1 1

Kuwait National Petroleum Company

Clean Fuels Project 2020

Presenter: Eng. Wael Al-Jasem – Former Team Leader Project Management KNPC Now Team Leader Mega Projects PIC

Cost & Budgeting of a Mega Project, Oct. 2018

2 2

Agenda:

1. Value Moment

2. Project Background

3. Cost & Budgeting Best Practice

3 3

Agenda:

1. Value Moment

2. Project Background

3. Cost & Budgeting Best Practice

4

Value Moment

4

5

Value Moment

REMEMBER…..

5

6

Value Moment

Principle of Crocodile

6

7

Value Moment

Principle of Crocodile • Evaluate the risk

7

8

Value Moment

Principle of Crocodile • Eliminate the risk

8

9

Value Moment

Principle of Crocodile • Substitute the risk

9

10

Value Moment

Principle of Crocodile

• Isolate the risk

10

11

Value Moment

Principle of Crocodile • Use Personal Protective Equipment

11

12 12

Agenda:

1. Value Moment

2. Project Background

3. Cost & Budgeting Best Practice

13 13

COMPANY OVERVIEW

KNPC - Kuwait National Petroleum Company • Local refining arm of Kuwait Petroleum Corporation

(KPC) • Operates a three refineries complex • Over 900,000 BPD capacity • 5,500 employees

14 14

• Meet international and local market demand & specifications.

• Enhance the environmental & safety performance of KNPC

refineries.

• Major upgrade of MAA and MAB refineries to convert high sulfur

fuel oil to higher value products.

• Provide new employment opportunities for Kuwaitis in the refining

sector.

• Support the country of Kuwait economic growth.

CFP Main Objectives

15 15

• IRR ~ 11% • PB ~ 7 years • Project Progress: ~ 96.4% • Man-Hours: ~ 361 Million • Man Power: ~ 41 K • Expenditure: ~ 3.85 Billion KWD ~ 31.4% Locally • Budgeted: ~ 4.7 Billion KWD

Status & Economics • FEED commenced 2006, completed 2008, updates 2009 • PMC awarded Jan 2013 • Appropriation granted March 2014 • EPC Awards April 2014

16 16

Contract Program Strategy

• Fixed price EPC Contracts – Major EPCs all 3 party consortia

• Reimbursable PMC Contract + Security & Third Party Inspection subcontracts

KNPC

EPC FCC

EPC MAB-1

EPC MAB-2

EPC HV

EPC PWC

EPC MAA

SUPPLIERS & CONTRACTORS TPI

PMC

SECURITY

17 17

MAA EPC Package

Awarded to JV of : M/s. JGC Corporation, Japan GS E & C, S. Korea SK E & C, S. Korea Contract Price KD. 1,361,608,000/-

Contract commencement 13-Apr-14 Contract completion - Mechanical Completion 12-Jan-18 - Commissioning / Start-up 12-Apr-18

18 18

MAB-1 EPC Package

Awarded to JV of : Petrofac Intl. Ltd., U.K Samsung Engg. Co., Korea CB&I, Netherlands Contract Price KD. 1,071,457,844/- Contract commencement 13-Apr-14 Contract completion - Mechanical Completion 12-Jan-18 - Commissioning / Start-up 12-Apr-18

19 19

MAB-2 EPC Package

Awarded to JV of : Fluor Ltd., U.K Daewoo E & C, S. Korea Hyundai Heavy Ind., S. Korea Contract Price KD. 962,020,536/- Contract commencement 13-Apr-14 Contract completion - Mechanical Completion 12-Jan-18 - Commissioning / Start-up 12-Apr-18

20 20

CFP Locations

21 21

CFP Scope – Key Metrics

Some interesting facts regarding total quantities :

482,000 m3 of concrete – the equivalent of 200 Olympic sized swimming pools (50m x 25m) full of concrete.

124,000 Tonnes of steel – Equivalent to 17 Eiffel Towers

3 Million linear meters of pipe – put end to end would take you from Kuwait to Hungary.

11,500 KM of cable will be used - put end to end would take you from Kuwait to the Bahamas (or to Thailand and back!)

22 22

CFP Scope

+ FCC, + PWC, + HV

MAA MAB - 1 MAB - 2 Total Process Equipment

Compressors 37 15 33 85 Turbines 21 19 16 56 Other rotating 490 286 281 1057 Tanks 48 15 35 98 Columns/Reactors 61 66 42 169 Exchangers 338 201 206 745 Vessels/Drums 205 191 156 552

Totals 1200 793 769 2762 All Equipment (approx) 4,000

I/O Count (approx) 25,000 50,000* 75,000 *includes revamp/re-instrument scope

23 23

Main Project Locations

24 24

Agenda:

1. Value Moment

2. Project Background

3. Cost & Budgeting Best Practice

25 25

Project Budget - Budget estimate accuracy is related to the level of engineering definition

- Class 5 estimate or ROM at feasibility / early stage of FEED - Class 3 estimate during FEED - Class 2 estimate at FEED closing

26 26

Project Budget

Main Budget Elements

1. Engineering based on man-hours and number of drawings / documents

2. Procurement based on major equipment and bill of material 3. Execution & Construction based on labor man hour + labor

rates + BOM 4. Owner Cost: PMT / PMC / Licensors / Fees / Insurance /

Land / Agencies / etc 5. Management Reserve 6. Contingency

27 27

Cost Management

Budget Element: Updated for EPC execution phase 1. Major Contract 2. Licensors 3. Consultancies 4. PMT 5. Insurance 6. Land Rental 7. Government Fees 8. Management Reserve & Contingency

Reporting: • Monthly Capex reporting • Quarterly Overall reporting • Annual Carry Over Budget with Forecast (Plan, Actual, Forecast)

28 28

Cost Management Sample Cost Report:

29 29

EPC Invoice Processing

Invoicing Process 1. Contractor submits a Progress Measurement Report (PMR) 2. PMC & PMT review and approve 3. Contractor submits invoice based on approved PMR 4. PMC & PMT verify invoice based on PMR 5. Then invoice is processed

* Supporting documentation must be attached based on contract

30 30

Cash Flow Forecasting

• 12 Month Forecast rolling on monthly basis - Basis: Engineering, Material delivery, site progress - Target 90% accuracy for first two months

• 6 Week Forecast rolling on weekly basis - Basis: Invoice submittals by EPC / consultants / service

provided - Target 95% accuracy or higher for first 4 weeks

* Develop a project guide and workflow process

Weekly & Monthly Rolling Forecast:

31 31

Cash Flow Forecasting Sample Cash Flow Report:

32 32

33 33

EPC Progress – Aug 2018 MAA – Site Photos

Unit 129 STEAM SYSTEM

Unit 176 Water System Unit 162 Flare Stack

Unit 141 ARDS Unit

34 34

EPC Progress – Aug 2018 MAA – Site Photos

Unit 136 DCU Unit 152 SRU

Unit 283 –Heavy Oil Cooling Unit 148 Hydrogen Production

35 35

EPC Progress – Aug 2018 MAB1 - Site Photos

UNIT - 111 UNIT - 114

UNIT - 117 UNIT - 216

36 36

EPC Progress – Aug 2018 MAB1 - Site Photos

U-148 Pre-commissioning Work Line Flushing & Blowing

Piping Pressure Test Equipment Insulation Works

37 37

EPC Progress – Aug 2018 MAB2 - Site Photos

Lighting Status at U-125-02

Unit 123 Lights On

Unit 137/154 Tankage Area

Unit 118 Hydrogen Production

38 38

EPC Progress – Aug 2018 MAB2 – Site Photos

Flare ignition in Unit 149 on 23-Aug-18

Central Control Room U 123 – T3

39 39

Project Integration Management : the processes and activities needed to identify, define, combine, unify, and coordinate the various processes and project management activities within the project management process groups.

Project Scope management : the processes required to ensure that the project includes all the work required, and only the work required, to complete the project successfully.

Project Time Management : the processes required to manage the timely completion of the project.

Project Cost Management : the processes involved in planning, estimating, budgeting, financing, funding, managing, and controlling costs so that the project can be completed within the approved budget.

Project Quality Management : the processes and activities of the performing organization that determine quality policies, objectives, and responsibilities so that the project will satisfy the needs for which it was undertaken.

Project Human Resource Management : the processes that organize, manage, and lead the project team.

Project Communications Management : the processes that are required to ensure timely and appropriate planning, collection, creation, distribution, storage, retrieval, management, control, monitoring, and the ultimate disposition of project information.

Project Risk Management : the processes of conducting risk management planning, identification, analysis, response planning, and controlling risk on a project.

Project Procurement Management : the processes necessary to purchase or acquire products, services, or results needed from outside the project team. Processes in this area include Procurement Planning, Solicitation Planning, Solicitation, Source Selection, Contract Administration, and Contract Closeout.

Project Stakeholder Management : the processes required to identify all people or organizations impacted by the project, analyzing stakeholder expectations and impact on the project, and developing appropriate management strategies for effectively engaging stakeholders in project decisions and execution.

40 40

KNPC & Background

Project Economics

Project Magnatude

Project Budget – main elements

Cost Management – Reporting

EPC Invoice processing

Cash flow forecasting system

Presentation Outline: