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SUPPLY CHAIN EXCELLENCE – MAKING A DIFFERENCE IN DECOM

Sam Long

Business Acquisition Manager,

Decommissioning, Petrofac

16 November 2016

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Agenda:

1. Context and purpose

2. Petrofac: an introduction

3. Where are we – a time for change

4. Role of the individual

5. The role of a company

6. The role of industry

7. Closing remarks

Disclaimer: as a Contractor, Petrofac cannot comment in regards to supply chain needs to the same degree as an

Operator. Opinions expressed herein reflect Petrofac interpretation of market requirements and do not necessarily

reflect the expectations or opinions of our clients or partners

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Context and Purpose: supply chain excellence

• Era of MER and on the cusp of decommissioning

• Work to be done to make both effective and affordable

• Buy side and sell side behaviours and processes must be FFP

• Avoid boom and bust models

• Align Supply Chain to be effective and reflective

There are activities to be taken at individual, company and industry

level to bring this about:

• On-going efforts to envisage the right means of doing business

• Awareness raising, both internal and external

• Building for the future, internal and external

Me Us

All

Making a

difference

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PETROFAC:

AN INTRODUCTION

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Petrofac – in general

Petrofac is a major oilfield contractor,

providing Engineering and

Construction (E&C), Operations

and Maintenance (O&M), Well

Engineering, training and other

specialist services to Operators

around the world

We employee 18,200 personnel,

with a turnover of $6.84BN (2015)

We have major operations

in the North Sea, Middle East

and Asia Pacific

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Petrofac – in decommissioning

Petrofac has the capability and the experience

to help existing and new clients on their

journey; whether that’s at project start-up,

through ongoing and late life operations,

onto decommissioning

We are building a Centre of Excellence

for late life and decommissioning

in the North Sea

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Late Life Asset Management and decommissioning services

ENGINEERING STUDIES

DUTY HOLDER

OPERATIONS

AND

MAINTENANCE

LATE LIFE ASSET MANAGEMENT

WELL ENGINEERING

OPTIMISATION

DECONSTRUCTION

DECOMMISSIONING

VERIFICATION

&

REGULATION

PROJECT

MANAGEMENT

SUPPLY

CHAIN

MANAGEMENT

HLV

MANAGEMENT

DISPOSAL

MANAGEMENT

PLUG AND

ABANDONMENT

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Buying and selling models in decom

TOTAL PACKAGE

SOLUTIONS

Individual service

lines examples:

• Well Engineering

(P&A)

• Decommissioning

studies and

estimates

Joined up service

lines, common

customer interface

example:

• P&A and

cleaning/flushing

Integrated service

lines, with shared

Project Management,

Project Services and

single focal point

examples:

• Duty Holder in

Decommissioning

• P&A and

decommissioning

Project

Management

Total

decommissioning

solutions provided

by Petrofac and

selected partners

INTEGRATED

SERVICES

BUNDLED

SERVICES

DISCRETE

SERVICES

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Petrofac decommissioning services and projects

CURRENTLY PROVIDING:

• Well Plug and Abandon campaign,

Tullow Horne and Wren (UKCS)

• Duty Holder in Decommissioning,

BP Miller (UKCS)

• Asset management review,

Repsol Sinopec (UKCS)

• Duty Holder oversight, decommissioning,

Tullow Horne and Wren (UKCS)

• Duty Holder – Late Life Asset Management

(LLAM), ENI Hewett (UKCS)

• Studies – various (confidential)

PREVIOUS PROJECTS:

• Hutton TLP topsides separation project,

Conoco (UKCS)

• AH001FPU strip down and rebuild,

Ithaca/Petrofac (UKCS)

• Bacton Gas Terminal decommissioning,

ENI (Onshore, UK)

• Decommissioning Cost Estimates,

multiple, confidential (Europe and Africa)

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WHERE ARE WE?

A TIME FOR CHANGE

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Where are we?

Time for MER in the North Sea is now

Time for decommissioning is coming

• G Newcombe, OGA Oct 2016: ~19 CoPs vs 15 FDPs

A number of issues prevent truly effective Decom from

happening in the current market

• Short term issues: affordability

• Medium term issues: cost control and estimation

• Long term issues: ill-suited frameworks,

models and approaches

Innovation will happen, but may need nurturing

• The industry can overcome significant hurdles once focussed,

e.g. Safety Case regulations

• Requires a different culture and mind-set in the industry,

across the supply chain and within individuals

Nurture

1. verb. care for and protect

(someone or something) while

they are growing

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ROLE OF

THE INDIVIDUAL

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What can I do to make a difference?

This is a different era in the basin and in the industry

• Unlikely to be involved in a major greenfield development

• Likely to be involved in a decommissioning project

• Guaranteed to be involved in MER

A different mind-set is required to make both effective

• Be passionate

• Advocate change

• Be conscious that Decom is end of life

• Innovate in your own space

Am I likely to personally

see a new jacket and

platform installed in the

NS in my career? Participate…

Innovate…

Me

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THE ROLE OF

A COMPANY

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Role of a Company

Develop people who are “fit for decom”

• New roles for graduates in 2017

• Building a team, Decom recognised alongside E&C and O&M

• Emphasis on right size, with right culture and right approach

Develop awareness

• Explain what is required and why

• Enable decision making (investment, effort)

• Prepare people for the future

Develop the Supply Chain

• Change in behaviours, strategies and models (buy/sell side)

• Build (new and old) relationships that suit requirements

• Work to the new norm, not the old way

E&C O&M

Decom

Us

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Role of a Company continued

Develop the right services, in the right time frame

Short term needs

• Only a small number of projects are currently in execute mode

• Affordability and cash flow impact: BAU for now

• Logistics, catering, FM, (de)construction

• However… bring service to a Project, not an Operation

• Requires innovation in T&Cs and agility in deployment

Long term needs

• Avoid bespoke, over engineered and costly solutions

• Think “Good is good enough”, “Fit-For-Purpose…”

• Focus should be on cost effective, repeat services.

e.g. NUI conversion, Park and Defer, Walk2Work

• Steps taken by Petrofac – optimise crew, optimise maintenance,

optimise rotas, share logistics, share facilities, innovative P&A

OGUK Share Fair

Sept’16

Current emphasis should

be on LLAM, not decom

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MER comes before Decom: Petrofac model

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THE ROLE

OF INDUSTRY

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Making it work, as an industry

Decommissioning impacts society,

environment, people, £

How do we make it more

sustainable/affordable /“sensible”?

How do we nurture it to

be more effective, quicker?

What happens if we don’t nurture it?

Maximise an opportunity, not the cost

Identify ways forward, time to change

MER and LLAM are the keys to successful decom

• Must strive to buy time through MER

CoP?

Decom?

MER/LLAM

Buy time

here

Which priority, when?

How do we get here? Time

$

All

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Role of Industry: OGA Decom Board

OGA Decommissioning Strategy

• Strategy published Q3’16

• Calls for new ways of working in decommissioning

• Drivers are to be cost effective, environmentally sound and safe

• Tripartite working – enable a different approach for Regulator, Operator,

Contractor, Supply Chain and tax payer

• Minimise the cost of decommissioning in an appropriate manner

OGA Decom board, Delivery Programme and themes

• Agreed priorities for 2017

• # 1Cost certainty and reduction

• #2 Delivery capability

• #3 Regulatory guidance

WIP, but working together

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Delivery capability

Team effort. Two elements under development: #1

Supply Chain capability/capacity

Objective: develop transparency in supply chain capability which,

supported by a robust demand profile, would allow creation of a predictable

decommissioning market.

Sponsored by Nigel Lees (Wood Group)

Progress

• Methodology currently under review

• Decom North Sea and OGA MER Supply Chain board involvement

• Work will draw upon the 2014 Arup report

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Delivery capability

Two elements under development: #2

Optimised execution and contractual models

Objective: develop, review, challenge and assess new and existing

models for decommissioning project execution and contracting.

Sponsored by Jonathan Brown (RSR), Sam Long, (Petrofac)

Progress

• Agreement to combine two elements into one, due to overlap between

execution and contracts

• Initial focus on Framing Workshop and suitable methodology for workshop

• Agreement to seek facilitation

• Intent is to map pros and cons of a number of models, identify barriers that

prevent some from being realised and create a roadmap for possible new

forms to become effective

• Barriers can be both perceived and real

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CONCLUSIONS

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Concluding remarks

• Can we make a difference?

• Can we afford not to?

• Disseminate, improve awareness of drivers, and of blockers

• Think, act and behave in a different way for MER and decommissioning

• Participate in dialogue, bring about change in thinking

• Innovation isn’t just about technology…

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THANKS

Sam long

Business Acquisition Manager, Decommissioning

sam.long@petrofac.com

+44 1224 247112