In-Kingdom Total Value Add (IKTVA) Program

In-Kingdom Total Value Add (IKTVA) Program Creating Value in the Kingdom Tuesday, December 01, 2015 Dammam Office Building

Journey

Seeds for a vibrant chemical industry

1980

•

Master gas system

•

Massive development of the Company’s human capital

Local sources preferential policy

1990

•

Introduced Contracting Policy for local contractors

•

Introduced Local Enterprise Support Policy

Concrete steps to increase local content development

2000

•

Established NBD in 2003

•

Merged services & procurement functions

•

Mandated Saudization in major contracts

Journey

2011 2015

Competitive Saudi energy sector •

Serving Saudi Aramco’s needs

•

Exporting to the region & the world

•

Growing & diversifying the Kingdom’s economy

Today’s Key Messages

IKTVA is a program, not a metric

IKTVA will work with suppliers in a new way for success

IKTVA is a Saudi Aramco Strategic Imperative

Saudi Aramco vision is to enable a globally competitive Saudi Industrial Base

2021 TARGETS ARE:

70% Local Content

500,000 Jobs

4

Saudi Aramco: Confidential

30% Exports

The In-Kingdom Total Value Add (IKTVA) Program

LevelPLAYING playing LEVEL field, FIELD, Transparency and TRANSPARENCY ANDclarity CLARITY

Procurement approach

70 21 by

70% localization by the year 2021 Beyond procurement enabling success

Access to information

5



The objective is to drive key activities towards localization and job creation, which will be assessed against the following metrics:

A. B. C. D.

Localized goods and services ($) Salaries paid to Saudis ($) Training & Development of Saudis ($) Supplier Development Spend ($)

E. In relation to revenue (spend from Saudi Aramco)

Supplier IKTVA Formula DEFINITION The IKTVA program drives, measures and monitors the “addedvalue” brought to the Kingdom by a supplier.

% IKTVA =

𝐴+𝐵+𝐶+𝐷 𝐸

∗ 100

Additional Info. • Number of Saudi Employees • Investment ($) • R&D spend ($) • Exports ($)

6


Key points

UNIFORM EVALUATION FOR BOTH

SUPPLIER FOCUSED Co-developed with the suppliers

Service Contractors Materials Providers

MUCH SIMPLER THAN THE OTHER INTERNATIONAL PRACTICES

ASSESSMENT & TRANSPARENCY Validation by 3rd party

7


IKTVA metric guidelines booklet

Calculation guidelines Certification guidelines

8


Suppliers’ Representative IKTVA Footprint

$2,500

$2,000

Spend ($)

$1,500

$1,000

$500

$0

0%

10%

20%

30%

40%

50%

% IKTVA 9


60%

70%

80%

90%

100%


LevelPLAYING playing LEVEL field, FIELD, Transparency and TRANSPARENCY ANDclarity CLARITY

Procurement approach

70 21 by


Access to information

10


Doing Business with Suppliers Competitive cost

Quality

Environment

IKTVA is imperative for doing business with Saudi Aramco

Schedule

Safety

11


Saudi Aramco Contracting & Execution View

IKTVA will be imbedded from start to finish

Planning

Construction

Design

•

Design Basis Scoping

•

FEED

•

Drilling Schedule Development

•

Requirements Master Plan

•

• •

Services Schedule Development

•

Detail Engineering, Procurement, and Construction Contract execution

Scope design

12


Operations •

Facilities Operation

•

Field & Well Services

Sourcing

EXCLUSIVITY FOR IK MANUFACTURERS • • • •

Capacity Capability Cost Schedule

SOURCING CRITERIA

• • • •

Technical & Quality Regional Distribution Cost Competitiveness New Technologies

13


NOVATION FOR IK ENGINEERED EQUIPMENT • • • •

Capacity Capability Cost Schedule

Contracts

Set IKTVA targets for major contracts Imbedding Supply Agreements into LSTK … Contracts

Master Service Agreements

Contracts IKTVA targets

•

Based on sectorial IKTVA Baselines

•

Part of the scope

•

Part of the evaluation

•

Part of supplier performance

Imbedding Supply Agreements into LSTK … Contracts •

Corporate Procurement Agreements

•

Local Manufacturing Development Agreements

14


Master Service Agreements (MSAs) •

End-to-End Agreement

•

Includes: Engineering, Design, Fabrication, Installation, Commissioning, MRO, and Supplier Managed Inventory

•

Multi-Year

Supplier Solution Center

Single Window to Saudi Aramco

Dedicated Supplier Relationship Managers

Liaison with external stakeholders

Registration Support

[email protected] www.saudiaramco.com\iktva

15


Pre-Qualification Technical Support


LEVEL LevelPLAYING playing FIELD, field, TRANSPARENCY Transparency and ANDclarity CLARITY

PROCUREMENT Procurement APPROACH approach

70 21 by


ACCESS TO Access to information INFORMATION

16


IKTVA Information Access Summary

GENERAL

SPECIFIC COMPANIES AND SECTORIAL FORUMS

Awareness (Web and Investor Forums) • Sectors of spend in USD

Awareness (Web and Investor Forums) • Sectors of spend in USD

Information Type

Information Purpose

•

Total Company spend

•

Total Company spend

SPECIFIC INVESTOR

Investment Plans •

Specific Products and/or services

•

Annualized Units for grouping of years

Disclaimer: This presentation contains forward-looking statements regarding future events based on current expectations, estimates, forecasts, and projections. The presentation is subject to updating, revision, further verification and amendment without notice. No reliance may be placed for any purpose on the information or opinions contained in this presentation or any other document or statement, or on the completeness, accuracy or fairness of such information or opinions therein. No representation or warranty, express or implied, is made or given by or on behalf of Saudi Aramco or its employees, or any other person as to the accuracy or completeness or fairness of the information or opinions contained in this presentation and no responsibility or liability is accepted by any of them for such information or opinions or for any errors, omissions, misstatements, negligent or otherwise, or for any communication written or otherwise, contained or referred to in this presentation.

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Forecast 2015 – 2025

Drilling Well Count

Capital Program Forecast

Surface Facilities

6% 10% 31%

Infrastructure

$334

Drilling

Billion

UR Other

42%

11%

Average Spend / Year is 33 Billion USD 18


Drilling Materials Spend Forecast 2015-2025 = $57 Billion

Quantities Examples

OCTG API, 11 Million units

Hanger assemblies, 24,000 units

Trees 20,000 units

Cement 5.8 million Tons

Percentage of Total Material Spend

Casing heads 15,000 units

Mud Products (Liquid) 298 million gallons

19


Rigs and Well Services Forecast $119 B (2015 -2025)

Rig Drilling Ops Services = $60 B 136

Well Services Total Spend = $59 B

Average Rig Count/Year 84 43

30 3

Onshore Onshore Offshore Oil Gas Oil

UR

Offshore Gas

20


Forecast 2015 – 2025

Capital Program Forecast

Surface Facilities

Maintain Potential

6% 10%

$334

Drilling

42%

29

Gas Facilities

24

Other

Billion

UR

39

Refining & Petrochem

31%

Infrastructure

Other

Surface Facilities

19

Oil Facilities

11%

10

Pipelines

Power Renewables Average Spend / Year is 33 Billion USD 21


9 3 0.5

Examples of Surface Facilities Materials Forecast (2015 – 2025)

PROCESS VESSELS CS - 6000 Units CARBON STEEL PIPING - 3.1 Million Tons HEAT EXCHANGERS - 4300 Units STAINLESS STEEL FITTINGS & VALVES - 5.7 Million Units CARBON STEEL FITTINGS & VALVES - 15.8 Million Units FIELD INSTR, ANALYZERS, GAGES - 66000 Units STRUCTURAL STEEL, 734000 Tons CONTROL VALVES, 86000 Units PROCESS VESSELS SS, 800 Units OTHER EQUIPMENT, 2000 Items COMPRESSORS, 514 Units CONCRETE, 20205 Cubic Meters STAINLESS STEEL PIPING (SS314/316), 135,348 Tons AIR COOOLERS, 554 Units STORAGE TANKS, 1177 Tanks BOILER PLANT EQUIP, 185 Units PUMPS CS, 3,789 Units CABLE, Low V, 56,420 KM

Surface Facilities Materials

$56 Billion Surface Facilities Construction

$75 Billion 0

1

2

3

4

5 Thousands

22


6

7

8

9

10

Total Manpower Forecast (2015 – 2025) is 280,000 Direct Jobs DRILLING AVERAGE MANPOWER/YEAR* SKILL LEVEL EXAMPLES

PROCESS FACILITIES AVERAGE MANPOWER/YEAR* SKILL LEVEL EXAMPLES

* This demand is for industrial projects only. It does not include Commercial, Residential, or Infrastructure Projects.

** Inclusive of all disciplines 23


Information Sharing

INFORMATION

SAUDI ARAMCO INTERNAL USERS

EXTERNAL USERS

Strategic Procurement (MS, PM, D&WO, NBD …etc.)

Suppliers /Contractors (10 Years Demand)

HR Development (T&D, UCG, PM, MS, CP, D&WO…etc.)

TVTC / HRDF/ Others (10 Years Demand)

IKTVA (MS, NBD, and Proponents)

Investment Promotion (10 Years Demand)

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Level PLAYING playing LEVEL field, FIELD, Transparency and TRANSPARENCY ANDclarity CLARITY

PROCUREMENT Procurement APPROACH approach

70 21 by

70% localization by the year 2021 BEYOND Beyond PROCUREMENT procurement ENABLING SUCCESS enabling success

ACCESS TO Access to information INFORMATION

25


Creating Value in the Kingdom

26


Take away messages

SIGNIFICANT OPPORTUNITIES LIE AHEAD

WIN – WIN PROPOSITION

EXCELLENT SUPPORT FROM KEY STAKEHOLDERS

Iktva IS A BUSINESS REQUIREMENT THAT NEEDS TO BE MET

27


In-Kingdom Total Value Add (IKTVA) Program

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