cmc marine vessels draft1

Marine VesselsSCM Category Management

Managing Supply Vessels Operation

2

© 2010 PETROLIAM NASIONAL BERHAD (PETRONAS)

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Category Management for Marine Vessels for

PCSB Drilling & Production Activities

CARIGALI Management Committee (CMC) 16 December 2010

Contents Introduction & Executive Summary Background

• Tender Brief Scope of Work Procurement Strategy & Methodology

• Key Elements of Tender Evaluation Methodology & Criteria

• Technical• Commercial

Summary of Recommendations Next Steps

1. Background1. Background

2. Sourcing Strategy2. Sourcing Strategy

3. Management & Monitoring3. Management & Monitoring

Agenda

To brief & seek CARIGALI Management Committee (CMC)’s guidance & endorsement on the following :

• Category Management & Sourcing Strategy for Overall Marine Vessels spread for PCSB Drilling & Production Activities

• Way forward for a systematic marine vessel movement tracking and fuel consumption monitoring

Objective


Rigs, Marine Vessels & Marie Spread have been identified as a Category Management profile under Strategic Sourcing in which Marine Vessels identified as one of the key categories for potential savings to the overall PCSB’s operations.


Introduction

Marine Vessels strategic sourcing & category management approach has been embarked in PCSB Carigali in 2008 to realize the following key objectives :-

• Sufficient marine vessels support available for both the PCSB’s domestic drilling and production activities

• Centre-led (CHO) EOS initiative generating value creation• Manage market availability & supply of marine vessels• Establish Marine Vessel Category Management in PCSB

Discussions incorporating the existing essential PCSB strategic planning tools have been used as a reference i.e. Project Generation Selection and Sequencing (PGSS), Master Integrated Schedule (MIS) and Long Term Drilling Sequence (LTDS). Incorporating the drilling rigs requirement will also determine the number of support marine vessels required for the overall PCSB’s drilling & production operations.


Executive Summary

PMO

SBO

SKO

CHO

DW

Marine VesselCategory

Management

Marine VesselCategory

Management

Operational Coverage


Scope Coverage

Overall, there are a total of sixty-nine (69) Marine Vessels for PCSB Drilling & Production Operations) is required to cater annually for PETRONAS Carigali’s drilling and production operations from 2010 until 2015.

No. Vessel Type CHO SKO SBO PMO Total

1 Anchor Handling Tug / Supply (Min. 35 MT) - Production AHTS NA 2 1 NA 3

Anchor Handling Tug / Supply (Min. 60 MT) - Drilling AHTS 8 NA NA 1 8

Anchor Handling Tug / Supply (Min. 100 MT) - Drilling AHTS 7 NA NA NA 6

2 Fast Crew Boat FCB NA 7 1 NA 8

3 Straight Supply Vessel (1 – SSV / Accommodation for PMO) SSV 12 NA NA 2 14

4 Landing Craft Tank LCT NA 6 2 NA 8

5 General Purpose Vessel GP NA 6 4 NA 2

6 Utility Vessel (3 – UV / Accommodation ; 5 – TUG Utility) UV NA NA NA 8 9

7 Production Supply Vessel (Deepwater Support) PSV 2 NA NA NA 3

Total 29 21 8 11 69


Operational Brief

SKO SBO PMO CHO DW

Vessel Types

No.

AHT<40 2

LCT 6

GP 6

FCB 7

Total 21

Vessel Types

No.

AHT<40 1

LCT 2

GP 4

FCB 1

Total 8

Vessel Types

No.

UV 8

SSV 2

TUG 1

Total 11

Vessel Types

No.

AHT>60 7

AHT<60 6

SSV 17

Total 30

Vessel Types

No.

PSV 3

Total 3

TOTAL VESSELS : 73 11 Types


Marine Vessels Distribution

The marine vessel integrated sourcing strategy is primarily to align both the production operations and the drilling support for optimization and savings for PETRONAS Carigali Domestic Operationso Rationalization of regional production and drilling marine vessel

support requiremento Procurements of marine vessels for PETRONAS Carigali ’s marine

support activities to be managed on Centre-led basis by PETRONAS Carigali SCM Planning & Strategy where its economically & operationally possible

o Standardization of Marine Vessel Specifications


Marine Vessels Overall Strategy

Reduce and minimize the adhoc and spot charters in PETRONAS Carigali operations

The long term strategy is to ensure PETRONAS Carigali ’s marine vessels availability & secured at competitive market rates

To ensure the continuity of marine vessel support for PETRONAS Carigali’s drilling and production operations, an integrated strategic sourcing & tendering exercise has been proposed in stages for most requirements from end 2010 until 2015.


Marine Vessels Overall Strategy (cont’d)

In order to realize value creation through this tender, the following strategic approaches have been identified & implemented since 2006:-

Year Strategic Initiative Key Strategy

2006 / 2007

PBI (Procurement Business Improvement)

Consolidation & integration

2008 RIM (Regional International Managers Forum) Bundling Initiative

Integrated bundling sourcing for vessels• Integration and EOS Long Term• Promotion of new-builts & Malaysian ownership

2009 / 2010

Strategic SourcingCategory Management

Integrated competitive tendering• Standard specifications• Revised Tendering Process• Establishment of Umbrella Spot Charter Contract• Vessel Optimization initiative to reduce cost


Overall Sourcing Strategy Conducted

3. Operational Supports3. Operational Supports2. Sourcing Strategy2. Sourcing Strategy

Value Creation

In order to realize value creation through this strategies, the following approaches have been outlined as follows :-

Element Previous Approach Way Forward

Economies of Scale (EOS)

Drilling & production source individually for contract start date within the next one year. Operations between regions sourced individually (PMO, SKO, SBO, CHO & DW)

Long term plan for drilling & production, volume consolidation, integrated & joint-PSC sourcing to drive EOS and discounted DCR.

Optimization of requirement

Optimization study limited within each region for both drilling & production activities.

Integrated optimization study between drilling & production activities for all possible vessel sharing or swapping options.

In order to realize value creation through this strategies, the following approaches have been outlined as follows :-

Element Previous Approach Way Forward

Total Cost of Ownership (TCO)

Drilling & production activities source individually to address high operating cost especially on fuel consumption.

Integrated sourcing to address & improve commercial evaluation and contract clause with regards to fuel consumption and monitoring mechanism. Introduction of fuel consumption capping and fuel flow meters installation to all marine vessels.

Pricing Short term charter duration resulted in higher Daily Charter Rate (DCR).

Securing marine vessel needs competitively while driving down the DCR via longer term charter durations. Minimize spot charters and optimize operations & activities.


Value Creation


Procurement Strategy & Methodology

PCSB Regions source individually for contract start date within the next one year

Long term integrated plan for PCSB group wide to identify future consolidation / optimization opportunities and address strategic issues

Sharing of vessels across regions production & drilling operations limited

Optimize cross regional sharing of vessels for supply milk-runs sectors and crew transfer

Limited sharing of vessel information across regions

Create & manage integrated vessel database under Category Management

Limited to giving preference to Malaysian flag vessels & restricted local state players

Encourage suppliers to purchase and “Malaysianised” certain vessel types

Explore feasibility of Malaysian new build vessels

Negotiation not allowed. In certain cases prior to award, negotiation is usually limited to price only

Negotiate prior to award on pricing, periodic price review mechanism

Integrated Planning

Optimization

Info Sharing

Malaysianisation

Negotiation

Current Approach Current Approach

Fixed price contract and no mechanism to capture volume discountPricing & Discount

Fixed price contract and introduce mechanism to capture volume discount


Supply Market Dimensions

Ownership

Supply Market Dimensions Key Insights Sourcing Implications

• Malaysian ownership for the following vessel types has been more than 80%:

– AHTS/AHTS– SSV, UTI, FCB, GP & LCT

• Low Malaysian ownership for PSVs to support deepwater activities

• Support Malaysianization agenda, encourage ownership of all vessel types

• Give preference to Malaysian owned vessels during evaluation

• To initiate longer term contracts & new-builts for Malaysian PSVs

Availability

• Sufficient availability of vessels for PCSB at present

• Relatively lower availability for LCTs and GPs to cater for SKO/SBO operations.

• By tendering now, most requirements can be met through shorter revised process

• Initiation of Umbrella Spot Contract


Pricing, Discount & Award StrategyBase Case Award Scenario

Apply Discount

Final Award Scenario

FUEL CONSUMPTION CONTROL MECHANISM• Fuel consumptions reporting mechanism established

with vendors on a monthly / half yearly / yearly basis• Vendors accountable for cost difference exceeding

10% of certified consumption ratings

Lower DCR - Seek volume discounts formulation in ITB• Vendors to quote discount rates for each additional

vessels awarded cumulatively

Lower DCR – Negotiate final discount structure• Review process to determine the most competent

technically capable and commercially competitive suppliers

Negotiations

Split award scenario• Split award scenario to be considered only if all

vessels within a specific category are awarded to 1 bidder

• Split award scenario and price impact to be developed and presented to TC for optimal scenario selections.

VesselOperation

Activity

Objective

OperationCost

Initiative

Vessel Operation ActivityVessel Operation Activity

To timely support user’s exploration activity, drilling operation,production and installation

To achieve 98% vessels utilization throughoutthe contract period

ObjectiveObjective

Overall outlook of vessel operation cost

SECTOR NO OF VESSELDCR (RM)

JAN-NOV 10FUEL (RM)

JAN-NOV 10

DRILLING 27 366,877,493.00 84,066,687.00

PRODUCTION 34 194,623,548.07 81,054,153.17

TOTAL 61 561,501,041 165,120,840.17

* PCSB incur almost RM750 million from Jan – Nov 2010 for vessels operation purposes

Operation CostOperation Cost

Piggy right contract

Farm in / Farm out

Swapping

InitiativeInitiative

WHAT?Move vessels within the PCSB

territory. Transfer the contract and the liability from drilling team to

production team and vice versa to avoid vessels idling.

HOW?- Identify the vessels which have high possibility to be idle and match it with drilling activities and requirement. - Allocate the vessel if it’s suitable to be used for other projects.- Communicate with other PSCs to utilize the vessel if no internal requirement.

WHEN?This activities are exercised between drilling, production,

installation and exploration. when there is possibility of idling vessel

or under utilizePiggy Ride

contract RESULT:

From Jan – Nov 2010: 4 drilling vessels to support PMO production operation

Total Cost saving for drilling teamRM14,540,500.00

WHAT? Temporarily transfer the contract of vessels together with DCR to other PSCs. PSCs to manage the vessels and pay the DCR. Release PCSB

liability.

HOW? - Identify the vessels which have high possibility to be idle and match it with drilling activities and requirement. - Allocate the vessel if it’s suitable to be used for other projects.- Communicate with other PSCs to utilize the vessel if no internal requirement.

WHEN?This activity exercised when the

drilling activities finished ahead of schedule but the vessel charter

period is still alive.

Farm in Farm out

RESULT:

From Jan – Nov 2010:- 4 vessels to EPMI - 2 vessels to Newfield - 2 vessels to Murphy

Total Cost saving RM47,187,433.00

WHAT?Swapping the SSV and AHTSV

within PCSB’s operation.

HOW?Identify project requirement and re-

arrange vessels to meet that requirement. Priority to use AHTSV to be given to the project with rig

move activities.

WHEN? During the rig move activities, the requirement for AHTSV is high. Project teams require at least two AHTSV during rig move. *Due to high DCR for AHTSV, we cannot have many AHTSV.

Swapping RESULT:

From Jan – Nov 2010:47 times vessels swappingTo upgrade SSV to AHTSV will cost additional RM3000 or more.Without swapping activities, there will be additional RM3000 x 47 operation cost.Total Cost saving RM 141,000.00

3. Operational Supports3. Operational Supports

Marine Vessels in SBO (Sabah Operations)

No Contract No. Vessel Type

Contractor Name Vessel Name Purposes Location Year

Built/Age

Contract Period & Extension options

Primary Period Start

Primary Period End(* - Extension)

1 S07/Y/028C GP Jaya Coastal Shipping SB Psalm 23 General

Purpose SAMARANG 1999 2 Years 22-Feb-08 21-Feb-11*

2 S07/Y/028B GP Jaya Coastal Shipping SB Psalm 68 General

Purpose ERB WEST 2007 2 Years 05-Dec-07 04-Dec-11*

3 S07/Y/029B LCT Jaya Coastal Shipping SB Permai Jaya Landing

Craft TugSAMARANG / ERB WEST / TEMBUNGO

2007 2 Years 06-Nov-07 05-Nov-11*

4 SB08/SPD/150C LCTYayasan Sabah Dua Shipping

SBBondex Jaya 9 Landing

Craft Tug SAMARANG / SUMANDAK

2008 5 Years 11-Nov-09 10-Nov-14

5 SB08/SPD/150A GP Asian Supply Base SB Psalm 118 General

PurposeSAMARANG / SUMANDAK 2009 5 Years 05-Nov-09 04-Nov-14

6 SB08/SPD/150B GP Asian Supply Base SB New Speed 2 General

PurposeMilk-run for SBO Southern region 2006 5 Years 05-Nov-09 04-Nov-14

7 SB08/SPD/150D AHT Asian Supply Base SB Sealink Maju 27 Anchor

Handler TugSupport SBO

anchor handling activities

2009 5 Years 16-Nov-09 15-Nov-14

8 SB08/SPD/150E FCB Asian Supply Base SB Borneo 1 Fast Crew

BoatCrew Change for

all platforms2005 5 Years 13-Nov-09 12-Nov-14


Marine Vessels in SKO (Sarawak Operations)



Built/Age



Primary Period

End

1 S08/Y/171 FCB Syarikat Borcos Borcos Firdaus 1 Support Eastern Sector 2007 5+2+1 yr 15/12/2009 14/12/2014

2 S08/Y/172 FCB Syarikat Borcos Borcos Firdaus 8 2008 5+2+1 yr 26/11/2009 25/11/2014

3 S08/Y/173 FCB Syarikat Borcos Borcos Firdaus 9 2008 5+2+1 yr 25/11/2009 24/11/2014

4 S08/Y/174 FCB Syarikat Borcos Borcos Firdaus 6 Support Southern Sector 2007 5+2+1 yr 04/01/2010 03/01/2015

5 S08/Y/175 FCB Syarikat Borcos Borcos Firdaus 7 Support Bintulu Sector 2007 5+2+1 yr 07/03/2010 06/03/2015

6 S08/Y/176 FCB Syarikat Borcos Borcos Firdaus 3 Support BDO inter-platform Sector 2007 5+2+1 yr 15/03/2010 14/03/2015

7 S07/Y/028(D) GP Jaya Coastal Psalm 128 2006 2+1+1+2 yrs 18/03/2010 17/03/2012

8 S06/D/180 CE GP Sribima (M) Shipping Psalm 33 2006 2+2 yrs 29/12/2008 28/12/2010

9 S06/D/019(C) GP Sribima (M) Shipping Bima 5 2004 2+3 yrs 16/07/2008 15/07/2011

10 S05/D/069 CE GP Sribima (M) Shipping Bima 3 1994 2+1+1 yr 21/02/2008 20/02/2011



Built/Age



Primary Period

End

12 S07/Y/028(A) GP Sisma Entreprise Psalm 88 2007 2+1+1+2 yrs 27.08.2009 26/08/2011

13 S06/D/019(A) CE GP Syarikat Borcos Borcos2 4 1993 2+3 yrs 24/06/2008 23/06/2011

14 S08/Y/178 LCT Jaya Coastal Bondex Jaya 7 2006 5+2+1 yr 27/11/2009 26/11/2014

15 S08/Y/179 LCT Jaya Coastal Wawasan 1 2006 5+2+1 yr 18/12/2009 17/12/2014

16 S07/Y/029(A) LCT Jaya Coastal Pelangi Pagi Milkrun for BDO – Northern Sector 2007 2+1+1+2

yrs 21/09/2009 20/09/201117 S05/D/071 CE LCT Sisma Entreprise Bondex Jaya 5 2002 2+3 yrs 07/10/2007 06/10/2010

18 S07/Y/029(C) CE LCT Sisma Entreprise Seagood Voctoria 6 2006 2+1+1+2

yrs 09/10/2009 08/10/2011

19 S06/D/235 CE LCT Ajang shipping Ajang Marwa Milkrun for BDO – Southern Sector 2006 1+3 yrs 16/12/2007 15/12/2010

20 S08/Y/199 AHT Sribima (M) Shipping CE Mariner Support Anchor

Handling activities 2009 5+2+1 yr 15/11/2009 14/11/2014

21 S08/BPD/050 AHT Newwing Energy Psalm 1 Support Anchor Handling activities 2009 3+2 yr 03/11/2009 02/11/2012


Marine Vessels in SKO (Sarawak Operations)

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