Download - Ecopetrol Capital Projects

8/18/2019 Ecopetrol Capital Projects

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March 10th, 2016

Bogotá

Enhancing capital project

execution at lower-for-longer prices

Workshop on global trends and tactical

opportunities to improve performance

Upstream


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Copyright © 2016 Accenture All rights reserved.

ASU brings experts and consultants with global experience

Eric Janvier

Capital Project Practice & QC

Capital Project Forum co-leader

Graham spent 30 years working for BP around the world. He

retired as Chief Engineer for BP‘s global upstream business. He

has experience in the North Sea, Alaska, Azerbaijan and many

other countries including Colombia.

Graham is a Chartered Engineer and a Fellow of the Institution of

Civil Engineers.

Raul Camba

Head for Mexico & Andean Countries

Raul is an Managing Director in ASU, based in Mexico. He has

extensive experience advising oil and gas companies in Latin

America and Europe. His main focus has been on petroleum

upstream with areas of expertise which include strategic planning,

operations, maintenance and capital execution

Manas is a Managing Director at ASU. He has lead engagements

with clients in typical areas of engagement such as market entryand/or growth strategy, risk-reward based commercial models,

technology life-cycle management, supply chain, inventory

management, distribution and receivables management.

Graham McNeillie

ASU Senior Advisor and former Chief Engineering for BP

Upstream

Capital Project Forum co-leader

Manas Satapathy

MD

Eric started his career as a wireline engineer for Schlumberger

He leads the Global Capital Projects Practice and the Quality &

Risk Committee.

Throughout his career he has advised several resource

companies, with particular focus in oil and gas in multiple

geographies including Europe, Africa, the former Soviet Republics

and the Middle East.

Jorge Falcón

MD

Jorge is a Managing Director in ASU, based in Mexico City. He is

focused on three key functions in Oil and Gas projects (strategy,operational transformations, capital productivity) with experience in

diverse geographies (Mexico, Colombia, Peru, Bolivia, Hungary

and Slovakia).

Andres is a Manager ASU, based in Mexico City. Prior to joining

SBC, Andres has experience working with clients across several

industries with particular focus in Oil and Gas, mainly in operations

and strategy.

Andres Castillo

Manager

Jorge Chaparro

Senior Manager

Jorge is responsible for Energy and Utilities for Colombia. He has

more tan 25 years of experience in consulting, integration of

solutions and project management.

Beatriz has more than 24 years of experience and has led

consulting projects across the world.

She has consulted for various industries including oil and gas.

Her work covers transformations, implementation of SAP and

Oracle solutions as well as sector-specific solutions.

Beatriz Carmona

Executive Director for Accenture Colombia and Venezuela


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ASU was created upon Accenture’s acquisition of Schlumberger’s

global energy management consulting division (SBC)

ASU helps oil and gas industry leaders solve problems regarding a wide range of practices:

Focus on Oil & Gas

Our group has world-class technical expertise and knowledge, covering the entire O&G value chain:

Deep Industry

Knowledge

We serve 95 clients in 40 countries and have developed more than 1,000 projects. Our client portfolio

includes 60% of major IOCs, 70% of major NOCs, as well as:Global Scope

▬ Exploration

▬ Field development

▬Production

▬ Midstream

▬ Refining

▬Gas and power

▬ Marketing and retail

▬ Alternative energy

▬ Independent companies

▬ Other energy players

▬ Banks

▬ Investment funds

▬ Governmental entities

▬ Strategy

▬ Organization

▬ Talent management

▬ Operations improvement

▬ Mergers and acquisitions

▬ Post-merger integration

ENERGYUpstream

WHAT ASU DOES THAT MAKES IT UNIQUEWHY ASU IS UNIQUE


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ASU is bringing the results and implications from the Capital

Projects Forum to Ecopetrol

We intend to bring the

results of the forum and to

engage with the audience

on several of the most

relevant topics in capital

projects in the oil and gas

industry today:

What the current trends

are in capital projects

that leaders across

industries are

identifying What valuable insights

we can gain

Discuss what trends companies are following

to increase the efficiency in capital projects

under the current price conditions

Understand and discuss success cases that

Ecopetrol can learn from

Opens Q&A panel session for the audience

to engage directly with the group of experts

to address concerns or doubts about the

trends and cases previously discussed

SPECIFIC OBJECTIVESMAIN OBJECTIVE


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Agenda

Main Learnings from the Capital Projects Forum (2015) 8:00 - 9:00

How impact can be achieved: Panel Discussions on Selected Topics 9:00 - 11:45

Conclusions and Wrap up 11:45 - 12:00


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Welcome and Introduction


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The 2014 forum concluded – even before prices dropped - that

operators needed to consider four actions to transform their project

performance

Source: SBC/ASU

1. Create a strong central governance

2. Focus on leaner designs

3. Adjust the growth strategy to match one’s true capabilities

4. Move to the next stage of collaboration with suppliers


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9Sources: Upstream; Companies annual reports; SBC/ASU Capital Projects Forum Survey 2015

% of respondents

Conclusions from the 2014 forum have now spread into strategic

statements and press articles

AREAS OF FOCUS MENTIONED BY THEPARTICIPANTS TO OUR SURVEY

Adoption of company

led standard solutions30%

20%

Reuse of concepts

developed for past projects

Adoption of supplierled standard solutions

50%

Establishment of

alliances with suppliers

Increase of call for tenders 10%

20%

30%

Simplication of

company standards

“Tearing up last year's contract and starting all over again will notbe enough. This is much more about design standards, better up-

front planning, contracting structures with the best suppliers, etc .”

B. van Beurden, CEO, Shell, 30/07/2015

“Standardization, simplification and industrialization. Not yetwords that are immediately associated with our industry. But

the potential is large, in many areas.”

E. Sætre,CEO, Statoil, 23/04/2015

“[Operators need to] engage at the very early stage and do it in away that is constructive. Every downturn there is the same

reaction - let's cut the cost immediately... squeeze the supply

chain. But I can tell you, this is not enough.”

T. Pilenko, CEO, Technip, 8/05/2015

“Something fundamental has to change or you arenot going to get a sustainable material change that

the industry demands.”

J. Gremp, CEO, FMC Technologies, 8/05/2015

E&P EXECUTIVES POINTS OF VIEW


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However, most of the efforts last year have been on contract

renegotiations and project revisions

Renegotiate or retender contracts

Stop or delay unprofitable projects, when

possible

Delay those that can be delayed,

to benefit from lower prices

Step-back and challenge concepts,

considered for projects in design phase

Sources: Upstream, Oil & Gas Investor, Statoil


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11Sources: IHS Energy; EIA

2000 = 100 (Left axis); Nominal USD/bbl, quarterly spot (Right axis)

The impact on costs has been substantial. This deflation is however

reaching its limits, and will not resist to a rebound of oil prices.

BRENT OIL PRICE AND IHS UPSTREAM CAPITAL COST INDEX

50

100

150

200

250

0

20

40

60

80

100

120

140

Q1

2015

Q1

2014

Q1

2010

Q1

2005

Q1

2004

Q1

2000

Q1

2008

Q1

2011

Q1

2013

Q1

2007

Q1

2006

Q1

2003

Q1

2012

Q1

2009

Q1

2002

Q1

2001

UCCI BrentUCCI

Brent oil price


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Leaders from several industries presented concrete examples on three key

topics to help address the current challenges

KEY QUESTIONS ADDRESSED AT THE CAPITAL PROJECTS FORUM IN 2015

What couldUpstream project

engineering &

management look

like in

10 years?

How far should

the operators

seek to partner

with their

strategicsuppliers?

Fixed vs. flexible

developmentprograms

Advanced

collaboration and

information

management

platforms

Supplier base

integration to

reduce complexity

Enhanced

collaborative

supply chainmanagement

practices

Smart standardization to

revert inflation in

complexity

“Design one, build

many” approach

Enhanced productivity,

eliminating non-value-

added activities

(alongside suppliers)

How can the

industry cut the

cost of projects

by 30 or 50%?

Enhanced

project

execution


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13Source: SBC/ASU Capital Projects Forum 2015

The Forum focused on implementation: do we have evidence that

they work in Upstream; and what does implementation look like?

DO THEY WORK INUPSTREAM? WHAT COULD IMPLEMENTATION LOOK LIKE?

Adrian Luckins

VP Global Projects

Solutions

Graham McNeillie

Senior Advisor & Former

BP Head of Engineering

Adam Lowmass

Senior Strategy Advisor

Gérald Bouhourd

SVP Life of Field

Elisabeth Tørstad

CEO Oil & Gas

Hugh Clayton

Director of Engineering &

Technology, Land & Sea

Division

Lawrence Gosden

MD Wastewater

Lindsay Woodhead

SVP

Mark Richardson

North Sea Projects Group

Project Manager

Tony Meggs

CEO, UK Major

Projects Authority

Alain Marion

CTO

Ian Gardner

Director, Global EnergyLeader

James Arnott

MD, Lead CapitalProjects Services

Matthias Naumann

Pdt

BoostAeroSpace


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Developments cost reductions can be achieved, by challenging existing assumptionsand concepts

The « lean » concept applies to Upstream Engineering, with substantial performance

benefits, especially in complement of a strategy to reuse proven concepts (design one,

build many)

The standardization of equipment and the simplification of technical standards bothrequire focus and persistence, but are necessary to revert the inflation in complexity and

allow longer equipment series

The deeper and longer term collaborations that have proven their worth in other

industries, are possible in Upstream: appropriately designed, they can be compatible with

sustained competition between suppliers and with efficient procurement

Advanced collaboration and information management platforms have emerged in

other industries, that supported these strategies and transformed the performance of

projects. They are necessary in Upstream, to capture similar benefits.

Source: SBC/ASU Capital Projects Forum 2015

The conclusions were very encouraging


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Early efforts along these lines start showing results, with examples

cutting design time by nearly and costs by nearly 40%

Source: SBC Forum & ASU estimates

Year 1 Year 2 Year 3 Y. 4

Transportation

Design

Design

Hookup & commissioning

Fabrication

Hookup & commissioning

Transportation

Fabrication

T r a d i t i o n a l

C l o s e c o p y

New

approach

Traditional

approach

-40%

IMPACT ON A SUBSEA INSTALLATION

Schedule reduction Cost reduction

-40%


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Rolls-Royce has implemented very structured continuous

improvement loops, closely involving clients over 20 years

(aerospace) or 3-5 years (industry and transportation)

Source: Rolls Royce

System Environment

System on level 0 Overall Product or

Service

System on level 1

Abstract System

System on level 2

Abstract System

System on level 3

…

VerificationClient

Needs

Client

Satisfaction


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Thames Water created Eight2O, an alliance with 7 strategic suppliers,

to deliver jointly their five years investment program

Source: Thames Water


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5 key players of the European Defence Industry created Boost

Aerospace, a platform that coordinates close to 2000 suppliers

Source: Boost Aerospace


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This year, the UK MPA is imposing BIM 2 integration, to all public

building and infrastructure projects over 50 million pounds

Source: UK Major Projects Authority


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1. Concentration of the private operators, as mid-size generalists have to exit complex

projects and majors & specialists leverage their cost advantage

2. Development of “Supply Chain Ecosystems”, sometimes Consortiums, each

organized around one or two leading majors and selected large EPCs

3. Concentration of the suppliers, as the investment in the “ecosystem” collaborations

start to pay back

4. Development in Upstream, of standard packages and semi-standard solutions, as a

direct consequence of these three first changes

Source: SBC/ASU Capital Projects Forum 2015

If the Upstream industry follows these paths, it could see similar

evolutions


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21Source: BP

All driven by the emergence of steep experience curves and the

associated competitive advantages


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“Supply Chain Ecosystems” will appear, each organized around one

or two leading majors and a few large EPCs

EXAMPLE OF SHELL FLOATING LNG PROGRAM

Shell

Technip Samsung

Supplier Supplier Supplier

Supplier Supplier Supplier

Woodside

???


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Decrease in the number of suppliers to

Better manage them

Minimize costs

Improve product quality by collaboratingwith the best suppliers of the sector

Risk Sharing Partnerships (RSP)

established with suppliers acquiring rights

to the future sales income

Number of Suppliers

Source: Companies’ website and publications; Aerospace Industries Association of Canada; SBC analysis

One consequence will be the concentration of the suppliers, as

the investment in the “ecosystem” collaborations start to pay back

SUPPLIER CONCENTRATION IN THE AEROSPACE INDUSTRY

0 300200100

-50% A350

(2014)

-80%Trent XWB

(2014)

Trent 500

(2002)

CRJ 700-900

(2001)-71%

C series

(2014)

A330

(1994)

Number of

Suppliers Case Study

346

EMB 170/190

(2004)

EMB 145

(1999) 350

38

4

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16Traditional’ Suppliers

Risk-sharing Suppliers