Supply Chain Seminar
Introduction & Welcome Deirdre Michie Chief Executive
Oil & Gas UK
Supply Chain Seminar
Deirdre Michie Chief Executive
This industry is a national asset
It’s worth fighting for!
Key Metrics Sharp Drop in Price
UKCS Cash Flow Drilling Activity
Production
Cost and Efficiency
Greater Inefficiency
Increased Unit Costs
Increased Activity
30-40%
40-50%
20%
Source: McKinsey Energy Insights; “Meeting the challenge of increasing North Sea costs” McKinsey article
CAPEX
OPEX
What is behind this cost increase?
No other basin in the world has seen such rapid cost inflation
Bold and immediate action is required
• Unless the UKCS adapts rapidly to the prevailing business environment, it will be a much smaller and greatly diminished industry by 2020
• Action now will ensure that the UKCS is as active in 2020 as it has been over the last decade
• The 2020 vision • Actively exploring and maximising recovery of oil and gas
• A supply chain providing a strong engine for growth
• Lifting costs contained at around $20 per barrel
Oil & Gas UK Efficiency Task Force Areas of focus
Business Process Standardisation Cooperation, Culture & Behaviours
Increase offshore productivity (integration of PETF work)
Intelligent logistics sharing
Streamline procurement process
Existing assets: Standard routine
Next generation: Standard tech
Standard routine commodity
Efficiency charter and cooperative standards
Supply chain cooperation events
Everyone has a part to play.
We need to: Re-create a competitive basin and industry
Learn from other Industries
Initiate structural and sustainable change Challenge behaviours
Bill Morrice Managing Director
Technip
Overview of the Oil & Gas Industry – focusing on Oil & gas UK Board and effort around simplification
Steve Johnson Director
Simply Joined Consulting
Supply Chain Forum Update
www.simplyjoined.com
Supply Chain Forum Update
Oil & Gas UK Supply Chain Seminar
30th June 2015
AECC
Steve Johnson
Contractor Co-Chair, Oil & Gas UK Supply Chain Forum
Tel: 01224 900907
Mbl: 07710 340207
www.simplyjoined.com
Supply Chain Forum Structure
Part of the Oil & Gas UK Operations Directorate – Ken Cruickshank
Well supported by the team of Business Analysts
2 Co-Chairs, representing the Operator and Contractor communities
- Operators – Ali Talpur, Enquest
- Contractors – Steve Johnson, Simply Joined
Open to any company that is a member of Oil & Gas UK, regardless of
size or position within the respective supply chains
Focus is on developing and embracing Supply Chain Management Best
Practice
www.simplyjoined.com
• Promoting Supply Chain Management best practice and co-operative Industry initiatives
• Model ITTs
• Adoption and use of Standard/Model Contracts – e.g. LOGIC
• Supply Chain Code Of Practice
• Rationalisation of Inventory and Spare Parts across the Industry
• Work with External Parties
• FPAL
• Universities (e.g Guest Lectures, RGU Academic Supply Chain Society)
• Chartered Institute of Procurement & Supply (CIPS) –
• Syndicated Corporate Award
• CIPS Branches – Aberdeen Branch is very active
• OPITO – Supply Chain Modern Apprenticeships in Procurement and Logistics
• Working to ensure that all the good work the industry is trying to do is effectively and
efficiently supported commercially and legally, from the introduction of technical
innovation to the reduction of ‘gold plating’ in current activities.
Supply Chain Forum Activities
www.simplyjoined.com
Thank You
Steve Johnson
Contractor Co-Chair, Oil & Gas UK Supply Chain Forum
Tel: 01224 900907
Mbl: 07710 340207
www.simplyjoined.com
www.simplyjoined.com
Ian Schollar Head of Corporate Delivery
CIPS
The Long Walk to Safety
Leading global excellence in procurement and supply
Procurement and Supply
What does the future look like?
The Impossible Hamster
Economic Growth Stimulated
Increased employment and demand for raw
materials
Skill shortages and supply problems
develeop
Staff wages and raw material prices rise
Inflation picks up as higher costs are passed
to customers
Interest rates rise
Economic growth slows
Interest rates fall
Boom-Bust Cycle
What are the indicators:
Manufacturing
– Output
– New Orders
– Export orders
– Backclogs of work
– Employment
– Quantity of purchases
– Input costs
– Output prices
Services
– Business activity
– Incoming new business
– Business outstanding
– Employment
– Input costs
– Prices charged
Economic Growth Stimulated
Increased employment and demand for raw
materials
Skill shortages and supply problems
develeop
Staff wages and raw material prices rise
Inflation picks up as higher costs are passed
to customers
Interest rates rise
Economic growth slows
Interest rates fall
New orders/ new business
Employment
Quantity of purchases
Backlogs of work/ business outstanding
Input costs Output prices/ charges
Boom-Bust Cycle
What does all this mean for
us?
Who wins? Who loses? Will it matter?
Profit not cost-savings
Outsourcing or insourcing?
Visibility
Collaboration
Complexity
First-Tier Supply Chain
Supplier Development
Supply Chain Development
Supplier Selection
Supply Chain Sourcing
Focus of Buyer Relationship
with the Supplier
Proactive
Reactive
Source: Andrew Cox et al: SCM A Guide to
Best Practice (2003)
Terms Relating to P&SCM
The benefits can be achieved by a mix of:
Reduced
Prices and Costs
Risks in the SC
Timescales
Improved
Service to customers
Quality
Brand
Reputation through sustainable SCs
Compliance to regulations
The Roles and Benefits of P&SCM
The benefits can be achieved by:
Resources
Processes
Systems
Procedures
Commitment
Reduced
Prices and Costs
Risks in the SC
Timescales
Improved
Service to customers
Quality
Brand
Reputation through sustainable SCs
Compliance to regulations
Achieved by
The Roles and Benefits of P&SCM
HIG
H
LOW HIGH
LOW
Acquisition Leverage
Critical Strategic
Degree of market
difficulty
Degree of profit impact
O’Brien’s Version of Kraljic’s Portfolio Analysis Matrix
Respected
Influential
Persuasive Visionary
Strategic
Sharp
Global Collaborative
Executive
Savvy
Required Professional Skill Sets
Bill Morrice,Technip Steve Johnson, Simply Joined Consulting
Ian Schollar, CIPS
Morning Panel Session
Ian Schollar, CIPS &
Phil Broughton
CIPS Presentation of Certificates
Neale Stidolph Head of Strategic Development
Lockheed Martin UK
Lockheed Martin Issues and lessons learned in Aerospace
L O C K H E E D M A R T I N P R O P R I E T A R Y I N F O R M A T I O N 40
Lockheed Martin Issues and lessons learned in
Aerospace
Oil & Gas UK Supply Chain Seminar
Presented by:
Neale Stidolph – Head of Strategic Development Johnstone House, Rose Street, Aberdeen, AB10 1UD, UK Telephone: +44 (1224) 611036
Mobile: +44 (0) 7801 039623
e-mail: [email protected] Web: www.lockheedmartin.com
L O C K H E E D M A R T I N P R O P R I E T A R Y I N F O R M A T I O N 41 September
15
Aerospace Challenges
L O C K H E E D M A R T I N P R O P R I E T A R Y I N F O R M A T I O N 42
F-35 Lightning II
World’s only 5th generation fighter
1,200 suppliers
Mile long factory
9 Country partnership
129,000 direct & indirect jobs
Standards & simplification
Advanced materials & sensors
6-8x more effective
Stealth & secrecy
Secure communications
L O C K H E E D M A R T I N P R O P R I E T A R Y I N F O R M A T I O N 43
Aerospace changes
How did the industry / LM used to do things? (Cold
War context)
• Fractured
• Undisciplined
• Unfocused
Why did it need to change?
• Changing market (peace dividend)
• Changing customer acquisition process
• Maturing tools and processes
L O C K H E E D M A R T I N P R O P R I E T A R Y I N F O R M A T I O N 44
Transition
How were the changes introduced?
• Process maturity models
• Industry consolidation
• Mapping of requirements
• Innovation initiatives drove targeted improvements to
baseline processes, i.e.
• Safety
• Affordability
• Technology
• Information management
• Successful innovations were shared and eventually
standardised
L O C K H E E D M A R T I N P R O P R I E T A R Y I N F O R M A T I O N 45
Making the change
What efficiency, standardisation, terms, quality,
metrics were adopted?
• Better mission analysis
• Standardisation drives interoperability
• Within a ‘platform’
• Within a service branch
• Model-based methods
Did everyone buy in to it?
• Change can appear threatening
• Change is threatening to those unwilling to learn and
grow
• “Nothing succeeds like success”
L O C K H E E D M A R T I N P R O P R I E T A R Y I N F O R M A T I O N 46
Benefits
What were the benefits of the standards?
• Product interoperability
• Workforce interoperability
• Enforce adoption of best practices
• Reduce program start-up costs
• Increase execution efficiencies
L O C K H E E D M A R T I N P R O P R I E T A R Y I N F O R M A T I O N 47
Know where you need to be
COMMODITY INNOVATION INVENTION
Proven
Fit for purpose
Simple
Cost driven
Existing buying methods
New idea
Lateral shift
Benefit driven
New engagements
New buying model
“Unknown” offerings
On/over the horizon
Low Tech Readiness Level
Partnering / joint effort
Hard problems
Radical R&D
Role of procurement?
Warning: Standards don’t always evolve enough and can hold back innovation
L O C K H E E D M A R T I N P R O P R I E T A R Y I N F O R M A T I O N 48
You don’t know what you don’t know!
L O C K H E E D M A R T I N P R O P R I E T A R Y I N F O R M A T I O N 49
Sensor
Solutions
Information
Technology
Autonomous
Systems
Materials and
Structures
Energy Solutions Enterprise
Applications
Lockheed Martin & Energy
L O C K H E E D M A R T I N P R O P R I E T A R Y I N F O R M A T I O N 50
New manufacturing / new materials
L O C K H E E D M A R T I N P R O P R I E T A R Y I N F O R M A T I O N 51 September
15
Nanotech Desalination
Perforene (in the Lockheed Martin labs)
500x thinner, 1000x stronger, 100x less energy and pressure
L O C K H E E D M A R T I N P R O P R I E T A R Y I N F O R M A T I O N 52
Remote Communications
AeroStat
High speed wireless comms
c.80 mile signal range
Low latency (signal delays)
Lower cost than satellite
Mobile
L O C K H E E D M A R T I N P R O P R I E T A R Y I N F O R M A T I O N 53 September
15
Simplify: Sensors & Automation
7,000 sensors
+ Laser fluid monitoring
+ Analytics
= Crew reduction from
200 to 40
Littoral Combat Ship
L O C K H E E D M A R T I N P R O P R I E T A R Y I N F O R M A T I O N 54 September
15
Autonomous Vehicles
Aerial Reconfigurable Embedded
System
Indago
SMSS
Airship:
6,000 mile
range, up to
500 ton load
L O C K H E E D M A R T I N P R O P R I E T A R Y I N F O R M A T I O N 55 September
15
K-MAX Autonomous Flight
Proven by flying >46,000 hours on 24x7 resupply runs without pilots.
Able to carry out emergency response roles.
Up to 6,000lbs lift capacity
L O C K H E E D M A R T I N P R O P R I E T A R Y I N F O R M A T I O N 56
Robotics
DARPA
Challenge
Trusted
Remote
Operati
on Of
Proxima
te
Emerge
ncy
Robots Able to drive vehicles,
climb ladders, operate
valves, etc.
L O C K H E E D M A R T I N P R O P R I E T A R Y I N F O R M A T I O N 57
High energy laser systems
ATHENA
30kW Lockheed Martin laser system
Disabled a truck engine in a few seconds
from a mile away
Could be applied to oil & gas
i.e. Marine cutting application / decomm
L O C K H E E D M A R T I N P R O P R I E T A R Y I N F O R M A T I O N 58 September
15
Situational Awareness
MED-E
Visualising and working on large, complex data sets
making them easier to interpret and act on
Automated storm
damage surveillance
using drones
L O C K H E E D M A R T I N P R O P R I E T A R Y I N F O R M A T I O N 59
Simplify: Information & Analytics
Predictive Maintenance & Quality
Cyber & Industrial Control System Security
Process Safety
Management
• 29% fall in O&M costs
• 22% rise in Plant
Availability
• 50% fall in Outage
Rates
• 10% fall in Insurance
Premium
L O C K H E E D M A R T I N P R O P R I E T A R Y I N F O R M A T I O N 60
Power Generation
Prototype in 5 years
The early reactors will be
designed to generate
around 100 MW and fit
into transportable units
measuring 23 X 43 ft.
1.5MW AR1500 turbine
Scottish MeyGen project
Pentland Firth
Wave energy systems
L O C K H E E D M A R T I N P R O P R I E T A R Y I N F O R M A T I O N 61
Who are we?
$45bn t/o
120,000 employees
Civil IS & GS division
100 year+ history
Broad range of skills / clients
Long term relationships
Global reach, strength and depth
Innovation
Lockheed Martin
L O C K H E E D M A R T I N P R O P R I E T A R Y I N F O R M A T I O N 62
Contact
Neale Stidolph
Head of Strategic Development
Lockheed Martin
Johnstone House
52-54 Rose Street
Aberdeen
AB10 1UD
United Kingdom
Tel. +44 1224 611036 Mobile +44 7801 039623
September 15
Cross Industry Collaboration - Time for some rocket science
Orion test launch, 5th Dec
2014
Horst Fischer Vice President Oil&Gas
Siemens AG
Optimize interfaces in the supply chain for projects and business – Experience from other industries and from a global LNG
project in Australia.
siemens.com/answers Restricted © Siemens AG 2014. All rights reserved
Oil& Gas UK Supply Chain Seminar 30 June 2015
Optimise interfaces in the supply chain for projects and
business
Horst Fischer Vice President Siemens VMM Oil & Gas
Page 65 December 2014 Horst Fischer, PD VMM Oil&Gas Restricted © Siemens AG 2014. All rights reserved
Challenges in the Oil & Gas Industry
View from the Oil Companies
Projects in Oil & Gas are getting larger, more complex and take several years to
develop
Product Suppliers and OEMs acting and manufacturing globally – complex
contracting
EPCs are using distributed project development and engineering centers
Missing all over transparency e.g. in projects
Management of contractual and technical interfaces across the entire supply chain
Global resource management (engineers, manufacturing, raw materials, lead times)
Todays CAPEX project approach leads to multi-vendor equipment and thus to
complex operational and maintenance processes – high OPEX
Cost pressure
Page 66 December 2014 Horst Fischer, PD VMM Oil&Gas Restricted © Siemens AG 2014. All rights reserved
Challenges in the Oil & Gas Industry
View from the Product & System Supplier
Projects development and co-ordination – coordinated information flow
Integration into complex supply chain
Slow implementation of new innovative solutions e.g. digitalization
Multiple Ts and Cs in the value chain
HSE policy needs highest reliable products and systems
Low oil price leads to price pressure on products and systems
Overall technical competence from end-user – EPC – product and system supplier
Mid / Long term invest planning vs. short term planning
Local content based on country and political regulations required
Early engagement in end customer decision making process – process alignment
Standardization is required
Price pressure
Page 67 December 2014 Horst Fischer, PD VMM Oil&Gas Restricted © Siemens AG 2014. All rights reserved
Conclusion based on challenges
Reduce Cost Per Barrel Oil
Cost pressure Price pressure
Oil Companies Product & System Supplier
We have to change our business model from a typical customer supplier relation
to a strategic partnership model
Learning from other industries – e.g. Automotive Industry
Working as ONE
Page 68 December 2014 Horst Fischer, PD VMM Oil&Gas Restricted © Siemens AG 2014. All rights reserved
Working as ONE
A successful partnership model considers the entire Value Chain
Business
Partner
Concept
based on
Value Chain
Technical Solutions
Service Solutions
Business Solutions
Operational Solutions
Page 69 December 2014 Horst Fischer, PD VMM Oil&Gas Restricted © Siemens AG 2014. All rights reserved
The Value Chain
Aligned approach and strategy
Operational
Value Proposition Strategic Value Proposition
Aligned strategy for implementation
Channel Management
Products & Systems Supplier
Oil Companies
SI, Sol.-partner E-house builder
EPC
Value Chain
OEM
Page 70 December 2014 Horst Fischer, PD VMM Oil&Gas Restricted © Siemens AG 2014. All rights reserved
Value Proposition based on partnership
Common Business Planning Defined scope of supply Frame agreements for categories Business & Technical Standards Global coordination/implementation Partner for Innovation & Solutions Customized service concepts Common project development
Predefined product scope Project information & involvement Solution partner concept Partner for applications, e.g. Rig
Aligned processes Common project coordination/team Aligned frame agreements, pricing FEED Support – Product Catalog
Aligned business approach and strategy
Products / Systems / Packages / Solutions
Oil Company
SI, Solution-Partner E-house builder
EPC
Value Chain
OEM
Clear interfaces management
Global order tracking Documentation standard
Execution excellence Partner Value Proposition
Aligned strategy for implementation
Harmonized global order tracking
Service strategy Transparency over entire
process
Lead time management Factory coordination (slots)
Customized Channel Management
Application with partner
Page 71 December 2014 Horst Fischer, PD VMM Oil&Gas Restricted © Siemens AG 2014. All rights reserved
TCO - Future Growth Project,
TCO and Siemens common project development
based on partnership
Page 72 December 2014 Horst Fischer, PD VMM Oil&Gas Restricted © Siemens AG 2014. All rights reserved
Future Growth Project based on partnership
MMDC Project TCO-Future Growth
Chevron (50%)
KazMunaiGaz (20%)
ExxonMobil (25%)
LukArco (5%)
PJV
(EPC)1
OEM 1
based on TCO FGP
KPJV
(EPC)2
OEM 2 OEM 3 OEM 50+
C 2
Italy
C 1
Germany
C 3
UK
C 4
France
C 14
USA
CAM Chevron
Siemens
TCO
(Kazakhstan)
TCO
Siemens
Capture
Team
Siemens
Service
Orders / Bids
Communication
Siemens
Motors
Siemens
Drives
Siemens
Systems
Siemens
Engineering
Page 73 December 2014 Horst Fischer, PD VMM Oil&Gas Restricted © Siemens AG 2014. All rights reserved
The Oil & Gas Value Chain
Project Value Chain
Shorter time to operate
Reduced CAPEX Reduced OPEX
Optimized Service
Initialized early
Involvement &
Standardization
Tools
Capture Teams
Today: Traditional approach without new concepts
Tomorrow: Optimization approach with partnership concepts
Page 74 December 2014 Horst Fischer, PD VMM Oil&Gas Restricted © Siemens AG 2014. All rights reserved
Siemens Process Industries and Drives Siemens Oil & Gas Community & Networking Initiative
Partnership initiative
Quality Vision
Quality Principles
The Siemens Industry Petroleum Club aims to foster the exchange among leading oil
and gas professionals from around the world. It is designed as an exclusive networking
platform for major stakeholders and experts interested in discussing important issues at the
heart of the industry, exploring key trends, developments and challenges as well as sharing
their ideas and insights.
In a series of exclusive events at various industry gatherings around the world, the
Siemens Industry Petroleum Club offers you the unique opportunity to meet with
likeminded peers in an informal atmosphere, to interact with Siemens Oil & Gas experts
and to develop new relationships and partnership concepts
Andrew Wareing General Manager
Nissan Europe
Cost Optimisation in the Automotive Industry
Neale Stidolph, Lockheed Martin Horst Fischer, Siemens AG
Andrew Wareing, Nissan Europe
Panel Session
Ian Rattray Supply Chain Manager
MOL Energy UK Ltd
Surfing the Storm
Surfing the Storm – Identifying the correct supplier to suit the organisation, exploring new tendering processes for corporate fit Oil and Gas UK – Supply Chain Seminar 2015
Collaborative Partnership Model
What percentage of your companies skills are
accessed by an operator to unlock the most economic
value?
Less than 50%
50% - 70%
70% - 90%
More than 90%
43%
36%
12%
9%
December 2014 we asked 100 senior executives and
managers from major contractors and suppliers
Agenda: Who we are MOL in the UKCS The challenges we face Supply Chain Partner Strategy Partner Selection Process Value Process going forward
MOL Group is an integrated international oil and gas company, working in the upstream and downstream sectors, active in around 40 countries across three continents, with a dynamic international workforce of nearly 30,000 people and a track record of more than 100 years in the industry.
MOL Group: an introduction
Downstream: “Efficiency”
Downstream and midstream assets in CEE:
4 refineries, 417 thbpd
1.700+ filling stations
2 petrochemical plants
Gas Transmission: 5.560 km pipeline in Hungary
Upstream: “Growth”
576 MMboe SPE 2P reserves
940 MMboe Recoverable Resource Potential
97 mboepd production
Production in 8, exploration in 13 countries
LOWER RISK
NORTH
SEA KRI
PAK
RUS KAZ
HUN, CRO
Why the North Sea?
HIGHER RISK
BALANCE RISK AS WELL AS SEEK NEW ACCRETIVE EXPLORATION AND DEVELOPMENT OPPORTUNITIES
Utilise opportunities that arise from lower oil price environment
Targeting more balanced portfolio in terms of country risk
More focus on exploration
Obtain know-how outside CEE
Establish new strategic partnerships
2015
Mgt Systems
Partner
ships
2014
People
Non-op JVs
2016
Operatorship
Best
Practice
2017
Growth model
60k and beyond
2018
Sustain ability
Growth Plan
Cost base
COSTS AND REVENUES
OIL PRODUCTION BY FIELDS SINCE 1975
EBITDA vs REINVESTMENT RATIO
UNIT OPEX
Venture • - 30% unit cost
• 2x speed
• 90% predictability
Unit Cost Reduction – 6 Key areas
1. ASSET
2. SPEED OF DECISION MAKING
3. PORTFOLIO MANAGEMENT
4. PEOPLE/PROCESSES/TOOLS
5. DISRUPTIVE IDEAS
6. SUPPLY CHAIN
• Speed and delivery
• Strategic relationships
• Simplification
• Standardisation
• Interface management
$ 1 - 3 / BOE
$ 1 - 3 / BOE
$ 1 - 3 / BOE
$ 2 - 4 / BOE
$ 0 - 3 / BOE
$ 3 - 8 / BOE
$ 8 - 24 / BOE
Traditional vs Non traditional
Collaborative Partnership Model
BS 11,000
Isolation
Involvement
Effectiveness
Star line
Circle Random
Communication strategies
Adding value from the supply chain
Production Wells Projects
Production – profit, growth, reputation
Contractor 1
Contractor 4
Contractor 3
Contractor 7
Contractor 2 Contractor 8
Contractor 13
Contractor 11
Contractor 9
Contractor 14 Contractor 6
Contractor 5
Contractor 10
Contractor 12
MOL MOL
MOL Out
Managing the portfolio
Acquisitions
Partner Selection Process
FPAL preselection
2,000 +
Initial engagement
50
Tier 1
25
Collaborative/ Commercial assessment
One to One
13
Preferred
partners
5
70%
Collaboration
30%
Commercial
Working together
Value Creation
Staying together
Culture fit
Trust
Collaborative
leadership
Client focus
Innovation
Creativity
Traditional BUT low
cost commercial
measuring
Vessel rates
Modelling
Day rates
Partnership Contracting
Strategic Partnerships:
Suppliers are part of the economic solution
Early engagement with clear understanding of value drivers
MOL + Suppliers construct the value model
Target to beat the market
Long term business partner
Plan Purpose Picture
The right partnerships
Beat the market Commitment Relationship
Trust Understanding
Expertise Assistance
Advice Anticipation Innovation
Interface management
Communication Risk management
Performance management
John Griffiths Head of Supply Chain,
Centrica Exploration and Production
Simplification and Standardisation
© Centrica plc, 2013
This document, and its contents, are strictly confidential and may not be used for any purpose by any person other than the intended recipient, and may not be reproduced or distributed to any other person or published, in whole or part, anywhere. Neither Centrica plc nor
any of its affiliates, representatives or employees, makes any representation or warranty, express or implied, as to the fairness, accuracy or completeness of any of the contents of this document, nor will they have any liability relating to or resulting from their use.
Standardisation and Simplification Cost Efficiency – The Need for Change
OGUK CIPS Conference
John Griffiths, Head of Supply Chain, Centrica Energy
© Centrica plc, 2013
Centrica – a leading integrated energy
company
• FTSE top 40 company
• 28 million customers in UK and North America
• Operate across the energy spectrum
• Diverse investor in our Supply Chain
© Centrica plc, 2013
UK and Netherlands – Assets and Operations
3 Manned platforms
1 FPSO Vessel
9 Normally unmanned
installations
3 Terminals
84% Operated production
85% Gas
Geographically diverse
Among the top UK gas
producers in 2014
© Centrica plc, 2013
In 2014 the energy world changed
Jan-15 Jan-14
NBP (Winter 2015)
Brent (Month Ahead)
AECO (Winter 2015)
Index (1st Jan 2014 = 100)
© Centrica plc, 2013
The opportunity for change
Source: Oil & Gas UK
The cost of operating on the UKCS
© Centrica plc, 2013
Several complementary workstreams
Short term
Short to medium term
Short, medium and long term
To unlock our portfolio we need to be profitable in a low price environment; we
want to shift our culture to : • deliver more cost efficiently and more productively,
• be open to new ways of working, learning and collaboration, and
• embrace technology
© Centrica plc, 2013
What and how - 100 in 100
We need to take
costs out of the
business
Dec 2014
Let’s take out
£50MM
Jan 2015
No, make that
£100MM in 100
days!
1 Feb 2015
What about next
year? We need
sustainable savings
April 2015
Evolution of the business challenge
© Centrica plc, 2013
What and how - 100 in 100
Urgent need to change
• Falling commodity prices
• Job losses across the industry
Create a compelling vision of our future
• £100mm of cash savings will help
create a safe, sustainable business and
help protect position
• Simple communication of how we get
there
Make it real and visible
• Created space where everyone could
contribute
• Communicated quick wins
• Everyone knew about the progress of
the challenge
The Result: 1,418 ideas with
potential savings of
£266mm
© Centrica plc, 2013
100 in 100 – the approach
Typical Cost
Reduction Approach
UKNL Approach
• Top-down targets only
• Everyone told what to do & where to cut
• Hard to get buy-in from organisation
• Not sustainable
• Shared mission (find £100mm of cash in 100 days)
• Organisation empowered
• Engaging campaign
• Shared successes and progress
• Better buy-in as the solution came from the organisation
© Centrica plc, 2013
108
The Trigger
• Opportunity rich, but costs too
high to deploy
• Consider full lifecycle reduction
(reach back)
• Interactions with supply at cross
purposes
• Needed targeted solutions
around our challenges
What and how – The Hackathon
© Centrica plc, 2013
What and how – The Hackathon
• Meeting of more than 130
new and existing
contractors to discuss
projects stuck in pipeline
• Opportunity to share
knowledge, experience and
capabilities
• Hundreds of ideas
generated and renewed
sense of collaboration with
supply chain
© Centrica plc, 2013
Decommissioning 33
Subsea developments 28
Ways of working 27
Brownfield 26
Very shallow reservoirs 19
Subsea Well
Abandonments 17
Southern North Sea
long reach drilling 13
Technology & Innovation 11
Collaboration 10
Other 3
Grand Total 187
The Results
• Reviewed nearly 190 ideas
from more than 70
companies
• Proceeding with nearly 140
– one already implemented
• Sharing relevant ideas with
PILOT/industry
© Centrica plc, 2013
The Hackathon – next steps
• Ideas from the Hackathon being
implemented in two SNS
decommissioning projects this year;
now evaluating new development well
at York and progressing Pegasus
prospect
• Re-engaging with contractors to
investigate ideas further for potential
future projects
• Sharing learnings, ideas and outcomes
with industry so knowledge is not lost
• Recognition that internal campaign on
cost efficiency was also required
© Centrica plc, 2013
112
Problem statement
• Today around 210 small discoveries (<15mmboe) remain undeveloped on the UKCS; equating to >1.1bn boe.
• We believe developing and deploying technology focused on standardised (non-bespoke) subsea tie backs, pipelines and brownfield modifications will unlock the potential while working closely with the ongoing development of new well designs.
What and how – Small Pools
© Centrica plc, 2013
Small Pools – The Prize
113
Source: Wood Mackenzie
Producing fields
Ongoing developments
Currently locked fields
Fiel
d r
eser
ves
(mill
ion
bo
e)
All UKCS discovered fields ranked by reserves
small pools (3-15mmboe)
• Small pools collectively account for more than 1billion boe
• This equates to 3-5% of the total discovered reserves on the UKCS –
or 13-20% of future production
© Centrica plc, 2013
Small Pools - Roadmap
114
© Centrica plc, 2013
This document, and its contents, are strictly confidential and may not be used for any purpose by any person other than the intended recipient, and may not be reproduced or distributed to any other person or published, in whole or part, anywhere. Neither Centrica plc nor
any of its affiliates, representatives or employees, makes any representation or warranty, express or implied, as to the fairness, accuracy or completeness of any of the contents of this document, nor will they have any liability relating to or resulting from their use.
Cost Efficiency – The Need for Change
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John Griffiths, Head of Supply Chain, Centrica Energy
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