achieving operational excellence by...

Proprietary and Confidential © 2017 HSB Solomon Associates LLC

www.SolomonOnline.com

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Achieving Operational Excellence by Benchmarking

Rosneft

III Upstream Technologies 2017

October 4th



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Confidentiality Statement

This presentation is confidential and intended for the sole use of the client to whom it is addressed. The information and methodologies outlined herein are proprietary, and their expression in this document is copyrighted, with all rights reserved to HSB Solomon Associates LLC (Solomon). Copying or distributing this material without permission is strictly prohibited.

M³ – Measure. Manage. Maximize.®, Comparative Performance Analysis™, CPA™, Performance Excellence Process™, PEP™, Q1 Day 1™, EDC®, EII®, CEI™, CWB™, Solomon Profile® II, RAM Effectiveness Index™, and other marks are registered and proprietary trademarks of Solomon. The absence of any indication as such does not constitute a waiver of any and all intellectual property rights that Solomon has established.



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World’s largest databases of upstream, midstream, and downstream operating performance

“Apples-to-apples” comparisons, letting you truly identify the areas where your facilities could improve

Solomon Benchmarking Global Standard

About Solomon

Global Perspective

Our data is proprietary, not pulled from inconsistent, publicly available sources.

85% of the worlds refining capacity participates in the study



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Benchmarking Services

Thermal Generation

Cogen

Geothermal

Advisory Services

Performance Excellence Process

Q1 Day 1

Workforce Optimization

Strategic Advisory Services

Solomon Services

Advisory Services


Q1 Day 1



Lubes

Aromatics

Olefins/Polyolefins

Propane Dehydrogenation

Ethylbenzene/Styrene

Reliability & Maintenance

Turnaround Duration

Advanced Process Control

Quality Control

Deep Drill-Down

Fuels


Integrated Site Services

Advisory Services


Q1 Day 1



Cost Projection Model

Heavy Oil


Onshore Production

Offshore Production

Enhanced Oil Recovery

Unconventional Oil & Gas

Steam-Assisted Gravity Drainage

Drilling & Completion Costs Production/Uptime Reliability

Floating, Producing, Storing, & Offloading

UPSTREAM POWER

GENERATION

MIDSTREAM DOWNSTREAM

Natural Gas Forecasting

NAGS Retainer Service

Supply/Infrastructure Assessments

N. American Gas Forecast to 2050

N. American Economic Ranking Report

Advisory Services


Q1 Day 1




Natural Gas Transmission

Natural Gas Processing

LNG Processing

Liquid Pipelines & Terminals

Trucking

Petroleum Marketing Terminal

Gas Storage



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Achieving Operational Excellence Why Benchmarking?

• Understand how your company compares to its peers in the areas in which you compete.

• Focus on the key attributes necessary to efficiently and effectively manage and maximize margin.

• Measure and track key performance indicators (KPIs), setting achievable and meaningful targets.

• Benchmarking is a critical step in the overall process of operational excellence.

• Downstream knows they exist in a competitive, valve-added margin business.

• Upstream tends to defer efforts on cost and efficiency during the “boom times” as an unnecessary distraction in the pursuit of growth.

• Key to success, post collapse of oil price, is to re-establish focus on sustainable, margin-driven performance.



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Experience with Rosneft*: Downstream Fuels and Lube Studies

Title Location of Refineries

2002 Fuels & Lubes Study Lisichansk, Orsk, Ryazan, Saratov

2004 Fuels & Lubes Study Lisichansk, Orsk, Ryazan, Saratov

2006 Fuels Study Lisichansk, Ryazan, Saratov

2008 Fuels Study Achinsk, Novokuibyshevsk

2008 Fuels Study Lisichansk, Ryasan, Saratov

2010 Fuels & Lubes Study Lisichansk, Ryasan, Saratov , Novoil,Ufa, Ufaneftechim

2010 Fuels Study Achinsk, Angarsk, Komsomolsk, Kuibyshevsk, Novokuibyshevsk,Syzran

2010 Lubes Study Angarsk, Novokuibyshevsk

2012 Fuels & Lubes Study Novoil,Ufa, UfaneftechimUfa, Ufaneftechim

2012 Fuels Study Achinsk, Angarsk, Komsomolsk, Kuibyshevsk, Novokuibyshevsk, Ryasan, Saratov, Syzran


2014 Fuels Study Achinsk, Angarsk, Komsomolsk, Kuibyshevsk, Novokuibyshevsk, Ryasan, Saratov, Syzran

2014 Fuels Study Novoil,Ufa, UfaneftechimUfa, Ufaneftechim


2016 Fuels Study Achinsk, Angarsk, Komsomolsk, Kuibyshevsk, Novoil, Novokuibyshevsk, Ryasan, Saratov, Syzran, Ufa, Ufaneftechim


* Including Acquisitions

1Q

4Q 9192939495969798

2010 2012 2014 2016

Operational Availability (Without Slowdowns), %

1Q

4Q

70

80

90

100

110

120

130

2010 2012 2014 2016

Energy Intensity Index (EII®)

1Q

4Q

50100150200250300350400450500

2010 2012 2014 2016

Personnel Index, work hr/100 EDC

ROSNEFT RYAZAN



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USA

Mexico

Trinidad & Tobago

Brazil

Norway

Denmark

United Kingdom Azerbaijan

China

Vietnam Thailand

Indonesia

New Zealand

Australia

Bangladesh

India

Angola

Equatorial Guinea

Nigeria

Mauritania

Tunisia Egypt

Netherlands

Solomon Upstream Worldwide Experience > 5,000 O&G fields; >83 FPSOs

Argentina

Qatar

Philippines

Russia

Brunei Malaysia

Canada

Colombia

Peru

Ecuador

Bolivia

Venezuela

Algeria

Germany Austria

Kazakhstan

Turkmenistan

Oman

UAE

Pakistan

Since 1992



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Solomon Upstream Operations Excellence

Top performers show a balanced focus on cost, production efficiency, reliability, and HSE performance

Good Sustainability HSE

Low Costs

Maintenance

Labor

Energy

High

Reliability

Availability

Efficiency



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Ass

et

A

Ass

et

B

Ass

et

D

Ass

et

C

Ass

et

E

Unit C

ost

, USD/B

OE

Peer Avg

Leader Avg

Asset D

Asset B

Asset C

Asset A

Asset E

r² = 0.9165

Act

ual Cost

, M

M U

SD

Standard Cost, MM USD

Ass

et

E

Ass

et

A

Ass

et

C

Ass

et

D

Ass

et

B

Tota

l O

pera

ting C

ost

Index

Leader Avg

Peer Avg

Operating Cost - Normalized Competitiveness vs Efficiency

Unit Cost Profile – Competitiveness

Total Cost – Normalization Model Output The line represents a standard/average cost. Deviations above and below are normally due to performance and operational philosophy differences.

Total Operating Cost Index – Normalized

1 2



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Asset A

Asset C Asset BAsset E

Asset D

MTBI,

d

MTTR, d

Infrequent Long

Frequent Long

Frequent Short

Infrequent Short

Challenges

Best Performance

Production Efficiency & Reliability Reliability Index Quadrant Analysis

Reliability Index Quadrant Analysis



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Relationship Between Cost and Production Efficiency

High

High

Low

75

80

85

90

95

100

0 50 100 150 200

4-Y

ear

Avg T

ota

l Pro

duct

ion E

ffic

iency

, %

Maintenance Efficiency Index, %

Peers Fields with Sustainable R&M

Top Performers

Harvest Primarily Cost Focus

Under-Investing in Reliability

Fire Fighting Deferral Catch-up Poorer Planning and Execution



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Improvement Paths

High Mechanical Availability and

Low Cost

Low Mechanical Availability and High Cost

No evidence of this route

Eff

ecti

ve

ne

ss

Efficiency

Industry Leaders

Facility

Maintenance Cost, % (USD/PRV)

Mech

anic

al Ava

ilabili

ty,

%

Supported by real data



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For more information:

Sergey Turchin

Director, Projects

4900 Woodway Drive

Suite 1000 | Houston, TX 77056 USA

Phone: +1.713.985.5188 | Cell: +1.832.491.9625

Juan Carlos Alba

SVP E&P Business Unit

Phone: +1.713.985.5189

Email: [email protected]


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