A.T. Kearney & Aker Solutions

Contracting Strategies & Behaviours

1) Process & Culture2) The Twelve Deadly Sins3) Collaboration4) Lean Processes

CONTENTS

To tackle the current challenges one hypothesis is that we need to remedy two systemic areas of value leakage

·A lack of cost focus during $100 oil has seen inflation of development and extraction costs in the race to First Oil

·Robust, collaborative processes are now required that cut across functional silos in a fact based methodology to reduce Total Cost of Ownership across the entire value chain

·Years of silo’ed thinking and competitive attitudes across operators and OFS providers have led to uncoordinated actions, specifications and duplication of common costs

·Today’s climate may justify a more radical approach, learning from other (younger) industries to tackle common O&G challenges in a combined effort – and getting the best person for the job!

THE TWELVE DEADLY SINS is a framework enabling us to tackle common causes of value leakage in processes

The Twelve Deadly sins of value leakage in processes

Drilling Projects

1 Mismatch helicopter flights

2

3

4

requirements levels

Unawareness technology

making

VO’s)

disconnect

outcomes not factored in materials” structures

Operations strategies intention and logic handover

overtime necessary

(waiting/idle time)

11 required at sites inventory

12

Specification process

Execution process

Sourcing process

10 Poor planning causing just in time needs

6 Global, local

7 Poor contract

8 Poor contract

9 Lack of commercial

awareness

5 Unit price focus

Lack of challenge and involvement at strategy setting

Over specification

Not considering

value, spreads etc.

Over-specified wells, incl. logging

Company men not familiar with

Commissioning services when not

Rig type to well requirements

New technology not considered (e.g. cuttings handling) Procurement involved too late to influence specs and strategy

Global agreements not incorporating local needs

Not incentivizing crew for best well

Mobilizing last minute support

Keeping kit offshore when not

Focus on day rates not associated

Not using operations data for functional decision making

Wrong concept choice

Tender driving wrong behavior (e.g.

Triggering variation orders

Contracting strategy not inducing optimal contractor behavior

agreements for local optimization

contractors to make best decision

commissioning spares to ops

Metallurgy for subsea equipment

Not using latest weight saving

Lack of flexibility in EPC frame

Payment terms, interfaces, risks etc.

Lack of consideration for handover to

Not sharing impact of delay to

Poor handover of spare parts and

Over-sized safety stocks or service

Overlooking experience and qualifications of contractor staff

differentiated, e.g. off-/onshore

Offshore staff unaware of contract

Storing obsolete/slow moving stock

Offshore O&M

Low capacity utilization of e.g.

Not using latest inventory replenishment software

No TCO mindset in decision

Maint. frame agreements not

Uncontrolled use of contractor

Low utilization of contractors

High share of spend on “time &

Should we be following leading examples of collaboration in other industries?

This mode of operation and collaboration would require an enlightened view on how to work in an industry, as well as a radical change in attitude...

Addressing the cultural challenges in Oil & Gas

Tesla: SRM & Open Source mindset

·“Tesla Motors was created to accelerate the

·If we clear a path to the creation of compelling electric vehicles, but then lay intellectual property landmines behind us to inhibit others, we are acting in a manner contrary to that goal.

·Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.”

·Tesla rely on leading SRM behaviours to learn

advent of sustainable transport.

about technology advances from their suppliers

Oil Operators: proprietary mindset

·Some emerging shared contracts across operators (e.g. maintenance)

·However, limited collaboration or shared development and planning

·Growth in patents has grown at double digit rate in the six years since 2008 recession

Collaboration

Values

Lean Work Processes

Lean Work Processes

Lean Work Processes