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Schlumberger Business Consulting

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  1. Schlumberger Business Consulting Business Strategy, Capabilities, and Market Offering Overview (Internal) Don Painter, Director, Business Consulting, NSA

  2. SIS Business Consulting Mission – Turbocharging the Growth Engine

  3. Market – Upstream Consulting Opportunity The upstream Oil & Gas Consulting market is large (>$500M), unconsolidated, and attractive to Schlumberger … • Major segments are: • Asset Management and Portfolio Optimization • Production Optimization • Technical Skills Management • Information Management Solutions • QHSE Efficiency Improvement … with no dominant players.

  4. Alignment with Core Business 1 6 2 5 3 4 Implementation Costs (M,T,P) Size proportional to benefits We are targeting the most attractive solution areas for our clients… • Expected return (for a $10B company) • Asset Portfolio Management- 10% on capital allocation – $100M • HSE- 30% on HSE related costs – $45M • Technical Skills Management and Knowledge Management- $100M per year • Rationalize IT Operations - 30% of IT Budget – $45M per year • Protect Corporate Assets- $20M to $100M • Production Optimization i.e. DDP/ALMCERA estimates – $50M to $300M

  5. 9 Increased Demand – 1.5%/yr 30 Decline in Production – 4.8%/yr 47 High risk investments and multiple options across the complete supply chain The Problem of the DecadeIntegrated industry facing very large capital commitments… World Oil Supply – Demand: A.G. Edwards (MMBOPD) 77 86 2010 2000

  6. 65+ 60-64 55-59 50-54 45-49 40-44 36-39 30-34 25-29 Workforce Age Distribution 20-24 O&Gdistribution Typicaltech company Age 0 5 10 15 20 25 Number of Employees Industry Challenges Reserve declines , demand growth, increasing business and technical complexity, and an accelerating knowledge loss are creating a change imperative for the upstream oil and gas industry Production Demand Increasing World Oil (MMBOPD) • A large percentage of future production must come from mature, complex fields so control of the inherently higher lifting costs will be critical for profitability • Managing asset risk is critical in view of increasingly challenging and complex investment environment • An aging traditional workforce is forcing the need to rapidly capture/transfer knowledge to the new global workforce, while simultaneously demanding ever higher productivity from fewer resources • And all this must be accomplished better and faster than ever before - leveraging new collaborative tools and technologies, much of the work done remotely, and with the ever-present need to manage global data overload 39 MMBPOD Gap (+52% productivity, +80% w/ workforce impacts) Increased Demand 9 74 30 Decline in Production 47 Source: World Oil Supply – A.G. Edwards (MMBOPD 2004) 2003 2010 Source: SBC Analysis of Society of Professional Engineers Data

  7. Development and Production Costs Increasing $10.00 $8.00 $6.00 $4.00 $2.00 1994 1998 2002 US Costs International Costs Source: Oil & Gas Journal, October 20, 2003 And the Development & Production Environments are More Complex and Costly than Ever Before • Move to new, remote frontiers increases cost and complexity of the drilling and production environment • More complex business partner environment • Unstable geopolitical environment • Shifting demographics • Steepening decline of mature fields • Complex new technologies • QHSE, Sarbanes Oxley

  8. $ / bbl. $ / bbl. 36 36 32 32 Production Cost 28 28 Crude Price Production Cost 24 24 Op. Margin 20 20 Development & Finding Cost 16 16 Crude Price Development & Finding Cost Op. Margin 12 12 8 8 4 4 Priority is to reduce TCO Priority shifts to increase production 0 0 2000 1998 Typical Basis: $15/bbl The Historically Volatile Environment has Led E&P Companies to use Very Conservative Economics … and more sophisticated approaches are needed.

  9. Schlumberger Business Consultants provide a unique blend of oil and gas business insight, knowledge, and capability. . . • Deep Oil and Gas Industry Expertise • Direct, first-hand experience • Average industry experience levels > 10 years • Thought leadership • Domain Expertise in Key Operational Business Processes and Enabling Capabilities • Operational Business Processes • Organizational Structures and Capabilities • Technology Strategy, Architecture, and Solution Integration • Professional Consulting Expertise and Capabilities • Average consulting experience > 8 years • Efficient, reliable methods and tools • Global oil and gas experience Business Value Industry Expertise Domain Expertise Business Consulting Business Opportunity Consulting Expertise . . . to deliver rapid and sustainable business value to our oil and gas clients

  10. SBC Practice Leaders Come from Tier 1 firms * September 2004 Start

  11. SBC Practice Leaders Come from Tier 1 firms

  12. SBC capabilities and offerings in four basic categories, targeted at 14 different key aspects of oil and gas asset operations, capabilities, and performance improvement • Operational Business Strategy • Capital Allocation and Portfolio Optimization (SPO) • Operational Business Performance Improvement Strategy (OPI) • Merger and Acquisition Strategy (MAS) • Operational Process Enablement • Dynamic Drilling and Production (DDP) • Asset Lifecycle Management (ALM) Integration and Optimization • Asset Portfolio Optimization (APO) and Strategic Reserves Management (SRM) • Quality, Health, Safety and Environmental Performance Optimization (QHSE) • Oilfield and Information Technology Enablement • Technology Strategy and Architecture (TSA) • Enterprise Performance Management (EPM) • Knowledge and Content Management (KCM) • Complex Project and Program Management (CPM) • Organizational Enablement • Human Resource Strategy, Management, and Transformation (HRM) • Technical Resource Management (TRM) • Organizational Change Management (OCM) • Project Benefits Realization (PBR)

  13. Major SBC Opportunities and Actions -- BRZ • MarCom (Mags, Global Online, Rio Oil & Gas, Bus news, SPE Brazil, IBP) • SLB internal awareness • Attend staff meetings, presentation in Macae • Client awareness • Host a lunch/dinner for Presidents of IOCs, MRHs, etc. • Petrobras • VIP Technology Conference • Meet Formiglli • Shared Services (Erardo) • New Ventures (Eduardo Riscala) / Jose Marques • Marcio Felix – change management – Espirito Santo – make use of war room • Palagi • Luison (?)– Real-Time Drilling Center manager • Asset management initiative (Downhole monitoring, intelligent wells) – Sallier • Borges – Mexillion (gas field) • Renilton – SEAL 100 – review with Michel Galbrun • Figuereido • Vandemir (IT processes)

  14. SBC Business opportunities - BRA • Leverage on existing projects • IT security • Knowledge management (Bra, ARC) • Well placement (Vitoria war room, UN-Rio) • ABL – case study on project coordination: value, etc… • JUB – KPIs, value of project coordination • QHSE for Pesa • Opportunities • SEAL-100 • Anchova – UN-BC (slow moving) – mature field optimization – water flood installation • Ubarana - FMP • Estreito - FMP • Castanhal - FMP • Carmopolis – FMP • Portfolio management – Costa Curta • Strategic sourcing – minimizing TCO – shared services (Erardo) • Field Rehab Program - Recage

  15. Business opportunities - ARC • Leverage on existing projects • Rio Tinto • D150? • Repsol TCO initiative (on top of WS) • Pesa – change management • CVX RTPro • Total??? • Opportunities • Pan American – Sand management

  16. Project Cost – $1-2 B (one asset) • NPV Impact • Total NPV impact (4 – 8% ROI): • $40M - $170M Exploration Exploration Development Delineation Development Production Maturity Maturity Accelerated revenues: 2- 3% $20 – $60M Increased recovery: 2-3% more production$24 - $$72m + + Cash Flow Cash Flow Time Time Project cost efficiencies 5% of E&C time $18 – $36M _ _ Goal Traditional Development Impact of ALM Traditional Development Dynamic Asset Optimization (DAO) Defined • “DAO is the integration of: • Business operating strategies • Core operational business processes • Organizational capabilities • Information technology • Oilfield technology • to continuously improvethe business performance of E&P assets.”

  17. SBC Advantages • Oil and Gas Focus • Deep Oil and Gas Experience and Domain Expertise • Proven Solution Architectures and Enabling Intellectual Capital • Multi-Disciplinary Approach • Proven, Efficient Methods and Tools • Business Orientation vs Technology Orientation • Product Independence • Capability to Leverage and Focus Full Schlumberger Capabilities • Global Presence and Consulting Capabilities • Client Advantages • Rapid credibility, contribution, and value add • Maximum Solution Efficiency • Minimum “time-to-value” • Leverage of unique Schlumberger industry perspective and best practices • Complete, holistic, reliable, and sustainable solutions • Open, integrated, best-of-breed solutions • Maximum solution relevance and value delivery across the solution • Minimize benefits risk, maximum benefits realization • Global support for global clients and global solutions The SBC Advantage

  18. SBC – Initial Process and Value Chain Capabilities

  19. SBC – Initial Process and Value Chain Capabilities

  20. SBC’s Operational Offerings Align Well with the SIS and OFS Solution Strategies and Offerings Portfolio Management& Capital Planning Exploration & Appraisal Facilities & Reservoir Engineering Construction & Development Production &Maintenance Divestiture & Retirement Dynamic Drilling & Production (DPP) Business Consulting Asset Portfolio Optimization (APO) Asset Lifecycle Management (ALM) Technology Enablement (ETS) Organizational Enablement (OCM) Drilling & Production Reservoir Characterization Value & Risk SIS Products & Services Information Management Infrastructure Services Data & Consulting Services Drilling & Measurements OFS Products & Services Well Completions & Productivity Well Services Wireline Seismic Services

  21. Business Consulting offerings are well-aligned with those of other segments and offer tremendous pull-through potential

  22. iField solutions are quickly moving from “technology experimentation” to “E&P business transformation”

  23. Business Consulting Perspectives on i-Field • i-field is quickly moving from: • Conceptual to the practical • Visioning to Operationalizing • Evangelist/Champion-driven to Strategy-driven • i-field is not a single thing. It is actually the act/practice of applying a definable set of disciplines, skills and solutions to the E&P business • The key to success in I-field is knowing what (I.e. disciplines and solutions) to apply where in the E&P business process space • i-field is not about technology breakthroughs anymore. The technology is there and has been largely proven. It is about: • Implementation/rollout barriers • Sustainability issues

  24. Business Consulting Perspectives on i-Field • The next wave of progress in i-Field will be aimed at unlocking the total value potential associated with • Streamlined E&P business processes • Aligning E&P organizational capabilities • Organizational structures in the context of new collaborative and remote operations technologies • Technical Skills Management in the context of new technologies • Technical Skills Capacity/Capability Management in the context of dramatic demographic changes • Performance management systems • New technologies and demographic changes have major TSM implications • We need to begin viewing the E&P asset as a “hydrocarbon factory” (I.e., a continuous manufacturing process operation) • Suggests that we should carefully but aggressively borrow from the Downstream experience with implementation and exploitation of process instrumentation, control, and optimization technology

  25. Getting Started The Assessment & Planning Engagement • Five (5) Internal Schlumberger Business Consulting Objectives: • Understand client’s current business context/environment and align with client’s strategic business and operating objectives • Build rapport, credibility, and confidence with the client • Understand and assess the client’s internal power/influence structure, political environment, and organizational dynamics • Identify, qualify, and assess the overall Schlumberger opportunity (I.e., not just Business Consulting) with the client • Optimize the targeting and delivery strategies for prospective Schlumberger offerings and solutions to be proposed to the client • Five (5) External Engagement Objectives: • At some appropriate level of detail/precision, based on scope, complexity, and the client sponsor’s budget …. • Understand client’s current business context/environment and align with client’s strategic business and operating objectives • Assess client’s current business capabilities in three dimensions (I.e., business processes, people and organization, technology) versus relevant best practice and competitive business architectures • Define the target business architecture (i.e., “solution architecture”) and capability gaps • Define/scope the client’s value proposition and business case • Define a solution roadmap and implementation plan

  26. Getting Started The Assessment & Planning Engagement Launch Align Assess Design and Plan Propose Action Business Processes and Best Practices Organizational Structures and Capabilities Kickoff Develop or Validate Strategy Proposal Information and Oilfield Technology Business Case & Implementation Plan Client Input and Validation Typical Duration: 1 weeks – 3 months, depending on scope, complexity, and precision Typical Resources: 3-10 SBC resources, 3-5 Client resources Typical Cost: $70K - $300K

  27. For “complex solutions”, SBC’s capabilities and value starts with “Assessment and Planning” and can extend high-value capabilities across the solution lifecycle. Program / Project Management Quality Management Engagement Management Cost & Schedule Management Contractor Management Assess & Plan Alliance Partners Benefits Realization Management Capability Assessment & Plan Solution Design Industry Standards: CMMI, ISO, PMI, WITSML Solution Development and Implementation Solution Architecture Business Process Optimization Business Case Development Organizational Change Implementation Plan Technology Enablement Business Process Operations Applications Support Client Commitment Infrastructure Support Business Consulting Consulting Internal / External Delivery Partners SI / IM Resources

  28. The SBC approach to iField transformation exploits our Integrated Business Process Models for the E&P business to provide - Provide an efficient framework supporting assessment, planning, and solution design - Identify streamlining, instrumentation and automation opportunities - Support for process simulation

  29. Assess Plan & Develop Validate Present Initialize Align & Strategize Strategize Executive Review Internal Client ‘As-Is’ Processes ‘To-Be’ Processes Summarize Solution ‘As-Is’ People & Org* ‘To-Be’ People & Org* Analyze Solution Gaps Business Case ‘As-Is’ Applications ‘To-Be’ Applications Fill / Resolve Solution Gaps Solution Architecture ‘As-Is’ Technologies ‘To-Be’ Technologies Architect Capabilities Plan Implementation ‘As-Is’ Architecture ‘To-Be’ Architecture ‘As-Is’ Integration ‘To-Be’ Integration Capability Assessment Plan Best Practices Gap Analysis Getting Started The Assess and Plan Methodology is part of a comprehensive, integrated Business Transformation Methodology utilized by SBC. *Includes HR, OCM, TRM, etc.

  30. Business Consulting “Rules of Engagement” – Key Elements • Three models/scenarios • Product-led/Consulting-support • Consulting-led • Joint Venture • Consulting pricing and costing • Geomarket “commission” for facilitating Consulting business

  31. Suggestion: Utilize SBC … • When you want to differentiate yourself from HAL/LMK • When the client is uncertain about their solution strategy and business value and/or is moving slowly • When you want to accelerate the client’s internal alignment and decision process • When you want to start displacing HAL/LMK • When you want to get more influence, access, and visibility to the decision-makers and the decision process • When you want to change the nature of the client relationship and the discussion from hardware and software “transactions” to a longer-termed, more strategic partnership

  32. More information? …. Call Don Painter Director, Business Consulting, NSA Schlumberger Information Solutions 5599 San Felipe, Suite 1700 Houston, TX 77056 Office: 713-513-2503 Mobile: 832-607-0733 Fax: 713-513-2012 eMail: dpainter@slb.com …. Or go to …. www.slb.com/sbc

  33. Backlog and factored pipeline cover more than 100% of 2004 revenue target

  34. Our goal: $100m Business in 5 Years, with 12% Net • We are confident about initial plan, leading to $100m in 5 years • Main investments in 2005 will be China & Russia • $1 to 2m investment each • Market for consulting services is abnormal • Maintaining Business Model is essential • SBC control of resources & prices is key • Temptation by non-SBC sales to discount billing rates is high • More growth? • Organic growth will be determined by the number & quality of people we can attract and the working capital • Acquisition options are limited

  35. 10 locations covered with 77 professionals

  36. Clients are buying our target offerings

  37. NSA Highlights • Initial Principal training and market offering development effort completed • Strong backlog and pipeline growth • Good FY04 revenue target coverage in first 4 months of operations • Client traction across entire market offering portfolio • Good collaborative connections and relationships established with geomarket and global account teams • Good engagement representation on strategic iField opportunities • Good engagement representation across MOCs and premier MRH (Pemex)

  38. NSA Early Clients - Examples

  39. Credentialing The Business Consulting “Credentialing” Process - Objectives • Establish credibility and rapport through an insightful discussion of the business issues and challenges relevant to the client • Create motivation and hope and a compelling case for change through a discussion of related business opportunities and value propositions • Highlight the solution complexities and critical success factors, creating a “solution dilemma” and a compelling need for consulting assistance • Provide an insightful, value-added perspective on a comprehensive consultative approach and likely elements of a sustainable solution • Highlight the “Schlumberger Advantage” and show alignment with the solution CSFs • Provide an easy, logical, affordable mechanism to get started – the Assess & Plan engagement …..Experience demonstrates that, once engaged, the cost of future sales drops by more than 80% and probability improves dramatically.

  40. Total Schlumberger value will vary with each opportunity but the results will be specific and measurable • The best opportunities are those requiring the most dramatic transformations • Hard criteria • Revenue growth • DAO solution sales volume • Margin growth • SIS and OFS products and services pull-through • Did we deliver on time, on budget, what we said we would deliver, and achieve the expected benefits? • Soft criteria • Client organization penetration, especially on the production side • Client satisfaction and perceptions of SLB in the marketplace

  41. NSA Pipeline - Top 20

  42. Business Consulting – Early Priorities • Successful strategies • Leverage our existing account relationships • Develop wider sponsorship • Target the production operations side of the business • Develop close relationships with industry leaders • Understand the client’s priorities and investment plans • Scale our offerings and proposed scope of work to address client needs • Be careful not to overwhelm client • Coordinate with our other services and products in play

  43. iField Clients -- Initial Target Clients and Asset Profiles • Mature, relatively high production onshore Brownfields • At least partially automated • Example: SLB @ Waddell Ranch, Husky Oil, Shell Canada • Mature, relatively high and/or expanding offshore Brownfield production • With high levels of automation already in place • Example: Shell MARS @ Gulf of Mexico • Greenfield projects • Where DAO can be designed in from the start • MRHs and M&As who need transformation and synergy expertise

  44. Competitive Environment Work in Progress