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UK Norway Share Fair

UK Norway Share Fair. April 20 th 2006 Ardoe House Aberdeen Alastair Reid Supply Chain Team Leader - Projects. Agenda. Overview - Shell Exploration & Production Global Category Management Selling to Shell E&P in Europe Norwegian Focus Contact us. Shell Exploration & Production.

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UK Norway Share Fair

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  1. UK Norway Share Fair April 20th 2006 Ardoe House Aberdeen Alastair Reid Supply Chain Team Leader - Projects

  2. Agenda • Overview - Shell Exploration & Production • Global Category Management • Selling to Shell E&P in Europe • Norwegian Focus • Contact us

  3. Shell Exploration & Production EP Key Locations Canada NW Europe Oman USA Brunei Nigeria Malaysia Australia

  4. E&P Supply Chain Strategic Elements Strategic focus: fit-for-purpose strategies for major spend categories. Business integration: Supply Management hardwired in business processes • dedicated global matrix organisation, clear accountabilities • processes to enable synergy with suppliers & efficient requisition to pay Common approach: common processes, tools & behaviours. • Best practice processes, min standards & enabling tools, “one voice” to market • Consistent & pervasive performance mgt with credible measures to monitor progress & support delivery of benefits.  Valued people: competent professionals working on strategic level. • Assuring competence development to meet business needs

  5. Global Category Management • Dedicated capability across a majority of third party spend for major market categories • Global strategies that support business objectives • Making full use of market intelligence • Sourcing contracts optimise total cost of ownership • Post contract award: continually improve cost and value performance as well as ensuring contract compliance

  6. Stakeholders Regional/OU structure WELL ENGINEERING: rigs, bits, cementing, OCTGs, completion equip, expandables, liner hangers, fishing/ milling, coiled tubing, ESPs, well control, casing/tubing running, Directional Drlg/Wireline Upstream Business Category Groupings PRODUCTION : boats, helicopters, prod chemicals, Integrated Services, Facilities Management, installed base compression CAPITAL PROJECTS : linepipe, pipelay services, compression, subsea facilities - deepwater, agency manpower SEISMIC, IT, TRAVEL, CONSULTANCY and other SERVICES Global Category Management

  7. Shell Exploration & Production in Europe • 1 Management team • 1 Business plan • 1 Strategy • Aligned policies • Aligned procedures • Integrated support team E P E u r o p e

  8. Shell Exploration & Production in Europe • Approx. 4,500 employees - contributing approx. one third to Shell EP Business. • And the prize in each country: • Norway - Est. 70% hydrocarbons still to be produced. • U.K. - just under 50% hydrocarbons still to be produced. • The Netherlands - Over 50% still to be produced. • Ireland - Plans to bring Irish gas onshore • Germany - Successful gas production in Europe’s biggest mature energy market. • Italy - Turn largest onshore oil accumulation in Europe into a legacy position. • Austria - Successful mature operator with growth aspirations. • Denmark - Successful venture with an extended licence period (2042). • UNDERPINNING OUR BUSINESS IS LEADERSHIP IN HS&E PERFORMANCE

  9. Jeff Prestwich Support Manager SCM Production SCM Alex de Jager Neil MacLean ASSEN ABERDEEN Supply Chain Management in E&P in Europe Supply Chain Manager John Lickvar ABERDEEN Well Engineering SCM Projects SCM Services SCM NOV SCM Iain Middelton Marie Marsh Clive Bray ABERDEEN ABERDEEN ABERDEEN STAVANGER Assurance, Process, External relationships Non Shell Operated Ventures Drilling Well Engineering E&M, Logistics Production Services IM/IT, Geosciences HR, FM Capital Projects

  10. Integrated Service Contractors (ISC) • Significant volume of our activity is performed by ISC's • Where we have an ISC - generally • Shell contract with 1st tier suppliers • ISC contract with 2nd tier suppliers • Key contacts within the ISC’s are available

  11. Supply infrastructure EPE gas/oil fields Shell Exploration & Production in Europe - ISC Overview Groningen Land Norway/Brent “Central” “Mature” Onegas GLT Maint MultiGas AKOP WGE Sigma 3 AJS OMC GLT Proj LOP(Projects) Maintenance only Projects only P + M

  12. Integrated Maintenance and Modifications Contract (ISC) Aker Kværner Offshore Partner (AKOP) Integration with and between Stavanger and Kr. sund organisations • Project Engineering and Engineering & Maintenance • Engineering Services: Mechanical, E&I, etc • Support: Procurement, Cost/ Plan, DCC etc • Prefabrication • Construction: Mechanical, E&I, Structural, Process, Safety, Surface Treatment, Insulation, Scaffolding • Maintenance Support: disciplines as above • Subcontracts: • Surface Treatment, Scaffolding/ rigging, Insulation • Process Support: pressure testing, high pressure cleaning, nitrogen purging. Option. • Civil: roads, structures, buildings, concrete, drains. Option • Material frame agreements: piping, steel, cable trays, nuts and bolts etc. • Does not include: maintenance discipline contracts (valves etc – managed directly), front end engineering/ concept. Larger mods/ projects can be run separately

  13. Our Value Proposition to Suppliers Relationships • It is our aim to work effectively with the industry, and where business needs justify and competitive supply assured, we build long-term relationships based on trust and clear, mutually agreed objectives. • We capture the efficiencies of dealing with suppliers, for example through standardising prequalification and terms & conditions. Collaboration • We work with suppliers in development and deployment of key technologies. • We actively promote the fair sharing of risk between supplier and operator, which is increasingly important as we venture into more technically and commercially challenging environments. Performance • Relationships with suppliers who perform to an excellent standard will be nurtured. • We measure performance and build differentiating performance into our contracting strategies.

  14. Doing Business With Shell Exploration & Production in Europe • Shell E&P in Europe use the oil & gas industry supplier database - Achilles in Norway and FPAL in UK and NL which eliminates the need to maintain our own in-house supplier database. • Achiles and FPAL give us a structured way of identifying and selecting potential suppliers & contractors based on the quality of their data in the database. • Suppliers interested in working with us should register with Achilies andFPAL and build up an attractive supplier profile by registering as fully and as accurately as possible. • Large or Critical suppliers may also be required to undergo FPAL Capability Assessment, to reduce duplication of requests for information in the tender process.

  15. The Supply Chain Code of Practice outlines a set of best practice guidelines for the UKCS oil and gas industry to: First adopted by the industry in 2002, signatories undertake to work towards full compliance. They include major purchasers (UKCS operators and principal contractors) and suppliers (companies providing goods or services). Streamline pre-qualification, tendering and negotiation processes to reduce billing costs, eliminate waste and value and increase competitiveness Increase feedback dialogue and shorten payment cycles to improve performance Transparent planning of contracting activity by major purchasers to improve supply chain capability • Include performance indicators • Give FPAL performance feedback • Pay all valid invoices within 30 days • Where pre-qualification data is required only invite bids from suppliers registered with FPAL • Eliminate supplier data duplication by utilising FPAL • Use industry standard ITT Models where appropriate • Provide appropriate de-briefing for all bids • Use industry standard contract forms • Include payment terms of 30days in all contracts • Communicate forward plans to the industry • Support the annual industry Share Fair • Publicise a list of internal contacts • Review Purchaser plans, FPAL Purchaser Profiles and attend Industry Share Fairs • Track and discuss key contract performance indicators • Request and participate in PLAL performance feedback • Submit complete and valid invoices • Adopt a prompt payment policy for own suppliers • Keep FPAL records valid and up-to-date • Refer purchasers to FPAL if duplicate information is required • Participate in the Industry Mutual Hold Harmless • Use standard industry contracts (LOGIC type or company specific global contracts)

  16. Business Principles Services and products delivered in accordance with Shell General Business Principles HS&E & Quality Aligned management systems and a very good performance track record Mutual Indemnity Agreement Undersign the deed Financial Satisfactory financial position to provide continuity in the market where it operates Technical (product features / vendor business capabilities) Meet requirements of (inter)national and if required specific Shell / E&P in Europe defined standards Shell Exploration & Production in Europe expects from vendors

  17. Norwegian Specifics

  18. Shell E&P Europe - Norway Kristiansund: 50 staff approx. Draugen Field Production Orman Lange Field Production (Oct.2007) Engineering Maintenance Aukra: 30 staff approx. Orman Lange Field - Plant & Admin Gas Processing Kristiansund Aukra Stavanger: 550 staff approx. Central Office Well Engineering Exploration Drilling Project Engineering Corporate Functions (FM, HR, Finance) Stavanger

  19. Office established in Kristiansund 1989 Operations in Kr. sund in 1992. 1 platform & single train Shell ownership, skilled offshore staff Value creation in Mid-Norway seen as target also for Ormen Lange: 40 year perspective Operations: Mid-Norway and NorskeShell

  20. E3 D3 Draugen Subsea Layout 2007/8 Activity

  21. Draugen project funnel showing big potential future projects: new loading buoy CO2 pipeline supply from the beach and injection into reservoir re-installing a drilling rig on the platform Draugen

  22. Trym Development • Trym is a Norwegian gas/condensate development • Trym Owners • Shell (50%) • Statoil (30%) • DONG (20%) • Tri-lateral subsea well • Tied back to Harald (located in Danish sector) via 5 km 8” flow-line. • Harald is a DUC owned and Maersk operated platform. • DUC = Danish Underground Consortium (39% A.P. Møller – Mærsk AS, 46% Shell, 15% ChevronTexaco). • Cross border issues Norway / Denmark Trym

  23. Rig availability - critical factor Drilling operations: Q1 and Q2 - 2007 Marine installations during summer season 2007 Harald platform modifications during Q2 and Q3 - 2007 Production start: Q4 - 2007 Plan

  24. Location: Gas production: Recoverable gas reserves: Recoverable condensate Water depth: Field investments: Pipelines investments: Operator for development andconstruction: Operator for production: 120 km northwestof Kristiansund 20 GSm3/yr 375 GSm3 22 MSm3 800 – 1100 metres Approx 55 bn NOK (2002) NOK 5 - 17 bn NOK Norsk Hydro ASA A/S Norske Shell Ormen Lange

  25. Ormen Lange Production Stair Case • Commissioning • Start-UP • Transfer of • Operatorship • Recruitment • Contracts • Maint. • Systems • Emerg Org. • Take-over • Recruitment • IT systems • Man systems • Procedures • Tender • Organisation 2007 • Recruitment • Operability Rev. • Contract Strategy • Power • Commissioning 2006 • Strategies • PDO • Organisation • Design 2005 2004 Operational Readiness 2003

  26. Ormen Lange Maintenance: Outsourcing Level Support preventive, corrective, shutdowns etc MAINTENANCE SUPPORT BY ISC SPECIALIST MAINTENANCE Preventive, Corrective and Condition Monitoring Equipment Suppliers and Other Specialists Call-off based on condition monitoring and preventive maintenance routines CORE MAINTENANCE 1st Line, Corrective and by Shell Personnel Supervision of execution, PMRs, 1st Line Core Maintenance 32% Support 38% • I.e. Shell ownership retained; • outsourcing level: • Stable, • Builds on current organisation Specialist 30%

  27. Examples of Ongoing and Upcoming Tenders: Ormen Lange and Draugen • USC Ongoing • Draugen Area Tiebacks 2007 • Frame Agreement for Lifting Equipment Tender Evaluation ongoing • Maritime Support/ Tugs – Ormen Lange Tender Evaluation ongoing • Inspection & Corrosion Monitoring tender Strategy/ plan for approval • Condition Monitoring Services tender Prequal performed • Quantitative Risk Assessment Services Screening & Prequal final • Control System Support Services Strategy/ plan for approval • Maintenance of Valves 2nd half 2006 • FM – Work Environment Q2 2006

  28. Contracting future plans Updated Quarterly Includes key contacts and timing per activity Selling to Shell overview Shell Group Business Principles Supply Chain Management key contacts www.shell.co.uk/supplychain

  29. We have a hard copy listing of contacts available for you For follow up please use our Contact List or contact: Shell emailvicki.caveney@shell.com Contact Us ……

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