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Drilling & Completion Well Construction Services & Commodities Category Plan 2009 - 2012

Drilling & Completion Well Construction Services & Commodities Category Plan 2009 - 2012. Tengizchevroil Eurasia Business Unit Nurlan Jassakhbayev – Category Manager. Drilling & Completion Category Strategy. Vision and Objectives Spend Segmentation Supplier Categorization

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Drilling & Completion Well Construction Services & Commodities Category Plan 2009 - 2012

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  1. Drilling & Completion Well Construction Services & CommoditiesCategory Plan2009 - 2012 Tengizchevroil Eurasia Business Unit Nurlan Jassakhbayev – Category Manager

  2. Drilling & Completion Category Strategy • Vision and Objectives • Spend Segmentation • Supplier Categorization • Category Strategies and Plans • Primary Focus Areas • Business Unit Assessment • Category Business Impact

  3. Vision and ObjectivesWell Construction “Services” Vision Main Objectives To be recognized by DERM (The Sponsor Group) and TCO as creating value while being viewed by suppliers as the customer of choice through working category management (including advance supplier relationships) at the enterprise level and having alignment with the company’s business goals. • 2009 Implement a strategic sourcing project for Well Construction Services ($550MM) that will continue to: • Utilize latest industry technology • Improve Safety Performance • Improve Equipment Reliability • Minimize total cost of ownership • 2009-2012 Develop and Implement a strategic sourcing project for Drilling Rig and Related Services ($580MM) • Provide equipment and personnel to support future drilling, work over, & non-rig activities in Tengiz. • 2009-2010 Develop and Implement sourcing projects for H2S, Heavy Equipment and Inspection Services ($70MM) Key Elements of Business Strategy In Scope • TCO DERM • Achieve Incident Free Operations • Collaboration with suppliers on the implementation of existing technologies and the dev of new technologies • Create value through OE/Operations improvement opportunities that align with the BU and OPCO business goals • Improve Supplier Performance • Maintain focus on Local Content and National Workforce opportunity Out of Scope • KPO Category Structure Well Construction Services Pumping Dir. Drilling Fluids Wireline Rentals& Service Well Const Equip Well Const Equip • Cementing • Cementing Tools • Stimulation • Sand Control Pumping & Tools • Directional Tools & Services • CHCD • MWD/LWD • Whipstocks • Survey Tools • Drilling Fluids • Completion Fluids • Completion Fluids Filtration • Solids Control • Cased Hole Logging • Open Hole Logging • Perforating • E-line/Slickline • Coil Tubing • Fishing Tools • Tubular Running • Thru Csg Perf • Coring • Liner Hangers • Rental Pipe & BOP‘s • SCSSV‘s • Ext Csg Packer • Screens/Blanks

  4. Vision and ObjectivesWell Construction “Commodities” Main Objectives Vision To be recognized by DERM (The Sponsor Group) and TCO as creating value while being viewed by suppliers as the customer of choice through working category management (including advance supplier relationships) at the enterprise level and having alignment with the company’s business goals. • 2009 Implement contract for CRA & Carbon Tubulars (~$500MM) • Improve Equipment Reliability • Reduce Total Cost of Ownership • 2009 Implement agreement for wellheads & trees ($60MM) • Improve Equipment Reliability • Reduce Total Cost of Ownership • 2009-2010 Create blanket purchase agreements tied to IMAs for all equipment/material providers. • 2010 Investigate opportunity for Drill Bits Key Elements of Business Strategy In Scope • Achieve Incident Free Operations • Collaboration with suppliers on the implementation of existing technologies and the development of new technologies • Create value through OE/Operations improvement opportunities that align with the OPCO business goals • Endeavour to seek synergies through joint efforts with KPO • TCO DERM Out of Scope • KPO Category Structure Well Construction Materials OCTG Drill Bits Other Surface Wellheads/Trees Artificial Lift Equipment • Fixed Cones-Purchased • Roller Cones-Purchased • Performance Agreements (rentals) • Services • Casing • Tubing • Connections • Accessories • Services • Pump Units • Tubular Coating • Tubular Inspections • Rod Inspections • Wellhead inspections • Wellheads • Trees • Manifolds • Wellsite Automation • Services • N/A for EBU

  5. Historical Spend Segmentation Consolidated Service Provider (Schlumberger) Increased in 2005 spend with the drilling of Ansagan Exploratory Well Decrease in 2006 spend as drilling activity demobilized. No rigs operating from Oct 2006.

  6. Well Construction ServicesSupplier Categorization

  7. Well Construction MaterialsSupplier Categorization

  8. Category Strategies and Plans Plans Strategies 1- Implement successful strategic sourcing projects that will include Capital Stewardship principles to manage over $550,000,000 spend for services and $500,000,000 spend for tubulars, $75,000,000 trees & wellheads, $5,000,000 for well control, $40,000,000 3D Seismic 2- Develop and implement a successful strategic sourcing project for Drilling Rig and Related Services with $580,000,000 spend and other sourcing projects for H2S, Heavy Equipment and Inspection Services with $70,000,000 spend 3- Actively monitor & manage supplier safety performance through adherence to TCO CHESM process. 4 - Utilize supplier business plans, Local Content Targets, safety metrics, and total cost of ownership metrics as the basis for managing performance. Deliver best in-class performance & total cost savings. 5- Monitor market & industry trends. Maintain cost models to identify key cost drivers. Routinely make price comparisons to monitor competitiveness. 1 - Ensure the best contractor(s) will be in the right place at the right time, to deliver superior quality service to TCO at the best negotiated rate. 2- Establish supplier safety as the top priority 2- Manage supplier performance in support of the well operations 3- Drive improved equipment OE performance, reliability, standardization 4- Lead the use of Category Management 5- Improve category performance by understanding markets and industry trends.

  9. D&C Primary Focus Areas – 2009-2012

  10. Business Unit Assessment Current Support Opportunities • Possibility of no new drilling activity until 2012 creates a threat of lack of support for non-rig activity, well remediation (T-4748), ordering of long-lead time materials, and bridging contracts to cover period. • Review current contracts during low-activity level for additional savings by eliminating unnecessary equipment and personnel / renegotiate rates. • Not all D&C contractors (who have a CVX IMA in place) have executed the Country-Specific Provisions for Kazakhstan. • Create blanket purchase agreements tied to IMAs for all equipment/material providers. • SM&I - Integration of suppliers into key processes • Establish additional Extended Enterprise agreements with D&C suppliers • Improve spend leakage (material orders going through Rig Contractor instead of TCO Warehouse) • Implementation of eProcurement and uploading contractor’s catalogs into Ariba. • Contract in place with Nabors Drilling and Cameron. Both have rates tied to industry indices • BPA in place with Sumitomo for CRA tubing with indexed pricing at time of P.O. placement • SLB, MI-SWACO, WTF, BHI, and BJ have a large support presence in the Caspian Region.

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