05/2014

Hatch Global SourcingOil & Gas Procurement Leaders Forum 09 May 2014

2

05/2014

Hatch Business Sectors

THERMAL

NUCLEAR

RENEWABLE POWER

TRANSMISSION & DISTRIBUTION

WATER

INFRASTRUCTURE SERVICES

PORTS AND MARINE TERMINALS

RAIL & TRANSPORTATION SYSTEMS

COAL

NON-FERROUS

LIGHT METALS

MINING & MINERAL PROCESSING

INDUSTRIALMINERALS

IRON & STEEL

IRON ORE

HYDROCARBONS

LNG

OIL SANDS

Oil & Gas Infrastructure Metals

Power

3

05/2014

Global Sourcing Equation

Traditional Supplier

Tender Price Landed CostEmerging Country

Tender Price

Landed Cost

Labour

Material

Overhead

Gross Savings

Emerging Country

Full Cost

More

Inspection

More

Expediting

Other

Mitigation

Costs

Risk Mitigation costs

Net

Savings

In Most Cases,

Net Savings Range

From 10 To 30%

4

05/2014

Global Sourcing Opportunities

Suppliers In Emerging Countries Can Now Supply

Equipment and Materials Internationally

5

05/2014

Global Sourcing Risk Management

6

05/2014

Global Sourcing Risk Watchlist (1)

0

5

10

15

20

25Quality management

Planning and control

Employees qualification

Contractual obligations

Finance

HSEC

Communication

Engineering standards / deliverables

China Average Vendor Risk

Risk before mitigation Risk after mitigation

7

05/2014

Global Sourcing Risk Watchlist (2)

0

5

10

15

20

25Infrastructure risk

Legal and regulatory risk

Geo-political risk

Economic risk

China Business Environment Risk

Risk beforemitigation

Risk after mitigation

8

05/2014

Hatch Global Procurement Intelligence (GPI)

9

05/2014

Supplier ABC Ratings

GPI - Supplier Ratings Process

Exchange

Rates

Exchange Rates Variations Against USD; Ref=1 on March 2008

0.6

0.65

0.7

0.75

0.8

0.85

0.9

0.95

1

1.05

1.1

2008/03

2008/04

2008/05

2008/06

2008/07

2008/08

2008/09

2008/10

2008/11

2008/12

2009/01

2009/02

2009/03

2009/04

2009/05

2009/06

2009/07

2009/08

2009/09

2009/10

2009/11

2009/12

2010/01

2010/02

CAD/USD

AUD/USD

ZAR/USD

BRL/USD

EUR/USD

CNY/USD

INR/USD

CLP/USD

RUB/USD

Labor

Rates

Labor costs per hour in USD - Source Economist Intelligence Unit (January 2009)

0

5

10

15

20

25

30

35

40

Indonesia

Egypt

Philippine

sIn

dia

Ukraine

China

Mala

ysia

Turkey

Russia

Brazil

Romania

Poland

South K

orea

Czech

Rep.

Australia

Japan

USA

Canada

Germany

Countries

US

D 2009

2010

Country

Risks

China Vendor Risk

0

5

10

15

20

25

Quality

management

Planning and

control

Employees

qualification

T&Cs compliance

Financial health

Safety, CSR and

SD

Communication

Engineering

Before

mitigationAfter

mitigation

Logistics

Costs

Ma

cro

-

eco

no

mic

Inte

llig

en

ce

CredentialsQualificationsFeedbacks Size and

Location

Supplie

r

AB

C

Inte

llig

en

ce

Reviewed and

approved by

GPI Category

Owner(s)

Reviewed and

approved by

GPI Country

Owner(s)

10

05/2014

GPI - Supplier Performance Feedback

Award of package Close out of packageStart of bidding phase

Bidding phase Execution phase

Provision of ad

hoc feedback

Provision of Execution

Performance Feedback

Provision of Bidding

Performance Feedback

Systematic provision of feedback on every package.

Provision of feedback, every time a significant issue arises.

11

05/2014

GPI - Suppliers By Headquarter Location

328393

676

1,239

686

345

342

12

05/2014

Hatch Global Sourcing Team

Sriram Venkatesan

Bruce Young

Paul Wang

Worldwide

Responsibility Sourcing CategoriesSuppliers

Project types

Saul David

Fred Gao

Paul Wang

Global Sourcing Director

Francois Potgieter

13

05/2014

Hatch China Sourcing Value

USD 1.1B

14

05/2014

China Sourcing Experience

2 Stackers and 2 Reclaimers for Anglo American Grosvenor Project in

Australia

Supplier: Huadian Heavy Industry, Beijing, China

15

05/2014

China Sourcing Experience

Pre-assembled Pipe Racks (PAR) for the Chevron-operated, Gorgon

Project in Australia

Supplier: China Offshore Oil Engineering Corporation, Qingdao, China

16

05/2014

Hatch Global Sourcing Mission

RIGHTPLACE

RIGHTTIME

RIGHTMATERIALS

OPTIMUM

COST

17

05/2014

Hatch Global Sourcing Services

• Optimal design of procurement strategy via global sourcing study

– Sourcing competitiveness analysis

– Local supply capability assessment

– Recommendation of the most competitive sourcing option

– Risk mitigation plan development

• Managing global sourcing delivery via risk centric approach

– supplier qualification, cross culture communication, technical compliance,

value engineering, vendor quality surveillance, expediting, logistics

management, installation & commissioning supervision and after sales

service support, etc.

18

05/2014

Global Sourcing Timing

Global Sourcing optimization

study:

Minimize Capex, Schedule and

Risks through optimal packaging

and contracting strategies, Global

vs. regional vs. local sourcing,

sourcing risk identification and

mitigation plans, etc.

Bidders lists populated only competitive

and low risk suppliers

Increased leverage in PO / Contract negotiation and in the resolution of execution issues

Global Sourcing

optimization study on Opex

Ongoing plans and estimates adjustments through supplier alerts, updated lead time and price trends, updated

country sourcing risks, etc.