CTOP Procurement : SCM , Contracting and Services Transformation

1. CTOP Procurement : SCM , Contracting and Services Transformation

2. Seven Procurement Strategy Levers • Key management actions demonstrating visible and consistent executive support for procurement strategies • Business Strategy & Operational Planning includes Procurement participation Corporate Direction • Clear roles & responsibilities for strategy ownership,execution of procurement policies & procedures, supplier selection and access to spend and contracting authority • Co-ownership and accountability for results Governance • Enterprise-wide Strategic Sourcing and Supplier Management Coordinated at the Appropriate Level (Globally, Regionally, and Locally) focused on the category supply chain and may include regional tactical procurement. Category Management • Structure enables category management, with regional and local execution, separating strategic and tactical activities • Efficient and cost effective delivery of operational services that leverage regional & local economies of scale Organization • Sufficient skilled and competent cross-functional resources with business, commercial and supply chain knowledge Organizational Capability • Full implementation of eSourcing tools across the enterprise • Fully integrated Systems to enable processes & data access (out of scope) Process / Systems / Tools • Common / core KPI’s across enterprise to drive category management & procurement operations Metrics

3. Corporate Direction • Strong Functional Expertise • Business Unit Responsibility • Joint Reporting to BU Management & GM Procurement • Contracts & Procurement & Services • Guiding Principles • Procurement will be partners in the Business • We will use standardized processes and technology • Results will be delivered through a highly competent organization • We will measure and manage our progress • Governance will be in place for all 3rd party spend • CTOP Leadership Team and Managing Directors to show visible support

4. Governance • We “own” the process for contracting goods and services • Annual Contracting Plan • Contract Review Committee (CRC) • Sign off on Contract Brief prior to execution of contract • Sign off on Purchase Orders • Jointly own the contracts – Joint accountability for contract performance • Responsible for contract compliance (includes governance in the contract) • Insure focus on OE and Total Cost of ownership

5. Category Management Structure / Focus • Category Management in CTOP is WEO Model. • Process Improvements and Lessons Learned will be captured as we deploy and modify. • What’s Next for Category Management? • Equipment RAT PCI EDE LGT MRO • Production Ops Engineering Tech Services Chemicals Small Capital Projects Maintenance • Logistics Aviation Marine Rail Road

6. CTOP & CTNAU Presidents Sponsors Category Group Council WEO Head (Kevin Lacy) Decision Exec • Responsibilities • (Councils & Subs) • Assure category strategy alignment with CVX business plans & drivers • Opportunity Prioritization • Resource Allocation • Optimize Synergies • Endorse & support Group Strategy • Performance Requirements • Performance Monitoring • Formal Business Interface and Guidance WEO, CTOP & CTNAU Leadership Team Representatives (VPs, MDs) Upstream Procurement GM(s) GM, Supplier Mgmt & Integration Corp HES VP Others (PRC, ETC) WEO CTNAU CTOP Illustrative – Actual teams and locations tbd WEO Category Group Group Category Team (Houston) • Responsibilities: • Strategy, Targets, Results & Reporting • Category Management Process • Best Practices • Common Policies • Use of standardized sourcing and contracting processes & resources Africa LA A/P EU NA Techcos & Servcos CTOP CTNAU Austral Asia / China Indo. & Asia South South Africa Nigeria Mid/Afr Eurasia & KSA Latin America MC GOM Europe CCR SJV Category Teams On & offshore Rigs Well Construction Materials Well Construction Services Subsea Wellhead Systems Category Manager Category Lead for BU SME Enterprise supplier / CVX teams as appropriate CVX/supplier local teams CVX/supplier local teams

7. Organizational Focus

8. Organizational Capabilities ASU MBA *Number of CTOP Personnel in Courses Completed or scheduled for 2003-04 1084 (Not counting Corporate courses) (Other recognized MBA Programs) CPM Certification ASU SCM Certificate Contract Professional Training Program** Advanced Negotiations* Market Analysis (25) *Just Now Available **Under Development ***(130 Web-based) 0~36 Months 0~24 Months Strategic Cost Mgmt 50 Strategic Sourcing 215 SM&I 280 CPDEP (200+) CSOC (200+) Contracting Workshop (120) 0~12 Months Inventory Mgmt. & Investment Recovery 125 Whse & Materials Mgmt -0- Total Cost Of Ownership 20 Internal Customer Relationships 125 Intermed. Negot 170 Practical Negot 152 Basic Procurement 75 Contract Admin 165 BASICS OF SUPPLY CHAIN MANAGEMENT 675

9. Leadership Leadership Performance (Other recognized MBA Programs) CPM or Equiv. Certification ASU MBA ASU SCM Certificate Contract Professional Training Program** Advanced Negotiations* Market Analysis Strategic Cost Mgmt Strategic Sourcing SM&I CPDEP / CSOC OE Contracting Workshop Inventory Mgmt. & Investment Recovery Whse & Materials Mgmt Total Cost Of Ownership Internal Customer Relationships Intermed. Negot Practical Negot Basic Procurement Contract Admin BASICS OF SUPPLY CHAIN MANAGEMENT *Number of CTOP Personnel in Courses Completed or scheduled for 2003-04 1084 (Not counting Corporate courses)

10. Process / Systems / Tools • We will use the Ariba suite of tools (Buyer, Contracts, Sourcing, Analysis/Dashboard and Category Manager) • All sourcing will use Ariba Sourcing and the standard sourcing process • We will categorize contracts and focus on the key and strategic contracts • Key and strategic contracts will require active contract management with jointly agreed metrics and business plans • Ariba Contracts module will replace contracts module in JDE • We will use IRIS & Contracting Best Practices and Principles • Standards Board will provide governance for JDE & One World deployments

11. Metrics • Scorecards for strategic suppliers at BU and OPCO level. BU’s to roll up to OPCO. • Establish and Monitor Key Performance Indicators for CTOP SBU’s • OE Metrics • Savings (First Cost & Total Cost of Ownership) • Cycle Time • Inventory $/BOEG • Training - % employees taking mandatory training • Progress to Measured Value / Transformation Assessment

12. CTOP Transformation Next Steps • Complete assessment tool –to include OE focus and national content • Conduct assessments of BU’s by first quarter 2005 • Report to DRB with recommendations • Resources :Mike Tweedy, Rick Combs & Ron Alvarez • We are transforming now –continue to move forward with implementation of the seven levers