The Report Final

Study the operational, logistics and Inventory management aspect of Completion Division, Weatherford

Summer Internship Report| School of Petroleum Management, Gandhinagar 1 | P a g e

CONTENTS EXECUTIVE SUMMARY……………………………………………………………………………………………………………………………iv

INTRODUCTION ....................................................................................................................................... 4

OBJECTIVE OF THE STUDY ........................................................................................................................ 5

ORGANIZATION PROFILE ......................................................................................................................... 6

COMPLETION DIVISION ........................................................................................................................... 8

Completion Department chart ............................................................................................................. 8

The Process Flow of the Department ................................................................................................... 9

COMPETITORS ....................................................................................................................................... 10

PRODUCT’S PROFILE .............................................................................................................................. 12

PROJECTS .............................................................................................................................................. 13

PROJECT 1: UNDERSTANDING THE PRODUCT PROFILE OF THE COMPLETION DEPARTMENT .................. 13

Sand Control: ..................................................................................................................................... 14

Gravel pack: ................................................................................................................................... 14

Frac-Pack: ...................................................................................................................................... 15

Expandable sand screen: ................................................................................................................ 15

Cased Hole Completion (CHC): ........................................................................................................... 16

Packers: ......................................................................................................................................... 16

Nipples and Lock: ........................................................................................................................... 17

Slick Plugs: ..................................................................................................................................... 17

Flow Control Valve: ........................................................................................................................ 18

Safety Valve: .................................................................................................................................. 18

Intelligent Completion Technology (ICT): ........................................................................................... 20

Gauges........................................................................................................................................... 20

Fiber Optics & Gauges:................................................................................................................... 20

Slickline: ............................................................................................................................................ 21

Well Intervention: ............................................................................................................................. 21

PROJECT 2: UNDERSTANDING THE TENDER PROCESS ............................................................................ 23

Steps Involved for filling tenders: ....................................................................................................... 25

Collection of Bid documents/tender papers: .................................................................................. 25



Submission of offers: ..................................................................................................................... 25

Attending tender opening: .............................................................................................................. 26

Periodic updates and post-tender status: ......................................................................................... 26

Negotiation: ................................................................................................................................... 26

Types of tenders ............................................................................................................................ 28

PROJECT 3: UNDERSTANDING AND ANALYZING THE PROCUREMENT PROCESS ...................................... 32

The procurement process .................................................................................................................. 32

The process flow................................................................................................................................ 32

Suppliers ........................................................................................................................................... 34

Analysis of the Ordering Process ............................................................................................................ 35

1) The Gantt chart of the ordering process: ..................................................................................... 35

2) Statistical Process Control .......................................................................................................... 36

3) Fishbone Analysis ...................................................................................................................... 37

Problem ................................................................................................................................................ 39

Recommendation .................................................................................................................................. 39

PROJECT 4: UNDERSTANDING THE LOGISTICS PROCESS ......................................................................... 41

The Process ....................................................................................................................................... 44

Additional License............................................................................................................................. 46

The demobilization of tools ................................................................................................................... 47

About the SEZ ................................................................................................................................... 48

The Role of Custom House Agent ......................................................................................................... 49

The Process of getting Essential Certificate ............................................................................................ 51

The Role of Completion Department ..................................................................................................... 53

Recommendations ................................................................................................................................ 54

PROJECT 5: UNDERSTANDING THE INVENTORY MANAGEMENT ............................................................ 55

Repair and Maintenance Schedules ....................................................................................................... 57

Inventory analysis.................................................................................................................................. 60

Causes for inventory .......................................................................................................................... 61

Classification of the inventory under the product line ........................................................................ 64

Suggestions to reduce current inventory ............................................................................................... 66

Suggestions to avoid further inventory .................................................................................................. 66

CONCLUSION ......................................................................................................................................... 67



BIBLIOGRAPHY ...................................................................................................................................... 68

APPENDIX: ............................................................................................................................................. 69

A) Key Dates: .................................................................................................................................. 69

B) Company Evolution .................................................................................................................... 70

C) Organization Chart ..................................................................................................................... 71

D) Tender terminologies ................................................................................................................. 71

E) The Incoterms for logistics ......................................................................................................... 73

F) The Form for Due diligence ........................................................................................................ 74



INTRODUCTION

Operation is the core functional area for the service providers. Managing the various product

lines, procurement, assets and inventory and logistics; in short the complete supply chain is one

of the biggest challenges for the service providers. Proper management of various operations will

avoid uncertainty and will help them to give the clients the cost effective solutions. Supply chain

management consists of the chain of all who are involved directly or indirectly in fulfil ling the

customer requests. This means the chain comprises right from the procurement to the distribution

stage. The key objective of a supply chain management is to maximize profit by effective

management of product flow, information flow and fund flow. Therefore, supply chain

management has the objective to be able to have the right product, in the right quantities, at the

right place and at the right time with an optimized cost. Here through this report, I will try to

explain the supply chain management done in Oil field service companies (OFS) by keeping the

Well Completion division of Weatherford Oil Tool M.E. Ltd as the base for the study.

OFS are companies that provide services to the petroleum and exploration and production

industry but that do not typically produce petroleum themselves. With exploration in difficult

and newer areas like deep water , oil sands , etc , becoming need of the day because of declining

oil reserves (80% of the world‟s producing assets are in decline).Thus the demand for

technology-driven oil field services has increased with a view to maximize recovery,

development and production efficiency. Hence, it requires that the OFS should be efficient in

their working. For OFS, to be efficient, they should manage their supply chain properly.

Weatherford International Ltd. (Weatherford) is an OFS, the major providers of equipment and

services for the drilling, evaluation, completion, production and intervention of oil and natural

gas wells. The company has 125 manufacturing facilities, 800 service bases, and 16 technology

development and training facilities in 100 countries. It is headquartered at Houston in Texas, the

US. The company's product offerings can be divided into 10 service lines: artificial lift systems,

drilling services, well construction, drilling tools, completion systems, wireline and evaluation

services, re-entry and fishing, stimulation and chemicals, integrated drilling, and pipeline and

specialty services. The well completion division of weatherford provides services during the

completion phase of the exploration.



OBJECTIVE OF THE STUDY

The objective of the project was to completely understand the operations of the completion

division of Weatherford Oil Tool M.E. Ltd. It was mainly focused on the study of supply chain

management practiced there. I tried to study the tender process of the division, the procurement

process, logistics and inventory management done by the division. Through this project, I also

got the opportunity to study the corporate culture practiced in the company.



ORGANIZATION PROFILE

Weatherford International Ltd (NYSE: WFT) is a Swiss-based, multinational oilfield service

company. It is one of the largest international oil and natural gas service companies. It was

formerly based in Houston, Texas. The company offers an exceptional breadth of product,

services and technologies breadth of exploration and production industry with product and

services that span a well‟s life cycle, encompassing drilling, evaluation, completion, production

and intervention. (Weatherford, Annual Report, 2009).

From its inception, the company pioneered an innovative

technique and equipment for the cementing of cased-hole oil

wells. Originally marketed to U.S. well owners, Weatherford

drilling and casing equipment was soon being used in the oil

fields of Venezuela by the Gulf Oil .Organic growth has

remained very catalytic factor in growth of Weatherford, it

created a stronger completion competence with the addition of

well-known brands in the sector such as Petroline, Cardium,

Nodeco, McAllister, Johnson Screens, Houston Well Screens,

Arrow, and CIDRA. (Wikipedia, 2010). As an oil and natural

gas drilling Services Company, Weatherford produces a variety

of products and services for the oil and gas industry. These

include drilling services, electronic well measurement and

monitoring, completion, production, and evaluation products

and services. In particular, the company has developed

directional drilling services that can extend through miles of bedrock with great precision, and

tubular running services that are used on almost half of the world‟s deepwater drilling projects.

The company has more sand screen systems installed worldwide than any other company, and

production optimization systems in 40,000 wells around the world. Weatherford also offers

intervention, completion, and decommissioning services for well owners, in addition to pipeline

pre-commission and commissioning operations.

Key Points

NYSE: WFT

Head Quarter :Geneva

Country :Switzerland

Founded in Weatherford,

Texas in year 1941 by Jesse

E. Hall Sr.

No. of Employees : 52000

(2009)

Operational in 100 countries

Mission: “Weatherford’s is

to be the company of choice

for an extensive range of

oilfield products, services

and technologies that will

help our customers produce

oil more efficiently and

profitably.”



Weatherford has created a more streamlined organizational structure to continue a push towards

greater individual productivity levels through more intensive recruiting, training and retention.

During the first quarter of 2007 in connection with an organizational realignment, company

segmented their operational performance on geographic basis. Company realigned their financial

reporting segments and now reports the following regions as reporting segment:

1) North America , 2) Latin America , 3) Europe /West Africa/the commonwealth of independent

states (“CIS”), 4) Middle East/ North Africa /Asia.

Their historical segment data previously reported under the Evaluation, Drilling, & Intervention

Services and Completion & Production systems divisions have been restated for all periods to

conform to the new presentation.

Figure1: Company Structure( Source: Secondary Data, Annual Report)



COMPLETION DIVISION

Completing a well encompasses installing a flow conduit from reservoir to surface, equipped

with specialized components such as packers, flow controls and safety valves, through

stimulation techniques that maximize a well‟s production potential , to well screen technologies

that protect from the damaging effects of sand. This market is characterized by an increasing

need for higher-specification completions propelled by higher-pressure and temperature

reservoirs and more aggressively produced fluids. The portfolio of Weatherford earlier contained

only basic cased-hole commodity products but now they have products that focus more heavily

on premium offerings for deepwater and high pressure/ high temperature environments.

Company offers a comprehensive line of completion tools and sand screens. These products and

services include the following:

Completion Department chart

Figure 2: The Completion Division Chart (Source: Internal Data)



The Process Flow of the Department

Figure 3: The process flow of the department (Source: Author)

The above figure shows how the completion department operations in general. As we can see

from the figure, the process starts when the client releases the tender request. The business

development team keeps a close look on these tender. If of interest, the completion

department participates in the tender. If department wins the contract, they receive the Letter

of acceptance from the client. Thus, this initiates the procurement process, which involves the

generation of Material Requisition document, Purchase order etc. Once these documents are

ready, they are sent to the pre-decided manufacturing plant or third party. Once the

equipments thus ordered are ready, they are then sent to the customers through the logistics

department. In the coming sections we will look into the tender process, procurement process,

logistics and inventory management in detail.

Supplied to Customer

Inspection

Logistics and Transportation

Custom Clearance

International Transport

Manufacturing

Procurement

Bidding for Tender

Announcement of Tender



COMPETITORS

Weatherford provides products and services worldwide, and compete in a variety of distinct

segments with a number of competitors. Their principal competitors include Baker Hughes (now

they have acquired BJ Services, which was earlier one of the major competitor), Halliburton,

Schlumberger (now they have acquired Smith International, which was earlier one of the major

competitor). Company also compete with various other regional suppliers that provide a limited

range of equipment and services tailored for local markets (PARVEEN and BOTIL).

Competition is based on a number of factors, including performance, safety, quality, reliability,

service, price, response time and, in some cases, breadth of products.

In Indian market apart from technical proficiency, supply chain management (speedy delivery);

pricing is very key issue. India is extremely price sensitive market. Most of the businesses are

won and loss because of pricing difference.

Figure 4:Company wise revenue details of world market of completions tools & services (Source:

secondary )

$-

$500

$1,000

$1,500

$2,000

$2,500

2005

2006

2007

2008

2009



It is very evident that consistently from 2005 to 2009 Baker Hughes has maintained its top slot in

market of completions tools and services worldwide, with Halliburton maintaining second slot

and Weatherford having third. But this equation can change now because of merger of BJ

services with Baker Hughes and merger of Smith International with Schlumberger.



PRODUCT’S PROFILE

Weatherford International Ltd. provides equipment and services used in the drilling, evaluation,

completion, production, and intervention of oil and natural gas wells to independent oil and

natural gas producing companies worldwide. It primarily offers artificial lift systems, which

include progressing cavity pumps, reciprocating rod lift systems, gas lift systems, hydraulic lift

systems, plunger lift systems, and hybrid lift systems, as well as wellhead systems and

production optimization. The company also designs and manufactures drilling jars, rotating

control devices, and other pressure-control equipment used in drilling oil and natural gas wells;

and provides a selection of in-house or third-party manufactured equipment for the drilling,

completion, and work over of oil and natural gas wells for operators and drilling contractors. In

addition, Weatherford International offers a line of completion tools and sand screens; wireline

and evaluation services; re-entry, fishing, and thru-tubing services; pipeline and specialty

services; and drilling and well construction services. Further, it provides chemical technology

and services comprising fracturing technologies, production chemical systems, and capillary

injection technology and services, as well as operates land drilling rigs

The product offerings of Weatherford can be grouped into ten service lines:

1) Artificial lift systems;

2) Drilling services;

3) Well construction;

4) Drilling tools;

5) Completion systems;

6) Wireline and evaluation services;

7) Re-entry and fishing;

8) Stimulation and chemicals;

9) Integrated drilling;

10) Pipeline and specialty services.



PROJECTS

PROJECT 1: UNDERSTANDING THE PRODUCT PROFILE OF THE

COMPLETION DEPARTMENT

Figure5: The product line of Completions Division (Source: Author)

Completion

Sand Control

ESS/Well Screen

Gravel Packs

Frac Packs

Cased Hole Completion

Packers

Safety Valves

Flow Control

Nipples

Slick Plugs

ICT (Intelligent completion Technology)

Gauges

Fiber Optics

RFID completions

Slickline

Service Oriented

Well Intervention



Sand Control: The installation of equipment or application of techniques to prevent migration

of reservoir sand into the wellbore or near-wellbore area. In weak formations, sand control may

be necessary to maintain the structure of the reservoir around the wellbore. In other formation

types, the migration of sand and fines into the wellbore may lead to severe loss in production and

hence need to be treated. The principal sand control techniques include:

1. ESS: Expandable Sand Screen

2. Well Screens

3. Gravel Pack

4. Frac-Pack.

The well drilling happens many a times in rock which is of variety sand stone or weak rock so

under the circumstances of high temperature, pressure and other well conditions this sand starts

entering into the system which leads to the corrosion and friction in instruments, it changes the

permeability of the well and thus production rate is altered. To protect any situation like this

measure to control sand is taken. The oil is produced from sedimentary rocks. These rocks are of

2 types: Carbonates and Sandstone. The sand control is generally used in the well producing oil

from sandstone.

Process:

a) The well is tested first by UCS test.

b) Other criteria‟s of the well are studied like:

a. Production period

b. Types of rock structure

c. Composition

c) Then depending on the studies conducted the sand control mechanism is decided.

Gravel pack: It borrows the concept from water well and the filtration process involved. A liner

is put besides the tubing and gravel is filled between liner screen and casing with the help of any

effluent or fluid. The size of gravel is decided on basis of particle size diameter of sand (PDS),

well condition, and type of rock or stone. The well fluid carrier for the gravel is prevented from

entering the perforated or slotted liner except at the top of the gravel sheath by a semi-solid

material pre-positioned in the slotted liner-tailpipe annulus. The semi-solid material is



progressively eroded by the well fluid entering the slotted liner-tailpipe annulus at the top of the

gravel sheath.

Frac-Pack: In this process, the fracturing is done in the well bore. These fractures are then filled

with proppants which help in controlling the inflow of sand and also help in stimulating the

production process. Generally the frac-pack is the costliest of all sand control technique and is

used in extreme conditions. This is a method to stimulate and fracture the well so that the

efficiency of the well improves. After hydraulic fracturing, proppant is put inside the fractures

with help of effluent. This proppant stops the sand from entering the well bore.

Expandable sand screen: The expandable sand screen is a simple and reliable sand-control

technique. After deployment, the screen is expanded to eliminate the annulus, making gravel-

packing operations unnecessary in reservoirs that carry risks, such as reactive shale, low fracture

gradient, fractures, or faults. An expandable sand screen consists of multiple overlapping

rectangular sheets of metal-weave filters attached to an expandable base pipe and encased within

a protective metal shroud. A porous screen is used in this type of control. The expandable sand

screen has a number of unique advantages.

a) It offers a large inflow area that minimizes screen plugging and erosion.

b) It is operationally simple to install.

c) It offers a larger internal diameter than most sand-control screens, thus facilitating

tubular installation for zonal isolation.

d) In open hole applications, an expandable sand screen eliminates the annulus between

the screen and the sand face. Therefore, it stabilizes the sand face and minimizes sand

movement, thus reducing the risk of sand failure and screen erosion caused by sand

production.



Cased Hole Completion (CHC): This involves running casing or a liner down through the

production zone, and cementing it in place. Connection between the well bore and the

formation is made by perforating. Because perforation intervals can be precisely positioned,

this type of completion affords good control of fluid flow, although it relies on the quality of the

cement to prevent fluid flow behind the liner. As such it is the most common form of

completion.

Packers: A production packer is a standard component of the completion hardware of oil and

gas wells it is used to provide a seal between the outside of the production tubing and the inside

of the casing, liner or wellbore wall. There are two types of packers

Retrievable : They are used temporarily during well services activities such as cement squeezing,

acidizing, fracturing and well testing.

Permanent: They remain in the well during well production. It is usually run in close to the

bottom end of the production tubing and set at a point above the top perforations or sand screens.

In wells with multiple reservoir zones, packers are used to isolate the perforations for each zone.

Functionality wise they are classified as:

a. Production Packer

b. Service Packer

Uses of Packer

a) Casing Protection

b) Separation of multiple zones

c) Zone Isolation

d) Elimination of Heading or surging

e) Gas Lift Installation

f) Subsurface Safety valve

http://en.wikipedia.org/wiki/Casing_(oil_well)

http://en.wikipedia.org/wiki/Perforation_(oil_well)



Process

A packer is run in the casing on production tubing or wire line. Once the desired depth is

reached, the slips and element must be expanded out to contact the casing. Axial loads are

applied to push the slips up a ramp and to compress the element, causing it to expand outward.

The axial loads are applied hydraulically, mechanically, or with a slow burning chemical charge.

Nipples and Lock: This is a receptacle to receive wireline tools. It is also a useful marker for

depths in the well, which can be difficult to accurately determine. Normally it is set close to the

end of the tubing string to be able to isolate the same from the reservoir conditions, at any time

during the producing life of the well. It is also used for the direct location of plugs, flow control

devices and to hang off pressure temperature gauges. The device is designed for slickline locking

mandrels and features a polished seal bore for controlling the high pressures. They are used in

case of packers fixing for creating the appropriate pressure within the well to expand the packers

along the wall. They are used to determine the depth of the well.

Figure 6: Nipple and Locks

Slick Plugs: The slick plug is used in through-tubing; it‟s a retrievable tool to service the

completions. This plug is set on slickline and functioned through mechanical manipulations; it

reduces the operational costs associated with electric lines tools if we use it mechanically. The

slick plug can be set on slick line, electric line, coiled tubing or drill pipe. This adds to the

flexibility of the slick plug. It is used for many functions like contingent plugging of completions

with damaged nipples, zonal isolation and water and gas shut-off, tubing leak identification, data

acquisition close to the producing interval. These are used to support wire line tools in cases

where the well lags the profiles



Figure 7: Slick Plug

Flow Control Valve: It is used to restrict or exclude production of unwanted effluents (water

and/or gas) from different zones in a production well. They can be used to control the

distribution of any fluid, water or gas injection in a well between layers, between compartments,

or between reservoirs. As a result, the operator can manage where water is injected or oil is

extracted to mobilize unswept reserves. Flow control products and systems control fluid flow

between casing and tubing and within the tubing to help ensure optimum production, minimize

equipment repairs, reduce rig downtime and extend well life. It is generally used to restrict or

exclude production of unwanted effluents. Generally, sliding sleeves are used to control the flow

in the well. Flow control is required to maintain the uniform flow profile within the well. At

times, generally it happens in horizontal wells, that the flow profile becomes non-uniform. This

may hence lead to premature water or gas breakthrough and screen plug-in or erosion. Thus, to

maintain the uniform flow profile this method is used. Variable flow control allows the operator

to optimize the production from the well when water or gas begins to encroach on oil production.

Safety Valve: A component on an oil and gas well, which acts as a failsafe to prevent the

uncontrolled release of reservoir fluids in the event of a worst case scenario surface disaster. It is

almost always installed as a vital component on the completion.

Process

These valves are commonly unidirectional flapper valves which open downwards, such that the

flow of wellbore fluids try to push it shut, while pressure from surface pushes it open. This

means that when closed, it will isolate the reservoir fluids from surface.

http://en.wikipedia.org/wiki/Oil_well

http://en.wikipedia.org/wiki/Failsafe

http://en.wikipedia.org/wiki/Oil_reservoir

http://en.wikipedia.org/wiki/Completion_(oil_and_gas_wells)



Most downhole safety valves are controlled hydraulically from surface. When hydraulic pressure

is applied down a control line, it forces a sleeve within the valve to slide downwards. This

movement compresses a large spring and pushes the flapper downwards to open the valve. When

hydraulic pressure is removed, the spring pushes the sleeve back up and causes the flapper to

shut. In this way, it is failsafe and will isolate the wellbore in the event of a loss of the wellhead.

This component is intended as a last resort method of protecting the surface from the

uncontrolled release of hydrocarbons. When closed the DHSV forms a barrier in the direction of

hydrocarbon flow, but fluids can still be pumped down for well kill operations.



Intelligent Completion Technology (ICT):

An intelligent well is a well that is equipped with sensors/monitoring equipment and completion

components that can be remotely adjusted to optimize production. It consists of the following:

Gauges

These are the device which are used to study the well conditions like temperatures, pressure

during the productions phase of well. They are of two types basically:

a) Memory Gauges: These are devices which can be used for limited period as they have

limited memory.

b) Permanent Gauges: These are devices which can be used for life long as they have

unlimited memory space available for them. They can be further divided into four

categories

a. Electrical

b. Mechanical

c. Fiber-optics

d. RFID

Electrical and mechanical gauges are generally used in well where the well conditions are not

extreme. For well in extreme conditions, fiber-optics and RFIDs are used. RFID are generally

used in form of capsules which have the bar-code for the required instruction. These capsules are

then circulated in the well along with a circulating fluid. These capsules are then read by the end

readers which does the required work as instructed.

A technology like this makes the operation simpler. It is widely used in horizontal wells. RFID is

installed in a self dissolving capsule (the duration of self dissolution can be designed according

the circumstances present in well and also depending on the frequency of the operation). This

capsule is passed through the well with help of fluid or effluent and as soon as it passes through

the receiver, it reads the parameters and instructions present in it and actions are performed

accordingly.

Fiber Optics & Gauges: are used while measuring temperature and pressure of the well. When

the conditions are severe then electronics product is not very sustainable in such environment so

fiber optics is used to do the measuring work. They have a memory chip installed in them which



can send real time information to the surface of the well conditions. Other control related

instructions can also be controlled through gauges and fiber optics.

Slickline: These are generally used to support the wireline tools used to provide the services during well

intervention. It‟s like a long, smooth, unbraided wire, often shiny, silver/chrome in appearance. It

comes in varying lengths; according to the depth of wells in the area it is used. In use and

appearance it is connected by the drum it is spooled off of in the back of the slickline truck to the

downhole tools in the well. Slick line is more commonly used in production tubing. The wireline

operator monitors at surface the slickline tension via a weight indicator gauge and the depth via a

depth counter 'zeroed' from surface, lowers the downhole tool to the proper depth, completes the

job by manipulating the downhole tool mechanically, checks to make sure it worked if possible,

and pulls the tool back out by winding the slickline back onto the drum it was spooled off of. The

slickline drum is controlled by a hydraulic pump, which is controlled by the operator.

Slickline tools operate with a mechanical action, controlled from surface in the wireline trucks

operators‟ compartment. (it can be ordered to specification) up to 35,000 feet in length. Slickline

is used to lower downhole tools into an oil or gas well to perform a specified maintenance job

downhole.

It is used for several types of operations, some of them are mentioned below:

Running production logging tools.

Fishing operation.

Lubricating long assemblies in and out of the hole.

Bottomhole pressure and temperature survey.

Setting/pulling gas lift valves.

Shifting sleeves

Well Intervention: A well intervention, or 'well work', is any operation carried out on a oil or

gas well during, or at the end of its productive life, that alters the state of the well and or well

geometry, provides well diagnostics or manages the production of the well. Any operation

carried out in an oil or gas well during or at the end of its productive life that alters the state of

the well and or well geometry, provides well diagnostics or manages the production of the well.



Several purposes of well intervention are:

Disposing or removing a component, equipment in well (plug packers or valves).

Performing various measurements in well (e.g. internal diameter, production parameters).



PROJECT 2: UNDERSTANDING THE TENDER PROCESS

A “tender” means an invitation to offer for an item/items or work. A tender is a formal bid

document which is prepared by a client for the contractor to cost out. It is a legal document

prepared by the client. All public sector purchases/contracts in India, over a certain value has to

be publicly notified through Tender Notices which are advertised through all India Newspapers,

trade journals, departmental publications and Notice boards and nowadays on company websites,

Internet.

A “quotation” is a fixed price for a fixed quota of work carried out to a fixed specification. If

strictly followed and no deviation is there then the final price you pay will be the figure given in

the original quotation.

Broadly the process followed while tender process is as mentioned below



Figure 8: The tender process (Source: Author)

A tender notice is published by the company, by this, company invites tenders for generating

competing offers from different bidders looking to obtain an award of business activity in works,

supply or service contracts.

A tender Notice broadly gives the following details:

1. Type of Item/Work enquired for.

2. Name and address of the tender authority.

3. The tender enquiry reference number/date.

4. The cost and the last date for collection of bid document.

5. Earnest Money deposit –This deposit is refunded to unsuccessful tenderers.

6. Due Date/Time- The last date/time for submission of tender papers.

Targeting

• Customer invites or publish it in news paper , online.

• Analyzing whether scope of bidding is present.

Purchasing &

Preparation

• Purchasing the tender .

• In-depth analysis of scope of work.

• Preparation of document.

Pre-bid meeting

• Seek clarification for doubts.

• Good source of competitors information.

Submission of tender

• Submit the technical and commercial bid (As per requirement ).

• Supporting documents needs to be submitted.

Evaluation

• Generally on basis of lowest quote but can be otherwise also in few cases.

• Critically analyze and carry the learning.



7. Opening date-The date, time and venue of opening of the sealed tenders in presence of

representative of tenderers.

8. Pre-qualification of tenderers: The criteria/qualification that will be considered before

issuing tender documents to a tenderers.

9. Any other instructions/information.

Steps Involved for filling tenders:

Collection of Bid documents/tender papers:

Interested parties should collect/ purchase the tender/ bid documents on payment/free of cost, as

the case may be. Every tender quotation has to be accompanied by the tender documents.

Tender document mainly contains

1. A letter to the participant company or an invitation to tender.

2. Details regarding how the bid process will be carried out and how can any company bid,

the rules regulations and criteria. (Instructions to bidders).

3. Bidder‟s info, agreement that has to be submitted, List of enclosures which participating

company has to attach .Many other documents required like technical, financial details

etc.

4. Project background.

5. Supplier response required, time table for choosing a supplier.

6. Requirements.

7. General condition of the bidding and term, conditions of contract.

8. Special conditions

9. Scope of work

10. Pricing format table: If participating companies doesn‟t follow this format then there is

fair chance of the company getting disqualified.

Submission of offers:

The quotation has to be submitted along with all other documents as stipulated by the tender

authority in the tender notice.



Attending tender opening:

Representative of the tenderers are allowed to attend tender opening. Representative of the

Tenderers are allowed to attend Tender opening. The activity during Tender opening is to list

down the names and addresses of the Tenderers, note down all the rates/freight charges/taxes etc.

and details of whether - EMD paid, Tender Document purchased, any Tender quotation is

rejected, if so for what reasons. The comparative statement of all the rates offered and other

terms like freight forwarding, quality assurance, Taxes, identifying the Lowest (L1, L2,

L3).(Refer appendix for L1, L2, L3 explanation) Offers etc. When the Order will be issued and to

which parties/Party. Tender opening is the good source of collecting information about

competitor‟s situation. In technical round, technical strength can be known to a certain extent and

in pricing round at which price the competitor has bidded gives the fair idea for future

competition for similar products.

Periodic updates and post-tender status:

The concerned parties regularly follow up and ensure that the purchase/work order is issued. Or

many a time only budgetary bid is submitted which can be renegotiated later.

Negotiation:

If for some reason, the party is not able to comply with the terms of the Order, an amendment

to the Order needs to be issued. The order may not necessarily be placed on L1 since; various

other criteria like past performance of the party, urgency of the requirement etc. are also

considered before decision is taken. In some cases orders are divided between two or three

parties. At times L2 (appendix) is asked to work/supply at L1 (appendix) rates. In these

situations, negotiation plays an important role especially in cases where multiple technology,

high value Items/Work are involved.

In company this process of tender information to completing the work follows below

mentioned steps.



Figure 9: the steps involved in tender process (Source: Author)

Customer inquires, RFQs

Receipt of tenderCredit

department check

Log in request into system

Prepare completions

travelerUpload into QC2

Review by contracts , team

Generate QuoteSubmission quote with supporting

documents

Clarification if necessary by

respective teams

Sign off by respective team

leaders Receive LOA

Receive LOACheck the

documentsAcceptance of

LOA



Types of tenders

Tender are generally of three types

Single tender: Single tendering means sending the tender to one particular party. Normally, it is

either for an item where there is only one supplier or for an item where the purchaser has

developed confidence in one supplier only and would just like to verify the current price,

delivery etc. But according to government rules if the work is of value more than certain amount

then the single tender for that work can‟t be issued and open competition has to happen for that

and so open bidding has to be followed by companies like ONGC, Oil India Limited.

Limited Tender: This involves issuing Tender to few selected tenderers only. Invited tenders

are only open to selected prequalified vendors or contractors. This may be a two-stage process,

the first stage of which produces a short list of suitable vendors. The reasons for restricted

tenders differ in scope and purpose one of them being the need to weed out tenderers who do not

have the financial or technical capabilities to fulfill the requirements.

Open Tender: Under an open tender procedure all suppliers who respond to an advertisement

are supplied/purchase with tender documentation. This means tender is open to any supplier or

party who can quote for the materials as per requirements while complying to all rules and

meeting all guidance. This is usually done by publishing the Tender Notice in Newspapers/Trade

Journals /Internet and other bulletins.

.

Tenders

Open

Nomination Basis

Limited



The bidding system is generally carried out in two types of manner:

1 One bid system: Commercial and technical both the documents of the companies who are

participating in bidding process are opened at a time only. Many a time this is the scenario when

the company has very long relations with the company which has participated in the bidding

process. So in this price and technical quotations are known at same point of time.

2 Two bid system: Two bid systems separate the technical proposal from the financing or cost

proposal in the form of two separate and sealed envelopes. During the tender evaluation, the

technical proposal would be opened and evaluated first followed by the financing proposal. First

of all technical documents of all the companies who have participated in the bidding process is

opened and based on the information they have provided in the tender document , who all are

eligible and satisfies the technical competencies are selected. After this phase is over the next

phase involves the price bid round where depending on the company‟s requirement they choose

L1, L2 etc. The objective of this system is to ensure a fair evaluation of the proposal. The

technical proposal would be evaluated purely on its technical merits and its ability to meet the

requirements set forth in the invitation without being unduly skewed by the financing proposal.

Nowadays online bidding process has come in to picture; all the documents which are required

while submission of hard copy of bid in normal process can be uploaded in online bidding

process and thoroughly it can be tracked and result can be seen. This kind of e-bidding is

considered as safer (in terms of information leak) rather than the hard copy one.

Financial Liabilities

Bid Bond: The Company while preparing the tender, this document is also prepared. It is a kind

of bond which company has to deposit while participating in the bidding process. This is a kind

of guarantee from the company that if they win the bid they will do the work and not back out .If

the company backs out then this amount is confiscated by the customer.

Performance bank guarantee (PBG): The amount equivalent to 10% of contract value has to

be given to the customer company. If the company who wins the contract wants to run away or

leave the work in between then this amount will be confiscated by the client company. This

amount has to be submitted to the company as soon as company wins the contract.



The process followed in tender process of Government companies differ little bit from the

process of private companies. While submission of tender of Government players like ONGC,

HOEC, 2-3 weeks are provided to the participants; it is not in the case of private companies

which on an average give not more than 1-1.5 week for submission of tender. Private companies

generally don‟t have pre-bid meeting before hand. They show little more flexibility than

government players and are open to negotiations regarding the requirement and suggestions.

(Refer for terminologies used in tender process Appendix D).



Figure 10: Tender work flow chart (Source: Author)

Look for opportunity

Purchase of tender documents

Receive tender documents followed with discussions

Attend pre-bid conference , good source of competitors information.

Arrange bid-bond gurantee and prepare other documents

If two bid system then attend technical bid , competitor's info source

If called for attend price bid, good source of competitors info

If tender is won , receival of LOI

Acknowledge for LOI , Performance gurantee (if required)

Receival of purchase order from client.

Match the P.O with tender, amend if required and send the order to location.



PROJECT 3: UNDERSTANDING AND ANALYZING THE PROCUREMENT

PROCESS

The procurement process

Procurement is the acquisition of goods and/or services at the best possible total cost of

ownership, in the right quality and quantity, at the right time, in the right place and from the

right source for the direct benefit or use of corporations, individuals, or even governments. Here

in completions department, procurement process basically involves acquiring goods from the

manufacturing plant or third party for the sales purpose. The process begins as soon as the

department gets the LOA from the customer. Following is the process flow of the process and

the detailed explanation.

The process flow

Figure 11: The process flow (Source: Author)

1 • Acceptance of LOA

2 • Generate Material Requisition

3 • Order Requisition(OR)

4 • Verification of OR cross checks

5 • Statement of Acceptance (SOA)

6 • Verification of SOA

7 • Delivery Tracking

8 • Intimation to Logistics



1) Once the company wins the contract they start processing the order request for the same.

After the LOA (Letter of Acceptance), material requisition (MR) is generated by the

completions department. The part number for each tools are required, which are asked

from the US dept. This step is taking too long and hence extending the length of the

process. Once, the part number is obtained, the MR is generated.

2) The MR thus generated is then sent to the purchase dept to generate the OR (Order

Request).

a. The documents needed for preparations of OR from MR are:

i. End user declaration

ii. LOA

iii. Internal Pricing

iv. MR

The MR can be converted into PO (Purchase Order) or OR (Order Request) depending on the

following situation:

Intercompany

Transfer (OF)

Purchase

Requisition

(OR)

MR

(Material

Requisition)

Local Purchase

Third Party

Purchase

Inter-Weatherford

Purchase

International Purchase

PO (Purchase

Order)

Purchase

Order (OP)



Procurement department, checks whether the material has to be procured locally or it‟s an

international purchase. If it‟s an international purchase, then either it can be inter-

company transfer or a Third party purchase.

3) Once this OR is generated, it is sent for the approval procedure. Depending on the cost of

the OR, it has to go through the following level of approval:

i. Regional Product Manager

ii. Country Product Line Manager (PLM)

iii. Finance Controller (India)

iv. Asset Controller

v. Regional Finance Controller

However, this process is time consuming. The communication done is through e-mail. If

the person is not on desk then the procedure may take lot of time. No severity level is

mentioned in the mail; hence a separate mail has to be sent, to mark the severity.

Once the OR, gets approved, it is sent to the regional office (Dubai), central procurement

dept. for sending it further to the manufacturing plant. This step is not adding any value

to the process, apart from time. Then the OR is sent to the manufacturing plant.

4) Delivery tracking is done manually from time to time.

5) During the time of delivery, the logistics department is intimated.

6) After receiving the delivery, inspection work is carried out.

Suppliers

The company has defined criteria for allowing the suppliers to be added into the list of

weatherford. They have 2 categories of suppliers:

Category 1: The suppliers under this category have direct impact on the performance of

the company. Like inspection of tools

Category 2: The suppliers under this category don‟t have direct impact on the

performance of the company. They are generally meant for miscellaneous products.



The suppliers are made to fill a questionnaire which has the questions related to the quality

standards followed by them, their other clients, past experience and various other practices etc.

All these are done by the QHSSE department of the weatherford. Weatherford follows ISO 9001

standards.

Analysis of the Ordering Process

We have tried to analyze the procurement process closely by using three process analysis tools

which are Gantt chart, statistical process control and the fishbone diagram. The detailed analysis

of the process is discussed below.

1) The Gantt chart of the ordering process:

The Gantt chart is the tool which helps in identifying the main events of a process. Whether these

events are sequential or parallel and what is the critical path which needs the at most importance

and attention and also which steps can be avoided to reduce the time invested in the process.

By preparing the Gantt chart of the procurement process, we see that the main activities of the

process are:

a) MR generation

b) OR generation

c) Approval Process

d) Processing in Region Office

e) Manufacturing plant

The critical path for the process is:

MR generation - OR generation - Approval Process - Processing in Region Office -

Manufacturing plant

On an average it takes around three and half week for processing an MR into OR and sending it

to the manufacturing plant, which is a matter of concern. As one of the annual objectives is to

reduce the ordering time to 7 days, this whole process should be looked into.



Figure 12: The Gantt chart for the ordering process (Source: Author)

2) Statistical Process Control

It is a toolkit for managing processes. It is also a strategy for reducing the variability in products,

deliveries, materials, equipment, attitudes and processes, which are the cause of most quality

problems. SPC will reveal whether a process is “in control” – stable and exhibiting only random

variation, or “out of control” and needing attention. It also automatically warns when

performance deteriorates, and can assist with long-term defect reduction, identification of special

or assignable causes, reduction or elimination of causes of variation and achievement of a level

of performance as close to target as possible.

One of the key tools of SPC is a Control Chart. It is used to monitor processes that are in

control, using means and ranges. It represents data, e.g., sales, volume, customer complaints, in

chronological order, showing how the values change with time. In a control chart each point is

given individual significance and is joined to its neighbors‟. Above and below the mean, Upper

and Lower Warning and Action lines (UWL, LWL, UAL, and LAL) are drawn. These act as

signals or decision rules, and give operators information about the process and its state of

control. The charts are useful as a historical record of the process as it happens, and as an aid to

detecting and predicting change.

We have taken the MR processing details of 2009 year and developed this P-chart by using SPC

tools. The Data used is



no of entries defects percentage p LCL UCL

January 5 4 80 0.8 0.8 1.336656

February 4 3 75 0.75 0.75 1.399519

March - - - - - 0

April - - - - - 0

May 3 0 0 0 0 0

June 13 9 69.23077 0.692308 0.692308 1.076331

July 18 6 33.33333 0.333333 0.333333 0.666667

August 11 3 27.27273 0.272727 0.272727 0.675572

September 3 0 0 0 0 0

October 3 0 0 0 0 0

November 3 0 0 0 0 0

December 10 3 30 0.3 0.3 0.734741

(Source: Internal data)

Figure13: The P control chart for the procurement process (Source: Author)

As studied from the graph, the ordering process is out of control. As most of the p-value lie

outside the LCL-UCL limit or on the LCL limit. Hence, the process should be looked into.

3) Fishbone Analysis

A useful way of mapping the inputs that effect quality is the Cause & Effect Diagram, also

known as the Fishbone or Ishikawa Diagram. It is also a useful technique for opening up

0

0.5

1

1.5

2

2.5

3

jan feb jun jul aug dec

UCL

LCL

p



thinking in problem solving. The effect or problem being investigated is shown at the end of a

horizontal arrow; potential causes are then shown as labeled arrows entering the main cause

arrow. Each arrow may have other arrows entering it as the principal causes or factors are

reduced to their sub-causes; brainstorming can be effectively used to generate the causes and

sub-causes. If we closely study the process, and try to develop a fish bone diagram for the same

we will have the following.

Figure 14: the fishbone analysis of the procurement process( Source: Author)

Sending of Document

to Dubai region, No

Value Addition

Management Process

People

Document comparison

done manually

Communication

among people

The OR mail sent, does

not has the severity level

incorporated into it

Ordering Process

more than 7 days

Document and

information gathering

is too time consuming

Whole communication

is done through mails Huge hierarchy

of approval

Too many documents

are required at each

level

No centralized

database system

Equipment

Environment

Material



Problem

1) The step of sending the OR to Dubai Region

2) Underutilized JDE tool

3) Documentation

Recommendation

1) There is a definite need for a more streamlined centralized database system. This will help is

reducing time at many level.

a) If we will maintain a centralized system, then the part number thus generated at the

manufacturing unit can be accessed from any region within no time.

b) The MR generated by the PL dept. can be directly accessed by the procurement

department.

c) A client interface can also be developed in that system, where clients can load there

documents. This can be done for few major clients, for rest we can follow the existing

process. A system mail will be generated that will remind the person at client‟s end to

send the required document, hence eliminating the mailing time.

2) Instead of comparing documents manually, for stages like SOA verification, we can use

comparison tools for the documents.

3) The whole stage of sending the OR to the Dubai Region can be eliminated. As no value

addition is done in this step. If we come up with the centralized database then the following

step can be followed.

Manufacturing

plant (for further

processing) Order

Requisition

Dubai Region

(for maintaining

database) In 1 step



4) The mails sent for the OR approval can have the severity level incorporated in it, so that

the action can be taken immediately and no further mails are needed to signal the severity

of the OR. System can have alarms incorporated in it which can signal the concerned

person about the severity of the OR.



PROJECT 4: UNDERSTANDING THE LOGISTICS PROCESS

Logistics is the management of the flow of goods, information and other resources between the

point of origin and the point of consumption in order to meet the requirements of consumers.

Logistics involves the integration of information, transportation, inventory, warehousing,

material-handling, and packaging, and occasionally security. Logistics is a channel of the supply

chain which adds the value of time and place utility. Logistics management is that part of the

supply chain which plans, implements and controls the efficient, effective forward and reverse

flow and storage of goods, services and related information between the point of origin and the

point of consumption in order to meet customer & legal requirements.

The reality of competing in a global supply chain environment has caused many organizations to

focus on strategic renewal and creative solutions to manage and mitigate the risks of operating in

today's dynamic marketplace. One particular strategy that has become increasingly popular is the

use of third-party logistics (3PL) support for global supply chain execution. Recent estimates

suggest that global 3PL services is a $390-billion industry, with double digit annual growth

expected, particularly as firms continue to engage in global expansion

Third-party logistics involves the utilization of external organizations to execute logistics

activities that have traditionally been performed within an organization itself. According to this

definition, third party logistics includes any form of outsourcing of logistics activities previously

performed in-house. If, for example, a company with its own warehousing facilities decides to

employ external transportation, this would be an example of third party logistics. Logistics is one

of the emerging business areas in many countries.

Weatherford follows the third-party logistics policy. The company basically outsources its

logistics. The main reason behind this outsourcing is

a) Cost reduction

b) Service Improvement



The other factors include

Opportunities to focus on core competencies

Improve productivity

Upgrade information technology (IT) capabilities

Leverage supply chain management

React to changes in the regulatory environment

A need for expertise

Globalization of business

Complexities of operating in a just-in-time (JIT) environment, rapid growth, and limited

resources to apply to logistics activities.

There are different policies which come into picture when delivering the goods to the client end.

Different clients have different conditions for delivery, which decides the accountability for the

goods at each stage. The appendix E shows how the responsibility has been divided among the

client and the company during the transport of goods from the manufacturing plant. The

definition of various key terms is as follows:

a) FOB (Free on Board/ Freight on Board)

It is an initial which pertains to the shipping of goods. Depending on specific usage, it may stand

for Free On Board or Freight On Board, with similar but distinct implications. FOB specifies

which party (buyer or seller) pays for which shipment and loading costs, and/or where

responsibility for the goods is transferred. The last distinction is important for determining

liability for goods lost or damaged in transit from the seller to the buyer.

b) Ex Works – EXW

This trade term requires the seller to deliver goods at their own place of business. All other

transportation costs and risks are assumed by the buyer.

c) Delivery Duty Unpaid

Seller fulfills his obligation to deliver when the goods have been made available at the named

place in the country of importation. The seller has to bear the costs and risks involved in bringing

http://en.wikipedia.org/wiki/Initialism

http://en.wikipedia.org/wiki/Shipping

http://en.wikipedia.org/wiki/Legal_liability



the goods thereto (excluding duties, taxes and other official charges payable upon importation) as

well as the costs and risks of carrying out customs formalities. The buyer has to pay any

additional costs and to bear any risks caused by failure to clear the goods for in time.

d) Delivery Duty Paid

A transaction in which the seller must pay for all of the costs related to transporting the goods

and is responsible in full for the goods until they have been received and transferred to the buyer.

This includes paying for the shipping, the duties and any other expenses incurred while shipping

the goods.

Generally, Cairns goes for X-works terms of delivery, ONGC always goes for FOB and B.G opts

for DDU, DDP



The Process

Figure 15: the process of logistics department (Source: Author)

Once the tools get ready to be transported, the PL dept is intimated by the manufacturing dept.

which in turn intimates the logistics. The manufacturing dept sends the packing list of the goods

along with weight of the goods and the draft invoice, and then depending on the weight of the

equipments the decision on the mode of transport is taken by the PLM. The options can be ship

(heavy), DHL (light) or air. The copy of invoice thus sent is reviewed against the contract by the

PL dept. The draft invoice is filled for the price, if the products are for the internal use, the price

filled is Inter-Company price and if the products are meant for sale, then the price quoted is the

one given in the contract with the client. The CHA are also intimated to start the procedure for

getting the Essential certificate if required. Once everything is done then the manufacturing plant

is given the green signal to transport the goods.

Tools ready for delivery

Intimation to PLMIntimation to

logistics department

check for required documents

Decision on mode of transport

Green Signal

TransportationOn

landing, intimation to the CHA

Custom Clearance

Hand over to local transporters or

clientsTools delivered



The manufacturing plant then approaches their transporters who transport the goods to the Indian

land. The logistics dept. of U.S and Canada, are now trying to standardize the process of

selecting transporter. They have now assigned a fixed dealer to each region so as to reduce

confusion and make things more standardized. According this, following are the transporters for

the specific region:

DHL : India

Panamanian : Latin America

KHL Express: Europe

When the tools land in the Indian Territory, the charge comes in the hand of the CHA (Custom

House Agent) of the Weatherford office. They have contract with 3 CHA companies. The CHA

then take care of the custom rules and regulations like they take the bill of landing, do the

examination and handle custom officers. They are responsible for getting the Essential

Certificate, if required which has to be done before the consignment get landed.

Once the custom clearance process gets completed the tools are transported to the client end or to

the company base depending on the contract. For the internal transportation also they have

contract with 3 transporters. These are also audited by the QHSSE department. They are all

category 1 suppliers. They are also required to maintain a journey management plan (JMP)

which has the information about the start point, end point, the route to be followed and the driver

contact number. Here also the weight is used as the criteria for selecting the mode of transport

like lorry, carriage, truck etc.

A check list has to be prepared which is checked in the pre-dispatch scenario. They have a check

of the tools, the vehicle, driver‟s physical health, his license etc. JMP form is also filled and it

has the information about the routes, stoppage time, stoppage spots and the supervisor‟

information. This is compliance by QHSSE department. The Weatherford items come under the

corporate global insurance. This is handled by the risk management team. They also have marine

transit insurance. The company generally don‟t negotiate for the FOB, CIF terms with their

client, however at times they do suggest the preferable mode.



Additional License

For the radioactive materials, the company generally have to take the permission from the

AERB dept. The Atomic Energy Research Board checks the types of instrument which are to be

transported, the location where they will be stored, for what use have they been brought to etc.

This is done after getting the packing list from the manufacturing plant.

For explosives, the company generally informs the police dept and gets a guard to escort the

movement.

Re-export Bond: This is basically made with the custom authority, generally for capital items, not

for spares. There are 2 types of Essential Certificate (EC) validity

1st is the period which defines the timeline during which the tools can be imported under

that EC.

2nd

is the period which defines the timeline during which the tools has to be re-exported

and the EC certificate has to be get cleared. This is generally 3 months period after the

contract under that EC gets over.

However, there are provisions to transfer the EC among the clients but clients generally don‟t

prefer this because they have to keep their contract open for it. So what weatherford follow is

they actually send the instrument to the SEZ area in Vizag, where they get their custom clearance

and hence can reuse their instrument. However certain contract demand for the goods to be

exported and not just get the EC cleared. Then in that case, they have to send those equipments

back to the location from where they were brought and then again supply them to the other client



The demobilization of tools

Figure 16: the process flow of demobilizations of tools (Source : Author)

Once the client is done with the use of the tools, they send the demobilizations letter to the

company to move their tools from their base. Once the company gets this letter, they check

whether the tools are required by any other client. If yes, then they check whether the tools are

under EC. If yes, then they get the EC cleared, inspect and service the tools and send it to the

other client. However if the tools is not under EC, then the company directly inspect and service

Receipt of Demobilization Letter

Required by

Other Client

On EC

On EC

Get the EC cleared

Send to Vizag (SEZ) Re-exporting

Get the EC transferred

to other client

Send it to the client

Send it back

Keep it in the base

NO

NO

NO

YES

YES

YES



the tools and send them to the client. If the tools are not required by the other client, then if the

tools are under EC, then they are sent back and the EC is cleared. But the tools were bought by

paying duty. Then the PL department keeps those tools in their base and updates the JDE and

ENDECA for the same.

About the SEZ

A Special Economic Zone (SEZ) is a geographical region that has more liberal economic laws

than the ones generally followed in the rest of the country. The category 'SEZ' covers a broad

range of more specific zone types: Free Trade Zones (FTZ), Export Processing Zones (EPZ),

Free Zones (FZ), Industrial Estates (IE), Free Ports, Urban Enterprise Zones and others.

A FTZ (Free Trade Zone) is a particular area of a country where normal trade barriers &

requirements like taxes, tariffs, and quotas are either eliminated or reduced, to attract businesses

& investment. FTZs are usually characterized by labor intensive manufacturing set-ups that

involve a high level of imports & exports. These kinds of zones are mostly prevalent in

developing nations, and further in under-developed regions of that nation. In India, FTZs are

seen as those areas where goods maybe landed, handled, manufactured or reconfigured, & re-

exported without much intervention from customs authorities. Only when the goods are moved

to consumers in the rest of the country, do they become subject to the prevailing customs duties.



The Role of Custom House Agent

The Custom House Agents (CHA) plays a very important role in the logistics procedure. The

main responsibilities of the CHA are:

1) Get the Essential Certificate (EC) from the DGH for the tools which are brought

without duty under the contract.

2) They are responsible for the inspections of tools when they land in the Indian

Territory and get the formalities of custom clearance done in defined time.

3) They are responsible for getting the EC cleared when the use of the tools brought

under EC is over and send them back.

Hence, CHA commands a very important position and relationship with them must be handled in

a proper manner because:

1) They have the power to blackmail and demand for bribery.

2) If they don‟t do their task well and the time limit for custom clearance gets overshoot

then the company will have to pay the demurrage

Thus, the contract signed with them must be very clear; specifying clearly the responsibility of

each side at each stage so there is no scope of ambiguity or any loop hole on which they can

leverage.

The logistic department of Weatherford takes care of all these things. They follow the following

procedure for selecting the CHA.

1) As required by the QHSSE department, the CHA are made to fill the questionnaire as

shown in the Appendix F. This questionnaire basically consists of 5 forms C1-C5. C1-C3

forms are filled by the CHA persons and C4-C5 forms are required to be filled by the

company. As per the FCPA rule of US, these agents have to go through the Due

Diligence test. As they are the sub-contractor of the company and represents the

companies in front of government bodies like PSU, DGH.



2) They are also made to go through On-Line training, which makes them aware about the

rules against corruption, bribery, the rules and legal procedures to which they need to

abide by.

3) The company has contract with 3 CHA agents. This is because, if they have only one

CHA, than the CHA will have an upper hand and will try to practice their monopoly.

Hence to avoid this, the company has contracts with 3 CHA, which are selected by

undergoing the above procedure.

4) The company floats the tender for the bid from these 3 CHA, the one having the lowest

price wins. However, L1 is not the criteria always. At times, they also take into

consideration the proficiency of a particular CHA in the given situation for awarding the

contract.



The Process of getting Essential Certificate

Figure 17: the process flow of getting the Essential Certificate (Source: Author)

Get the draft invoice from the manufacturing plant

Inform the CHA

Ask the client to fill the EC application

Submit the application

Get EC Reference number

Provide the EC Reference number to the client

Send the Hard copy to DGH

Provide

the EC

Client checks

the application Do the necessary changes

DGH checks

the details

Do the necessary changes

Correct

Wrong/Unsatisfactory

Wrong/Unsatisfactory

Correct



The process flow

1) The process starts when the department gets the draft invoice from the manufacturing

plant. The draft invoice is checked against the contract and the price is filled into it

accordingly.

2) The CHA department is informed about the arrival of the goods and that they should start

the procedure of getting the EC if required for that contract.

3) The client under whose contract, the EC is required is informed. They are requested to

prepare the application for the EC and submitted it online to the DGH.

4) Once the application is submitted, an EC reference number is obtained. This number is

then used by the client to login and check the application. If everything is fine, the client

signs the application.

5) The hard copy of this application along with the EC reference number is then taken by

the CHA to DGH and gets it checked and approved by the nodal officer.

6) Once the EC is obtained, the green signal is given to the manufacturing plant to transport

the goods.



The Role of Completion Department

The role of specific Product Line department is quite limited in the logistics and there is not

much to look into from their perspective. However, following are the things which are performed

by the Completions department when it comes to dealing with the logistics of the tools.

1) Filling the Draft invoice for the pricing and checking it with the contract.

2) Intimating the logistics department about the arrival of the goods.

3) Rest the process of getting EC, custom Clearance and local transportation is taken care by

the logistics department.

4) Since, the most of the revenue of completions department comes from sales, the

demobilization of tools and SEZ doesn‟t play major role in their working. It only comes

in picture when we talk about the rental tools which constitute mere 2% of the total

revenue of the department.



Recommendations

However, there is no such major problem with the process but certain things need to be taken

care of, in order to keep the process under control.

1) The green signal for transport must be given only when the company is ready with the EC,

because if the goods get landed on the India land without EC and the time period exceeds 3

days before they get custom clearance, then the company will have to pay the demurrage,

which is the extra cost to the company.

For example: A case happened where the goods landed on the Indian coast before the

company was ready with the EC and the department had to pay the demurrage for the same.

2) The decision regarding the mode of transport must be taken by keeping both the things into

consideration:

a. Time duration within which tools need to be supplied

b. Cost of the mode of the transport.

3) The clear terms of responsibility must be mentioned in the contracts with the CHA and the

local transporter leaving no scope for the ambiguity.



PROJECT 5: UNDERSTANDING THE INVENTORY MANAGEMENT

Inventory: In business management, inventory consists of a list of goods and materials held

available in stock.

Inventory management is primarily about specifying the size and placement of stocked goods.

Inventory management is required at different locations within a facility or within multiple

locations of a supply network to protect the regular and planned course of production against the

random disturbance of running out of materials or goods. The scope of inventory management

also concerns the fine lines between replenishment lead time, carrying costs of inventory, asset

management, inventory forecasting, inventory valuation, inventory visibility, future inventory

price forecasting, physical inventory, available physical space for inventory, quality

management, replenishment, returns and defective goods and demand forecasting. Balancing

these competing requirements leads to optimal inventory levels, which is an on-going process as

the business needs shift and react to the wider environment.

Types of inventory

Raw materials: The purchased items or extracted materials that are transformed into

components or products.

Components: Parts or subassemblies used in building the final product.

Work-in-process (WIP): Any item that is in some stage of completion in the manufacturing

process.

Finished goods: Completed products that will be delivered to customers.

Distribution inventory: Finished goods and spare parts that are at various points in the

distribution system.

Transportation or Pipeline Inventory: Inventory is used to fill the pipeline as products are in

transit in the distribution network.

Speculative or Hedge Inventory: Inventory can be carried to protect against some future event,

such as a scarcity in supply, price increase, disruption in supply, strike, etc.



Maintenance, Repair, and Operating (MRO) Inventory: Inventories of some items (such as

maintenance supplies, spare parts, lubricants, cleaning compounds, and office supplies) are used

to support general operations and maintenance.

Completion department tries to maintain zero level inventories at their base. As the tools here are

bought as per the specification of the client under the contract, hence maintaining inventory

makes no sense. For inventory management they don‟t follow any model at country level in

India, however the company is coming up with the model of forecasting at regional level. They

are trying to implement ABC analysis and 80-20 rule by using the past sales volume data

analysis.

Keeping an inventory in India is not easy because of the custom regime in India. According to

the custom law, whatever assets are brought in India under EC certificate have to be send back in

order to clear the EC. Hence for all the instruments which are brought on rental basis they have

to be sent back.

However, there are provisions to transfer the EC among the clients but clients generally don‟t

prefer this procedure as they have to keep their contract open for it. So what weatherford follow

is, they actually sent the instrument to the SEZ area in Vizag where they get their custom

clearance and hence can reuse their instrument. However certain contract demand for the goods

to be exported, not just get the EC cleared, then in that case they have to send that equipment

back to the location from where it was brought and then again supply it to the other client

The inventory count is performed once in a year and so is the asset count. The procedure

followed for the same is as discussed below:

1) The regional officer sends the list of goods along with the JDE number (and the serial no

for the asset).

2) The tools are then checked on the field and are marked against the list.

3) However, if the goods are not found on the base, then the regional office provides 2 more

chances of finding them. Even if then the tools are not found then they are marked as lost

and not found and the department has to take the financial hit for them.

4) If the tools are present in the inventory for consecutive 2 years without being used, then

are marked as obsolete.



Repair and Maintenance Schedules

Repair and maintenance is one of the most important activities for service providers. The

equipments which are in contract require a regular inspection and maintenance schedule to be

followed. Various inspections carried out during maintenance are as follows:

Lifting Equipments

Magnetic Particle Inspection (MPI) – done every 6 months

Load Test – once in year. Also, the Non destructive test (NDT)

Pad – I tested every 6 months

Rental Tools

Calibration – once in year, MPI – every 6 months

Jars – every 250 hrs of operation

There are huge capital expenditures attached with the activities of service providers and the E

& P operators. Almost all of these expenditures are directly or indirectly because of the use

of highly sophisticated technological equipments. Thus, let us understand the procedure for

doing repair and maintenance to avoid use of non – functional equipments with the help of

flow chart.

1) Whenever the equipments arrive at base, they are either demobilized or under new contract.

Demobilized equipments come to base either for servicing & inspection or the equipment is

out of contract.

2) Then it is checked, weather the equipment is used or unused.

3) If the equipment is used one, it is inspected by the third party and if it in unused, the

equipment is visually inspected and made ready for the mobilization at operational location.

4) If the used equipment passes the inspection, it is ready to use. But if does not passes the

inspection, it is checked for damage beyond repair (DBR).

5) If the equipment is DBR, it is written off. But if it isn„t DBR, it is repaired again as per

requirement. And then post repair inspection is carried out.



6) Once the result of post repair inspection is positive the tool is ready to be used but if it isn„t

positive, then it is again tried to repair.

7) And finally when it passes the post repair inspection, the repair and maintenance procedure

ends and the equipment is sent for operations as and when required.



The Flow Chart

Demob/ contractual instruments

Used

Pass

DBR

Inspection

Repair

Post Repair Inspection

Ready

End

Used

Write Off

Yes

Yes

Yes

Yes

No

No

No

No

Figure 18: the repair and maintenance flowchart (Source: Author)



Inventory analysis However, they do have certain inventory which is hitting the department financially and is

adding cost to them. The total cost of the inventory is around $ 139,113.31 and the total quantity

of inventory units is around 131. If we look into the graph, out of the total inventory cost, around

71.32 % by cost is in Patalganga which amounts to around $ 99,216.21.The distribution of

inventory by cost and by number is almost in the same proportion in Patalganga and Wadala.

However the same gets changed when it comes to HOEC and Office, where HOEC has more

inventories by cost and office has more by number.

71.32

24.68

0.133.86

classification of inventory based

on Cost percentage

Patalganga

Wadala

Office

Hoec

99,216.21

34,334.78

187.765,374.56

Classification of inventory by

cost

Patalganga

Wadala

Office

Hoec

106

22

2 1


number

Patalganga

Wadala

Office

Hoec

Classification of inventory based

on number percentage

Patalganga

Wadala

Office

Hoec

Figure 19: The Classification of inventory by cost (Source: Author, Internal Data)

Figure 20: The Classification of inventory by number (Source: Author, Internal Data)



Causes for inventory

1) The contract under which the tools were brought is over now. For example the one with

Transocean. Because of which the tools which were ordered in advance are now in

inventory and also the tools which were required for compiling these tools are also

rendered as inventory now.

2) An order was placed which had the wrong specification of the tool. As the tool was

understood in the wrong manner by the person and the wrong order was placed. That tool

was not required by the clients and hence is now in the inventory.

3) An order was placed which had more tools than were actually ordered by the clients. Also

these tools were not taken under consideration when the client placed the same order

again. Hence, they are in the inventory.

4) The well design was wrongly assumed hence wrong tools were ordered due wrong

speculation. These were not cancelled by the team, even when they realized that the

wrong tool has been placed in the order.



The cause for the inventory can be classified as avoidable and unavoidable as shown in the figure

below. Avoidable are those which can be looked into and worked upon and hence will not

increase the inventory, while the unavoidable are those which when occurred will lead to

inventory. However we can take certain precautions which will help in reducing that inventory

and eliminating them.

Figure 21: The classification of the causes of the inventory (Source: Author)

Inventory Reasons

Unavoidable

Contract Cancellation

Will be required by the client but currently in the base

Avoidable

Lack of technical knowledge among

the staff

Lack of Computer proficiency

Unawareness about the current inventory



In these graph shown below, the inventory has been classified under the avoidable and

unavoidable reasons both by quantity and by percentage.

As shown from the graph. Around 87.27% of the inventory falls under unavoidable reasons

category. Hence, most of the time it‟s the fault of the system and the procedure which leads to

the inventory. Thus, there is not much which we can do, but still we can work on the avoidable

part of it and get rid of the current inventory or keep it to minimum.

240

35

the classification of inventory

under avoidable and

unavoidable

Unavoidable

Avoidable87.27%

12.73%

the classification of inventory

under avoidable and

unavoidable

Unavoidable

Avoidable

Figure 22: The Classification of inventory due to reasons (Source: Author, Internal

Data)



Classification of the inventory under the product line

The figure below classifies the inventory under the product line of our completion department.

As can be seen cementing has the maximum amount of inventory amounting to 148.

Figure 23: The classification of inventory under product line (Source: Author)

Cased-Hole Completions

28

Flow-Control and Slick Plug

92

Flow-Control and Slick Line

7

Cementing

148

Total: 275 units



As can be seen from the graph, around 53.82% of the total inventory falls under cementing

product line which amounts to about 148 units. Hence we should try to promote our cementing

product line to our clients and try to pull in more contracts under it. Similarly, the inventory

count under flow control and slick plug is around 92 and hence we should also try to focus on it.

28

92

7

148

Classification of inventory under

the product line

Cased-Hole Completion

Flow Control and Slick Plug

Flow Control and Slick Line

Cementing

10.18%

33.45%

2.55%

53.82%


percentage under the product

lineCased-Hole Completion

Flow Control and Slick Plug

Flow Control and Slick Line

Cementing

Figure 25: The Classification of inventory under product line (Source: Author, Internal

Data)



Suggestions to reduce current inventory

1) Keep the ENDECA updated.

2) No duplication should be there

3) Inform the region about the inventory

4) We can also try to promote the tools which we are having in the inventory to our clients.

Inform our customer relationship management person about the tools which we are having so

that they can look into the opportunity where they can promote these tools to our clients.

5) The tools which are having shelf life should be given higher priority. Though the company

has the policy of not selling the tools at less the Inter-Company pricing but still we should

look into the options were we can club our products with the other products required by the

clients through product bundling. We should figure out some trade-off between the cost of

the tool and their shelf life and try to figure out the appropriate time of selling the product at

a price lower than the IC price.

Suggestions to avoid further inventory

1) The person reading the contract of the client and placing the order must be well versed

with the technicalities of the each and every product so that there is no ambiguity at the

time of placing the order.

2) The whole team should be trained for computer proficiency and using JDE tools.

3) The steps of checking the OR, SOA verification, checking the Draft invoice should not be

skipped and must be performed diligently. We can incorporate some alarm in the system

which does not allow the process to move ahead if these steps are not performed.

4) The person placing the order must be well aware of the current inventory before placing

the order.



CONCLUSION

The service companies need to streamline their operations so that they can offer the operators,

the best of services. In the service industry as we have understood that procuring the equipments

at the right price, along with the timely delivery and storage and maintenance of those

equipments are of prime importance. Basically these operations come under the Supply Chain

Management domain. In the Completions division of Weatherford, the three divisions,

Procurement, Logistics and Assets & Inventory play their individual roles in synchronization, to

support the operations. In procurement division, the requirements are processed and the process

of interaction with suppliers is initialized. The process has been brought online with the ERP

implementation and has been standardized and fast. The criteria for selecting the suppliers are

decided by the QHSSE department. Logistics ensures the transportation of the equipments within

the time frame which is of prime importance. The transport optimization mostly is decided at the

regional level so that the cost of transportation can be lessened. Though the process of

transportation is subcontracted, the responsibility in the organization lies with this division.

Another important task of this division is to see whether the requisite documents from the

regulatory bodies are being obtained for the equipments. For example „Essentiality Certificates‟

have to be obtained from the DGH so that the equipments can be brought in for specific projects

without the charge of import duty. The Custom Handling Service Providers takes care of

obtaining clearance from designated authorities, as well as the transportation within the country

and they have to be monitored by this team. Assets and Inventory ensures that the storage of the

assets and spares are done in the right order. It is seen that the presence of the equipments are

captured in the ERP system so that when it is required by the product lines they can access and

have their locations. The annual inventory count is also conducted by this department and the

objective is to reduce the variance in inventory levels to a manageable proportion. Ideally there

should be no variation with the implementation of the ERP system, but in real life variances are

there. The process tries to keep the variance within the tolerance limit. Hence all the three

departments work together to properly perform the operations of the division.



BIBLIOGRAPHY

Akhil Sambhar, S. L. (2008, November 04). Financialexpress.com. Retrieved June 1, 2010, from

Financialexpress: http://www.financialexpress.com/news/domestic-oilfield-services-firms-shift-

into-high-gear/380888/

Weatherford. (2007). Annual Report. Switzerland: Weatherford International Ltd.

Weatherford. (2009). Annual Report. Switzerland: Weatherford International Ltd.

Wikipedia. (2010, May 27). Wikipedia.org. Retrieved May 30, 2010, from Wikipedia:

http://en.wikipedia.org/wiki/Weatherford_International



APPENDIX:

A) Key Dates:

1940s: Weatherford Spring Company is founded in Weatherford, Texas.

1972: Energy Ventures is founded as an offshore gas and oil exploration and production

company.

1987: Energy Ventures is liquidated and re-established.

1988: Enterra acquires CRC Evans.

1990: Energy Ventures acquires Grant Oil Country Tubular.

1995: Weatherford International merges with Enterra, becoming Weatherford Enterra

Inc.; Energy Ventures purchases Prideco.

1997: Energy Ventures builds a manufacturing plant in Canada and changes its name to

EVI.

1998: Weatherford Enterra merges with EVI Inc. to become Weatherford EVI Inc., later

renamed Weatherford International, Inc.

2000: Company spins off its Grant Prideco Drilling Products subsidiary and buys Gas

Services International, Oakwell Compressor Packages, and Alpine Oil Services.

2001: Company sells Weatherford Global Compression Services to Universal

Compression Holdings, Inc.



B) Company Evolution

1941-1948

•Founded in 1941 in Weatherford, Texas by Jesse E. Hall Sr.

•In 1948, the company was renamed Weatherford Oil Tool Company (WOTCO) with ownership by Jesse Hall, his son, Elmer, James E. Berry, and Juan A. Perea

1970s

•Separate company of Energy Ventures, Inc. was founded as an offshore gas and oil exploration and production company

1980s

•In 1987, Energy Ventures was liquidated and re-established.

Early 1990s

•By 1990, had acquired Grant Oil Country Tubular Company.

•In 1991, Weatherford acquired Petroleum Equipment Tools Company (PETCO).

•Weatherford and HOMCO later merged operations to create Weatherford Services.

•In 1995, Weatherford International merged with Enterra, becoming Weatherford Enterra Inc

Late 1990s

•In May 1998 Energy Ventures, since renamed EVI, Inc. and Weatherford Enterra, Inc.merged, creating the current company now known as Weatherford International.

•In next two years, Weatherford added a number of well-organized brands to itsexpertise, including Dailey, Orwell, Energy Rentals, Whiting, Williams, BBL and ECDNorthwest.

2000s

•In 2005, Weatherford acquired Precision Drilling Corporation‟s Precision Energy Servicesand International Contract Drilling divisions.

•In 2008, the company announced that it was shifting its place of incorporation from Bermudato Switzerland.

•Completed acquisition of V-Tech International, a pioneer in the development of mechanicalpower tong systems in the North Sea to improve rig safety.



C) Organization Chart

D) Tender terminologies

EOI: Expression of interest.

RFA: Request for applications

RFD: Request for documentation

RFI: Request for information

RFO: Request for offer

RFQ: Request for quotation

RFP: Request for proposal

ROI: Registration of interest



L1 : It means lowest price quoted by any party .

L2 : It means second lowest price quoted by any party.

L3: It means third lowest price quoted by any party, and so on.



E) The Incoterms for logistics



F) The Form for Due diligence

FORM C-1

INTERMEDIARY DUE DILIGENCE QUESTIONNAIRE

Weatherford International Ltd. and its affiliates (collectively, “Weatherford” or the “Company”) takes compliance with the U.S. Foreign Corrupt Practices Act (“FCPA”), U.S. and international import and export control laws, economic sanctions, international boycotts and other applicable laws very seriously. To comply with its obligations under these laws, Weatherford requires its prospective agents, sales agents, commission agents, resellers, consultants, representatives, distributors, joint venture partners, customs/import brokers, freight forwarders and other third-party intermediaries with whom the Company transacts business that are authorized to act in any way on the Company’s behalf (“Intermediaries”) to (i) provide certain information for Weatherford’s review and (ii) complete a web-based anti-corruption training course prior to entering into any agreement with such

Intermediary.

Accordingly, Weatherford requests that you please answer all of the questions below as fully and accurately as possible. Please then sign the “Data Privacy Statement and Affirmation” verifying the

accuracy of the information provided (found on the final page of this Questionnaire).

For any answer requiring more space, please attach the complete answer on a separate sheet of paper. Please attach all requested additional documents to this completed response. If a question is not applicable, or if you do not know the answer, please so indicate in your response along with a

short explanation. Please note that incomplete or vague responses will result in delays in the review process as follow-ups will need to be conducted. Please contact your Weatherford business contact should you have any questions.

1. General Information

a. Name: ____________________________________________________________

b. Business Address (including street address and mailing address): _________________________________________________________________________

_________________________________________________________________________

c. Telephone: ___________________________________

d. Fax: ________________________________________

e. E-mail: ______________________________________

f. Identity of Bank, Currency of Account, and Address of Bank:

_________________________________________________________________________

_________________________________________________________________________



2. Business Information

a. If you are completing this Questionnaire on behalf of a corporate entity or other organization, please provide a copy of your commercial registration and charter documents for the country in which you are incorporated and in the country of intended activity, if that is different from the country in which you are incorporated.

b. Number of employees: _______ (please provide a complete organizational chart)

c. Your principal lines of business, including your current customers and current products being represented or distributed:

_______________________________________________________________

_______________________________________________________________

_______________________________________________________________

d. Other locations of business:

_______________________________________________________________

e. Does your company conduct trade (including imports or exports) or any other form of business with any of the following countries, or is your company owned and/or controlled by any entity (private or governmental) from any of the following countries

(check as appropriate):

Cuba Sudan Burma (Myanmar)

North Korea Syria Iran

If yes, please describe the nature and extent of any trade or business in those

country(ies), and/or specify the percentage of ownership and/or control by any entity

from any of those countries.

_______________________________________________________________

_______________________________________________________________

f. Approximate annual revenue in the last five years (check as appropriate):

less than US$1 million US$1 to 10 million

US$10 to 50 million Over US$50 million

3. Ownership and Management

a. If a company, are you publicly held? Yes No

If yes, please attach a copy of your most recent public filing showing the company’s shareholders, partners, or owners. If this filing does not list major (>5%) shareholders, please provide the full name of each major shareholder (public and non-public) with their current nationality.

___________________________________________________________________



___________________________________________________________________

If no, please provide the full name, percentage of ownership, and nationality of each of your direct and indirect owners and partners. Indirect owners include persons who do not own shares of the company directly, but benefit from another party’s

ownership of the shares, including for example (i) one party holding shares in the name or on account of another party; or (ii) one party holding the shares but promising to include the other party (an indirect owner) in the proceeds upon selling the shares. If any of the shareholders are a company, list the ultimate beneficial

owners and any intermediate shareholder entities or individuals.

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

b. List the full name and nationality of each member of your board of directors.

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

c. List the names, titles, and nationalities of all officers, directors, shareholders, managers, and other employees who will be conducting activities on behalf of Weatherford. In addition, please provide curriculum vitae of each of these persons.

__________________________________________________________________

__________________________________________________________________ __________________________________________________________________

__________________________________________________________________

__________________________________________________________________

d. Do any of the persons listed above hold director, officer, or other management

positions with other companies or entities? Yes No

If yes, please provide the name of each company and the title of the relevant position.

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

e. Does any individual and/or entity identified on the list of “Specially Designated Nationals” available via the website http://www.ustreas.gov/offices/enforcement/ofac/sdn/t11sdn.pdf own or control any

interest in your company or business? Yes No

If yes, please provide the name of the individual(s) and/or entity(ies) and specify the percentage of ownership and/or control for each.

__________________________________________________________________

__________________________________________________________________



__________________________________________________________________

4. Government Relationships

a. Are any persons (or their family members) identified in response to question 3:

(i) Current officials, employees, or representatives of any government, including any government ministry, agency or government-owned or controlled entity

(such as a government-owned oil company)? Yes No

(ii) Current officials, employees, or representatives of any public international organization (such as United Nations, World Bank, or International Monetary

Fund)? Yes No

(iii) Current officials, employees or representatives of any political party, or a

candidate for any political office? Yes No

(iv) Past officials of any of the above-described government bodies, enterprises, political parties, or public international organizations?

Yes No

(v) Involved in any business relationship, including acting as an agent or consultant for, or holding common ownership of any business enterprise or partnership with, any current official (or close family member) of the government, including any government ministry, agency, or government-

owned or controlled entity (such as a government-owned oil company)?

Yes No

b. In a position (formally or informally, directly or indirectly) to exercise influence over the purchasing decisions of any government-owned or controlled entity (such as a government-owned oil company), including by virtue of holding a leadership position in a political party? If the answer to any of (i) through (v) is yes, provide details,

including:

(i) The name of the relevant individual, and the full name of the government body, company, or party position:

____________________________________________________________

(ii) A description of the individual’s official responsibilities:

____________________________________________________________

(iii) The individual’s dates of service (current or past):

____________________________________________________________

c. For each individual answering yes to any of a.(i) through a.(v) above, please indicate that such individual is able under local law to conduct activities on behalf of Weatherford.

__________________________________________________________________



__________________________________________________________________

5. Commercial References (please give at least 3 references, including at least one U.S. company, if possible; for each, include contact name and telephone, fax, and/or e-mail contact information).

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

6. Compliance with Applicable Laws

a. In the last 5 years, has your company been involved in any government audit, investigation, enforcement action, or filed any disclosure of an actual or potential violation of any of the following areas: economic sanctions, import or export controls, international boycotts, U.S. Foreign Corrupt Practices Act or other anti-corruption

laws, anti-money laundering, or other applicable criminal laws? Yes No

If yes, describe the action and how the issue was resolved? (fines, settlement, etc.)

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

b. Is your company aware of any actual or potential violation by the company, its

personnel, or any of its affiliates of any of the areas listed above? Yes No

If yes, please explain.

__________________________________________________________________

__________________________________________________________________

c. Have you, your company or any of the principal officers, directors, or shareholders

ever been investigated or charged with any offense, including bribery, kick-backs,

corruption, money laundering, or conflicts of interest? Yes No

If yes, provide details.

__________________________________________________________________

__________________________________________________________________

d. Does your company have a code of conduct, anti-corruption compliance policies, export compliance policies, a system of internal accounting controls, and/or any other compliance-related policies, whether formal or informal, applicable to your business

and your employees? Yes No

If yes, provide copies of any anti-corruption compliance policies, export compliance policies, and code of conduct currently in force.

7. Use of Subcontractors or Subagents

a. Does your company intend to use any subcontractors or subagents on work

performed for Weatherford? Yes No



If yes, please provide the following information regarding the subcontractors or subagents:

(i) Name and address;

(ii) A full description of the work that will be performed;

(iii) Ownership structure;

(iv) Whether the subcontractors or subagents have any government relationships (as described in 4.a. and b. above).

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

8. Review of Company Policies; Annual Acknowledgement and Certification

a. Please review Weatherford’s Summary of Trade Compliance and Anti-Corruption policies (attached as Form C-2) and forward them to all personnel who may work with Weatherford.

b. Please review and sign the Annual Acknowledgement and Certification (attached as Form C-3).

9. Training Requirement

Before your company can be engaged by Weatherford, each of the individuals listed in 3.c above must complete a web-based anti-corruption training course provided by Weatherford. To initiate registration for the course, please provide e-mail addresses for each of the listed

individuals in the space below (one e-mail will suffice for all individuals, if necessary) and note any special language requirements. Registration information will be e-mailed to each individual.

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

______________________________________________________________________________



10. Data Privacy Statement and Affirmation

Data Privacy Statement

This form is provided because you are under consideration for a business relationship with

Weatherford. Submission of this form to Weatherford is only one step in the review program, and such submission does not affirm the existence of a business relationship between Weatherford and you.

The information you provide in the Questionnaire will be used by Weatherford to help achieve compliance with anticorruption and trade laws of the United States and other jurisdictions. The questions have been tailored to seek only information that is relevant to Weatherford’s compliance efforts. Weatherford will obtain further information about you from the references and other parties identified in your response and will use such information for the purposes described above. The

information collected through the Questionnaire, and from your references and other parties, will not be used, transmitted, or processed for any other purposes.

The information obtained in connection with the Questionnaire may be transmitted to Weatherford

employees or agents, Weatherford’s external legal counsel and/or regulatory or other authorities in the United States or other countries outside your country of residence/business, whose laws protecting personal information may not be equivalent to those in your own country. Weatherford will store this information as long as necessary in connection with the purposes described above in

accordance with Weatherford’s policies and procedures.

You may have rights to access or, where incorrect, amend or delete, information that Weatherford holds pertaining to you. Completion of the Questionnaire is voluntary; however, failure to complete the Questionnaire may preclude Weatherford from doing business with you. If you have any questions or concerns about the above, please consult with your Weatherford contact.



Affirmation

By signing below, I affirm (a) that the information submitted on the Questionnaire and in any attachments is accurate and complete; (b) that I have read and understood the above Data Privacy

Statement and expressly consent to the collection, use, processing, storage, and transfer of data, including my personally identifiable information and data about my company and related persons that I identify in the Questionnaire, to the United States and other jurisdictions, in the manner and for the purposes described in the Questionnaire and in the above Data Privacy Statement; (c) that I agree to provide any and all notices and obtain any and all consents from individuals that I identify in

the Questionnaire for the sharing of their information with Weatherford for the purposes described in the Questionnaire and the Data Privacy Statement; and (d) that I expressly consent to the transfer of the data, including my personally identifiable information, to a jurisdiction that may not provide equivalent protection to the laws in my home country. I authorize you to take such steps as you may

require to verify the data. I understand that the provision of false or misleading information may result in the termination of any relationship that may develop in the future between me/my company and Weatherford and that Weatherford reserves such other remedies as may be appropriate if such a termination occurs. I acknowledge that I have the authority to sign this document.

Name of Certifying Official

Title of Certifying Official Company Name

Signature Date



FORM C-2

WEATHERFORD INTERNATIONAL LTD. SUMMARY OF TRADE COMPLIANCE AND

ANTI-CORRUPTION POLICIES Trade Compliance Policy

It is the policy of Weatherford International Ltd. and its affiliates (collectively, “Weatherford” or the “Company”) that all agents, sales agents, commission agents, resellers, consultants,

representatives, distributors, joint venture partners, customs/import brokers, freight forwarders and other third-party intermediaries that are authorized to act in any way on the Company’s behalf (“Intermediaries”) be aware of import, export controls, sanctions and international boycott laws and comply with them and other applicable laws in conducting business on behalf of the Company.

Import and export control laws cover all imports, exports and in some cases re-exports (from third countries) of products (e.g., goods, software, materials) and technology, as well as foreign-made products that incorporate U.S.-origin parts, components, or technology. These rules restrict the export of certain types of products, certain end uses, and certain end users (e.g., parties denied export privileges, producers of military, nuclear, biological, or chemical weapons, explosives). Any party shipping products for Weatherford must comply with these export rules specific to our operations.

Sanctions laws restrict and sometimes prohibit all persons and companies, wherever located, from doing business with countries subject to sanctions. It is Weatherford’s policy that it will not do business in or with parties from Cuba, Iran, Sudan, or Syria and will not permit Weatherford

products to be shipped to these countries or services to be performed in these countries. No Intermediary will enter into a contract on Weatherford’s behalf to conduct business in any of these countries. Other restrictions may apply to transactions involving other countries, such as Burma/Myanmar and North Korea. Weatherford requires all parties shipping Weatherford products to comply with this policy and all applicable sanctions rules.

Weatherford will provide further guidance on specific rules if requested or as needed.

Anti-Corruption Policy

It is the policy of Weatherford to conduct its worldwide operations ethically and in compliance with the laws of the United States and the other nations in which we operate, including prohibitions against bribery. Weatherford requires that all Intermediaries doing business with Weatherford comply with this policy by conducting business for or on behalf of Weatherford in full compliance with

the U.S. Foreign Corrupt Practices Act (“FCPA”) and all other applicable anti-corruption laws.

The FCPA and other anti-corruption laws prohibit companies or their employees, agents, or representatives from corruptly giving, paying, promising, offering, or authorizing the payment, directly

or indirectly through a third party, of anything of value to any Covered Person to persuade such person to help the Company, or any other person, obtain or keep business or obtain any other improper advantage. The FCPA also requires publicly traded companies to keep accurate books and records of all payments and to maintain an adequate system of internal accounting

controls.

“Covered Person” means any government official, political party or party official, or candidate for political office, as well as close family members (i.e. brother, sister, mother, father, husband, wife or

child) of these individuals. A government official is (i) any officer or employee of a government or any department, agency, or instrumentality of a government; (ii) any officer or employee of a public



international organization such as the United Nations or the World Bank; (iii) any individual acting in an official capacity for or on behalf of a government agency, department, instrumentality or of a public international organization; (iv) any officer or employee of a company owned or controlled by a government; or (v) any member of a royal family who may lack formal authority but who may otherwise be influential, including by owning or managing state-owned or controlled companies. The definition of government official could also cover former government officials in cases where the former official retains some sort of quasi-official status.

The prohibitions cover direct bribes to secure contracts, payments to obtain discretionary permits or clearances (e.g., passing customs inspections), and indirect payments made by agents or other Intermediaries acting on Weatherford’s behalf.

Under no circumstances shall any officer, director, or employee of Weatherford or any Intermediary

acting for or on behalf of the Company:

a) corruptly give, pay, or offer or promise to pay, or authorize the giving or payment of anything of value, directly or indirectly, to any Covered Person to obtain or retain

business, direct business to another person or entity, or obtain an improper advantage; or

b) give, pay, or offer or promise to pay, or authorize the giving or payment of anything of value to any business partner (such as a joint venture partner or Intermediary) while knowing, including having knowledge of facts that would allow a reasonable person to know, that the payment or promise to pay will be or is likely to be passed on to any Covered Person in order to obtain or retain business, direct business to another person or entity, or to obtain an improper advantage.

Despite the fact that the FCPA permits, in very limited circumstances, payments called "facilitating payments," (i.e., small payments made to obtain ministerial, governmental services to which the

payor is entitled), the Company prohibits the use of such payments by its employees and any Intermediary acting for or on behalf of the Company. Further, all transactions involving Company funds or assets, or transactions conducted on behalf of the Company by any Intermediary, must be timely recorded in reasonable detail and accurately and completely reflect the transactions.

You should also be aware of and comply with all local laws concerning imports, exports, and anti-corruption/anti-bribery that apply in your jurisdiction. Weatherford expects all Intermediaries to conduct themselves applying the highest ethical standards at all times.

Participation in any improper transaction or deviation from established Company accounting

practices is strictly prohibited and may result in disciplinary action, dismissal, termination of a contract or agreement with the Company, or civil or criminal prosecution.

Please see the following websites for further information:

Wassenaar Arrangement Trade Controls: http://www.wassenaar.org/

U.S. Trade Controls: http://www.bis.doc.gov and http://www.treas.gov/offices/enforcement/ofac

Canadian Trade Controls: http://www.international.gc.ca/controls-controles/index.aspx

EU Trade Controls: http://ec.europa.eu/trade/creating-opportunities/trade-topics/dual-use/

http://www.wassenaar.org/

http://www.bis.doc.gov/

http://www.treas.gov/offices/enforcement/ofac

http://www.international.gc.ca/controls-controles/index.aspx

http://ec.europa.eu/trade/creating-opportunities/trade-topics/dual-use/



UK Trade Controls: http://www.berr.gov.uk/whatwedo/europeandtrade/strategic-export-control/index.html

United Nationals Trade Controls: http://www.un.org/sc/committees/

U.S. FCPA: http://www.usdoj.gov/criminal/fraud/fcpa

http://www.berr.gov.uk/whatwedo/europeandtrade/strategic-export-control/index.html

http://www.berr.gov.uk/whatwedo/europeandtrade/strategic-export-control/index.html

http://www.un.org/sc/committees/

http://www.usdoj.gov/criminal/fraud/fcpa/



Form C-3

INTERMEDIARY ANNUAL ACKNOWLEDGMENT AND CERTIFICATION

This Intermediary Annual Acknowledgment and Certification is to be completed by any individual or authorized representative of an entity (hereinafter, “Intermediary”) seeking to be, or currently, engaged in a contractual relationship with Weatherford International Ltd. or one of its subsidiaries or affiliates (collectively, “Weatherford”) .

Intermediary acknowledges that it:

1. Is familiar with and understands Weatherford’s Trade Compliance Policy as described on Form C-2 (“Trade Compliance Policy”); and

2. Is familiar with and understands Weatherford’s Anti-Corruption Policy as described on Form C-2 (“Anti-Corruption Policy”).

Intermediary represents, warrants, and agrees that it:

1. Has not and will not take any action that would constitute a violation of the U.S. Foreign Corrupt Practices Act (“FCPA”), Weatherford’s Anti-Corruption Policy, or local anti-corruption laws in connection with the services it provides to Weatherford, including making any offers or payments to any Covered Person to obtain or retain business on behalf or for the benefit of Weatherford, or to obtain any other improper advantage;

2. Has not and will not make "facilitating payments" (i.e., small payments made to

obtain ministerial, governmental services to which the payor is entitled) in connection with the services it provides to Weatherford;

3. Has not and will not directly or indirectly, sell, provide, import, export, re-export, transfer, transship, divert, loan, lease, consign or otherwise dispose of any Weatherford product, material, services, software including source code, or technology (“Items”) to or via any person, entity or destination, or for any activity or end-use (including nuclear, missile, chemical or biological weapons proliferation,

military, or money laundering activities) restricted by the applicable laws or regulations relating to imports, exports, reexports, economic sanctions, and international boycotts, or otherwise restricted by Weatherford’s Trade Compliance Policy;

4. Has not and will not transship any Weatherford Items, irrespective of the country of origin of the Item(s), through any country subject to economic sanctions including Cuba, Iran, Sudan, Syria, or North Korea;

5. Has not and will not sell or export any Items obtained from Weatherford or on behalf of Weatherford to Cuba, Iran, Syria, and Sudan, or to entities or individuals in or related to those countries;

6. Has kept and continues to keep accurate financial records that timely, completely, fairly and accurately reflect all financial transactions of the undersigned; and

7. Will cause all personnel that will be conducting activities on behalf of Weatherford to (i) complete a web-based anti-corruption training course provided by Weatherford



before Intermediary is engaged and (ii) participate in compliance training as requested by Weatherford after engagement.

Intermediary agrees that it shall promptly notify Weatherford of any possible violation involving

Weatherford Items or if the Intermediary is under investigation for possible violation of trade compliance and/or anti-corruption laws, including those relating to imports, exports, economic sanctions, international boycotts, or the FCPA. Intermediary also agrees that it will provide this Annual Acknowledgment and Certification on each annual anniversary of the contractual relationship with Weatherford and at any other time if reasonably requested by Weatherford.

On behalf of Intermediary, the undersigned affirms that above statements are true and correct and further agrees that if any of the above statements should become untrue or incorrect due to a change in law, fact or both, the undersigned shall promptly notify Weatherford.

______________________________________________________________________________ Name and Title

______________________________________________________________________________ Signature

______________________________________________________________________________ Date



FORM C-4

INTERMEDIARY DUE DILIGENCE REPORT

(To be completed by Weatherford Personnel)

Weatherford takes compliance with the U.S. Foreign Corrupt Practices Act (“FCPA”) and other applicable laws very seriously. Weatherford expects all Weatherford Personnel to take appropriate steps to protect against violations of the FCPA and other anti-corruption laws, rules and regulations.

To this end, Weatherford requires prospective Intermediaries to provide certain information for Weatherford’s review prior to entering into any agreement with any such Intermediary or other business partner.

As part of its due diligence process, Weatherford requires relevant Weatherford Personnel to review information related to Intermediaries to identify potential compliance issues. Accordingly, please review the information provided to you by the prospective Intermediary and complete the following report as fully and accurately as possible. This is an essential part of the Weatherford due diligence process, and Weatherford will not enter into any agreement with an Intermediary or other business partner until this report has been prepared and filed with the appropriate business and compliance personnel for review.

For any answer requiring more space, please attach the complete answer on a separate sheet of paper. If a question is not applicable, or if you do not know the answer, please so indicate in your response along with a short explanation. Please note that incomplete or vague responses will result in delays in the review process as follow-ups will need to be conducted. Once you have completed the report, please submit it as part of the due diligence materials with the completed Form C-5 –Request for Approval of Intermediary.

Name: ________________________________________________________________________

1. Business Address (including street address and mailing address):

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

2. What services would the Intermediary render to Weatherford?

________________________________________________________________________

________________________________________________________________________

3. Who within the business unit would oversee the Intermediary’s performance under the agreement?

________________________________________________________________________

4. What experience does the Intermediary have in providing such services to other customers or clients?

________________________________________________________________________



________________________________________________________________________

5. What is the precise nature of the expertise the Intermediary can offer Weatherford and how did the Intermediary obtain this expertise?

________________________________________________________________________

________________________________________________________________________

6. How much would the Intermediary be compensated? (Please attach a rate sheet, if applicable)

________________________________________________________________________

7. How did the parties determine the appropriate level of compensation?

________________________________________________________________________

________________________________________________________________________

8. Is the amount of compensation fair, reasonable, and comparable to compensation paid in the geographic area for similar services?

________________________________________________________________________

9. Did the Intermediary provide answers to all of the questions on the Intermediary Due

Diligence Questionnaire? If not, why was the Intermediary not able to complete all of the questions on the questionnaire?

________________________________________________________________________

________________________________________________________________________

10. Have you contacted the Intermediary’s references? Yes No

If “no”, please provide an explanation as to why you have not been able to contact the reference. If “yes”, please provide a brief description of what the reference said about the Intermediary.

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

11. What is the business justification for engaging this Intermediary?

________________________________________________________________________

_______________________________________________________________________



12. From what source did you learn of this Intermediary?

________________________________________________________________________

________________________________________________________________________

13. Was the Intermediary referred to you or the Company by a Covered Person as that term is defined in the Anti-Corruption Compliance Manual? If so, please provide specific circumstances, including the name and title of the Covered Person and any relationship, formal or informal, such Covered Person has with the Intermediary.

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

14. Will the Intermediary use any subcontractors or subagents on work performed for

Weatherford? Yes No

If “yes”, please provide an explanation of why this is necessary.

________________________________________________________________________

________________________________________________________________________

15. Are you aware of any of the following “red flags”:

• Failure to provide basic documentation

• Relationship with any official or employee of any government agency or government-owned or controlled entity that was not disclosed

• Prior judgments, liens, or bankruptcies

• Civil or criminal litigation that was not disclosed

• Criminal arrests

• Requests for unusual contract terms or payment arrangements

• Failure to verify any of the provided information

• Intermediary becomes argumentative over basic requests for information

Please describe any of these – or any other – “red flags” that you have identified. (For additional information on possible red flags, see the Anti-Corruption Compliance Manual.) Also, please

indicate whether you believe mitigating measures could be taken to address any of the “red flags” identified.

________________________________________________________________________

________________________________________________________________________



________________________________________________________________________

________________________________________________________________________

16. Do you have any concerns about the Intermediary, or have reason to believe that the Intermediary would not comply with Weatherford’s anti-corruption or trade compliance policies, or U.S. and international anti-corruption and trade compliance laws?

Yes No

If “yes”, please provide an explanation.

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

Certification

The undersigned hereby certifies that, to the best of my knowledge and belief, all information set forth in this Due Diligence Report is correct and complete.

Name

Title

Signature Date



FORM C-5

REQUEST FOR APPROVAL OF INTERMEDIARY Approval is requested to engage an Intermediary as follows:

Business Unit Requesting Approval: _______________________________________________________________________

Entity Name: _______________________________________ ENODE #: _________________________________________

Country or Countries Covered by Agreement: ________________________________________________________________

Product Line Covered by Agreement: _______________________________________________________________________

Name and Business Address of Intermediary: ________________________________________________________________

_____________________________________________________________________________________________________

_____________________________________________________________________________________________________

Brief Description of Services to be Provided by Intermediary: ____________________________________________________

________________________________________________________________________________________________________

Compensation to Be Paid to Intermediary: ______________________________________________________________________

_________________________________________________________________________________________________________

Estimated Annual Compensation to be Paid to Intermediary: ________________________________________________________

_________________________________________________________________________________________________________

Date upon which Intermediary’s Services Would Begin: _________________________________________________________

Business Justification for Engaging Intermediary: ______________________________________________________________

_____________________________________________________________________________________________________

Documents Submitted (place check by each document submitted):

Due Diligence Questionnaire Annual Acknowledgment and Certification

Due Diligence Report (completed by Requestor) Representation Agreement (in final draft form; may be provided later in

process by Legal Counsel) provided later in process by Operations Counsel)

Requesting

Parties:

Name Title Signature Date

Requestor: __________________ ___________________ ________________________ ___________________

Manager: __________________ ___________________ ________________________ ___________________

(either Country or Product Line Manager, as appropriate)



Legal Counsel Review

Legal Counsel: ________________________________________ Date: ____________________________________

Red flags noted, if

any:

______________________________________________________________________________________

______________________________________________________________________________________

______________________________________________________________________________________

______________________________________________________________________________________

FCPA Review Committee Review and Approval

Documents Obtained (place check by each document obtained):

Due Diligence Questionnaire

Annual Acknowledgment and Certification

Due Diligence Report

Representation Agreement

Intermediary Screen

Additional documents (please specify any additional documents):

_____________________________________________________________________________________________

Director, E&C Group: ___________________________________________________ Date: ______________

Director, Special Projects

Group:

___________________________________________________

Date:

______________

Director, Trade Compliance

Group:

___________________________________________________ Date: ______________

Chief Compliance Officer: ___________________________________________________ Date: ______________

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