kvaerner approach to in-time and on-budget execution of...

Kvaerner

approach to in-time and

on-budget execution of offshore

projects

Meeting on PJSC "Gazprom“ technology development

October 4, 2017

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Industrial Holdings

Aker BP 40.0%

Aker Solutions 34.8%

Akastor 36.7%

Kvaerner 28.7%

Ocean Yield 66.2%

Aker BioMarine 99.5%

Kvaerner at a glance

2

Aker ASA Holding Structure

Projects execution (including EPCI) in the range from pre-

conceptual and up to utilization of offshore facilities

• Concrete GBS foundations (26)

• Jackets (45)

• Topsides (24)

• Floaters

• On-shore facilities

~2.600 employees in 6 countries

Revenue 2015 ~ USD 1.8 B

Revenue 2016 ~ USD 1.3 B

Share prices last 12 month +50%

Annual output >18 million of man/hours

Statoil Johan Sverdrup

Topsides, Jackets

GBS foundations

Onshore facilities

Statoil Johan Sverdrup Lundin Edvard Grieg

Hebron

Shell Norge Nyhamna

Large scale projects and phases of the

projects

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Kvaerner – EPC Scope

3

Construction

Fabrication

Assembly

Hook-up

Site engineering

Commissioning

Equipment and system

installations

Engineering

Engineering management

Studies & concepts

FEEDs

Detail engineering

Procurement

Procurement &

Subcontracting

Logistics

Quality assurance

Vendor management

Telecom

Project management HSSE & Quality

Contract management

Marine operations

Construction management

Personnel management

Commissioning

Concrete

solutions

Steel jacket

substructures

Platform

topsides

Onshore

oil and gas plants

Market leader,

Norway

Leading position Market leader,

Europe

Market leader

globally

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Some of Kvaerner’s EPC projects

4

Two Sakhalin-2 GBS (111000 and 120000 t) installed in 2005, and

one Sakhalin-1 GBS (160000 t) installed in 2012,

GBS foundation construction sites Bull Arm, Newfoundland, Canada for Hibernia GBS in

1990th, and Hebron GBS in 2010th

Vostochniy Dry Dock (Russia), construction in 2003 for

Sakhalin-2, modernization in 2012 for Sakhalin-1 project

Johan Swerdrup Project: Utilities and Living Quarters topsides (18 300 t),

completion 2018,

Johan Swerdrup Jackets for Riser Platform (22 800 t /

140 m), installed, and for Drilling (18 300 t / 140 m) and

Process Platforms (17 700 t / 140 m), completion 2018

Hebron Project GBS (685 000 t) installed

in 2017

Nyhamna Gas Plant new onshore

facilities completed in 2007, expansion

and modification completed in 2013

http://www.google.no/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjLnYSE1MnUAhWiHJoKHabXCXkQjRwIBw&url=http://www.hebronproject.com/construction/ba.aspx&psig=AFQjCNEq2YPKiBLQt8qmoHX66IISLqdN_Q&ust=1497953005095397

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Bulk concrete blocks for artificial islands

5

Fabrication and transportation

Arkhangelsk or Murmansk areas,

Series production by placing concrete in slip-forms,

Size L x W x H = 100 m x 20 m x 11 m,

Weight 14 000 t,

Transportation by heavy load vessel,

Offloading at the depth of ~ 20 m and towing to the

site,

Installation

Ballasting and setting on sea bottom

Loading of caissons and gaps with earth

extracted at the site,

Applicable for water depth 4-12 m,

Positive experience – Tarsuit caisson retained

island, Beaufort Sea.

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Bulk concrete blocks for artificial islands (second

version)

6

Each block consists of caissons with potential for towing,

Series fabrication of caissons onshore, transportation by heavy load vessel, offloading and

towing to site,

Caissons are binding together by post-tension reinforcement,

Installation of topsides modules at the site by crane vessel.

60 m

35 m

40 m

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Large scale comprehensive offshore projects.

Adriatic LNG Terminal

7

Concrete foundation180 х 88 х 48 m

2 steel storage reservoirs each 250 000 m3

GBS foundation weight 290 000 t

Total weight of the terminal 640 000 t

Capacity 8 billion m3 of natural gas per year

Water depth 30 m

Lifetime 25 years

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Adriatic LNG Terminal

Proven Execution Methodology

8

Topsides and GBS integration

Campamento, June 2008 – flooding

of dock

Construction of cellar walls

and tank slab

Tank walls and roof

construction

Topsides and GBS integration

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GBS EPCI project experience past and present

9

2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003

Sakhalin 2 Lun-A

Sakhalin 2 PA-B

Adriatic

Sakhalin 1 AD – Berkut

Hebron

34 000m3

27 000m3

82 000 m3

51 000 m3

2017 2016 2015

136 000 m3

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On-shore projects: Nyhamna Gaz Plant EPCM

10

2007: EPC for new onshore facilities; 2013: EPCM for expansion and modifications (20 000+ t of new

modules)

Main drivers:

Importance for EU energy supply including 20% of the UK’s total gas consumption since 2009 and

22 mln. households in the UK and continental Europe upon completion of expansion project

Depletion of Ormen Lange field, connection of Aasta Hansteen and potentially other fields

Long term contract: six years, and options for additional two plus two years

Ormen Lange

Aasta Hansteen

Nyhamna

Easington

http://www.kvaerner.no/en/toolsmenu/Media/Press-releases/2015/Kvarner-ASA--Kvaerner-awarded-additional-work-at-the-Nyhamna-gas-plant/

http://www.google.no/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiKyfXj08nUAhWFNJoKHSPfDVoQjRwIBw&url=http://www.ikm.no/top-links/nyhetsarkiv/2013/ikm-hvac-tildelt-hvac-kontrakten-pa-nyhamna-prosjektet/033ff61b-4f97-49dc-8365-afe681b00538&psig=AFQjCNGNJcwc1Zsm8izilPMn_fVLc8oOIw&ust=1497952937758488

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Kvaerner Project Execution Model

Kvaerner completes projects in-time and on-budget

The core of Kvaerner’s success is implementation of

Project Execution Model (PEMTM)

40+ years of Kvaerner EPCI experience are consolidated in Project Execution Model, which is a

system of Kvaerner Corporate Regulations defining:

Sequence of project Phases, Stages, and Activities

Composition and content of design, fabrication, and management activities

Criteria for completion of preceding and initiation of subsequent activities

PEM regulations are consolidated into interdependent Modules

11

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Project Execution Model (PEMTM)

12

Is applicable to Jackets, Topsides, GBS Foundations, and on-shore facilities

Feasibility & concept

System definition

Detailing & fabrication

Assembly & erection

System completion

Opportunity

appraisal

Feasibility studies

Concept selection

Concept definition

System definition

System design &

layout

development

Global design

Detailed design

Work preparation

Prefabrication

Fabrication

Contract completion

Transport &

positioning

Assembly

Mechanical

completion

Commissioning

Transport &

installation

Start-up

Take-over

Service &

assistance

Warranty,

insurance & legal

handling complete

Work accepted &

contract closed

Comprises the whole life cycle of offshore or onshore facility – from idea to close of

EPCI Contract

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Factors leading to successful large-scale oil and gas

projects

13

According to “Independent Project Analysis” (IPA), Inc. (http://www.ipaglobal.com/)

the success or failure of the large-scale oil and gas project depends upon:

1. Quality of Front-End loading including feasibility and concept, pre-FEED, FEED,

2. Continuity of control through the entire life-cycle of the project,

3. Ability to effectively manage more aggressive schedules of oil and gas projects in

comparison with other industries.

Total number of O&G projects

studied 200+

Cost growth Production

failures

Schedule slip

Successes – 22% of total 0% 0% 0%

Failures 40% 63% 30%

Sources:

1. Merrow, E. 2003, Reflections on 10 Years of Upstream Asset Development Benchmarking. Paper Oral presentation presented at

the Offshore Technology Conference, Houston, 5-8 May.

2. Merrow, Edward W. 2011. Industrial Megaprojects: Concepts, Strategies, and Practices for Success. New Jersey, USA: John

Willey & Sons.

3. Edward W. Merrow, Independent Project Analysis, Inc. Oil and Gas Industry Megaprojects: Our Recent Track Record. Oil and Gas

Facilities, Vol. 1, Iss. 2, 24 March 2012.

http://www.ipaglobal.com/

http://www.ipaglobal.com/

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Kvaerner’s perception of failure factors with respect to

offshore projects

14

Insufficient elaboration of interdependent aspects of the project life-cycle in the course of

conceptual phase. For instance, the lack of due consideration to selection of fabrication

facilities and/or assessment of their capabilities will hinder manufacturing and integration of

components for offshore facility including need in partial or total redesign of the project,

Turnover of general contractors at sequential phases of the project,

General contractor’s lack of appropriate internal regulations and/or expertise required for

successful execution of large-scale projects,

Lack of compatibility between Oil & Gas Company's regulations for management of

exploration and production project and EPCI Contractor’s regulations for design and

development of offshore facility project.

Operation Execution

(Production started)

Definition (Development plan

defined)

Selection (Development concept

selected)

Appraisal (Reserves approved)

System Completion

Assembly and Erection

Detailing and Fabrication

System Definition

Feasibility and Concept

Oil &Gas Company’s Exploration and Production Project Life Cycle

EPC Contractor’s Offshore Facility Project Life Cycle

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Amount of conceptual and feasibility works

15

ExxonMobil

Statoil

Chevron

Conoco Phillips

Lundin Norway

Total

Eni

Shell

Bayern Gas Norge

Det Norske

Fluor

Husky Energy

Maersk Oil

Amec Inpex

Dong Energy

Repsol Argentina

Idemitsu

Operation Execution

(Production started) Definition

(Development plan defined)

Selection (Development concept

selected)

Apprisal (Reserves approved)

During the period 2011-2016 Kvaerner

completed 130+ conceptual and

feasibility studies

Typical for North Sea

% of Total Project Cost

Typical EPCI cost

distribution

Level of influence

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16

Check List Quality Levels

Typical Phase

Milestones

Phase

Stages

Activity Work Flows

Key Deliverables

Quality Level Description

Status requirem. Status

Activity Descriptions

28/09/2017 16

Typical Stage

PEM Structure

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Gate reviews

17

Carried out at predefined stage milestones to evaluate compliance

Prime gate review objectives are to:

Verify that the PEM™ and contractual requirements are fulfilled (quality, time,

cost, HSSE, etc.)

Secure readiness for the next project phase

Secure that the next project phase is adequately planned and prepared for

execution

Ensure that project management and stakeholders are informed about the

actual status

Identify and implement appropriate actions to secure optimal project

execution results

Gate reviews ensure avoiding rework – get it right the first time

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Partner Companies Integration on the base of PEM

18

Kvaerner PEM priorities and key-deliverables are integrated into the

Partner Companies execution models

Focus for earliest possible fabrication start are embedded into the Stage

Engineering execution model

Agreements are established between engineering disciplines and

fabrication with the purpose of matching engineering deliveries with

fabrication expectations

Stage milestone quality levels are ensured through incorporation of

essential level of information as outlined in the Kvaerner PEM™ into the

Partner Companies execution model

Kvaerner fabrication method best practises are implemented by the

Partner Companies

Common model review and stage compliance checklists are established

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Projects implementation

19

Kvaerner could support various forms of cooperation with Russian Oil and Gas companies under

terms and conditions subject to elaboration in each particular case. That could be:

1. Conventional execution of projects under the contract with O&G Company (in the range from high-level

study to full scale EPC). In that particular case Kvaerner would structure activities and involve

subcontractors upon agreed between Kvaerner and O&G Company,

2. Creation of joint Kvaerner and O&G Company’s project teams with significant involvement of O&G

Company’s employees into project activities. It would be reasonable to start implementation of that

approach with feasibility and conceptual studies to ensure a strong foundation for EPC phases of the

project. Local and international engineering, fabrication and construction entities could be involved,

3. Execution of early project phases (feasibility, conceptual, pre-FEED) by project teams comprising

representatives of O&G Company and local contractors with minor involvement of Kvaerner in the role of

engineering advisor and project management supervisor to establish a base for EPC phases to be executed

as per items 1 and 2 above,

Fundamental principles would be:

1. Ensure transparency and controllability of project activities for the Client,

2. Focus on mitigation of project risks with emphasis on meeting schedule and budget targets,

3. Execution of project activities in Kvaerner Project Execution Model environment,

4. Identification of the most cost-efficient solutions,

5. Localization of technologies and transfer of competencies.

Thank you for your attention.

Questions?

Contact information:

(You also could ask your questions at any time in future)

Axel Thorsdal

General Director, Kvaerner LLC (Russia)

Tel: + 7 495 664 77 11

E-mail: [email protected]

Dmitry Kazakovtsev

Deputy General Director for Business Development,

Kvaerner LLC (Russia)

Tel: + 7 495 664 77 20

Cell: + 7 905 783 16 75

E-mail: [email protected]

Backup slides

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GBS foundations for Sakhalin 1 and Sakhalin 2 Projects

22

Piltun-Astokhskoye-B (PA-B) Platform

Located 12 km off the north-eastern

coast of Sakhalin Island,

Water depth of around 30 m

In operation since 2008

GBS installed in 2005

• Weight 118 000 t

• Size of caisson 94 х 91.5 х 11,5 m

• Columns heights 39 m

• Columns diameter 24 m

Topside built separately in South

Korea by Samsung and installed in

2007

• Weight 24 000 t

• Total staff 140 employees

Production capacity: oil 70,000 b/d

(11,130 m3/d); gas 100 mln scf/d (2.8

mln m3/d)

Lunskaya-A (LUN-A) Platform

Located 15 km off the north-eastern

coast of Sakhalin Island,

Water depth of 48 m


GBS foundation installed in 2005

• Weight 111 000 t

• Size of caisson 88 х 105 х 13,5 m

• Column height 56 m

• Column diameter 20 m

Topside built in South Korea by

Samsung yard and installed in 2006

• Weight 22 000 t

• Total staff 136 employees

Production capacity: gas – 51 mln

m3/d; condensate about 50,000 b/d

(8,000 m3/d)

Berkut Platform at Arkutun-Dagy Field

Located 25 km off Sakhalin’s north-

eastern coast,

Water depth of 30-40 m


GBS:

• Weight 160 000 t

• Caisson size 100 x 133 m

• Caisson height 10 m

• Height with columns 55 m

Topside built separately in South Korea by

Daewoo

Weight 42 000 t

Production capacity: 4.5 million tons per

year of crude oil, or 90 thousand barrels

per day

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Topsides for Johan Sverdrup project

23

Johan Sverdrup EPC for Utilities and Living

Quarters topsides*

Key figures

• Contract award June 2015

• Mechanical Completion October 2018

• Weight 18 300 t

• Living Quarters capacity 560 people

• Central control room for the field

Scope of work

• EPC

• JV with KBR (Kvaerner 51% - KBR 49%)

http://www.kvaerner.no/en/toolsmenu/Media/Press-releases/2015/Kvarner-ASA-Kvaerner-KBR-JV-wins-Johan-Sverdrup-platform-contract-/

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Jackets for Johan Sverdrup project

24

Riser Platform Jacket

(Installed*)

EPC 2014 – spring 2017

Weight: 22 800 t

Height: 140 m (all three)

Footprint top base:

28 m x 94 m

Footprint bottom base:

64 m x 94 m

Piles: 24

Process Platform Jacket

EPC 2015 – summer 2018

Weight: 17 700 t

Footprint top base:

28 m x 80 m


60 m x 80 m

Piles: 20

Drilling Platform Jacket

EPC 2014 – spring 2018

Weight: 18 300 t

Footprint top base:

33 m x 71 m


55 m x 85 m

Piles: 24

http://www.kvaerner.no/en/toolsmenu/Media/Press-releases/2017/The-first-jacket-for-Johan-Sverdrup-completed/

http://www.google.no/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiD4-q0k4HVAhUrMZoKHeD2C1IQjRwIBw&url=http://subseaworldnews.com/2015/09/11/kvaerner-to-build-sverdrups-drilling-platform-jacket/&psig=AFQjCNHh47LSepEFZNxvb9JRuQqOtf0-WQ&ust=1499859822197146

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HEBRON Project – 2017

25

Foundation

Water depth 93 m

Height 120 m

Diameter 130 m

Diameter of the cent. column 35 m

Concrete 132 000 m3

GBS weight 685 000 t

Reinforcement weight 40 000 t

Well slots 52

Storage 1.2 mln. bbls

Events

FEED 2010 г.

Planning, approvals,

modernization of

construction site 2011 г.

Construction of foundation 2012 г.

Fabrication of topsides 2013 г.

Integration 2016 г.

First oil 2017 г.

Kvaerner milestones

Sakhalin 2 LUN-A 2005 / 34 000 m3

Sakhalin 2 PA-B 2005 / 27 000 m3

Adriatic 2008 / 82 000 m3

Sakhalin 1 AD-Berkut 2012 / 51 000 m3

Hebron 2017 / 132 000 m3

http://www.kvaerner.no/en/Products/Concrete-structures-for-offshore-platforms/Hebron-GBS-Project/

http://www.kvaerner.no/en/toolsmenu/Media/Press-releases/2013/Kvarner-ASA--Kvaerner-wins-EPC-contract-for-Hebron-GBS-project/

http://www.hebronproject.com/

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GBS foundations construction sites

26

Welding

workshop

Welding

workshop

“Exotic

materials”

workshops

Warehouse

Rebar

workshops

100 t/day

Sewage

water

treatment

Bund wall

Vostochniy

Construction of gravity base structure for «Berkut» platform 2008-2012

Casting basin

265 x 138 x 14 m

Hibernia (1990-th) and Hebron (2010-th) GBS

construction site in Bull Arm, Newfoundland,

Canada

Administrative

area

Vostochniy Site establishment,

September 2003

http://www.google.no/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjLnYSE1MnUAhWiHJoKHabXCXkQjRwIBw&url=http://www.hebronproject.com/construction/ba.aspx&psig=AFQjCNEq2YPKiBLQt8qmoHX66IISLqdN_Q&ust=1497953005095397

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Conceptual Design impact on Risk and Project CAPEX

27

E

Example of Offshore platform Construction Project in the North Sea

P

Time

3 - 8 months

Concept FEED, Basic Engineering

Detailed Engineering Procurement Construction Installation

(commissioning)

~ 0.1-0,5%

6 – 8 months 6 - 8 months

14 – 19 months 30 months 6 - 8 months

~ 0,5-2% ~ 3-8% ~ 60-70% ~ 10-20%

Conceptual design has the greatest impact on the project alongside with a minimum costs and allows :

Determining the minimum profitable level of reserves’ volume for production platform;

Choosing strategy development and technology.

Identifying the ways of increasing economic profitability of project;

Reducing the risks of project financing;

Increasing the value of Total Field Development.

Conceptual

Design 10%

50% 35%

5%

90% 5%

3% 2%

-50%

-25%

0%

25%

50%

Возможность влиять на проект

Затраты проекта

FE – Front End

P – Procurement

C – Construction

I – Installation

С I

Opportunity to influence project

Costs of project

% of Total Project Cost Cost saving Design Phase

FE

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Copyright

Copyright of all published material including photographs, drawings and images in this document remains vested in Kvaerner and third party contributors as appropriate.

Accordingly, neither the whole nor any part of this document shall be reproduced in any form nor used in any manner without express prior permission and applicable

acknowledgements. No trademark, copyright or other notice shall be altered or removed from any reproduction.

Disclaimer

This Presentation includes and is based, inter alia, on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to

differ. These statements and this Presentation are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the

regions and industries that are major markets for Kværner ASA and Kværner ASA’s (including subsidiaries and affiliates) lines of business. These expectations, estimates and

projections are generally identifiable by statements containing words such as “expects”, “believes”, “estimates” or similar expressions. Important factors that could cause actual

results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are or will be major markets

for Kvaerner’s businesses, oil prices, market acceptance of new products and services, changes in governmental regulations, interest rates, fluctuations in currency exchange

rates and such other factors as may be discussed from time to time in the Presentation. Although Kværner ASA believes that its expectations and the Presentation are based

upon reasonable assumptions, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in the Presentation. Kværner ASA is

making no representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the Presentation, and neither Kværner ASA nor any of its directors,

officers or employees will have any liability to you or any other persons resulting from your use.

Copyright and disclaimer

Copyright

Copyright of all published material including photographs, drawings and images in this document remains vested in Kvaerner and third party contributors as appropriate.

Accordingly, neither the whole nor any part of this document shall be reproduced in any form nor used in any manner without express prior permission and applicable

acknowledgements. No trademark, copyright or other notice shall be altered or removed from any reproduction.

Disclaimer

This Presentation includes and is based, inter alia, on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to

differ. These statements and this Presentation are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the

regions and industries that are major markets for Kværner ASA and Kværner ASA’s (including subsidiaries and affiliates) lines of business. These expectations, estimates and

projections are generally identifiable by statements containing words such as “expects”, “believes”, “estimates” or similar expressions. Important factors that could cause actual

results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are or will be major markets

for Kvaerner’s businesses, oil prices, market acceptance of new products and services, changes in governmental regulations, interest rates, fluctuations in currency exchange

rates and such other factors as may be discussed from time to time in the Presentation. Although Kværner ASA believes that its expectations and the Presentation are based

upon reasonable assumptions, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in the Presentation. Kværner ASA is

making no representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the Presentation, and neither Kværner ASA nor any of its directors,

officers or employees will have any liability to you or any other persons resulting from your use.

Copyright and disclaimer

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