Investor Trip Investor presentation November 2008 Sharjah 2008 - - PowerPoint PPT Presentation

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Investor presentation Sharjah 2008

Investor Trip November 2008

Day 2 Engineering & Construction

Introduction

Obj ectives of investor presentation

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communicate our vision and strategy

–

communicate the extent of our service capabilities and our market

• pportunities

–

communicate how we are building a platform for sustainable growth

–

provide an opportunity to meet senior management of our Engineering & Construction and Operations S ervices divisions

Vision & values

Our vision is for Petrofac to become the global oil & gas industry’ s premier facilities and infrastructure provider, admired by customers and employees for consistently delivering and rewarding excellence Achieving this demands that we:

–

work to world-class standards

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focus always on customer satisfaction

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respect the environment and sensitive to the communities in which we work

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promote and reward on merit

United by shared values - safe, et hical, innovative, cost-conscious, responsive to customers and focus relentlessly on delivering results

Petrofac today

Petrofac is a successful business that has enj oyed tremendous growth

–

doubling of our employee headcount in three years

–

significant increase in our operational capability through organic development and acquisition

–

strong year-on-year growth in our financial performance

Whilst current conditions create uncertainty, industry fundamentals remain compelling and support long-term growth in demand for our services Petrofac is well placed:

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focused on geographies with lower capital costs/ conventional developments

–

significant exposure to National Oil Companies, who may be better able to meet short-term challenges

–

strong balance sheet and well-funded

–

low operational gearing and cost-effective capability

Industry fundamentals: demand, positive trend

OECD and non-OECD oil demand, 1960-2005

Total World Demand OECD Non OECD

10 20 30 40 50 60 70 80 90 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007E Demand (mbbls/d) Recessions:

4Q'69-1Q'70 3Q'74-1Q'75 2Q'80-3Q'80 1Q'81-2Q'81 4Q'90-1Q'91 1Q'01-3Q'01

Source: IEA

Global demand for oil followed positive trend throughout successive recessions

Industry fundamentals: demand led by China, India, ME

10 540 5,200 Europe 1 1,130 1,000 India 2 1,320 2,600 China 12 190 2,200 Middle East 15 1,190 17,300 OECD 20 450 9,100 North America

Oil Consumption Per Capita (bbls) Population (millions) 2006 Oil Demand (mbbls/year)

Disparity in consumption per capita expected to decrease To overtake OECD in terms of total demand for oil, India and China combined need only consume at the rate of 7 bbls per capita, which is less than half of the OECD level Disparity in consumption per capita expected to decrease To overtake OECD in terms of total demand for oil, India and China combined need only consume at the rate of 7 bbls per capita, which is less than half of the OECD level

S

• urce: based on IEA data, World Energy Outlook 2008

Oil consumption per capita in China and India is currently less than 15%

• f

the average level in OECD states

— this disparity is clearly not sustainable

Domestic demand for oil & gas in Middle East also driving growth

Source: Energy Information Administration, 2008

Recent sharp decline in oil price and uncertainty over near term levels has led to general expectation that some marginal proj ects will be deferred Industry’ s current investment plans in oil sands, challenging deep water and potentially North S ea may be uneconomic in current environment However, Petrofac’ s Engineering & Construction division focused on lower cost markets

20 40 60 80 100 120 10 20 30 40 50 60 70 80 90 100 Hydrocarbon liquids-millions of barrels per day 16% ROCE WTI price $ per boe

Major oils today Traditional reinvestment (Deep Water & some oil sands) Persian Gulf OPEC Unconventional reinvestment (with subsidies) Marginal cost of supply- less efficient oil sands

Oil price-cost curve schematic

S

• urce: Credit S

uisse research, 2008, arrow, oval and it alicised t ext added

Industry fundamentals: supply/ cost curve

Gulf OPEC Curve likely to move to left as mature fields deplete Core Petrofac markets

Souce: Norwegian Petroleum Directorate

500 1,000 1,500 2,000 2,500 3,000

1967- 1971 1972- 1976 1977- 1981 1982- 1986 1987- 1991 1997- 2001 2002- 2006

Discoveries <5 mm Sm3 Discoveries 5-10 mm Sm3 Discoveries 10-15 mm Sm3 Discoveries 50-100 mm Sm3 Discoveries >100 mm Sm3

1992- 1996

Million standard m3 oil equivalent (mm Sm3)

Industry fundamentals: supply, easy oil discovered

Industry fundamentals: substantial capex spend required

• To satisfy world hydrocarbon demand by 2030 the industry will need to boost reservoir

recovery rates, find significant new reserves and invest approximately US $10 trillion

2008 2030 20 40 60 80 100 120 Oil Production & Demand (mbbls/d)

Existing Production New Production Existing production base declining at around 8% per year Existing production base declining at around 8% per year Demand expected to grow 1.6% per year Demand expected to grow 1.6% per year By 2030, new production capacity of more than 70% of the existing base will be required to meet demand By 2030, new production capacity of more than 70% of the existing base will be required to meet demand

S

• urce: based on IEA dat a, World Out look 2008

Our 2009 reorganisation

Maroun S emaan Engineering services

(Woking and lower cost engineering centres)

Offshore Engineering & Operations (Facilities

Management, Brownfield)

Training

Production S

• lutions

(S PD, Caltec, Eclipse, Dubai) New ventures (Mubadala, S audi Arabia, IKPT etc) Sharj ah-based

Lump-sum EPC Energy Developments Amj ad Bseisu

Our 2009 reorganisation

Principal benefits of new reorganisation structure are:

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deliver revenue synergies through greater integration and deployment of multiple services to customers and proj ects

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deliver differentiated returns through innovative commercial structures that provide for an appropriate share of risk and reward

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deliver consistently through common systems and processes that are both scalable and sustainable

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share knowledge and best practices across the group, avoiding duplication of effort and costs

Our growth, Engineering & Construction

Previous investor trip to United Arab Emirates in November 2006 Engineering & Construction division has grown significantly since that time Key awards during the year included Kashagan third oil train, Ebla gas plant, Jihar gas plant, KOC gas pipeline

2,116* 1,081 2006 2008

Revenue (US$m)

40% CAGR * Analysts’ consensus estimate for 2008 4,800** 2,700 2006 2008

Headcount

33% CAGR ** At Oct ober 2008

Our growth, Engineering & Construction

Division now capable of undertaking much larger scale contracts S trong growth in headcount and revenue, and even stronger growth in net profit Engineering & Construction remains leveraged to the strong fundamentals

• f the oil & gas industry

201* 95 2006 2008

Net profit (US$m)

46% CAGR * Analysts’ consensus estimate for 2008 9.5%* 8.8% 2006 2008

Net margin

Our growth, Engineering & Construction, personnel

Current employee strength ~ 5,000

2008 Sharj ah 1,771 37% Sites 1,518 31% Mumbai 521 11% Woking 556 11% Chennai 433 9% Moscow 40 1%

(rounded) 4,800

By location 2008 Engineering 2,027 42% Construction 2,079 43% Procurement 204 4% Support & others 529 11%

(rounded) 4,800

By class

Manpow er Grow th

2600 4000 4800 2006 2007 2008

Our growth, Engineering & Construction, personnel

Recruited approximately 1,000 personnel in 2008 Brand reputation and awareness in universities and market place Employee referral programme implemented Organisation and Development team fully established focused on competency and career development/ progression and succession planning Identified backup for most key positions Robust graduate development, 2 year structured programme, leading to “ graduation” E-learning programme being rolled out Best in class employer, compensation and benefits programme being continually improved Annualised attrition rate reduced to < 9%

Our growth, Engineering & Construction, infrastructure

Infrastructure – maj or IT proj ects Unified global computer network and e-mail infrastructure under one umbrella (Petrofac.com) Group wide enterprise business software solution (Oracle ERP) Business continuity plan, IT disaster recovery

Our growth, the way forward

Consolidate position in current core markets

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Maintain cost competitiveness

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Maintain relations with customers, subcontractors and service providers

Well focused push into:

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Abu Dhabi and S audi Arabia for EPC opportunities

–

LNG

–

Offshore engineering and construction

Opportunistic approach to new markets eg. Nigeria, Libya, Iraq Continued investment in human talent

Future growth drivers and initiatives

Future growth drivers and initiatives

Overview In spite of global economic events, outlook is optimistic International oil companies and national oil companies remain focused on investment although a slowing down in some areas (downstream) Core markets – Middle East and Africa remain strong Human capital less of a challenge

Future growth drivers and initiatives

S trategies for growth and risk management Geography - diversification by region

–

portfolio of risk: security, political/ legal, economic

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five/ six core country markets with numerous opportunistic countries

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local presence continues to be a strong differentiator

Customers and product diversification

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diverse: international oil companies, national oil companies and smaller independent operators

Well established and transparent execution model

–

FEED / EPC / Operations & Maintenance / Training

Added value, cost and delivery optimisation from synergies across the total business offering, Engineering & Construction, Operations S ervices, Energy Developments

Future growth drivers and initiatives

Geographic diversification, sales and development focus Middle East

–

Qatar, S audi Arabia, Kuwait, Oman, UAE

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Iraq (medium term)

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Iran (medium to long term)

Africa

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Algeria, Egypt, Tunisia, Nigeria, Libya

CIS

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Kazakhstan, Turkmenistan, Russia

Future growth drivers and initiatives

Geographic diversification Obj ective is to maintain a balanced portfolio by target region

–

2005 Middle East order intake

–

2006 Africa and CIS

• rder intake

–

2007 Africa and CIS

• rder intake

–

2008 Middle East order intake

–

2009 Middle East and Africa

Increased participation in long term initiatives and partnerships

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Petrofac / IKPT (partnership), LNG proj ects

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Petrofac Emirates (partnership)

–

Petrofac S audi Arabia

Future growth drivers and initiatives

Customer and product diversification Focus on strong relationships with international oil companies and national

• il companies

Mitigate cyclical industry trends by

–

LNG, refinery, petrochemical

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balance services over offshore/ onshore

Ability to offer differentiated commercial models Ability to build cost effectively on existing expertise eg. sour gas Utilities and offsites experience – t ranscends oil & gas, refinery and petrochemicals

Future growth drivers and initiatives

Customer and product diversification LNG / GTL S elective technology positions

–

alliances, j oint ventures with specialist contractors

Build on local presence

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UAE

–

Oman

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Algeria

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Qatar

–

Kuwait

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Kazakhstan

Future growth drivers and initiatives

Competition With the Tier 1 contractors, limited peer competition, increasing Korean competition Development of differentiated position

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through execution model, services to EPC, operations and training

–

through reliability and delivery leading to repeat business, negotiated awards and word of mouth recommendations thereby introducing new customers

–

value associated with strong brand

–

competitive cost structure

Future growth drivers and initiatives

Petrofac Emirates - new venture in the UAE Joint venture between Petrofac and Mubadala S cope of work, EPC in UAE and where Mubadala has participating interest Maj or short-term bidding activity

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ADCO, S AS , BAB Compression

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ADGAS , Das Island

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GAS CO, Habshan utilities and offsites

S hort-medium term

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ADCO, 1.8 expansion

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Conoco Phillips, S hah development, multiple EPC contracts

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Takreer refinery

Future growth drivers and initiatives

S audi Arabia Actively bidding for proj ects eg. Karan utilities & offsites, Yanbu export refinery Excellent visibility of opportunities 2009-2012 in core oil & gas, refinery and petrochemical Local legal entity established – essential for in-country execution Targeted growth plan to establish Petrofac as a maj or player in the S audi market S trong relationships and positioning with key subcontractors

Future growth drivers and initiatives

LNG Prequalified for S hell LNG proj ects worldwide, US $5-10 billion greenfield Bid for world class LNG proj ect, albeit unsuccessful (Algeria) Currently bidding for other LNG opportunities Good visibility of short/ medium-term prospects Pursuing strategic alliances with other maj or LNG contractors Focused recruitment programme ongoing

Future growth drivers and initiatives

The outlook Target markets, outlook remains positive Good visibility of 2009, 2010 prospects for EPC Acquisitions on a selective basis S ecuring and retention of resources is a primary focus

Risk management

Risk management

Risk management processes Risk management processes Corporate support and guidance Contract/ proj ect risk management and execution management Executive risk management strategy

Risk management strategy

Executive risk management strategy Focus on areas of principal expertise, lump sum EPC and engineering services Mitigation through a broad portfolio, countries and services S trong management control and accountability Heavy investment in proposal management and proj ect controls Focus on strengthening risk monitoring and assurance processes Business continuity planning

Risk management approach

Corporate support and guidelines Measurement and monitoring of corporate risk exposures, banks, countries, contracts, commodities, and other counter-party risk (vendors, subcontractors) etc Use of guidelines to establish limits and parameters for risk taking Common processes for reviewing and assessing corporate risk in new business

Contract risk in Engineering & Construction

CUSTOMER RISKS PARTNER RISKS

VENDOR/SUPPLIER RISKS SUBCONTRACTOR RISKS

Contracts Purchase orders Join venture/ Consortium agreement

Subcontracts

COUNTRY RISKS

PETROFAC

Petrofac’ s contractual risk policy

Petrofac seeks balanced contractual risk allocation with customers, partners and subcontractors to:

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avoid disproportionate potential liabilities

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eliminate/ minimise potential liabilities outside Petrofac control

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allow an equitable allocation of risks amongst parties involved

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contractual risks control and mitigation by party in best position to manage

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promote smooth contractual relationship among involved parties

Contract risk, prequalification cycle

Prequalification phase Prequalification documents submission Prequalification documents submission Prospect identification Prospect identification

High level execution strategy High level execution strategy Assessment of customer risk & country risk Assessment of customer risk & country risk Assessment & decision to pre-qualify Assessment & decision to pre-qualify Choose partners Choose partners

Contract risk, proposal cycle

Bid/no bid decision phase Review and submission phase

Tender information sheet distributed Tender information sheet distributed

Proposal submission Proposal submission

Bid/no bid decision Bid/no bid decision

Proposal preparation phase

Review ITT and key contract terms Review ITT and key contract terms

Revisions based on DRRC, RRC and board directives Revisions based on DRRC, RRC and board directives Check for deal-breakers Check for deal-breakers

Receive ITB Receive ITB

Technical and commercial review Technical and commercial review Identify and issue ITBs to vendors & subcontractors Identify and issue ITBs to vendors & subcontractors

Decision to bid Decision to bid

Detailed review ITT and key contract terms Detailed review ITT and key contract terms Divisional risk review committee (DRRC) Review Divisional risk review committee (DRRC) Review Proposal ready for review Proposal ready for review Risk review committee (RRC) Review Risk review committee (RRC) Review

Board approval Board approval

Identification of risks & mitigation measures for presentation to DRRC/RRC/board Identification of risks & mitigation measures for presentation to DRRC/RRC/board Obtaining vendor & subcontractor Prices Obtaining vendor & subcontractor Prices 1 week

1st price review 2nd price review

2 - 3 weeks

1 week

Maj or contractual terms in EPC contracts

Rely upon information Financial provisions and securities (payment terms, bank guarantees, etc) Liquidated damages for delay & failure to achieve performance guarantees Change in law Maximum aggregate liability of contractor under the contract Consequential losses/ damages Liabilities, indemnities and insurance Warranty obligations S uspension/ termination Force maj eure

Contract risk, proj ect cycle

EPC phase Warranty phase Provisional acceptance Provisional acceptance Commencement

• f EPC contract

Commencement

• f EPC contract

Warranty period

Final acceptance Final acceptance Mechanical completion Mechanical completion Commissioning phase

Engineering Engineering

By Petrofac/ customer with support from vendors & subcontractors By Petrofac/ customer with support from vendors & subcontractors

Vendors & subcontractors to meet their warranty obligations Vendors & subcontractors to meet their warranty obligations

Construction through subcontractor(s) Construction through subcontractor(s) Subcontractor to achieve mechanical completion Subcontractor to achieve mechanical completion Procurement through vendors Procurement through vendors Vendors to meet required performance guarantee for their equipment Vendors to meet required performance guarantee for their equipment

CONTRACT RISKS

Progress

Final acceptance certificate Effective Dat e Provisional Acceptance Certificate 100% 0% 100% Mechanical completion RFS U Assess and allow for proposal (performance Tests, rely upon info etc) Take up wit h vendors and subcontractors Identify & align vendors who can meet requirements Correct design/ performance test procedures/ completions checklist Vendor representatives at site

‘ Back to back’ vendor guarantees

M i t i g a t i

• n

m e a s u r e s

Proposal phase Execution phase Warranty phase

Make good Make good Pay LDs Pay LDs

Contract risk, profile

S ubcontracts, risk management

PETROFAC

CONSTRUCTION SUBCONTRACTORS CONSTRUCTION SUBCONTRACTORS MATERIAL VENDORS/SUPPLIERS MATERIAL VENDORS/SUPPLIERS

Back-to-back basis with the EPC contract conditions (obligations, payment terms, bonds, liquidated damages, warranty etc) Back-to-back basis with the EPC contract conditions (obligations, payment terms, bonds, liquidated damages, warranty etc) a) Pass-through obligations b) Warranty on a back-to-back basis with the EPC contract c) Compliance with main contract requirement a) Pass-through obligations b) Warranty on a back-to-back basis with the EPC contract c) Compliance with main contract requirement

Contract risk, large scale proj ects strategy (1)

CUSTOMER

Joint venture Petrofac – JV Partner Joint venture Petrofac – JV Partner

PETROFAC

JV PARTNER

Engineering Engineering

Responsible for performance of its work scope Responsible for performance of its work scope Responsible for performance of its work scope Responsible for performance of its work scope

Commercial risks Schedule risks Technical risks Commercial risks Schedule risks Technical risks Commercial risks Schedule risks Technical risks Commercial risks Schedule risks Technical risks Joint & several liability towards customer S haring of risks Procurement Procurement Construction Construction Engineering Engineering Procurement Procurement Construction Construction E, P & C S cope E, P & C S cope

CUSTOMER

Joint venture Petrofac – Partner 1 – Partner 2 Joint venture Petrofac – Partner 1 – Partner 2

PETROFAC

PARTNER 1

Engineering Engineering

Responsible for performance of its work scope Responsible for performance of its work scope Responsible for performance of its work scope Responsible for performance of its work scope

Commercial risks Schedule risks Technical risks Commercial risks Schedule risks Technical risks Commercial risks Schedule risks Technical risks Commercial risks Schedule risks Technical risks Joint & several liability towards customer S haring of risks Procurement Procurement Engineering Engineering Procurement Procurement

PARTNER 2

Responsible for performance

• f its work scope

Responsible for performance

• f its work scope

Commercial risks Schedule risks Technical risks Commercial risks Schedule risks Technical risks Construction Construction

Contract risk, large scale proj ects strategy (2)

S ubcontractor risk management

Warranty phase Commissioning phase

EPC phase

Provisional acceptance Provisional acceptance Commencement of EPC contract Commencement of EPC contract

Warranty period

Final acceptance Final acceptance Mechanical completion Mechanical completion

Late mobilisation Late mobilisation Lack of resources Lack of resources Defective workmanship Defective workmanship Delay in progress Delay in progress Non-achievement of mechanical completion Non-achievement of mechanical completion Incentive schemes to subcontractor Incentive schemes to subcontractor Take out scope of work and assign to other subcontractor(s) Take out scope of work and assign to other subcontractor(s) Additional resources by Petrofac Additional resources by Petrofac

Project sponsor, steering committee and executive management: monitoring and intervention Project sponsor, steering committee and executive management: monitoring and intervention

Petrofac control of subcontractor resources & lower-tier subcontractor Petrofac control of subcontractor resources & lower-tier subcontractor Petrofac construction management Petrofac construction management Direct intervention by Petrofac Direct intervention by Petrofac Acceleration & recovery measures by subcontractor(s) Acceleration & recovery measures by subcontractor(s)

SUBCONTRACTOR RISKS MITIGATION MEASURES

Warranty period

Vendor/ supplier risk management

Commissioning phase

Order execution phase

Provisional acceptance Provisional acceptance Placement of purchase order Placement of purchase order Mechanical completion Mechanical completion VENDOR RISKS VENDOR RISKS MITIGATION MEASURES MITIGATION MEASURES

Order of raw materials/ sub-components Order of raw materials/ sub-components Lack of resources Lack of resources Defective workmanship

• r material

Defective workmanship

• r material

Delay in fabrication Delay in fabrication Failure during factory acceptance Failure during factory acceptance Incentive schemes to sub-vendors Incentive schemes to sub-vendors Take out partial scope of work and assign to other sub-vendors Take out partial scope of work and assign to other sub-vendors Additional resources by Petrofac Additional resources by Petrofac

Project sponsor and executive management: monitoring and intervention Project sponsor and executive management: monitoring and intervention

Shop load status Shop load status Placement

• f resident

inspectors Placement

• f resident

inspectors Outsourcing test bench facilities Outsourcing test bench facilities Lack of capable site engineers Lack of capable site engineers Slow response in addressing warranty issues Slow response in addressing warranty issues Use of high level pressure from vendor management Use of high level pressure from vendor management

Warranty phase

Air freight/ charter flights Air freight/ charter flights Acceleration & recovery measure by vendor Acceleration & recovery measure by vendor Step-up expediting efforts Step-up expediting efforts

Final acceptance Final acceptance

Identification of critical contract risks and mitigation measures Careful selection of partners, subcontractor and vendors Identification of critical contract risks and mitigation measures Careful selection of partners, subcontractor and vendors

The proj ect cycle

Negotiations with customer to ensure fair and equitable contract Negotiations with partners, subcontractors and vendors to ensure a fair and equitable contractual relationship Negotiations with customer to ensure fair and equitable contract Negotiations with partners, subcontractors and vendors to ensure a fair and equitable contractual relationship

Ensure strong support & coordination from partners, subcontractors and vendors for a goal- driven unified- approach Ensure strong support & coordination from partners, subcontractors and vendors for a goal- driven unified- approach

PROPOS AL S TAGE AWARD S TAGE EXECUTION STAGE

Sound contractual policy Direct intervention by senior management Regular reporting and reviews Sound contractual policy Direct intervention by senior management Regular reporting and reviews

Execution management

Execution management

Phases of a proj ect Basic components of each phase Common drivers

Execution management, proj ect phases

Bidding and proposals Contract realisation Custody handover Warranty period

Bid start Contract award COMM complete Performance test complete End of liabilities

Execution management, proposal & bidding

Customer

• Vendors
• S

ubcontractors

• S

pecialist services

• Technology/ licensors
• Vendors
• S

ubcontractors

• S

pecialist services

• Technology/ licensors

Proposal Commercial Technical Contractual

Execution management, proposal approach

Proposals are the cornerstone of good execution Manage the proposal as a proj ect Mobilise the task force for the proposal Understand, analyse, dissect technical, contractual and commercial requirements Engage with customer, in clarification Identify third party involvement and engage them Develop a good understanding of how the proj ect will be executed

Execution management, proposal approach

Technical Prepare and submit technical proposal including clear representation of your understanding of requirements Prepare preliminary execution plans for the realisation phase including

• rganisation, schedule, specifications and data sheets and basis of bid

Detailed review of vendors and sub-contractors submission and engaging them in clarification process - zero on the critical Prepare technical document register, procurement register, schedule Align offers of vendors, subcontractors and third parties to the contract requirements where possible Prepare risk matrix and proposed mitigations, including proposed actions to deal with non transferable risks or liabilities

Execution management, proposal approach

Engineering Verification and endorsement of the FEED – meets performance guarantees, material deliveries, alternatives, etc Development of the FEED at the bid stage, as required, to support the detailed estimate, provide early start for all disciplines Third party verification: for specialist technology domains Introduction of specialist subcontractors/ partners to add value to the bid and execution

Execution management, proposal approach

Contractual Prepare detailed list of contractual obligation and liabilities - assess criticality/ acceptability and risk associated with each submission Prepare detailed clarifications and qualifications and engage the customer Quantify cost where it is possible and prepare alternative proposals Include clear basis of the proposal in the bid and include alternatives S upport in selection of subcontractors and finalise all contractual commercial issues related to maj or subcontractors and vendors Review and analyse cash flow and propose alternative Prepare risk matrix

Execution management, proposal approach

Commercial proposal Zero pricing principle (no rules of thumb, no estimation curves) Issue enquiries and obtain quotations Engage critical vendors in clarification and negotiations Evaluate data obtained against in-house recent data from proj ects Engage subcontractors and issue BOQ, for obtaining prices Compare obtained quotes to in-house performed estimates Review cycles for BOM, BOQ and prices Comparison to historical data

Execution management, proj ect realisation

Engineering Project services HSSE QA/QC Project controls Commissioning Construction Procurement Project management

Execution management, proj ect realisation

Project management principles Risk - early identification of risks and plans for mitigation HS S E - safe execution saves time and money Quality - the most cost effective scenario is do it right first time Customer satisfaction - create win-win relation with the customer Budget - set budget, control, report and improve Target driven schedule – plan, identify risk, be flexible and responsive Management of interfaces - early recognition of problems means early solutions Commissioning and construction are the aim of the engineering and procurement

Execution management, proj ect realisation

Project management approach Task force, with full in-house capability and competence QA and HS S E are an integral part of the proj ect activities Construction/ commissioning driven schedule Target driven schedules and plans Decision making process based on technical and optimum cost solutions Early procurement of critical material Bulk orders in phases to meet site requirements Continuous cost monitoring, reporting and control

Execution management, quality assurance & control

Quality management principles Customer focused organisation Leadership and standard setting Involvement of right resources Process approach (plan, do, check, act) Continual improvement Best practices, lessons learned Factual approach to decision making Mutually beneficial supplier relationships Embedded within execution, not treated as a “ bolt-on”

Execution management, HS S E

Management commitment to highest health, safety, security and environment standards Risk based inherently safe approach Exhaustive in-house HS S E technical capability for all proj ect phases Integration of home office and site HS S E organisations

Execution management, HS S E

Construction HS S E programmes including:

–

emergency response procedures

–

crisis management

–

training

–

security

–

medical resources

Proven capability of world class HS S E performance on proj ects with

–

extreme environments

–

low competency manpower

–

brownfield operations

–

sour gas presence

Execution management, HS S E

Principles/approach Identify proj ect specifics and risk areas – early and remain focused Develop programmes and specific plans S et targets and KPIs across all levels of proj ect staff Develop plans, monitor, report and improve Visible leadership Ensure execution plans embody safety Ensure method statements and risk assessments cover requirements to execute safely All team members are responsible for safety Constructability reviews early and include safety aspects

Execution management, engineering

Full in-house capability and control Cover all aspects from studies to det ailed engineering - Woking, S harj ah, Mumbai, Chennai & Indonesia High value operation centres (Mumbai, Chennai and Indonesia) Integrated data centric approach In-built quality assurance process Mature procedures and method statements S chedule tailored to meet construction needs Established material management system Feedback through field engineering

Execution management, procurement

Integrated within proj ect task force – buying, inspection and expediting Worldwide capability - Europe, US , Middle East offices Terms and conditions that cater for all potential risks and liabilities Deep understanding of our market/ vendors Use of customer vendor lists Integrated material management system Early identification of misalignment and development of contingency plans Win-win partnership approach with vendors

Execution management, construction and completions

Principles Construction is generally sub-contracted Early engagement of construction partner - bidding Ensure relationship is governed by an equitable contract, that is almost ‘ back to back’ with the main contract Develop a complementary win-win relationship and deal with problems promptly Mobilise supervision early in the proj ect Establishment of robust preservation and maintenance team Integrate with commissioning plans

Execution management, construction

Construction approach Experienced, hands-on construction management team

–

supervision, planning, quality, HS S E, material management

–

proper training and exposure

Construction partner (local)

–

local materials, logistics, customs clearance, construction resources

–

local authorities and regulations

–

equitable win-win relation

–

identify weakness and bottlenecks through open and frank relat ions

–

minimal reference to contract by creating alignment

–

more than one subcontractor per discipline

Execution management, completions

Completion principles Use in-house resources Mobilise early enough to involve them in the formal reviews Input to engineering equipment, model reviews Input to quality plans of vendors Early definition of commissioning handover systems/ schedule Identification and alignment with customer start-up/ early operations requirement Include vendor requirements in the purchase inquiries Identification of specialist equipment and tools early on Mobilise to site early enough to act as customer for construction

Execution management, warranty

Obtain back-to-back warranties Plan warranty period activities Allow provisions

–

in-house resources

–

third party costs (involve vendors)

–

materials

Assign warranty coordinator (continuity) Responsiveness and problem solving Develop relations with the plant custodians

Current proj ects

Current S harj ah proj ects

Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10

Facilities upgrade, Kuwait In Salah gas compression, Algeria Harweel, Oman Hasdrubal, Tunisia S alam gas plant, Egypt Ebla gas plant, S yria Jihar gas plant, S yria KOC 40” feed pipeline Kashagan Train 3 Kashagan construction management

KOC facilities upgrade

KOC facilities upgrade

Customer Kuwait Oil Company (KOC) Proj ect type Multi location Brownfield - EPCC- LS TK S cope Oil processing capacity increase and relocation of all underground hydrocarbon service piping to above ground at seven gathering centres & two booster stations Award May 2005 S chedule (revised) Progressive - 43 months for last station (GC3) Value Approx $800 million

KOC facilities upgrade

Project description Proj ect covers seven oil gathering centres (GCs’ ) and two gas booster stations (BSs’ ) S ection-I Crude oil processing capacity increase by addition of HP/ LP separators, hydro cyclones (de-oiler) in six GC’ s and desalter trains in five GCs’ . Capacity increase by about 250,000 barrels/ day New condensate recovery units (compressor systems) for associated gas in three GCs’ Upgrade of all control and shut down systems in six GCs’ , and partial upgrade in the rest Section-II Relocation of all underground hydrocarbon piping to above ground in all seven GCs’ and two BSs’

KOC facilities upgrade

Engineering from S harj ah All procurement from S harj ah Construction through single CMEI local subcontractor Kharafi National Consistency check and change management across various stations maintained through proj ect engineering management & discipline leads S equential shut down, tie-in and re-commissioning of all GC’ s and BS ’ s S equential commissioning of new facilities in six GC’ s

Harweel field development

Harweel field development

Customer Petroleum Development Oman (PDO) Proj ect description Harweel field development, enhanced oil recovery (EOR) proj ect Proj ect type Oil & gas production/ treatment Grass roots/ tie-ins S cope Engineering, procurement, construction, pre-commissioning, training Award December 2005 S chedule 34 Months (original)

Ebla gas proj ect surface facilities

Ebla gas proj ect surface facilities

Customer Petro-Canada Palmyra BV Proj ect Ebla gas proj ect surface facilities Location Palmyra, S yria S cope Engineering, procurement, construction, commissioning and start-up Commenced March 2008 Completion April 2010 Contract value US $477 MM

Ebla gas proj ect surface facilities

Overview The scope comprises engineering, procurement, construction, commissioning and start-up of:

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gas treatment plant producing 80 MMS CFD of sales gas

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gas gathering station

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flow lines and pipelines, connecting well sites and gas gathering stations with the gas treatment plant

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gas treatment plant consists of, gas dehydration unit, gas separation using turbo-expander/ low temperature separat or process, LPG recovery unit, LPG storage facilities and loading facilities, condensate stabilisation and storage

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associated offsites and utilities

Hasdrubal gas plant

Hasdrubal gas plant

Customer BG Tunisia/ ETAP Contractor Petrofac E&C Proj ect type Gas processing / LPG & Condensate Export Location Hasdrubal, Tunisia S cope Engineering, procurement, construction and commissioning Award November 2006 S chedule Ready for hydrocarbon introduction, 29 months Contract value US $460 MM

Hasdrubal gas plant, plant capacity

Input 120 MMS CFD of raw gas and gas condensate/ oil Product 15,000 BPD of stabilised condensate and oil 400 TPD butane and propane 98.6 MMS CFD of lean gas

Khalda gas processing plant

Khalda gas processing plant

Customer Khalda Petroleum Company Project type Gas production/ treatment/ grass roots Scope S alam gas trains 3 &4 (S GT 3/ 4) Engineering, procurement, construction, commissioning and initial operations Award October 2006 Schedule 25 months (original) Value Approx $400 million

Khalda gas processing plant

Key features Fast-track proj ect, 25 months from award to gas in Full PDMS plant modelling Adj acent to existing operating facilities (S GT-1 & 2)

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construction safety

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S IMOPS / (O&M)

High pressure (separation) – 110 bar Tie-ins from S GT-3 & 4 to existing plant – completed within plant shutdown schedule

In S alah gas compression

In S alah gas compression

Customer IS G (j oint venture), S

• natrach 35%

, BP 33% , S tatoil, 32% Contractor Petrofac E&C Proj ect type Compression proj ect Location Three sites, Teg, Reg & Krechba 600 km from Hassi Messaoud, Algeria S cope Engineering, procurement, construction, utilities commissioning, process commissioning assistance,

• perations support and training

Award October 2007 Durations 25 months Teg, 26 months Reg, 35.5 months Krechba Value $600M

In S alah gas compression

Reg and Teg Addition of further field separation and cooling Two parallel trains of gas turbine driven compression Associated utilities, air compressor package, nitrogen package, HP flare system, 3.8MW GTUG) Krechba Addition of further field separation and cooling S ingle train of VS D electric motor driven compression Power requirements will be met by the addition of a third RB211 gas turbine generator

Engineering services

Engineering services

S uccessful delivery of

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consultancy

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FEEDs

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detailed engineering

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PMC/ EPCM

A differentiated offering to Engineering S ervices customers based on Petrofac’ s unique combination of LS TK EPC, operations management, training and asset management capabilities

Engineering S ervices, structure

>500 personnel Consultancy FEED Detailed design PMC/ EPCM

Woking Mumbai Chennai

>500 personnel Detailed engineering support to S harj ah >400 personnel Detailed engineering support to S harj ah, Woking and Aberdeen

Engineering services, Woking

Currently occupying four office locations, allowing capacity for >800 personnel Extend offering for engineering and proj ect management services in other geographic regions such as Middle East, North Africa, West Africa, and CIS Continued expansion into higher volume market areas eg. LNG, refinery Continue to improve competitive position by maximising use of resources from lower cost centres

Engineering services, current proj ect, Karachaganak

Proj ect Karachaganak Phase III FEED, Kazakhstan Customer KPDL Duration October 2006 – December 2008 S cope Front end engineering design (FEED) FEED for the construction of new facilities for the Phase III expansion proj ect of the Karachaganak field. Particular challenges included location, transport and installation strategies taking into account the remote location and harsh, sour gas environment. The largest FEED contract to date executed by Woking office - 1.1million hours

• ver 2 years.

Engineering services, current proj ect, Kharyaga

Proj ect Kharyaga Phase III proj ect Customer Total E&P Russia Duration December 2007 – December 2008 S cope Front end engineering design (FEED) Basic Design (TEO-C) The Phase III development will ensure the facilities maintain oil production at the present rate and provide de-mercaptinisation of the crude oil and gas sweetening and dew pointing to achieve the sales gas specification and remove the requirement for flaring. Execution of the proj ect is across Woking, Chennai, S amara and Moscow. Petrofac also executed the EPC contract for Phase II between 2000-2003 which increased oil production to 30,000 BOPD.

Engineering services, Mumbai and Chennai

S upports delivery of proposal and proj ect work for S harj ah, Woking and Aberdeen Centre of excellence for detailed engineering and 3D modelling Operates with the same business management system as S harj ah and Woking – certified to IS O 9001 S trong resource bases with plans for continued growth

Offshore engineering

Offshore engineering, introduction

Enhanced service line offering for 2009 Market research and customer surveys indicate Petrofac can readily build

• n excellent E&C reputation to participate in $10billion pa offshore capex

market Based in Woking - synergies and resource share with existing E&C engineering Currently recruiting additional specialist and offshore proj ect management leaders from industry Build on Petrofac’ s brownfield, offshore operations and Energy Developments’ offshore proj ects experience

Offshore engineering, strategy

Leading offshore engineering team in Woking will be grown and supported by E&C engineering, offshore operations and brownfield engineering. More intensive business development and marketing programme Q1 2009 Pursue reimbursable FEED engineering proj ects Build capability and competence from Energy Developments and external IOC proj ects Reimbursable low risk Higher risk/ reward Concept/ FEED Engineering Detailed design Programme management Capital lump sum proj ects

Offshore engineering, strategy

We will consider cost effective st rategic acquisition opportunities to accelerate growth and build competency/ specialist expertise Utilise Petrofac lower cost engineering centres EPC proj ects effectively lead to additional negotiated business

• pportunities for Petrofac functions; commissioning, operations,

maintenance and brownfield engineering plus training Utilise E&C cost effective processes and existing full service capability Market differentiation is our ability to optimise proj ects using our in- house offshore operations experience and access to E&C cost effective engineering and procurement systems as well as leveraging market relations

Offshore engineering, market

Focus is on international oil and gas companies and national oil companies Maj or offshore proj ects

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brownfield (field development)

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greenfield (new build/ conversion)

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abandonment/ decommissioning

S pecific regions

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North S ea

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Middle East

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S

• uth East Asia

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West Africa

Offshore engineering, proj ects

Petrofac Energy Developments offshore proj ect, examples

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Cendor Phases I and II, Malaysia

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West Don and Don Southwest, UK North Sea

Offshore engineering

Acquisition date, 2004 Partners, Petronas Carigali, Kufpec, PetroVietnam Petrofac working interest, 30% and operator Field description:

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Location offshore Peninsular Malaysia (Block PM304)

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Formation, miocene

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Reservoir depth 1,600 metres TVD, average well depth 2,900 MD

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Reserves, 24.6 MMBO (P90) Development concept:

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Rate, daily production 14,000 bpd declining over 8 years

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S ales, oil to FS O, marketed by Petronas

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Cost, US $52.5 million (capex only)

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Schedule, first oil achieved in September 2006

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Further development phases planned

West Don and Don S

• uthwest

Offshore engineering

Offshore engineering – West Don and Don S

• uthwest

Petrofac as licence holder and field operator has managed every element of the proj ect delivery from subsurface evaluation and concept development, through regulatory engagement to detailed engineering, drilling, execution and ultimately operation of the field The field development plans for both fields were sanctioned by BERR (now DECC) in May 2008 Northern Producer refurbishment completed, and unit installed in field November 2008 First production well on West Don drilled to target depth on prognosis All pipelay and trenching and maj ority of subsea construction activities completed

Offshore engineering - summary

Natural market progression for Petrofac Utilise extensive and differentiated in-house expertise Market is ready for an innovative new participant Build from low cost reimbursable business to full EPC proj ect capability Established Petrofac presence in target offshore regions Enhance Petrofac Energy Developments’ offshore proj ect opportunities