Marine Vessels

SCM Category Management

Managing Supply Vessels Operation

Category Management for Marine Vessels for PCSB Drilling & Production Activities

CARIGALI Management Committee (CMC) 16 December 2010

2010 PETROLIAM NASIONAL BERHAD (PETRONAS)

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Contents
 Introduction & Executive Summary  Background Tender Brief  Scope of Work  Procurement Strategy & Methodology Key Elements of Tender  Evaluation Methodology & Criteria Technical Commercial  Summary of Recommendations  Next Steps

Agenda
1. Background 2. Sourcing Strategy 3. Management & Monitoring

1. Background
 Objective
To brief & seek CARIGALI Management Committee (CMC)s guidance & endorsement on the following : Category Management & Sourcing Strategy for Overall Marine Vessels spread for PCSB Drilling & Production Activities Way forward for a systematic marine vessel movement tracking and fuel consumption monitoring

1. Background
 Introduction
Rigs, Marine Vessels & Marie Spread have been identified as a Category Management profile under Strategic Sourcing in which Marine Vessels identified as one of the key categories for potential savings to the overall PCSBs operations.

1. Background
 Executive Summary
Marine Vessels strategic sourcing & category management approach has been embarked in PCSB Carigali in 2008 to realize the following key objectives : Sufficient marine vessels support available for both the PCSBs domestic drilling and production activities Centre-led (CHO) EOS initiative generating value creation Manage market availability & supply of marine vessels Establish Marine Vessel Category Management in PCSB Discussions incorporating the existing essential PCSB strategic planning tools have been used as a reference i.e. Project Generation Selection and Sequencing (PGSS), Master Integrated Schedule (MIS) and Long Term Drilling Sequence (LTDS). Incorporating the drilling rigs requirement will also determine the number of support marine vessels required for the overall PCSBs drilling & production operations.

1. Background
 Scope Coverage
Operational Coverage

SBO SKO Marine Vessel Category Management

PMO

CHO DW

1. Background
 Operational Brief
Overall, there are a total of sixty-nine (69) Marine Vessels for PCSB Drilling & Production Operations) is required to cater annually for PETRONAS Carigalis drilling and production operations from 2010 until 2015.
No.
1

Vessel Type
Anchor Handling Tug / Supply (Min. 35 MT) - Production Anchor Handling Tug / Supply (Min. 60 MT) - Drilling Anchor Handling Tug / Supply (Min. 100 MT) - Drilling AHTS AHTS AHTS FCB SSV LCT GP UV PSV

CHO
NA 8 7 NA 12 NA NA NA 2

SKO SBO
2 NA NA 7 NA 6 6 NA NA 1 NA NA 1 NA 2 4 NA NA

PMO
NA 1 NA NA 2 NA NA 8 NA

Total
3 8 6 8 14 8 2 9 3

2 3 4 5 6 7

Fast Crew Boat Straight Supply Vessel (1 SSV / Accommodation for PMO) Landing Craft Tank General Purpose Vessel Utility Vessel (3 UV / Accommodation ; 5 TUG Utility) Production Supply Vessel (Deepwater Support)

Total

29

21

11

69

1. Background
 Marine Vessels Distribution
SKO SBO PMO CHO DW

Vessel Types AHT<40 LCT GP FCB Total

No. 2 6 6 7 21

Vessel Types AHT<40 LCT GP FCB Total

No. 1 2 4 1 8

Vessel Types UV SSV TUG Total

No. 8 2 1 11

Vessel Types AHT>60 AHT<60 SSV Total

No. 7 6 17 30

Vessel Types PSV Total

No. 3 3

TOTAL VESSELS : 73

11 Types

2. Sourcing Strategy
 Marine Vessels Overall Strategy
The marine vessel integrated sourcing strategy is primarily to align both the production operations and the drilling support for optimization and savings for PETRONAS Carigali Domestic Operations o Rationalization of regional production and drilling marine vessel support requirement o Procurements of marine vessels for PETRONAS Carigali s marine support activities to be managed on Centre-led basis by PETRONAS Carigali SCM Planning & Strategy where its economically & operationally possible o Standardization of Marine Vessel Specifications

2. Sourcing Strategy
 Marine Vessels Overall Strategy (contd)
Reduce and minimize the adhoc and spot charters in PETRONAS Carigali operations The long term strategy is to ensure PETRONAS Carigali s marine vessels availability & secured at competitive market rates To ensure the continuity of marine vessel support for PETRONAS Carigalis drilling and production operations, an integrated strategic sourcing & tendering exercise has been proposed in stages for most requirements from end 2010 until 2015.

2. Sourcing Strategy
 Overall Sourcing Strategy Conducted
In order to realize value creation through this tender, the following strategic approaches have been identified & implemented since 2006:Year
2006 / 2007 2008

Strategic Initiative
PBI (Procurement Business Improvement) RIM (Regional International Managers Forum) Bundling Initiative Strategic Sourcing Category Management

Key Strategy
Consolidation & integration Integrated bundling sourcing for vessels Integration and EOS Long Term Promotion of new-builts & Malaysian ownership Integrated competitive tendering Standard specifications Revised Tendering Process Establishment of Umbrella Spot Charter Contract Vessel Optimization initiative to reduce cost

2009 / 2010

3. Operational Supports 2. Sourcing Strategy

 Value Creation
In order to realize value creation through this strategies, the following approaches have been outlined as follows :Element Economies of Scale (EOS) Previous Approach Way Forward

Drilling & production source Long term plan for drilling & production, volume individually for contract start consolidation, integrated & joint-PSC sourcing to drive date within the next one EOS and discounted DCR. year. Operations between regions sourced individually (PMO, SKO, SBO, CHO & DW) Optimization study limited Integrated optimization study between drilling & within each region for both production activities for all possible vessel sharing or drilling & production swapping options. activities.

Optimization of requirement

2. Sourcing Strategy
 Value Creation
In order to realize value creation through this strategies, the following approaches have been outlined as follows :Element Total Cost of Ownership (TCO) Previous Approach Drilling & production activities source individually to address high operating cost especially on fuel consumption. Way Forward Integrated sourcing to address & improve commercial evaluation and contract clause with regards to fuel consumption and monitoring mechanism. Introduction of fuel consumption capping and fuel flow meters installation to all marine vessels.

Pricing

Short term charter duration Securing marine vessel needs competitively while resulted in higher Daily driving down the DCR via longer term charter Charter Rate (DCR). durations. Minimize spot charters and optimize operations & activities.

4. Management & Monitoring

 Procurement Strategy & Methodology
Current Approach
Integrated Planning
PCSB Regions source individually for contract start date within the next one year Sharing of vessels across regions production & drilling operations limited

Current Approach
Long term integrated plan for PCSB group wide to identify future consolidation / optimization opportunities and address strategic issues Optimize cross regional sharing of vessels for supply milk-runs sectors and crew transfer

Optimization

Info Sharing

Limited sharing of vessel information across regions

Create & manage integrated vessel database under Category Management

Pricing & Discount

Fixed price contract and no mechanism to capture volume discount

Fixed price contract and introduce mechanism to capture volume discount Encourage suppliers to purchase and Malaysianised certain vessel types Explore feasibility of Malaysian new build vessels Negotiate prior to award on pricing, periodic price review mechanism

Malaysianisation

Limited to giving preference to Malaysian flag vessels & restricted local state players Negotiation not allowed. In certain cases prior to award, negotiation is usually limited to price only

Negotiation

4. Management & Monitoring

 Supply Market Dimensions
Supply Market Dimensions Key Insights
Sufficient availability of vessels for PCSB at present Relatively lower availability for LCTs and GPs to cater for SKO/SBO operations.

Sourcing Implications
By tendering now, most requirements can be met through shorter revised process Initiation of Umbrella Spot Contract

Availability

Ownership

Malaysian ownership for the following vessel types has been more than 80%: AHTS/AHTS SSV, UTI, FCB, GP & LCT Low Malaysian ownership for PSVs to support deepwater activities

Support Malaysianization agenda, encourage ownership of all vessel types Give preference to Malaysian owned vessels during evaluation To initiate longer term contracts & new-builts for Malaysian PSVs

4. Management & Monitoring

 Pricing, Discount & Award Strategy
Base Case Award Scenario
FUEL CONSUMPTION CONTROL MECHANISM Fuel consumptions reporting mechanism established with vendors on a monthly / half yearly / yearly basis Vendors accountable for cost difference exceeding 10% of certified consumption ratings

Apply Discount

Lower DCR - Seek volume discounts formulation in ITB Vendors to quote discount rates for each additional vessels awarded cumulatively

Negotiations

Lower DCR Negotiate final discount structure Review process to determine the most competent technically capable and commercially competitive suppliers

Final Award Scenario

Split award scenario Split award scenario to be considered only if all vessels within a specific category are awarded to 1 bidder Split award scenario and price impact to be developed and presented to TC for optimal scenario selections.

4. Management & Monitoring

Vessel Operation Activity

Objective

Operation Cost

SECTOR

NO OF VESSEL

DCR (RM) JAN-NOV 10 366,877,493.00

FUEL (RM) JAN-NOV 10 84,066,687.00

DRILLING PRODUCTION TOTAL

27 34 61

194,623,548.07

81,054,153.17

561,501,041

165,120,840.17

Initiative

3. Operational Supports
 Marine Vessels in SBO (Sabah Operations)
No Contract No. Vessel Contractor Type Name GP GP LCT
Jaya Coastal Shipping SB Jaya Coastal Shipping SB Jaya Coastal Shipping SB Yayasan Sabah Dua Shipping SB Asian Supply Base SB Asian Supply Base SB Asian Supply Base SB Asian Supply Base SB

Vessel Name

Purposes General Purpose General Purpose Landing Craft Tug Landing Craft Tug

Location

Contract Primary Primary Period & Year Period Period End Built/Age Extensio (* - Extension) Start n options 1999 2007 2007 2 Years 2 Years 2 Years 22-Feb-08 05-Dec-07 06-Nov-07 21-Feb-11* 04-Dec-11* 05-Nov-11*

1 2 3

S07/Y/028C S07/Y/028B S07/Y/029B

Psalm 23 Psalm 68 Permai Jaya

SAMARANG ERB WEST SAMARANG / ERB WEST / TEMBUNGO

4 5 6 7 8

SB08/SPD/150C SB08/SPD/150A SB08/SPD/150B SB08/SPD/150D SB08/SPD/150E

LCT GP GP AHT FCB

Bondex Jaya 9 Psalm 118 New Speed 2 Sealink Maju 27 Borneo 1

SAMARANG / SUMANDAK General SAMARANG / Purpose SUMANDAK General Milk-run for SBO Purpose Southern region Support SBO Anchor anchor handling Handler Tug activities Fast Crew Crew Change for Boat all platforms

2008 2009 2006 2009 2005

5 Years 5 Years 5 Years 5 Years 5 Years

11-Nov-09 05-Nov-09 05-Nov-09 16-Nov-09 13-Nov-09

10-Nov-14 04-Nov-14 04-Nov-14 15-Nov-14 12-Nov-14

3. Operational Supports
 Marine Vessels in SKO (Sarawak Operations)
No Contract No. Vessel Contractor Vessel Name Type Name
FCB FCB FCB FCB FCB FCB GP GP GP GP Syarikat Borcos Borcos Firdaus 1 Syarikat Borcos Borcos Firdaus 8 Syarikat Borcos Borcos Firdaus 9 Syarikat Borcos Borcos Firdaus 6 Syarikat Borcos Borcos Firdaus 7 Syarikat Borcos Borcos Firdaus 3 Jaya Coastal Sribima (M) Shipping Sribima (M) Shipping Sribima (M) Shipping Psalm 128 Psalm 33 Bima 5 Bima 3 Support Southern Sector Support Bintulu Sector Support BDO interplatform Sector

Purposes
Support Eastern Sector

Location

Contract Primary Year Period & Period Built/Age Extensio Start n options
2007 2008 2008 2007 2007 2007 2006 2006 2004 1994 5+2+1 yr 5+2+1 yr 5+2+1 yr 5+2+1 yr 5+2+1 yr 5+2+1 yr 15/12/2009 26/11/2009 25/11/2009 04/01/2010 07/03/2010 15/03/2010

Primary Period End

14/12/2014 25/11/2014 24/11/2014 03/01/2015 06/03/2015 14/03/2015 17/03/2012 28/12/2010 15/07/2011 20/02/2011

1 2 3 4 5 6 7 8 9

S08/Y/171 S08/Y/172 S08/Y/173 S08/Y/174 S08/Y/175 S08/Y/176 S07/Y/028(D) S06/D/180 CE S06/D/019(C)

2+1+1+2 yrs 18/03/2010 2+2 yrs 2+3 yrs 2+1+1 yr 29/12/2008 16/07/2008 21/02/2008

10 S05/D/069 CE

3. Operational Supports
 Marine Vessels in SKO (Sarawak Operations)
No Vessel Contract No. Type GP GP LCT LCT LCT LCT LCT LCT AHT AHT Contractor Name Sisma Entreprise Syarikat Borcos Jaya Coastal Jaya Coastal Jaya Coastal Sisma Entreprise Vessel Name Purposes Contract Primary Period & Year Location Period Built/Age Extensio Start n options 2+1+1+2 2007 27.08.2009 yrs 1993 2006 2006 Milkrun for BDO Northern Sector 2007 2002 2006 Milkrun for BDO Southern Sector Support Anchor Handling activities Support Anchor Handling activities 2006 2009 2009 2+3 yrs 5+2+1 yr 5+2+1 yr 2+1+1+2 yrs 2+3 yrs 2+1+1+2 yrs 1+3 yrs 5+2+1 yr 3+2 yr 24/06/2008 27/11/2009 18/12/2009 21/09/2009 07/10/2007 09/10/2009 16/12/2007 15/11/2009 03/11/2009 Primary Period End 26/08/2011 23/06/2011 26/11/2014 17/12/2014 20/09/2011 06/10/2010 08/10/2011 15/12/2010 14/11/2014 02/11/2012

12 S07/Y/028(A) 13 S06/D/019(A) CE 14 S08/Y/178 15 S08/Y/179 16 S07/Y/029(A) 17 S05/D/071 CE 18 S07/Y/029(C) CE 19 S06/D/235 CE 20 S08/Y/199 21 S08/BPD/050

Psalm 88 Borcos2 4 Bondex Jaya 7 Wawasan 1 Pelangi Pagi

Bondex Jaya 5 Seagood Voctoria Sisma Entreprise 6 Ajang shipping Sribima (M) Shipping Newwing Energy Ajang Marwa CE Mariner Psalm 1