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111-04-05
Key Challenges Ahead
PELC, The Hague, April 11, 2005
211-04-05
AGENDA
1. Key Challenges
2. Technip’s Response
3. Who we Are?
311-04-05
1. Key Challenges Selected
1.1 Risk and Risk Sharing
1.2 Globalization
1.3 Information Technology (Tools)
1.4 Rules, regulations & requirements
1.5 Technology & Innovations
411-04-05
1.1 Risk and Risk Sharing
1. Challenges
511-04-05
1.1 Risk & Risk Sharing (1)
NET EARNINGS 1994 2003 USD in Billions
10 largest oil companies
10 largest E&C companies
23.2 75.7
Source : Bloomberg 2003
0.8 -0.3
611-04-05
GROWING IMBALANCE BETWEEN OIL AND E&C COMPANIES
SHAREHOLDERS‘ EQUITY 1994 2003 USD in Billions
10 largest oil companies
10 largest E&C companies
235 423
1.1 Risk & Risk Sharing (2)
Source : Bloomberg 2003
8 9
711-04-05
PROJECTS GROWING FASTER THAN E&C COMPANIES‘ SIZE
At Technip, the 5 largest contracts in backlog (Group share) amounted to:
10 years ago : € 1.6 Billion 5 years ago : € 2.1 Billion 2003 : € 2.9 Billion
Average size of the 5 largest contracts is now close to Euro 600 million per contract;
equivalent to about 1/3 of the Technip Group’s equity.
1.1 Risk & Risk Sharing (3)
MEGA PROJECTS = HIGHER RISKS BUT are those really FAIRLY SHARED?
811-04-05
Find & Development cost per BARREL : 1992 - 2000 fluctutating between 4.2 to 5.1 USD/Barrel 2001 - 2003 suddenly going up from 4.6 to 7.1 USD/Barrel (oops!)
Source : ABN/AMRO
To reduce project cost, companies are inclined to tighten terms and conditions on projects. E&C contractors are forced to accept:
Lower margins for higher risks Heavier liabilities Negative cash flows Lower insurance coverage
Paradoxically, such an approach is more likely to lead to higher costs on projects (+ a few casualties among the E&C companies).
In turn E&C companies wil try to transfer parts of the above risks towards their suppliers and subcontractors, normaly with the same end results and the claim culture is born.
1.1 Risk & Risk Sharing (4)
911-04-05
1.2 Globalization
1. Challenges
1011-04-05
E&C companies have been transferred from local engineering outfits into large global companies (Technip from 6.000 to 19.000 people in last 5 years).
Ongoing reducing margins and pressure on project budgets has forced the E&C contractors and their suppliers to find low cost labor and hardware.
Significant investments needed to upgrade low/moderate cost engineering centers (requires about 10 years).
Hardware : value for money ! Tremendous effort needed to maintain quality and ensure project schedules when purchasing in low cost countries.
Potential danger of loosing competences in home office engineering centers by outsourcing design & engineering work.
More and more difficult to find skilled, well trained engineering staff in Western Europe. Engineering is not sexy!
Some vendors are technically preferred (single source) by one company but blacklisted by another for the same application. This is hampering efficient global procurement and competitive bidding.
1.2 Globalization (1)
1111-04-05
USA 55-65 €/hNorthern Europe
55-75 €/h
Southern Europe 30-45 €/h
SE Asia 18-25 €/h
India 15-20 €/h
(1 € = 1.30 $)(1 € = 1.30 $)
1.2 Globalization (2)
1211-04-05
1.3 Information Technology
1. Challenges
1311-04-05
1.3 Information Technology (1)
Investments in IT tools are high : 70-80 million Euros for the Technip Group on a yearly basis.
Selected IT tools of (engineering) companies are embedded in their work processes.
Software suppliers are launching new programs and versions irrespective if there is a need or not (Windows 95, 98, 2000, SE, XP). Technip Group went from W’95 directly to XP. Same is applicable for engineering tools.
Clients/owners are insisting on their own tools during project execution, resulting in inefficiencies, loss of data and extra costs on those project(s).You can think about Smartplant P&ID versus Autocad or PDS versus PDMS etc.
E&C contractors on their turn are forcing vendors to use their procurement tools resulting in the same.
The increase in data transfer and handling is asymptotic, especially the data transfer by email :
1411-04-05
1.3 Information Technology (2)
Electronic Mail: The Numbers!!!
18,000 Users in the Technip Group
3,100 Email Accounts in Technip Paris Office.
2,800 Individual Email Accounts
300 Project Email Accounts
About 800,000 emails per Day in the Group
About 250,000 Internet Emails per Day to the Group,including:
35,000 Spams and
18,000 virus infected emails (blocked by our tools)
1511-04-05
1.3 Information Technology (3)
1 Bite = 1 Character (0 or 1)1 Byte = 8 Bits1 Kilo Byte (KB) = 1,024 Bytes1 Mega Byte (MB) = 1,024 KB1 Giga Byte (GB) = 1,024 MB
1 Page Email (Text) = 5 KB1 Message of 1 MB = 200 Pages
= 2.5 cm1 Picture = Few KB to > 1 MB
1 Email Account of 1 GB = 200,000 Pages= 25 m= 1/12 Eiffel Tower!
Unit of Measures…
1611-04-05
Electronic Mail: The Numbers!!!
For Information, Technip Group currently has:
120 Email Accounts over 1Giga Bytes
450 Email Accounts over 500 Mega Bytes
1,250 Email Accounts over 200 Mega Bytes
2,300 Email Accounts over 50 Mega Bytes
Total Individual Accounts Volume = 750 GB
Total Project Accounts Volume = 1500 GB
This represents a pile of paper of nearly 60 km high and please note this is without the fact most of this paper is printed in multiple number of copies.
1.3 Information Technology (4)
1711-04-05
1.3 Information Technology (5)
THIS OR THIS ?
1811-04-05
Easy to loose track on the ongoing developments : what is not possible today can be done tomorrow.
Required education levels engineering staff are going up (i.e Red lining on document control).
People are overwhelmed with information E-mail culture without clear questions/organization,
Server capacity of today is too small for tomorrow.
E&C companies are fully dependent on IT tools. Standard E&C formats are not excepted by owners.
IT tools do not save one single engineering hour, although reducing inconsistencies.
IT tools are capital intensive i.e. PDS 3D, FEM analysis, CFD & EFD, E-procurement, ERP
Against the IT philosophy, clients and authorities are asking more and more paper and TECHNIP transfers this message to the suppliers
1.3 Information Technology (6)
1911-04-05
1.4 Rules and regulations
1. Challenges
2011-04-05
1.4 Rules, Regulations & Requirements (1)
Pressure Equipment Directive (PED)
CE marking
Safety Integrity Level (SIL)
Atmosphere Explosive (ATEX 137 & ATEX 100a)
Local Authorities : TUEV/STOOMWEZEN/APAVE…… NOBO’s!
HAZARD reports
HAZOP reports
ISO 9001
ISO 14001
OSHA 18001
And ………………………..
2111-04-05
1.4 Rules, Regulations & Requirements (2)
Specific client requirements and of course all different.
Environmental requirements.
Local (authority requirements)
ALL ABOVE RESULTING IN :
– An Inspection & Test Plan for a compressor these days consist of 100 pages.
– Significant increase in size (data) of requisitions containing contradictive information.
– Vendors are not capable to read everything in the proposal phase.– Increased prices due to risk coverage is the result.– Changes to the vendor standard products increases the error rate.
BUT HAS HARDLY ANY EFFECT ON THE PLANT DESIGN (HARDWARE) ITSELF.
2211-04-05
1.5 Innovations & Developments
1. Challenges
2311-04-05
1.5 Innovations & Developments (1)
This is typically accepted as an innovation:
2411-04-05
1.5 Innovations & Developments (2)
This is typically NOT accepted as an innovation:
2511-04-05
1.5 Innovations & Developments (3)
Neither is this one :
80" P10004A-DA10-H
2611-04-05
Type of costs Reference Plant(80’s):
600 kta
Mega-Plant(2004):
1000+ kta
Energy input 8000 kWh per ton ofProduct
5300 kWh per ton of Product
Product losses Less than 1% Less than 0.25%
CO2 emissions 1550 kg per ton of product
790 kg per tonof product
Operators 7 per shift 7 per shift
Also the silent Reduction in OPERATING COST for Ethylene Production is seen as “normal” and not as an
innovative design
1.5 Innovations & Developments (4)
2711-04-05
2. Technip’s Response
2.1 Risk and Risk Sharing
2.2 Globalization
2.3 Information Technology Tools
2.4 Rules and regulations
2.5 Technology & Innovations
2811-04-05
2.1 Risk & Risk Sharing (1)
What is needed to restore a more balanced relationship between plant owners/Clients and E&C contractors?
A new Behavior?– Limit Lump Sum contracts to well-defined scope end technologies.– Allocate risks/costs to the right party.– Let business people run the show (Rather then lawyers)– …and provide them some give-and-take authority.– Focus on the long term partnerships
Contractual Terms– Provide the E&C contractor a neutral, if not positive cash flow.– In turn E&C contractor shall do the same to their suppliers.– Payments in multi-currencies in line with contractor’s cost structure.
Or in other words : Plant owners to re-establish an appropriate risk-award balance for their
contractors and actually SHARE risks in order to provide sustainable profits for all participants in the engineering chain.
2911-04-05
Each project is evaluated on its own meritsNo market share or asset utilisation target supersedes this rule
TENDER
CostEstimation,
Legal & FinancialReview
ManagementAuthorization
to Tender(ATT)
BID
Cost, Legal
& FinancialUpdate
ManagementAuthorization
to Commit(ATC)
AWARD
Ensure Appropriate Risk/Reward Achieved on Each Contract
2.1 Risk & Risk Sharing (2)
3011-04-05
2.2 Globalization
Multi Office project executions are very well possible today by means of IT tools, but actual cost savings shall not be over estimated.
By means of global networks on all engineering levels and IT tools (databases via Lotus Notes, red-lining) this can be managed.
(Expensive) investments on IT tools are an absolute must as well as the definition of one set of company standards and work processes. This is achieved via the Global Engineering & Construction Council within the Technip group.
By global procurement and lumping of project volumes, price discounts can be achieved. A global procurement organization is a must for today's E&C contractor in order to obtain best prices and buy goods as per the project currency.
Vendor lists in case of LSTK contracts shall not be restricted in order to obtain fair & global competition.
3111-04-05
GLOBAL NETWORK OF ENGINEERING CENTERS
BogotaCaracas
Abu DhabiChennai Bangkok
170300
1,080690 160
Shanghai
520
Moderate cost centres provide enhanced competitiveness on projects
Staff by Location
Aberdeen + Oslo2,430
Rome1,120 Zoetermeer
+ Düsseldorf580
Kuala-Lumpur
960
Rio1,520
Houston2,170
PARIS3,380
A powerful tool to:Manage fluctuating workloadsMitigate currency exposure
3211-04-05
2.3 Information Technology
Control of project data an absolute must. Sharing of data via controlled databases only instead of sending i.e. 20 MB emails to 20 people. Email filling is difficult and expensive, while databases can be maintained after the correct instructions are provided. Also security aspects (access rights can be easily handled )are covered.
Companies shall not interfere in each others’ working process, except when it has added value for both parties and on mutual agreed basis only. Cost involved shall be recognized.
Exchange of data via a predefined protocols/forms during the project life cycle is an absolute must. It is our vision this shall be one global standard. How companies enter or extract data shall be up to them.
Better strategic tool development a must. Better communication between software suppliers and E&C contractors (wants & needs) shall be established.
Difficult to share I.T. developments as competition between E&C contractors and competition between software suppliers will remain.
3311-04-05
2.4 Rules, Regulations & Quality Requirements
Limit the adoption of more rules and regulations. The positive affect of the old ones is still subject to debate…..
Clients/Plant owners to accept E&C and equipment suppliers standards instead of imposing their own. It safes money for all participants in the chain when doing so. Authority and HSE requirements are of course an obligation for all parties involved.
Of course shall each plant be safe, ensure health of all involved and have as less as possible impact on the environment. Generating tons of additional paper will not lead to the desired results.
Technip promotes besides modern tools the traditional working processes like combined P&ID reviews, combined HAZOP studies, combined Model reviews. Training and education for all involved shall secure a safe plant design.
Involvement of notified bodies has not increased safety either quality, but early involvement a must to avoid surprises later on by opinion engineering.
In order to achieve the desired quality level of goods, ordered with low cost suppliers, the quality control need proper attention from both expediting and quality control at the supplier premises. This is achieved by the Technip Group by using expediting and inspection power available within the group at the locations needed. The EPC.business.com tool is used for this.
3411-04-05
2.5 Technology & Innovations
Technology is a differentiator for the Technip Group.
Technology developments are centrally coordinated outside the Business Units, however with input from the BPU w.r.t. needs and wishes.
Technology Budgets available in each operating centers but Group wise coordinated based on market need/trends.
Technology Manager assigned and responsible for local developments.
Clients to recognize innovations and realize the latest technology is not developed at zero cost. E&C companies and their suppliers shall be compensated for their innovative work.
Technology and lessons learnt are shared via the database philosophy as explained earlier. Engineering defects are reported via the Quality Improvement Database and require a physical implementation in the existing QA system before it can be approved. Turn around time is set on 12 weeks. Q.I.P. databases can be shared by the whole Technip Group.
3511-04-05
3. Technip Group - Who are we?
3611-04-05
TECHNIP IN A SNAPSHOT
A leading provider of engineering, technologies and construction services for the oil & gas, petrochemical and other industries
Listed on Euronext Paris and New York Stock Exchange
OFFSHORE:
Engineering
Subsea Construction
Platforms
ONSHORE:
Refining / Hydrogen
Petrochemicals
Gas, LNG, GTL
Onshore Pipelines
INDUSTRIES:
• Lifescience/Chemicals • Metal & Mining • Power Plant / Infrastructures
Share of 2004 Revenues
48.5%48.5% 46.5 %46.5 %
5 %5 %
3711-04-05
2004 REVENUES BY REGIONS
Europe, Russia - Central Asia
Asia - Pacific
Americas
TECHNIP : 5.141 M€
18%
7%
50%25% Africa, Middle East
3811-04-05
TECHNIP: No. 1 IN EUROPE, No. 4 WORLDWIDE
10.2
9.4
8
6.4
6.1
5.4
4.4
3.3
3.1
2.6
2.6
1.4
1.3
1.2
1.2
12.5
Schlumberger
Fluor
Halliburton
Baker Hughes
Saipem
Smith Intl
JGC
Weatherford
Transocean
BJ Services
McDermott
IHC Caland
Stolt Offshore
Non oil service engineering & construction segments
Oil service engineering & construction segments
2004 Revenues (USD in billions)
Source: Bloomberg
* * 9 months 2004 – Annual Results on 10 March
3911-04-05
Hallib
urton
Kvaer
ner
Saipem
Schlu
mber
ger
Foster
Whee
ler
Fluor
Technip
TECHNIP: HIGHLY INTEGRATED
Up
str
ea
mD
ow
ns
tre
am
No
n-
oil
Oil
& G
as
Exploration & drilling
Engineering & project management
Subsea construction
Pipelay
Subsea equipment
Facilities fab. & install.
Refining
Gas processing
Petrochemicals
Life Sciences
Mining & Metals
Power plants & infrastructures
4011-04-05
GLOBAL NETWORK OF ENGINEERING CENTERS, YARDS & PLANTS
UK2 550
USA3 480
Colombia140
Brazil1 570
Venezuela300
Africa160
France3 530
Italy1 870
Benelux360
Scandinavia930
Germany350
Russia100
Middle East + Abu Dhabi
1 030
India670
Australia170
Asia-Pacific1 450
Spain/Portugal290
Canada50
19,000 People Worldwide
4111-04-05
VESSELS
Apache - 122,9 m
Sunrise 2000 - 132 m
Alliance - 78 m
Constructor - 126,3 m
Marianos - 91,1 m
Orelia - 119 m
Deep Pioneer - 158,6 m
Venturer - 129,1 m
Wellservicer - 111,4 m
Seamec 3 - 92,7 mSeamec 2 - 92,7 mSeamec 1 - 92,7 m
Deep Blue - 206,5 m
Pipelay Vessels
Subsea Construction Vessels
Trenching Vessel
Normand Pioneer* - 95 m
* Owned by Solstad (Long term charter)
4211-04-05
CONTROL OF PROJECT EXECUTION
Two principles are concurrently implemented:Project Director: single point of accountability for each project Senior Management: hands-on policy, supported by central expertise
SeniorManagement
Reporting
SVP Project Management
SVP Global Procurement
SVP Cost and Planning
Support
Reporting
Monitoring (Monthly Project Reviews)
CostControl
ConstructionInstallation
Engineering Procurement
Project Director
Full AuthorityReporting
4311-04-05
GLOBAL PROCUREMENT NETWORK
Worldwide Network Increases Flexibility and Competitiveness
EPC Internet-Based Procurement SystemVolume Processed in 2003: €1,200M Sourcing from USD zone: 2000: 27% 2003: 41% Estimated net savings in 2003: €30M
Houston
Los Angeles
Kuala Lumpur
Aberdeen
ParisRome
Rio de Janeiro
Düsseldorf
RegionalProcurement
Manager
RegionalProcurement
Manager
GlobalProcurement
Officer
GlobalProcurement
Officer
Commodity Family
Managers
Commodity Family
Managers
Zoetermeer
4411-04-05
4511-04-05
ANNEX
4611-04-05
OFFSHORE CREDENTIALS
4711-04-05
OFFSHORE CREDENTIALS - SPAR EVOLUTION
4811-04-05
ONSHORE REFERENCES
LNG RECEIVING TERMINAL, FREEPORT, TX, USA
First terminal to be built in USA in 20 years Capacity: 1.5 billion cubic feet/day of gas - Delivery: 2007
4911-04-05
ONSHORE REFERENCES
QATARGAS II LNG PLANT (QATAR)
The two biggest trains to be built as of todayLNG capacity: 15.6 million tons/year - Delivery: 2008
5011-04-05
ONSHORE REFERENCES
Contract Value: $1.1bn
MIDOR REFINERY (EGYPT)
5111-04-05
INDUSTRIES REFERENCES
ChemicalsFertilizersPharmaceuticalsFood ProcessingEthyl AlcoholProprietary technologies: sodium chlorate chlorine dioxide perchlorate hydrogen
peroxide soda ash ethanol phosphoric acid
Airbus 380 - Assembly Halls
5211-04-05
MANAGEMENT STRUCTURE
OffshoreI. REPLUMAZ, CEO
Onshore-DownstreamD. BURLIN, CEO
J. DESEILLIGNY, SVP Business and Operations
IndustriesJ.N. MEARY, CEO
D. VALOT, Chairman
Executive Management
D. VALOT, Chairman and CEOD. BURLIN, A. DECRESSAC, J. DESEILLIGNY,
O. DUBOIS, I. REPLUMAZ
Board of Directors (11 members)
A. DECRESSAC O. DUBOIS
CFOHR/COMM
5311-04-05
OVERALL DIVISION STRUCTURE (BPU)
OFFSHOREONSHORE /
DOWNSTREAM
INDUSTRIES
North Sea, Canada
USA, Mexico,
Caribbean
Western Europe,
Russia, CIS
Southern Europe, Eastern
Europe, Africa
Chemicals Life SciencesAmericas
Ethylene ElectricityGNL
Africa-Mediterranean
Industries Buildings
Middle-East, Pakistan,
India
N. UCCELLETTIP. BARRILL. POPE
D. MIELCAREK
M. BUFFENOIR A. DURANTE E. FALLEURH. OGER
S. ALEV N. GRECO G. CAVANNA
J.F. CAZESI. STEVENSON
S. EGGEN J.N. MEARY
Asia-Pacific
B. DI TULLIO
Brazil
F. DELORMEL
I. REPLUMAZD. BURLIN
J. DESEILLIGNYJ.N. MEARY
Caspian Sea
K. BOE
Latin America
E. GORY
5411-04-05
BREAKDOWN OF TECHNIP'S CAPITAL
February 28, 2005
6 % Oppenheimer Funds Inc.
3.20 % IFP
1.40 % Treasury stock
2.20 % Employees
87.20 % Others