The New Oil and Gas Industry Supply Chain Code of Practice To be added ADD TITLE AS APPROPRIATE

Supply Chain Code of Practice Initially developed by a work group established by ILT / PILOT under the Progressing Partnership banner (PPWG) The Supply Chain CoP is one of over 10 initiatives launched by PILOT and outlines a set of best practice guidelines   First adopted by the industry in 2002, signatories undertake to work towards full compliance with the Code Signatories include major purchasers (operators and principal contractors) and suppliers (providers of goods and services)  The Code is endorsed by PILOT, the Industry Leadership Team and the key Trade Associations In July 2005 the PPWG SCCOP Work Group was disbanded and replaced with a new Supply Chain Steering Group which reports directly to ILT / PILOT To be added

SCCOP Industry Involvement PILOT Industry Leadership Team Major Purchasers and Suppliers Operators Supply Chain Steering Group ILT (Supplier & Operator) 2 DTI 1 Standard Contracts FPAL SCMN UKOOA / LOGIC Marketing / Communications Supply Chain Steering Group (9) Supply Chain Managers Network (50+) Supply Chain Managers Network Operators 30 Trade Associations 6 Major Contractors 10 Industry Groups Work Group Work Group SCCOPWork Group Work Group Work Group To be added SCCOP Work Group Operators 2 Major Contractors 4 Industry Groups 3 DELIVERY

The PILOT 2010 Vision To make the UKCS the safest place to work in the worldwide oil and gas industry Production at 3bn BOE per day in 2010 UKCS capital investment sustained at £3Bn per annum Prolonged self-sufficiency in Oil & Gas Supporting up to 100,000 more jobs than there otherwise would have been by 2010 A 50% increase in oil and gas exports by 2005 £1 billion per annum additional revenue from new business To be added

PILOT Initiatives Access to Infrastructure CoP Commercial CoP Subsea Effectiveness Technology Progressive & Innovative Licensing Decommissioning UK Norway Co-operation Wells Share Initiative Stewardship The Fallow Process Step Change in Safety Workforce Capacity & Capability Supply Chain Efffectiveness Supply Chain CoP To be added

Code of Practice Objectives Increased UKCS Supply Chain competitiveness through improved efficiency and reduced waste Improve working practices, commercial behaviours and purchaser / supplier relationships Regular and detailed forecasting of activity levels. Enhance and simplify the bidding process. Prompt payment. Active two-way relationship management. To be added

The original Code comprised 6 sections Supply Chain Code of Practice The original Code comprised 6 sections Commercial Stage - Forecast/Planning all activity up to the point of tender Commercial Stage – Tendering all activity up to the point of contract negotiations, including elimination of bidders Commercial Stage - Negotiation agreement of contract terms Commercial Stage - Implementation and review through the life of the contract and at the end of the contract To be added Commercial Stage - Monitoring and Evaluation of Code Implementation and Adoption of the Code … commitment received from 80+ Operators and Major Contractors

Code of Practice for Suppliers was developed in 2003 Supply Chain Code of Practice Code of Practice for Suppliers was developed in 2003 Stage 1 Forecasting and Planning – To provide more effective business cycle planning. Stage 2 Tendering – To reduce the cost of bidding. Stage 3 Negotiations – Cut waste and reduce unnecessary paperwork. Stage 4 Implementation and Review – Getting the job done right. To be added Stage 5 Monitoring and Evaluation of the Code – Assuring process is in place. … commitment received from 300+ suppliers and contractors

The Code is endorsed by: To be added The Code is endorsed by: PILOT, Industry Leadership Team, Supply Chain Steering Group, Supply Chain Management Network, DTI, EIC, FPAL, IMCA, OCA, UKOOA, WSCA … it’s a real achievement for the Industry For latest information see PILOT Website http://www.pilottaskforce.co.uk/ … it has significant sign-ups already

To be added

Supply Chain Code of Practice New clean and simple format Signed by CEO and Supply Chain Manager Simplified structure New features include Industry Model ITT’s “Fair” contracting principles “Value based” contracting More efficient Code implementation survey Drafting party represented all industry groups PLAN CONTRACT PERFORM & PAY To be added

Supply Chain Code of Practice PLAN CONTRACT PERFORM & PAY Communication of forward plans to industry Provide support for Share Fairs FPAL purchaser profiles Suppliers to make use of information provided To be added

Supply Chain Code of Practice PLAN CONTRACT PERFORM & PAY Restricting bidders to FPAL registered companies Eliminate duplication of data by using FPAL Providing debriefs Using standard contract forms Payment in 30 days Use of industry Model ITT’s To be added

THE OPPORTUNITY Supply Chain Code of Practice IADC analysis of Rig ITT’s undertaken Highly fragmented approaches evident Extensive duplication of FPAL data Patchy use of standard contracts ITT quality extremely variable Tender compilation slow and expensive To be added

THE SOLUTION Supply Chain Code of Practice Create a standard ITT structure Simple, logical organisation Easy buy-in Standard documents for those that want to go further Aimed at ease of production A quality ITT A swift offer A trouble free evaluation To be added

Supply Chain Code of Practice ITT Index Commercial Sections Contractual Sections Technical Sections Guidelines on completion Tendering instructions To be added

Supply Chain Code of Practice Templates are clear, simple and pragmatic Focus is on principle not prescription Uses industry documents where they exist Nomenclature is standard Modular design gives flexibility Designed to allow substitution To be added

Supply Chain Code of Practice ITT’s are Easier, Faster and Cheaper to issue Bids are Easier, Faster and Cheaper to return Simplifies the contracting process Code recommendations incorporated Creates a vehicle to introduce better practices Operators can decide their own scale and pace of adoption Creates step out opportunities with Well Services, Operational and Construction ITT’s To be added

Supply Chain Code of Practice Model Rig ITT currently available on FPAL website, is now in use and is easy to access ……. To be added

Supply Chain Code of Practice Model Rig ITT currently available on FPAL website and now in use ITT drafting groups launching Model ITT’s in 2006 Well Services suite of Model ITT’s Marine Construction Model ITT Platform services, plant and equipment Model ITT’s To be added

Supply Chain Code of Practice CODE OF PRACTICE SURVEY METHOD Easier method of surveying Code adherence Use of FPAL Type III feedback uses existing industry scheme and little additional effort Input now verified To be added 3 additional elements

Supply Chain Code of Practice PLAN CONTRACT PERFORM & PAY Include performance Indicators in all significant contracts Provide and receive FPAL performance feedback via Type 1 and Type 3 mechanisms To be added

Supply Chain Code of Practice PLAN CONTRACT PERFORM & PAY Submit complete and valid invoices Pay all valid invoices within 30 days Adopt a prompt payment policy for own suppliers To be added

Profitability decreasing Supply Chain Code of Practice PLAN CONTRACT PERFORM & PAY Why does the Code of Practice matter to Contractors? WSCA 2005 Report To be added Revenue increasing Profitability decreasing The Industry still cannot afford non-value adding costs in Supply Chain Management processes

…… work on sign-ups continues Supply Chain Code of Practice …… work on sign-ups continues Code covers in excess of 80% of UKCS expenditure (on an operated reserve basis) To be added