-house expertise
Market is ready for an innovative new participant
Build from low cost reimbursable business to full EPC project capability
Established Petrofac presence in target offshore regions
Enhance Petrofac Energy Developments’ offshore project opportunities