Expectations and key success factors

Eddie Eide – Senior Procurement Advisor Draugen EPCm Project

14.10.2014

Company overview

■ Industry pioneer with over 100 years

history

■ A leading service company within the

oil, gas and renewable energy industry

■ Eight locations in Norway and four

internationally

■ Aibel employees around 5,000

worldwide

■ Annual turnover in 2013 approximately

12 billion NOK

Company overview cont.

■ 50 % ownership in EMC (Egyptian

Maintenance Company)

■ Long term maintenance and

modifications contracts

■ Deliver new platforms and modules

■ Present on half of the offshore

installations and 4 onshore terminals

in Norway

■ Successfully entered into offshore

wind market

Aibel locations

Headquarter in StavangerYard in Haugesund Yard in Thailand

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Aibel suppliers

■Current status – our supplier

database

■Suppliers are key to Aibel - 2/3 or

approx. 60-70% of value creation is

procured

Huge influence on Aibel

competitiveness

Purchases per county in Norway

NCS - Future expectations

■ Good potential for new large and small

discoveries

■ Further optimization of the shelf

■ New installations under construction will

provide new MMO contracts

■ Deferred maintenance and modifications

will provide new employment

■ There will be industrial development in

northern Norway

■ The industry has undergone continuous

restructuring – we will succeed again!

Strategy and goals

■ Aibel has a leading position on the

Norwegian continental shelf and aims to

maintain this position

■ We aim to expand internationally

■ Need for cost reduction and increased

efficiency - We reposition and make

improvements■ Integrated and cost effective execution

model■ Increased international interest in the

implementation of our projects

Aibel, international share

What is important to us – and our clients

■Delivery performance

■Quality

■Documentation

■Solution provider, not (only) a supplier of goods and/or services

■Cost awareness

■Cost optimisation - The ability to be creative and proactive

■Efficiency and productivity

■Reputation

■Flexibility

■Key personnel

Main focus areas

■Knowledge of specifications

■Reliability in delivery

■Quality in execution

Knowledge of specifications

■ Pay extra attention HSE & working

environment

■ HSE requirements must be first

priority in all projects

■ Our biggest customer, Statoil, have increased focus on working environment for maintenance

■ Offer according to specifications in

inquiry

■ If supplier offer standard equipment – specify exceptions

Reliability in delivery

Effects of delays are increased both in cost

and schedule! Therefore:

■ Be ‘realistic’ regarding delivery time

■ You will be challenged – know your capabilities and the risks involved

■ Inform when in trouble

■ Do not expect to solve all problems – inform us and work to solve it

■ Give us the possibility to reduce the negative effects

Quality in execution

■ Use qualified sub-suppliers

■ Contractual demands / selected makes etc.

■ Ensure quality and expedite!

■ Use your quality system in project

execution

■ Do it right the first time

■ Negative trend in ‘punch-items’ and

‘warranty issues’

■ ‘Short-cuts’ on quality does not pay off

The key to success

■Project deliverables■ Quality■ Schedule■ Productivity

■A winning culture

■A good working environment

Areas of improvement

Where suppliers can contribute:

■Schedule – My Responsibility

■Capability vs. capacity

■Estimation and experience data

■Commercial awareness

■Cost optimisation

■Continuous improvement

HSE, Compliance and Quality

Health, safety and environment

Zero injury philosophySpecific KPIs for HSE

Lost time incidents

Total recorded injury rate

Serious injury rates

Sick leave

HSE programme developed yearlyAction plan for overall activitiesLocal action plans tailored for each location

Quality

■ An important goal for Aibel is to deliver consistent and

correct quality for all our projects.

■ Through our management system W3, we ensure that

we always use our best practice for the execution of

projects and work.

■ The management system fulfills the requirements of the

following standards and directive:

■ ISO 9001: Quality management systems

■ ISO 14001: Environmental management systems

■ BS OHSAS 18001: Occupational health and safety management system

■ Pressure equipment directive 97/23/EC module H

■ ISO 3834-2: Fusion welding

■ ISPS: International code for the security of ships and of port facilities

Compliance

■ Many years of experience in developing

and living up to high business

compliance and ethical standards

■ Implemented new methods and systems

in recent years to ensure a highly

compliant and ethical business conduct

(Code of Conduct)

Procurement Method

Method

As it is vital to get:

the right material in the right quality to the right site at the right time at the lowest total cost

Procurement is a key for success in all our projects.

Overall method

ProVision is the standard method for start-up, execution and close-out of projects.

Procurement process

Visualized in W3 and includes all relevant procurement procedures, templates and method descriptions needed for procurement in a project.

Tools

Aibel SAP or customers ERP (Enterprice Resource Planning):

The Material Management module in SAPReservations (qty, specifications, need dates, status)

Purchase Orders (PO)

Reports (status, commitments)

Achilles – database for relevant suppliers

Procurement Corporate Frame Agreements - database

New Vendor Request - database

Proarc – document control system

Procurement Toolbox

Documentation requirements

- Attached to an inquiery you will find a typical example of Supplier Documentation Requirement List (SDRL) showing documentation and data tables to be submitted with the bid and as a part of the PO-delivery.- Read this carefully and calculate the costs assosiated.- Invest the necessary resources to deliver the documentation according to the contract.- Documentation is 50% of the delivery!

How to become a supplier to Aibel and Shell:

Step 2: Mail regarding “New Vendor Request” will be issued from Aibel asking for

Address informationOwnership information

Initial Contact Information

Payment information

Aibel will evaluate and check / approve information

Aibel to perform verification of received information

Close / check any gap – go or no go

NB: Aibel use Achilles as the basis of “Approved Vendor List” and has it own area where vendor information is available – Achilles is a “key” to be approved!

Achilles registration!

Step 3: How to become a supplier to Aibel:

Aibel`s Supplier Qualification Process consist of a “questionnaire” asking for info on:

Management and leadership, information and analysis, strategic planning, human resources, process management, business improvements and operational results, customer focus and satisfaction, supply management and HES.

Aibel will evaluate and score completed form

Verification of received information (visit)

Close any gap – go or no go

Prequalification levels if approved

Supplier Quality Management after approved

Supplier verifications/audits is performed, also based on “Key Performance Indicators”

Supplier approval and re-approval

Maintenance of Aibel Approved Vendor List (Achilles)

Key performance indicators is established and shared with supplier`s to agree if any corrective action is required on one or both sides to improve performance.

Non Conformance system in place

Typical findings at new suppliers Missing or insufficient:

- HSE thinking not according to expectations in the oil&gas industry

- Presentation of organisation

- Missing organisation chart

- Diffuse responsibility

- Systems for reporting of injury and sick leave

- Target for TRIF factor and strategy to keep low

- Total Recordably Injury frequency

- Number of injuries x 1 mill mhr / actual mhr

- Risk management systems

Typical findings at new suppliers

Verification and Audit systems for subcontractors

■ Systems to satisfy Norsok S-006

■ Risk management of working environment

■ Treatment of nonconformance

■ Monitoring of ability to deliver, quality cost, ”on time delivery” etc

■ Documentation of prosesses and results of these

■ Systems for high ethics standard

■ Capacity and competence to handle complex systems

■ Engineering

■ Planning

■ Financial

Summary

What to remember

Aibel use only Achilles approved suppliers who are also Aibel approved.

Aibel has an open approach regarding co-operation and new vendors.

Aibel will keep “find contracts” updated to reflect current opportunities.

All vendors to Draugen must be TA (Technically Approved) by Shell.

©

2008