Shell Exploration & Production

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UK Norway Share Fair

April 20th 2006

Ardoe House Aberdeen

Alastair Reid

Supply Chain Team Leader - Projects

Agenda

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

EP Key Locations

USAUSA

NigeriaNigeria

OmanOman

BruneiBrunei

NW EuropeNW Europe

AustraliaAustralia

CanadaCanada

MalaysiaMalaysia

Shell Exploration & Production

Strategic focus: fit-for-purpose strategies for major spend categories.

Business integration: Supply Management hardwired in business processes

• dedicated global matrix organisation, clear accountabilities

• processes to enable synergy with suppliers & efficient requisition to pay

Common approach: common processes, tools & behaviours.

• Best practice processes, min standards & enabling tools, “one voice” to market

• Consistent & pervasive performance mgt with credible measures to monitor progress & support delivery of benefits. 

Valued people: competent professionals working on strategic level.

• Assuring competence development to meet business needs

E&P Supply Chain Strategic Elements

Global Category Management

• Dedicated capability across a majority of third party spend for major market categories

• Global strategies that support business objectives

• Making full use of market intelligence

• Sourcing contracts optimise total cost of ownership

• Post contract award: continually improve cost and value performance as well as ensuring contract compliance

Global Category Management

PRODUCTION : boats, helicopters, prod chemicals, Integrated Services, Facilities Management, installed base

compressionCAPITAL PROJECTS : linepipe, pipelay services,

compression, subsea facilities - deepwater, agency manpower

SEISMIC, IT, TRAVEL, CONSULTANCY and other SERVICES

WELL ENGINEERING: rigs, bits, cementing, OCTGs, completion equip, expandables, liner hangers, fishing/ milling, coiled tubing, ESPs, well control, casing/tubing

running, Directional Drlg/WirelineUpstrea

m Busines

s Categor

y Groupin

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Regional/OU structure

Stakeholders

E PE u r o p e

• 1 Management team

• 1 Business plan

• 1 Strategy

• Aligned policies

• Aligned procedures

• Integrated support team

Shell Exploration & Production in Europe

Shell Exploration & Production in Europe

• Approx. 4,500 employees - contributing approx. one third to Shell EP Business.

• And the prize in each country:

– Norway - Est. 70% hydrocarbons still to be produced.

– U.K. - just under 50% hydrocarbons still to be produced.

– The Netherlands - Over 50% still to be produced.

– Ireland - Plans to bring Irish gas onshore

– Germany - Successful gas production in Europe’s biggest mature energy market.

– Italy - Turn largest onshore oil accumulation in Europe into a legacy position.

– Austria - Successful mature operator with growth aspirations.

– Denmark - Successful venture with an extended licence period (2042).

• UNDERPINNING OUR BUSINESS IS LEADERSHIP IN HS&E PERFORMANCE

Support Manager SCM

Alex de Jager

ASSEN

Well Engineering SCM

ABERDEEN

Projects SCM

Iain Middelton

ABERDEEN

Services SCM

Marie Marsh

ABERDEEN

Production SCM

Neil MacLean

ABERDEEN

NOV SCM

Clive Bray

STAVANGER

Jeff Prestwich

Supply Chain Manager

John Lickvar

ABERDEEN

Supply Chain Management in E&P in Europe

Drilling

Well EngineeringCapital Projects

E&M, Logistics

Production Services

IM/IT, Geosciences

HR, FM

Assurance, Process,

External relationships

Non Shell

Operated Ventures

Number of Current EPE Contracts

Supply Chain UK Norway The Netherlands Ireland Italy

Production 826 538 53 233 2 0Projects 349 63 38 22 226 0Services 908 310 432 138 22 6Well Engineering 284 127 73 61 23 0

Total 2,367 1,038 596 454 273 6

Total

Projects15%

Services38%

Production35%

Well Engineering

12%

Integrated Service Contractors (ISC)

• Significant volume of our activity is performed by ISC's

• Where we have an ISC - generally

– Shell contract with 1st tier suppliers

– ISC contract with 2nd tier suppliers

• Key contacts within the ISC’s are available

Supply infrastructure

EPE gas/oil fields

Norway/Brent “Central” Onegas“Mature”

Sigma 3AKOP AJSWGE

LandGroningen

GLT Proj

LOP(Projects)

MultiGasGLT Maint OMC

Maintenance only

Projects only

P + M

Shell Exploration & Production in Europe - ISC Overview

Integrated Maintenance and Modifications Contract (ISC) Aker Kværner Offshore Partner (AKOP)

Integration with and between Stavanger and Kr. sund organisations

• Project Engineering and Engineering & Maintenance

• Engineering Services: Mechanical, E&I, etc

• Support: Procurement, Cost/ Plan, DCC etc

• Prefabrication

• Construction: Mechanical, E&I, Structural, Process, Safety, Surface Treatment, Insulation, Scaffolding

• Maintenance Support: disciplines as above

• Subcontracts:• Surface Treatment, Scaffolding/ rigging, Insulation• Process Support: pressure testing, high pressure cleaning, nitrogen purging.

Option.• Civil: roads, structures, buildings, concrete, drains. Option• Material frame agreements: piping, steel, cable trays, nuts and bolts etc.

• Does not include: maintenance discipline contracts (valves etc – managed directly), front end engineering/ concept. Larger mods/ projects can be run separately

Our Value Proposition to Suppliers

Relationships

• It is our aim to work effectively with the industry, and where business needs justify and competitive supply assured, we build long-term relationships based on trust and clear, mutually agreed objectives.

• We capture the efficiencies of dealing with suppliers, for example through standardising prequalification and terms & conditions.

Collaboration

• We work with suppliers in development and deployment of key technologies.

• We actively promote the fair sharing of risk between supplier and operator, which is increasingly important as we venture into more technically and commercially challenging environments.

Performance

• Relationships with suppliers who perform to an excellent standard will be nurtured.

• We measure performance and build differentiating performance into our contracting strategies.

• Shell E&P in Europe use the oil & gas industry supplier database - Achilles in Norway and FPAL in UK and NL which eliminates the need to maintain our own in-house supplier database.

• Achiles and FPAL give us a structured way of identifying and selecting potential suppliers & contractors based on the quality of their data in the database.

• Suppliers interested in working with us should register with Achilies andFPAL and build up an attractive supplier profile by registering as fully and as accurately as possible.

• Large or Critical suppliers may also be required to undergo FPAL Capability Assessment, to reduce duplication of requests for information in the tender process.

Doing Business With Shell Exploration & Production in Europe

The Supply Chain Code of Practice outlines a set of best practice guidelines for the UKCS oil and gas industry to:

First adopted by the industry in 2002, signatories undertake to work towards full compliance. They include major purchasers (UKCS operators and principal contractors) and suppliers (companies providing goods or services).

Transparent planning of contracting activity by major purchasers to improve supply chain capability

Streamline pre-qualification, tendering and negotiation processes to reduce billing costs, eliminate waste and value and increase competitiveness

Increase feedback dialogue and shorten payment cycles to improve performance

• Communicate forward plans to the industry

• Support the annual industry Share Fair

• Publicise a list of internal contacts

• Where pre-qualification data is required only invite bids from suppliers registered with FPAL

• Eliminate supplier data duplication by utilising FPAL

• Use industry standard ITT Models where appropriate

• Provide appropriate de-briefing for all bids

• Use industry standard contract forms

• Include payment terms of 30days in all contracts

• Include performance indicators

• Give FPAL performance feedback

• Pay all valid invoices within 30 days

• Track and discuss key contract performance indicators

• Request and participate in PLAL performance feedback

• Submit complete and valid invoices

• Adopt a prompt payment policy for own suppliers

• Keep FPAL records valid and up-to-date

• Refer purchasers to FPAL if duplicate information is required

• Participate in the Industry Mutual Hold Harmless

• Use standard industry contracts (LOGIC type or company specific global contracts)

• Review Purchaser plans, FPAL Purchaser Profiles and attend Industry Share Fairs

Shell Exploration & Production in Europe expects from vendors

• Business Principles

– Services and products delivered in accordance with Shell General Business Principles

• HS&E & Quality

– Aligned management systems and a very good performance track record

• Mutual Indemnity Agreement

– Undersign the deed

• Financial

– Satisfactory financial position to provide continuity in the market where it operates

• Technical (product features / vendor business capabilities)

– Meet requirements of (inter)national and if required specific Shell / E&P in Europe defined standards

Shell Exploration & Production

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Norwegian Specifics

Shell E&P Europe - Norway

Stavanger

Kristiansund

Aukra

Kristiansund:

Aukra:

Stavanger:

Draugen Field Production

Orman Lange Field Production (Oct.2007)

Engineering Maintenance

550 staff approx.

30 staff approx.

50 staff approx.

Orman Lange Field - Plant & Admin

Gas Processing

Central Office

Well Engineering

Exploration Drilling

Project Engineering

Corporate Functions (FM, HR, Finance)

Operations: Mid-Norway and Norske Shell

o Office established in Kristiansund 1989

o Operations in Kr. sund in 1992.

o 1 platform & single train

o Shell ownership, skilled offshore staff

o Value creation in Mid-Norway seen as target also for Ormen Lange: 40 year perspective

E3

D3

Draugen Subsea Layout

2007/8 Activity

Draugen

• Draugen project funnel showing big potential future projects:

– new loading buoy

– CO2 pipeline supply from the beach and injection into reservoir

– re-installing a drilling rig on the platform

14

FID

ApprovalSelectPre -Init. Identify ReviewIG FG CG AG RGExecute

1st

HC

Draugen Opportunity Funnel, March 2006

E3 wellPWM Phase 2,incl. NWIT line

A-55 gasinjection

HOLD

New infill wells/remaining oil targets

RS flowbase

e-Operation

D3 well

EF Appraisal well

CO2 for EOR +Electrification

SWIT(integrity)

Platform Rig

I-gate April

I-gate Q2

F-gateMay/ June

Joint rigopportunity poss

A55 repair

F-gate May

Loading bouy

X-mas tree integrity work,D2, A53, A5 GI,EF Dev work,Draugen 2025

Fire& Gas

Leak detection

Next 4D

Trym

• Trym is a Norwegian gas/condensate development

• Trym Owners• Shell (50%)• Statoil (30%)• DONG (20%)

• Tri-lateral subsea well• Tied back to Harald

(located in Danish sector) via 5 km 8” flow-line.

• Harald is a DUC owned and Maersk operated platform.

• DUC = Danish Underground Consortium (39% A.P. Møller – Mærsk AS, 46% Shell, 15% ChevronTexaco).

• Cross border issues Norway / Denmark

Trym Development

Plan

• Rig availability - critical factor

• Drilling operations: Q1 and Q2 - 2007

• Marine installations during summer season 2007

• Harald platform modifications during Q2 and Q3 - 2007

• Production start: Q4 - 2007

Ormen Lange

Location:

Gas production:

Recoverable gas reserves:

Recoverable condensate

Water depth:

Field investments:

Pipelines investments:

Operator for developmentand construction:

Operator for production:

120 km northwest of Kristiansund

20 GSm3/yr

375 GSm3

22 MSm3

800 – 1 100 metres

Approx 55 bn NOK (2002)

NOK 5 - 17 bn NOK

Norsk Hydro ASA

A/S Norske Shell

2003

2004

2005

2006

Ormen Lange Production Stair Case

2007

•Strategies•PDO•Organisation•Design

•Recruitment•Operability Rev.•Contract Strategy•Power•Commissioning

•Recruitment•IT systems•Man systems•Procedures• Tender• Organisation

• Recruitment• Contracts• Maint. Systems• Emerg Org.• Take-over

•Commissioning•Start-UP•Transfer of Operatorship

Operational Readiness

Ormen Lange Maintenance: Outsourcing Level

CORE MAINTENANCE1st Line, Corrective and

by Shell Personnel

SPECIALIST MAINTENANCE Preventive, Corrective and Condition Monitoring

Equipment Suppliers and Other Specialists

MAINTENANCE SUPPORT BY ISC

Supervision of execution, PMRs, 1st Line

Call-off based on condition monitoring and preventive maintenance routines

Support preventive, corrective, shutdowns etc

Support38%

Core Maintenance 32%

Specialist30%

I.e. Shell ownership retained; outsourcing level:- Stable,- Builds on current organisation

Examples of Ongoing and Upcoming Tenders:

Ormen Lange and Draugen

• USC Ongoing

• Draugen Area Tiebacks 2007

• Frame Agreement for Lifting Equipment Tender Evaluation ongoing

• Maritime Support/ Tugs – Ormen Lange Tender Evaluation ongoing

• Inspection & Corrosion Monitoring tender Strategy/ plan for approval

• Condition Monitoring Services tender Prequal performed

• Quantitative Risk Assessment Services Screening & Prequal final

• Control System Support Services Strategy/ plan for approval

• Maintenance of Valves 2nd half 2006

• FM – Work Environment Q2 2006

www.shell.co.uk/supplychain

• Contracting future plans

– Updated Quarterly

– Includes key contacts and timing per activity

• Selling to Shell overview

• Shell Group Business Principles

• Supply Chain Management

– key contacts

Contact Us ……

We have a hard copy listing of contacts available for

you

For follow up please use our Contact List or contact:

Shell email vicki.caveney@shell.com