1. Managing Successful Offshore Modularized Fabrication — Through Cost Effective Procurement Strategy Gu Hong, COOEC April, 2011

2. 2   Offshore Project Management   Sourcing in China   Need Analysis   Procurement Risk Mitigation CONTENTS

3. 3 TANGGU Who We Are COOEC is one of the largest EPCI contractors for offshore oil & gas industry in the Asia Pacific area. CNOOC owns approximately 60% shares of COOEC. COOEC has also entered new business segment in the fabrication of modularized plant and drilling rig. QINGDAO

4. 4 Jacket Topsides / Modules FPSO Topside / Modules Subsea Pipeline Subsea Cable Mooring Structure / system Terminal Facilities Pressure Vessel & Skids Jack-up Drilling Rigs Modularized Plant ServicesP roducts Conceptual Engineering FEED Detailed Engineering Shop Drawing As-built Drawing Procurement Fabrication Load-out and Sea fastening Offshore Transportation Offshore Installation Site Hookup & Commissioning Maintenance and Renovation Project Management What We Do

5. 5 1950s/1960s1970s1980s1990s2000 - Present Self-Elevating Jackup designed by China China began to design and fabricate jack-up rigs by herself First oil field cooperated with oversea partners in 1982 After establishment of CNOOC, China offshore Oil & Gas engineering industry began to see great development. International Standards applied PSC Introduced In 1966, the first steel offshore platform / module was built in Bohai Bay A milestone of China Offshore Engineering Industry development. 1. Increased E&P activities in South China sea 2. Water Depth Increased to 120m 3. International cooperation further enhanced 1. Water Depth Increased from 100m to 300m 2. Module Size more than 10000tons 3..EPCI capability of large complex projects 4..International Quality and HSE code Executed Historical Development

6. 6 One of Key Factors for Successful Project QINGDAO YARD The yard has experience with EPCI contract in the Asia Pacific region for oil & gas industry. Choosing the Right Module Yard to Deliver a Challenging Project

7. 7  Quay Line: 1,645 M  Quay Water Depth: 10~12.4 M  Total Area: 1,200,000 M 2  Annual Fabrication Capacity: 270,000 T  Dock: 420 M * 110 M * 13.9 M

8. 8 HSE High HSE Performance HSE POLICY Award of “Excellent Contractor” Prevention First Process Control Continual Improvement The HSE are always the weakness in our management which need continuous improvement. —— Fu Chengyu, CNOOC Chairman 0.550.550.340.34 0.180.18 0.120.12 0.070.07 6.46.4 12.212.2 1.11.1 22.922.9 13.3613.36 Manhour ( Million ) LTIR 2006 2007 2008 20092010

9. 9 Quality Management System Standard: ISO 9001:2008 Environmental Management System Standard: ISO 14001:2004 Occupational Health and Safety Management System Standard: OHSAS 18001:2007 EN ISO 3834-2:2005 Welding Certificate HSE QUALITY PROGRESS WELDING PERFORMANCE Quality

10. 10 CNOOCCHEVRON TEXACO PHILLIPS SHELL BP HUSKY CSPC TOTAL HHI Kerr-McGee ARCO ENI SAIPEM WORLEY CACT-OG TECHNIP KODECO GUSTO QUANTITY Category 100+ Jacket for Fixed Platform 100+ Topside for Fixed Platform 9 Single Point Mooring System 10 FPSO 63 FPSO Topside/Modules 4 Jack-up Drilling Rig 1,234 Subsea Pipeline (km) 17 Modules for Mining Plant 200+ Equipments Skids / Modules Performance Record

11. 11   Offshore Project Management   Sourcing in China   Need Analysis   Procurement Risk Mitigation CONTENTS

12. 12 Understanding Project Clients' Requirements Teamwork Clients’ Need Analysis Communication Multi-level & -facets Channel Multicultural Communication Protocols & Processes The difference between success and failure consists in communicatiion. Since 1982, all the upstream projects for China offshore oil & gas development adapted international codes & standards. International Standards: ISO 、 API 、 ASME/ANSI 、 AWS 、 IEC 、 ASTM 、 DNV 、 ABS 、 BV 、 SOLAS… etc. National Standards: GB 、 Q/HS 、 SYT 、 CCS…etc.

13. 13 Correspondence Memo/File Transfer Regularly Scheduled Meetings Technical Exchange Regular visit among top management Communicate, Understanding Project Clients' Requirements Communicate, and Communicate!

14. 14   Offshore Project Management   Sourcing in China   Need Analysis   Procurement Risk Mitigation CONTENTS

15. 15 Sourcing in China More Material and equipment used for Modules now can be produced from China Technical Comparable of China Produced material & products Cost and time effectiveness for China Produced Material/Equipment/Products CHINA

16. 16 Competitive cost Reliable quality... offers strategic long-term benefits beyond cost savings Benefits in Sourcing China Ontime delivery

17. 17   Offshore Project Management   Sourcing in China   Need Analysis   Procurement Risk Mitigation CONTENTS

18. 18 DESIGN STANDARDS Once the standards determined (API, JIS, etc.), the range of the vendors also determined Try to use Chinese Standards are the ultimate goal for Modularization in China DESIGN CHANGES Mainly occurs in early stage of a project, which could affects the construction schedule and material quantities ordered Asks for quick response from client and vendor to contractor to minimize the procurement risks Procurement Risk Mitigation DESIGN

19. 19 Approved vendors from client LOCAL MARKETGLOBAL MARKET Low Cost Easy to meet Schedule requirementnt Good Service DEFECTS: Communication and cooperation deficiency Schedule requirements hard to achieve DEFECTS: Approval from client for vendor and products quality. Standard deficiency. Quality assurance from client MARKET: Maximize the Local Market Potential Procurement Risk Mitigation

20. 20 Text in here Text in here EPC CONTRACT: The Base of all Procurement Activities Vendor List Limits the local market sourcing, affects the project schedule Unit Rate Reimbursement Cost Plus / Provisional Sum PAYMENT: Affects not only cost but also procurement activities period and procedure. Procurement Risk Mitigation

21. 21 Vendors active participation Clients requirements Anti-dumping Duties Import Limitations Other Factors Law Term Risks Cooperation With Client & Vendors Promotes efficiency and understanding Directly sent to vendors without differentiations Procurement Risk Mitigation

22. 22 China Sourcing Project

23. 23 OPPORTUNITIES Advanced project management and coordination interface Logistic and technical challenges Confidence in local vendors Foreign and Chinese standards Accelerated shift of fabrication project to China yard from Overseas yard; Clients are more cost conscious Global Economic is waking up and Capex is increasing The improvement of hardware condition and human resources enables Chinese companies to get more projects. In this way, Chinese scouring steps into a larger stage. CHALLENGES Closing Summary

24. THANK YOU! ADDRESS: No.1078, Dan Jiang Road, Tanggu, Tianjin, 300451, P.R.China CONTACT : Mr. Li XiaoWei TEL: +86 22 6690 8879 FAX: +86 22 6690 8899 WEBSITE: www.cnoocengineering.com E-MAIL: lxw@mail.cooec.com.cn ADDRESS: No.492, Lian Jiang Road, Qingdao Economic & Technical Development Zone, Qingdao, 266555, P.R.China CONTACT : Mr. Shen Weihe TEL: +86 532 8675 818888128/8228 FAX: +86 532 8675 8108 WEBSITE: www.cnoocengineering.com E-MAIL: swh@mail.cooec.com.cn