© 2012 Fluor Corporation. All Rights Reserved. Fluor Procurement Overview China Sourcing Petroleum Equipment Summit 2012

Fluor China Sourcing Petroleum Equipment Summit 2012 Global Petrochemical Project Execution Discussion Topics u Fluor u Petrochemical Project Sourcing Trends u Procurement Execution Strategies u Fluor Prospect Update 2

3 Fluor Corporation Fluor Corporation Executive Overview u One of the world’s leading publicly traded EPCM companies u Over 1,000 projects annually, serving more than 600 clients in 66 different countries u More than 42,000 employees –1,900 Procurement professionals u Offices in 28 countries on 6 continents u 100 years of experience

Fluor China E&C Company Fluor China E&C Company Office Profile 4 u Executing projects in China since 1978 u More than 250 projects completed in China u Strong FSR/FEED/PMC/EPCM/EPC execution capabilities u 9 Mega Projects executed during the last decade u Fluor has worked with more than: –20 Class A China Engineering Companies –Several Super Class / 1 st Class construction companies u Current staff ~ 876 u Office Locations: –Head Quarters, Shanghai Dawning Center –Beijing Lido Plaza Beijing Shanghai

Fluor China E&C Company Fluor China E&C Company Customer Value Proposition u Dependability and Reputation: Proven track record of successful project execution in China - minimizing clients’ risk exposure, world- class reputation in project management, systems and tools. u Depth and capability of resources, including access to world wide expertise u Unmatched capability with very large projects but also with small and medium sized projects. u Full range of services from FSR, conceptual, self-perform design, procurement, construction, start-up, commissioning to O&M. u Our world class and leading track record in Safety in China u Class A Design and Pressure Piping QC and Class 1 Construction License u Large and highly capable China Sourcing center allowing customers to maximize China content whilst meeting safety and quality criteria u Extensive fabrication management experience – over US$ 1 billion in the last 3~4 years. 5

Current Sourcing and Procurement Trends u Capital Project Market u Development of Local Supply Content Capabilities u Best Country Sourcing (BCS) u Modularization Execution Strategies 6 Fluor Procurement Sourcing and Procurement Trends

Petrochemical Capital Project Market Impacts u Petrochemical Capital Project Markets –High Growth Markets - Asia and Middle East – Constrained Capital Project Funding s Driving more moderate design margins, industry specifications, High Value and best country sourcing trends –Increased Local Content and Social Regulatory Requirements –Remote Project Sites, Constrained Resource Base u Client Market Profile –Rise of National Oil Companies –Total Cost of Ownership Focus u Competitor Market Profile –Established Asian Competitor Base – Expanded Global Market Reach u Commercial Contracting Structures –Increased competition base –Increased Risk to Contractor –Lump Sum Turn Key Market –Execution Partnerships critical to pursuit and award opportunities 7 Fluor Procurement Current Sourcing and Procurement Trends

Local Content Requirements u Local content is rising to the top of developing country political agendas impacting oil, gas, and mineral development capital projects u Local Content Requirements will be increasingly used as means to strategically develop national industries and generate employment –Countries will utilize procurement and contracting instruments to creatively build national competitiveness through capital investment, technology transfer, and skills development. u The regulations, compliance requirements, business development, project delivery, and social performance policies have to be formulated with great care and aligned to the domestic suppliers ability to win contracts on the basis of an international competitive tender –Instead of creating new jobs and filling local order books the result can be harmful impact on the country or region’s long term growth –Introduction of new risks and higher costs to investment projects –Reduce the volume or timeliness of government revenues from the project investments u Project Execution Risks and Opportunities –Capital Project Execution Framework Flexibility –Ability to optimize Local Labor and Supply Market Capability –Western and Local Supply Integration Programs (Craft Training, Supply Integration) 8 Fluor Procurement Current Sourcing and Procurement Trends

Best Country Sourcing (BCS) and Market Intelligence Capabilities u Owner inquiries specific to BCS capabilities continue to increase –Owners are interested in cost and schedule comparison across multiple emerging market s –Specific to the China, India, South East Asia, Brazil, and Russia supply markets u Source from the best competitive market location based on job site location and project execution strategy –Landed costs – logistics –Customs Clearance Costs –Leverage/Optimization of International Country Trade Agreements –Optimized Cost, Schedule, Landed Costs, Customs, Trade Agreements 9 Fluor Procurement Current Sourcing and Procurement Trends u Enables – Supplier Integration Initiatives – Front End Supply Partner Brokering – Competitive Price Based Agreements that support capital projects, MRO, and total cost of ownership – Cost Baseline knowledge that supports more effective Negotiations – Expanded Sourcing Strategy Capabilities

Modularization Design and Construction Strategies u Increased Number Capital Projects with Remote Location Sites –Lack Available Trained Labor –Increased Policy Costs –Increased Schedule with stick build execution, personnel rotations, and land locked transportation requirements u Benefits to Project/Owner: –Reduction in direct onsite labour hours, minimising exposure to safety incidents and reduction of site infrastructure –Higher productivity and better quality management due to centralised construction workshops, with a permanent and trained workforce –Parallel construction rather than sequential –Early identification of assembly conflicts, allowing for corrective action without impacting onsite progress Fluor Procurement Current Sourcing and Procurement Trends

Stick Built Costs Modularisation Costs Tradeworker ProductivityHigherShop environment more productive Tradeworker HoursReducedHigher productivity Tradesworker All-In Labour CostReducedLower overheads; low cost labor resources Field Indirect Costs (Camps & Catering) HigherFewer Tradesman on site Scaffolding CostsHigherMore work above grade Engineering CostsHigherMore structural design; added project management Transportation CostsHigherHeavy haul/heavy lift costs Material CostsHigherMore structural steel Project ContingencyHigherLess risk factors in shop environment Execution FlexibilityReducedDesign and procurement frozen earlier Material SurplusNeutral May be less with modular approach Cost of CashHigherEarlier spending Fluor Procurement Current Sourcing and Procurement Trends

Procurement Execution Strategies include the following which are being driven and fueled by Best Country Sourcing, Local Content, and modularization trends u Sustainable Supply Chain Focus u Procurement Outsoucing u Procurement Offshoring 12 Fluor Procurement Procurement Execution Strategies

Sustainable Global Supply Chains u Supply Chain disruptions can be devastating for capital project operations and client relationships. u Globalization has changed how companies manage the supply chain –Production of goods have shifted to developing and transitional economies s Cost and Schedule Advantages s Increased Capital Project Activities in developing markets (Mining, LNG, Petrochemical) s Local content requirements –This has brought new Challenges and Risks s Inconsistent or Poor Quality Equipment and Material s Supply Disruptions – Schedule Impacts s Cultural, legal, administrative, language, and political issues s Environmental – waste and emissions reduction, recycling, product design, recovery s Social Issues – child labor, working conditions, bribery, corruption u Companies that fail to manage these issues expose themselves to execution failures and reputational risks 13 Fluor Procurement Current Sourcing and Procurement Trends

14 Fluor Procurement Current Sourcing and Procurement Trends Sustainable Global Supply Chains Critical Success Factors for developing and maintaining sustainable supply chains in developing and emerging markets include –Identification and Qualification of top tier performers –Relationship Management – Building / Maintaining –China Commercial Terms and Conditions –Continuous Alignment on technical, quality, and commercial requirements –Procedures Development Assistance –Production / Schedule Planning Support & Assistance –QA/QC/Supplier Quality Surveillance –Final Inspection for Release of shipment –In-Country Presence

Procurement Outsourcing/Offshore Execution Client Drivers include Capital Project Cost, Schedule, Funding, Total Cost of Ownership Focus, and lack of presence or expertise in high value supply locations. u Lack of Presence and capabilities in high value supply markets – China, SEA, India, Brazil, Russia –Cost and Effort to establish presence in cost competitive markets –Ability to implement sustainable supply chain critical success enablers in these markets u Asia and Middle East Capital Project Growth –Capital Project Funding –Local Content Requirements –High Value and Best Country Sourcing Drivers u Operations Cost – MRO Spend –Best Country Sourcing –Local Content Requirements –Supply Chain disruptions can impact project schedules, client relationships, plant operations 15 Fluor Procurement Procurement Execution Strategies

16 Market Prospect Update

Global EPCM Market Size Forecast Next 5 years

Fluor EPCM Market Forecast The Americas mining shale gas oil sands upstream upstream biofuels mining chemicals

Fluor EPCM Market Forecast Europe, Africa, Middle East upstream chemicals renewables infrastructure power infrastructure upstream infrastructure power

Fluor EPCM Market Forecast Asia Pacific power pharmaceuticals mining LNG upstream/downstream power photovoltaic nuclear mining infrastructure infrastructure

21 Q & A