the new oil and gas industry supply chain code of practice l.
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The New Oil and Gas Industry Supply Chain Code of Practice ADD TITLE AS APPROPRIATE Supply Chain Code of Practice Initially developed by a work group established by ILT / PILOT under the Progressing Partnership banner (PPWG)

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slide2

Supply Chain Code of Practice

  • Initially developed by a work group established by ILT / PILOT under the Progressing Partnership banner (PPWG)
  • The Supply Chain CoP is one of over 10 initiatives launched by PILOT and outlines a set of best practice guidelines  
  • First adopted by the industry in 2002, signatories undertake to work towards full compliance with the Code
  • Signatories include major purchasers (operators and principal contractors) and suppliers (providers of goods and services) 
  • The Code is endorsed by PILOT, the Industry Leadership Team and the key Trade Associations
  • In July 2005 the PPWG SCCOP Work Group was disbanded and replaced with a new Supply Chain Steering Group which reports directly to ILT / PILOT
slide3

SCCOP Industry Involvement

Major Purchasers and Suppliers

PILOT

Industry Leadership Team

Operators

Supply Chain Steering Group

Supply Chain Steering Group (9)

Supply Chain Managers Network (50+)

Supply Chain Managers Network

Work Group

Work Group

SCCOPWork Group

Work Group

Work Group

SCCOP Work Group

DELIVERY

slide4

The PILOT 2010 Vision

  • To make the UKCS the safest place to work in the worldwide oil and gas industry
  • Production at 3bn BOE per day in 2010
  • UKCS capital investment sustained at £3Bn per annum
  • Prolonged self-sufficiency in Oil & Gas
  • Supporting up to 100,000 more jobs than there otherwise would have been by 2010
  • A 50% increase in oil and gas exports by 2005
  • £1 billion per annum additional revenue from new business
slide5

PILOT Initiatives

Wells Share Initiative

UK Norway Co-operation

Access to Infrastructure CoP

Decommissioning

Subsea Effectiveness

Commercial CoP

Stewardship

The Fallow Process

Technology

Step Change in Safety

Progressive & Innovative Licensing

Supply Chain Efffectiveness

Workforce Capacity & Capability

Supply Chain CoP

slide6

Code of Practice Objectives

  • Increased UKCS Supply Chain competitiveness through improved efficiency and reduced waste
  • Improve working practices, commercial behaviours and purchaser / supplier relationships
  • Regular and detailed forecasting of activity levels.
  • Enhance and simplify the bidding process.
  • Prompt payment.
  • Active two-way relationship management.
slide7

Supply Chain Code of Practice

The original Code comprised 6 sections

  • Commercial Stage - Forecast/Planning all activity up to the point of tender
  • Commercial Stage – Tendering all activity up to the point of contract negotiations, including elimination of bidders
  • Commercial Stage - Negotiation agreement of contract terms
  • Commercial Stage - Implementation and review through the life of the contract and at the end of the contract
  • Commercial Stage - Monitoring and Evaluation of Code
  • Implementation and Adoption of the Code

… commitment received from 80+ Operators and Major Contractors

slide8

Supply Chain Code of Practice

Code of Practice for Suppliers was developed in 2003

Stage 1 Forecasting and Planning – To provide more effective business cycle planning.

Stage 2 Tendering – To reduce the cost of bidding.

Stage 3 Negotiations – Cut waste and reduce unnecessary paperwork.

Stage 4 Implementation and Review – Getting the job done right.

Stage 5 Monitoring and Evaluation of the Code – Assuring process is in place.

… commitment received from 300+ suppliers and contractors

slide9

The Code is endorsed by:

PILOT, Industry Leadership Team, Supply Chain Steering Group, Supply Chain Management Network, DTI, EIC, FPAL, IMCA, OCA, UKOOA, WSCA

… it’s a real achievement for the Industry

For latest information see PILOT Website

http://www.pilottaskforce.co.uk/

… it has significant sign-ups already

slide11

Supply Chain Code of Practice

PLAN

CONTRACT

PERFORM & PAY

  • New clean and simple format
  • Signed by CEO and Supply Chain Manager
  • Simplified structure
  • New features include
    • Industry Model ITT’s
    • “Fair” contracting principles
    • “Value based” contracting
    • More efficient Code implementation survey
  • Drafting party represented all industry groups
slide12

Supply Chain Code of Practice

PLAN

CONTRACT

PERFORM & PAY

  • Communication of forward plans to industry
  • Provide support for Share Fairs
  • FPAL purchaser profiles
  • Suppliers to make use of information provided
slide13

Supply Chain Code of Practice

PLAN

CONTRACT

PERFORM & PAY

  • Restricting bidders to FPAL registered companies
  • Eliminate duplication of data by using FPAL
  • Providing debriefs
  • Using standard contract forms
  • Payment in 30 days
  • Use of industry Model ITT’s
slide14

Supply Chain Code of Practice

THE OPPORTUNITY

  • IADC analysis of Rig ITT’s undertaken
  • Highly fragmented approaches evident
  • Extensive duplication of FPAL data
  • Patchy use of standard contracts
  • ITT quality extremely variable
  • Tender compilation slow and expensive
slide15

Supply Chain Code of Practice

THE SOLUTION

  • Create a standard ITT structure
    • Simple, logical organisation
    • Easy buy-in
  • Standard documents for those that want to go further
  • Aimed at ease of production
    • A quality ITT
    • A swift offer
    • A trouble free evaluation
slide16

Supply Chain Code of Practice

ITT Index

Commercial Sections

Tendering instructions

Contractual Sections

Technical Sections

Guidelines on completion

slide17

Supply Chain Code of Practice

  • Templates are clear, simple and pragmatic
  • Focus is on principle not prescription
  • Uses industry documents where they exist
  • Nomenclature is standard
  • Modular design gives flexibility
  • Designed to allow substitution
slide18

Supply Chain Code of Practice

  • ITT’s are Easier, Faster and Cheaper to issue
  • Bids are Easier, Faster and Cheaper to return
  • Simplifies the contracting process
  • Code recommendations incorporated
  • Creates a vehicle to introduce better practices
  • Operators can decide their own scale and pace of adoption
  • Creates step out opportunities with Well Services, Operational and Construction ITT’s
slide19

Supply Chain Code of Practice

  • Model Rig ITT currently available on FPAL website, is now in use and is easy to access …….
slide20

Supply Chain Code of Practice

Well Services suite of Model ITT’s

Marine Construction Model ITT

Platform services, plant and equipment Model ITT’s

  • Model Rig ITT currently available on FPAL website and now in use
  • ITT drafting groups launching Model ITT’s in 2006
slide21

Supply Chain Code of Practice

CODE OF PRACTICE SURVEY METHOD

  • Easier method of surveying Code adherence
  • Use of FPAL Type III feedback uses existing industry scheme and little additional effort
  • Input now verified

3 additional elements

slide22

Supply Chain Code of Practice

PLAN

CONTRACT

PERFORM & PAY

  • Include performance Indicators in all significant contracts
  • Provide and receive FPAL performance feedback via Type 1 and Type 3 mechanisms
slide23

Supply Chain Code of Practice

PLAN

CONTRACT

PERFORM & PAY

  • Submit complete and valid invoices
  • Pay all valid invoices within 30 days
  • Adopt a prompt payment policy for own suppliers
slide24

Supply Chain Code of Practice

PLAN

CONTRACT

PERFORM & PAY

Why does the Code of Practice matter to Contractors?

WSCA 2005 Report

Revenue increasing

Profitability decreasing

The Industry still cannot afford non-value adding costs in Supply Chain Management processes

slide25

Supply Chain Code of Practice

…… work on sign-ups continues

Code covers in excess of 80% of UKCS expenditure (on an operated reserve basis)