1. Fluor Procurement Overview China Sourcing Petroleum Equipment Summit 2012
© 2012 Fluor Corporation. All Rights Reserved.
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2. Fluor China Sourcing Petroleum Equipment Summit 2012
Global Petrochemical Project Execution
Discussion Topics
Fluor
Petrochemical Project Sourcing Trends
Procurement Execution Strategies
Fluor Prospect Update 2

3. Fluor Corporation Executive Overview
One of the world’s leading publicly traded EPCM companies
Over 1,000 projects annually, serving more than 600 clients in 66 different countries
More than 42,000 employees
1,900 Procurement professionals
Offices in 28 countries on 6 continents
100 years of experience
Fluor is one of the worlds leading EPCM companies. We execute over 1,000 projects annually and have over 42,000 employees, 1,900 of which are procurement professionals either in various execution offices or on the project sites.
This year marks out one hundred year anniversary and that is a testament to Fluor’s ability to adapt to changing markets and technology.
Keep it free-flow. 3
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4. Fluor China E&C Company Office Profile
Executing projects in China since 1978
More than 250 projects completed in China
Strong FSR/FEED/PMC/EPCM/EPC execution capabilities
9 Mega Projects executed during the last decade
Fluor has worked with more than:
20 Class A China Engineering Companies
Several Super Class / 1st Class construction companies
Current staff ~ 876
Office Locations:
Head Quarters, Shanghai Dawning Center
Beijing Lido Plaza
Beijing
Shanghai 4

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

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

7. Petrochemical Capital Project Market Impacts
Fluor Procurement Current Sourcing and Procurement Trends
Petrochemical Capital Project Market Impacts
Petrochemical Capital Project Markets
High Growth Markets - Asia and Middle East
Constrained Capital Project Funding
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
Client Market Profile
Rise of National Oil Companies
Total Cost of Ownership Focus
Competitor Market Profile
Established Asian Competitor Base – Expanded Global Market Reach
Commercial Contracting Structures
Increased competition base
Increased Risk to Contractor
Lump Sum Turn Key Market
Execution Partnerships critical to pursuit and award opportunities 7

8. Local Content Requirements
Fluor Procurement Current Sourcing and Procurement Trends
Local Content Requirements
Local content is rising to the top of developing country political agendas impacting oil, gas, and mineral development capital projects
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.
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
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)
Procurement Instruments include regulations, contracting strategies, vendor pre-qualification, technical standards, bid documents, tender evaluation criteria and contract conditions 8

9. Best Country Sourcing (BCS) and Market Intelligence Capabilities
Fluor Procurement Current Sourcing and Procurement Trends
Best Country Sourcing (BCS) and Market Intelligence Capabilities
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
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
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 9

10. Modularization Design and Construction Strategies
Fluor Procurement Current Sourcing and Procurement Trends
Modularization Design and Construction Strategies
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
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
Modularization Design and Construction strategies
Modularization is the process of engineering and fabricating projects into shippable packages or segments that can be installed economically and logistically at a permanent site.
Modullaarriizzaattiion Saaffeettyy IIncceenttiivveess
 Offsite Advantages:
• Reduction of field-craft hours
• Modules are built at grade reducing probability of fall hazards
• Controlled fabrication environment
Onsite Advantages:
• Minimizes number of temporary scaffolds required
• Minimizes fall hazards and falling objects
• Eliminates potential risk for uncertain weather extremes
• Piping systems can be Pressure Tested in a controlled environments
limiting contractor exposure to potential hazards 10

11. Fluor Procurement Current Sourcing and Procurement Trends
Stick Built Costs
Modularisation Costs
Tradeworker Productivity
Higher
Shop environment more productive
Tradeworker Hours
Reduced
Higher productivity
Tradesworker All-In Labour Cost
Lower overheads; low cost labor resources
Field Indirect Costs (Camps & Catering)
Fewer Tradesman on site
Scaffolding Costs
More work above grade
Engineering Costs
More structural design; added project management
Transportation Costs
Heavy haul/heavy lift costs
Material Costs
More structural steel
Project Contingency
Less risk factors in shop environment
Execution Flexibility
Design and procurement frozen earlier
Material Surplus
Neutral
May be less with modular approach
Cost of Cash
Earlier spending

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

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

14. Sustainable Global Supply Chains
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 Instruments include regulations, contracting strategies, vendor pre-qualification, technical standards, bid documents, tender evaluation criteria and contract conditions 14

15. Procurement Outsourcing/Offshore Execution
Fluor Procurement Procurement Execution Strategies
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.
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
Asia and Middle East Capital Project Growth
Capital Project Funding
Local Content Requirements
High Value and Best Country Sourcing Drivers
Operations Cost – MRO Spend
Best Country Sourcing
Supply Chain disruptions can impact project schedules, client relationships, plant operations
Procurement Instruments include regulations, contracting strategies, vendor pre-qualification, technical standards, bid documents, tender evaluation criteria and contract conditions 15

16. Market Prospect Update

17. Global EPCM Market Size Forecast Next 5 years
This is Fluor’s outlook for capital EPCM projects for the next 5 years, all of which are in industries that Fluor has experience…and are opportunities that Fluor is pursuing. I want to demonstrate to you the opportunities that exist for suppliers supporting oil & gas, infrastructure, power, mining, and general manufacturing projects.
**Mention 2 or 3 opportunities relevant to the supplier for each region. Look in the procurement sales teleconference report for prospect information.**
$200B
$250B
$120B
Over $1.9 Trillion Total 17

18. Fluor EPCM Market Forecast The Americas
oil sands
mining
$368B
upstream
shale gas
In North America, we see $368 billion worth of projects over the next 5 years with strong focuses on oil sands and mining in Canada; upstream, shale gas, biofuels, and chemicals in the US; and upstream and mining in South America.
**Mention 2 or 3 specific projects**
----OLD TEXT----
If we look at the America’s region, there will be more that $500 billion dollars worth of work for the next 5 years, $370 billion of which will be in North America. Mining for copper, gold, and potash remains robust while oil sands continues to be among the most active projects in Canada. In fact, the Canadian Energy Research Institute expects oil sands capacity to rise from 2MM barrels/day now to 5.4MM barrels/day in 2035.
Shell itself has planned for 20 projects by These include deep water projects in Brazil and the Gulf of Mexico, and shale gas in North America.
Focusing on mining, in recent months the Top 40 mining companies have announced plans to invest $311 billion in capital projects in the coming years, of which $120 billion is scheduled for These announcements represent a major increase over the $67 billion spent by these same companies in 2010.
Additionally, the abundance of shale gas in North America is also driving a renewed interest in gas-to-liquids projects. Dow considers shale gas to be a “game-changer” and expects that to be the case for decades to come. And in the US, biofuels and other alternative energy sources continue to grow.
While the Middle East continues to be the low cost leader for the chemicals market, the US is adding new production capacity and is not far behind.
biofuels
chemicals
$120B
upstream
mining 18

19. Fluor EPCM Market Forecast Europe, Africa, Middle East
renewables
infrastructure
power
$370B
upstream
chemicals
$200B
infrastructure
In Europe, there will be $370 billion worth of work being driven by renewables, instrucuture, and power projects. Across the EAME region, there will be $200 billion worth of work with upstream, chemicals, and infrastructure leading the way in the Middle East…and power, infrastructure and upstream being the focus industries in Africa.
**Mention 2 or 3 specific projects**
----OLD TEXT----
Despite the fears of a recession in Europe, there will substantial investments in rail and road in Europe and the Middle East. In total, more than $250B will be or already have been invested in to heavy and light rail, tram, and metro projects in the Middle East. Additionally upstream, downstream, and chemicals continues to be strong markets. The ExxonMobil West Qurna project continues to provide work while Tengizchevroil has a couple of TCO projects that will be awarded this year and in Solar and other power projects remain a focus as most of Europe is moving away from nuclear power.
We also see opportunities in power, rail, road, and upstream in Africa. There have been a high level of investments in African oil, particularly from India and China, as they struggle to meet energy demands.
power
infrastructure
upstream 19

20. Fluor EPCM Market Forecast Asia Pacific
infrastructure
power
$600B
pharmaceuticals
mining
infrastructure
power
In China, infrastructure, power, pharmaceuticals, and mining projects are driving the $600 billion worth of opportunities. The rest of the region will have $250 billion in work with LNG, upstream, downstream, and mining being strong in Australia…and infrastructure, power, photovoltaic, and nuclear being drivers in India and the rest of the Asia Pacific.
**Mention 2 or 3 specific projects**
----OLD TEXT----
In Asia Pacific, China and India have reaffirmed their commitment to nuclear power. However, China has continued to invest in alternative energies, particularly solar and wind (which is already the world’s largest capacity).
Additionally, mining, pharmaceuticals, and rail/road projects remain active industries.
Power and infrastructure projects will remain strong as India continues to develop and support it’s manufacturing base and population. The Indian government has already approved for a $90B Delhi-Mumbai corridor which is set to be completed by Additionally, to meet its fast growing demand for energy, India will be increasing the refining capacity as evidenced by large scale projects like the Reliance Gasification complex in Jamnagar.
In Australia, we continue to see an abundance of LNG and mining projects, particularly iron ore. Clients like BHP, Rio Tinto, Ivanhoe and Newcrest have over $33B worth of announced projects set to be awarded within the next 5 years. Global LNG is expected (by CitiGroup) to be 307MM TPY by 2020, with Australia and New Zealand accounting for close to 40% of the total production.
$250B
photovoltaic
nuclear
LNG
upstream/downstream
mining 20

21. Q & A 21