A new collaboration standard for project development

Subsea Operations Conference, HaugesundSteven Petrie, Supply Chain Manager ProjectsCentrica E&P Norway

Topics

• Overview of Centrica E&P Norway

• The Market

• Project Execution Strategy (SPA Model)

• Oda Development & SPA Influence

• SPA Key Success Criteria

Barents Sea

Norwegian Sea

North Sea

Centrica E&P Norway

2006Established in Norway

70.000Barrels of oil equivalentsper day(rank #10 on the NCS)1/3

Part of Centrica E&P’s oil and gas Reserves & productionlies in Norway

8Producing fields

3Development projects

50Licences, 13 operated

150Employees and contractors

2015Moved to new HQ in Bjergsted, Stavanger

Market -major cost increase last ten years

Driven by:• Oil price• Resource constraints

• Unbalanced market conditions• Increased documentation

UCCI index (approx.):

• 2000 to 2014: 225%

• 2014 to 2016: -20%

Subsea index (approx.):

• 2000 to 2014: 375%

• 2014 to 2016: -5%

Offshore rig index (approx.):

• 2000 to 2014: 480%

• 2014 to 2016: -27%

Q4 2015

Source: IHS

Market - oil price drop creates climate for change

• Project simplification– Fit for purpose solutions– Improved efficiency in all areas

• Standardisation– Cost effective solutions and design– Industry standards, not company

specific requirements

• Collaboration with suppliers– Early engagement to maximise value– Open communication to improve efficiency– Use suppliers design solutions

... all needed for sustainable business in a 30–40 $/bbl regime

Centrica project execution strategy

• Front End Loading

• Continuity in personnel from Define to Execute

• Close cooperation with host owner

• Strategic partnership with key suppliers

... to maximise supply chain effects

Project optimisation

SPA Model Framework

First Phase

SPA Identification and Description

Opportunities and challenges definition

Vision & Strategy

Clear goals & Mgt. buy in

Aggressive timeline

Hands-on governance

Strong organisation

Open and inclusive tender process

Proactive stakeholder mgt.

SPA Implement and collaboration and trust build

Sustainability

Quick wins

Revisit vision, mission, goals

Leadership performance monitoring

Integrate into CEN Project

Merge resources, develop processes & tools

Progress “hard” and “soft” tools to secure collaboration and trust

Conduct training

Third PhaseSecond Phase

Collaborative ITT with supply chainPartnership roll-out road mapLeadership ownershipOrganisation adjustments Partner selectionContinuous risk management

SPA Select and Planning

Opportunities preparation and risk management

Culture development

Training and learnings

Partners involved in this phase

Award «100 Days»

Centrica selected a new contract model

• Based on shared values, objectives and common goals

• Early engagement to develop fit for purpose solutions minimising complexity, cost and schedule

• Commercial model that supports mutual trust, co-operation and integrated work, rewarding collective performance

• Long term agreements

FMC

DNV GL

Subsea 7

Aibel

Centrica

Strategic partnership alliance with a few experienced suppliers

SPA Model based on collaboration

VALUE CHAIN

GATE DELIVERY PROCESS

Design, Engineering & Management

Subsea Installation

Independant Verification & Engineering Specialists

Firm Scope

Optional Scope

Optional

• Optional scope only awarded if seen to be the best solution for the project;• Strategic Partner present recommendation and proposal with supporting justification including

benchmarking;• Proposal evaluated based on Competency, Capacity and Competitiveness.

Strategic Partnerships – Scopes of Work

EvaluateConcept

selectFEED Detail design Procure Fabricate

Installation & Hook Up

Operation

PG1 FIDDesignFreeze

MCStartProd

PG2

Subsea Production Systems

Commercial Model

We are seeking a commercial model that:

• Provides optimum driver alignment between Company and Contractor (win-win)

• Is fair and balanced

• Provides flexibility

EvaluateConcept

selectFEED Detail design Procure Fabricate

Installation & Hook Up

Operation

Design, Engineering & Management

Subsea Installation

Independant Verification & Engineering Specialists

Reimbursable Target Price incl. gain & pain share

Reimbursable Target Price incl. gain & pain share

Reimbursable

Subsea Production Systems

Reimbursable Target Price incl. gain & pain share

Portfolio Level - Drivers and Success Factors

• Relationships• Continuity of

resources• Experience transfer• Cross project

learnings• Commitment from

SPA Contractors

Team Experience & Knowledge

• People (right behaviours & competence)

• Agile CE&P core team

• Assets (vessels, fabrication, mill slots etc.)

Flexibility & Optimisation

• Access to core knowledge

• Use of NORSOK and SPA Contractors technical requirements

• Use of SPA Contractors systems and tools

Technology, Specifications, Systems

& Tools

• Subsea tie-in to Ula with BP delivering brown field scope at Ula

• Subsea infrastructure, pipelines and drilling delivered by Centrica

• One 4 slot template with 2 producers and 1 water injection well

• Peak production of 35,000 boepd with production startup mid. 2019

Oda (Butch) field development plan

Plan to sanction Butch project Q4 2016

ButchSubsea tie-in to Ula

Significant savings are being identified

DG2 SC Savings SPA Savings Target

SPA

ele

men

ts

SURF

SPS

SURF

SPS

- c.40% cost reduction on SPS and SURF

- SPA Model co-operation important contributor to enabled scope optimisation.

Distribution of target SPA Capex

- taking benefit of market window, concept optimisation and SPA contract model

• Behaviours – live by values, fair, integrity

• Communication – open, listening, inclusive

• Work environment (culture) – motivating, hardworking

• Cooperation – proactive, delivery focus, sharing

• Integrated teamwork – high performing, innovative

… drive efficiency, standardisation and simplification

Key success criteria

Collaboration changes our way of working

Thank you for your attention!