Category Plan Master

1. Category Plan Master

2. 1. Category Strategy Market Characteristics Internal Business Drivers & Philosophy • Movement is away from EPC contracts, and toward IPA recommended mixed contracting strategy primarily due to lack of internal organizational capability to manage construction contractors on reimbursable contracts. • Supply of quality construction resources may be limited in the next couple of years due to large projects inside the Hydrocarbon Processing Industry and competition with other industries, e.g. Power Generation, Shipyards, Railroads, etc. This will tend drive wages up more rapidly and is likely to cause a labor shortage. • IPA Reports highlight that facilities have lost the capability to properly manage construction contractors on a reimbursable basis. They therefore recommend paying the premium for a lump sum contract. Regaining the capability to properly manage contractors offers big savings opportunity along with safety and quality improvement opportunity. • Chevron has fallen in performance in execution of our capital projects. Our objective is to achieve Class A Performance for the Project System. • In order to achieve world class performance in Reliability our business units need quality engineering and inspection service providers. We also need to insure that all equipment purchased or installed meets our high standards. Category Strategies Strategies Shrink Spend & Incident Costs through focus on Total Cost of Ownership Initiatives Build Organizational Capability to Manage Services with Excellence Develop Preferred Suppliers Agreements • Gain TCO through supplier management of existing small project engineering preferred suppliers • Implement Contractor Management Organizational Capability Initiative to build Oversight, Ownership and Management Capability • Develop Capital Equipment Quality Programs to improve equipment reliability • Large Project Engineering • Equipment Inspection Services • Small Capital Project Construction • Capital Project Equipment • Spend • & • Lost Profit • Opportunity • Cost Low First Cost High Productivity & Quality Service

3. 2. Category Overview:Engineering Services & Small Capital Project Construction Top Business Drivers Demand Analysis Supplier Analysis Today Future $MM By Geography Europe US EUR APA Tot Brinderson 39.5 .. .. 39.5 Jacobs 10.7 .. .. 10.7 Foster Wheeler 0 6 2 8 IESCO 5.3 .. .. 5.3 Connexsys 3.1 .. .. 3.1 Next 5 11.1 .. .. 11.1 Rest 83.2 3.5 8 94.7 TOTALS 152.9 9.5 10 172.4 Safety 6% Quality $ MM Productivity NA 152.9 Reliability Europe 9.5 APA Cost Management APA 10 7% Demand Management TOTAL 172.4 NA 87% Focus Areas By Commodity Today Future Supply Market Analysis Compliance Market size $150 B + Worldwide Key Players Reach $MM sales Spend MM URS Eng global 11,540 0 VINCI Const global 20,488 0 Kobe Steel global 11,540 0 Rockwood Insp global ? 0.064 Demand Management Negotiations based on more transparency Aggregation / consolidation IRIS Supply Chain optimisation Re-specification (standardisation) Local Content $ MM Future US Eur APA Tot Trend Eng Services 77.2 6 3 86.2 Inspection Serv. 9.7 .5 1 11.2 Small Project Con. 33 0 5 38 Capital Equip 33 3 1 37 TOTALS 152.9 9.5 10 172.4 Market Dynamics / Characteristics Key Opportunities 2005 - 2006 • Description: Target $ m Benefit • Large Project Engineering 2.25 Q3/05 • Inspection Services 0.55 Q4/05 • Small Pressure Vessel Fabrication 0.5 Q4/06 • Small Project Construction 2.0 Q1/06 • Supplier Mgmt – Contractor Mgmt 4.5 Q1/06 • Heat Exchanger Fabrication 1.0 Q1/05 • Large Pressure Vessel Fabrication 0.5 Q1/07 • Movement is away from EPC contracts • Oil & Gas Capital Budgets are increasing over the next few years, increasing Engineering & Construction Demand • Construction is projected to increase 21% in 2005 and 28 percent in 2006. • Engineering market will tighten before construction labor market

4. 3. Vision and Objectives Vision Main Objectives In collaboration with Chevron Business Units, Category Management will build the organizational capability (people, processes and tools) required to achieve our business unit goals. 1) No one is injured working on our projects. 2) We meet 100% of project operability objectives. 3) Our project system achieves IPA 1st Quintile Cost performance. 4) Our project system has slightly faster than Industry Average Cycle Time. 5) We improve unit reliability to 1st quartile Solomon performance Key Elements of Business Partner Strategy In Scope Out of Scope • XX • Work currently performed by Company Employees • Large Capital Project Construction • Capital Equipment cover by CrossOpco Category Mgmt. • Refining • Marketing • Upstream (where synergy exists) • Midstream (where synergy exists) Category Structure Engineering Services & Small Capital Project Construction ($172.4MM) Preferred Agreements Currently in Place Engineering Services ($86.2MM) Inspection Services ($11.2MM) Capital Equipment ($37MM) Construction Services ($38MM) • NDE Techs • Supplemental API / NBIC Inspectors • Diving Inspectors • Marine Inspection • Small Project Construction • Piping Prefabrication • Pressure Vessels • Heat Exchangers • Staffing • Small Project • Large Project

5. 4. Demand Side Analysis Spend Analysis (2004 & 2005 Capital Budget data) Utilization of Preferred Contract US Europe APA Small Project Eng. Large Project Eng. Inspection Services Small Project Const. Capital Equipment NIP NIP NIP NIP NIP NIP NIP NIP NIP NIP NIP NIP Low High Low High Low High NIP-None in Place TCO/OE Levers • Price 20% • Planning 20% • Productivity20% • Enablers • Supplier Mgmt 20% • Reliability 20% • (Need more rigor) Eng. Services: $ MM % Reach Brinderson Eng 25.5 31 N/A Jacobs 10.7 12 Global Foster Wheeler 7.0 8 Global Connexsys 3.1 4 N/A Calc 2.5 3 N/A Next 5 Suppliers 7.9 9 Regional Other (16) 26.3 33 mix TOTALS 86.2 100 Insp. Services: $ MM % Reach IESCO Inc. 5.3 47 Global GE 2.6 23 Global IIS Inc. .80 7 Regional Rockwood .64 6 NA Southern Insp. .54 5 Regional Next 5 Suppliers 1.0 9 Regional Other (18) .32 3 mix TOTALS 11.2 100 Procurement Involvement Small Proj Const: $ MM % Reach Brinderson Const 14 37 US Manning Const 2.5 7 US Performance 1.5 4 US Cypress .5 1 US Dutra Group .5 1 US Next 5 Suppliers 2.4 7 mix Other (21) 16.6 43 mix TOTALS 38 100 Capital Equip: $ MM % Reach Ohmstead ? ? N/A Nooter ? ? Global Custofab ? ? N/A Brown Fintube ? ? US Hudson ? ? US Next 5 Suppliers ? ? mix Other (70) ? ? mix TOTALS 37 100 US Europe APA Small Project Eng. Large Project Eng. Inspection Services Small Project Const. Capital Equipment Low High Low High Low High

6. Buyer’s Market Mutual Dependence High Buyer Power Independence Seller’s Market Low Low High Seller Power 5. Supply Market Analysis Market Characteristics US Market Characteristics Europe Market Characteristics APA • Movement is away from EPC contracts • Oil & Gas Capital Budgets are increasing over the next few years increasing Engineering & Construction Demand • Construction is projected to increase 21% in 2005 and 28 percent in 2006. • Engineering market will tighten before construction labor market • Growth is expected to be less than the US and APA markets but is expected to slightly increase. • Growth is expected to be high in Central Asia’s developing countries such as Kazakhstan. • LNG facility construction in producing countries will also create high demand for engineering and construction services Supply Market Analysis Supply Market Power Eng. Services: Market Size $ 7400 m Key Players Reach $m sales Spend $m URS global 2,746 0.0 SNC-Lavalin global 2,531 0.0 Fluor global 1,908 0.0 Jacobs global 1,883 10.7 Insp Services: Market Size $ xxx m Key Players Reach $m sales Spend $m Rockwood global ? 0.64 GE global ? 2.6 IESCO global ? 5.3 Conan Insp global ? 0.0 Small Proj. Eng. Large Proj. Eng Small Proj. Const. Capital Equipment Small Proj Const Market Size $ 37000 m Key Players Reach $m sales Spend $m VINCI global 20,488 0.0 Bouygues global 17,208 0.0 Skanska global 14,056 0.0 Shimizu global 13,390 0.0 Capital Equip: Market Size $ 100,000 m Key Players Reach $m sales Spend $m Kobe Steel global 11,540 0.05 Sumitomo global 4,569 0.0 Hitach Zossen global 3,194 0.0 Nuovo Pignone global 2,276 0.0 Inspection Services Leading Practices (Internal & External) • External: • Utilize Mixed Contracting Strategy for Capital Projects where practical (reimbursable engineering & lump sum construction) • Chevron Specific: • Fully develop Inspection Services Shared Resources with company and contract resources • Develop quality control programs with capital equipment suppliers

7. 6. Supplier Management Category Performance Indicators Porter’s Five Forces / SWOT Analysis • KPISTargets • Safety XX • Eng as a % of Total Installed Cost XX • Eng as a % of Engineering Estimate XX • Estimated vs. actual hours/schedule XX • Schedule milestone adherence XX • Rework XX • Customer Satisfaction XX Bring in from Excel sheet Supplier Segmentation Supplier Fragmentation = x % of spend covered by top 5 suppliers = x % of spend covered by next 5 suppliers = % of spend covered by next 10 suppliers = % of spend covered by remaining suppliers

8. 7. Category Initiatives and Opportunities 3 yr Plan Short and Long Term Opportunities Need to add columns for benefit area OE or risk, delete support 2005 • Description: Potential $ m Issues, Actions & Next Steps (need to include Assess, SM&I, S) Scope Support Probability Benefits in • Large Capital Project Engineering 3.0 First Cost Savings, Assessment in progress Global medium high Q3/05 • Inspection Services 1.1 Market Analysis in progress Regional high medium Q4/05 • Heat Exchangers 1.5 Assessment Delayed– resource limited NA medium medium Q1/06 • Small Capital Project Construction 4.0 Assessment Delayed – resource limited Regional low medium Q1/06 • Preferred Supplier Mgmt 6.0 KPI’s, Scorecards, TCO focus Global medium high Q1/05 • Contractor Mgmt Org Capability Gain support &Implement Recommended Practice Global high medium Q3/05 • (Potential Captured as part of Preferred Supplier Management Potential) 2006 • Description: Potential $ m Issues, Actions & Next Steps Scope Support Probability Benefits in • Heat Exchangers 0.5 Perform assessment UK, APA medium medium 04/06 • Pressure Vessels Small 1.2 Perform assessment NA, UK, APA medium medium Q4/06 • Pressure Vessels Large 1.0 Perform assessment Global medium medium Q1/07 • Small Project Engineering 0.0Renegotiation Regional medium medium Q3/06 • New Preferred Supplier Mgmt 10.0 Contractor Management, KPI’s, Scorecards, TCO focus Global medium high Q2/06 2007 • Description: Potential $ m Issues, Actions & Next Steps Scope Support Probability Benefits in • Piping Prefabrication 0.5 Perform assessment Regional medium medium Q3/07 • Diving Inspection 0.5 Perform assessment Regional medium medium Q3/07 • Large Capital Project Engineering 0.0 Renegotiation Global medium medium Q3/07 • Inspection Services 0.0 Renegotiation Regional medium medium Q4/07 • New Preferred Supplier Mgmt 3.0 Contractor Management, KPI’s, Scorecards, TCO focus Global medium medium Q2/07 2005 Target: $ 10.1MM Run Rate

9. 2005 2006 2007 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 8. Opportunity and Initiative Plan Implementation Plan Large Proj Eng. Inspection Services Heat Exchangers - NA Small Proj Const. Contractor Mgmt Organization Capability Heat Exchangers – UK, APA Small Press Vessel Large Pressure Vessels Offsite Piping Prefab Diving Services Preferred Supplier Management Stretch Target $ 10.1MM 100% Target: $ 7.3MM 100% Stretch Target: $ 17.2MM 100% Target: $ 11.1MM 100% Stretch Target: $ 5MM 100% Target: $ 2.5MM 100%

10. 9: Network Plan: Internal Marketing Constituents

11. Investment Recovery & Inventory Solutions Category Planning Guide Due Diligence Considerations • Equipment and material suppliers and service providers can support Chevron in meeting its surplus asset and inventory management objectives to maximize the value of surplus and idle assets through internal utilization, external sale, or exchanges; reduce costs by using surplus, used or refurbished equipment instead of buying new; cost effectively manage warehouse inventories to meet operational needs; and prevent surplus generation. • Screening Question - Does or could this category include acquisition, maintenance, repair, or management of equipment, materials, or spare parts? Check one: yes p no p • If no, there are no IRIS opportunities related to this category. • If yes, the category plan should address IRIS opportunities and related initiatives should be identified and prioritized. Opportunity Identification Potential Savings • Which of the following potential IRIS supplier support opportunities apply? • Can suppliers for this category potentially: • Help us standardize specifications? yes p no p • Help us identify and use assets we already own instead • of selling us new? yes p no p • Refurbish assets we own for re-use? yes  no  • Sell us used or refurbished assets instead of new? yes  no  • Facilitate asset exchanges? yes  no  • Buy back our surplus assets/spare parts or help us sell • them to their other customers? yes  no  • Own and/or manage inventories of material/ parts? yes  no  • Help us optimize spare parts or other MRO inventory? yes  no  • Take back unused new assets we don’t need? yes  no  • Help deploy Chevron objectives to capital projects? yes  no  • Help in other ways? yes  no  List opportunities (yes answers to left) and potential cost savings associated with each OpportunityPotential Savings $K _______________________ _________ _______________________ _________ _______________________ _________ _______________________ _________ _______________________ _________ _______________________ _________ _______________________ _________ _______________________ _________ Due Diligence Confirmation Have you discussed and validated opportunities (or lack there of) with suppliers? yes p no p Have you discussed and validated opportunities (or lack there of) with IRIS? yes p no p Have you added an initiative for each identified IRIS opportunity to the category plan? yes p no p

12. Supplier Diversity/Local Content Category Planning Guide Due Diligence Considerations • /Diverse Suppliers and Small Businesses both commodity and service providers can support Chevron with value-added small, minority, and women-owned businesses to develop innovating cost-effective solutions that fuel our mutual growth. In most operating locations, Local Content is a requirement by the host government and Chevron strongly supports utilization of Local Content. Supplier Diversity/Small Business Program/Local Content consists of Utilization, Training and Education, Tracking, Certification and Outreach to our Diverse Supplier network. • Screening Question - Does or could this category include Diverse Suppliers or Local Content? Check one: yes p no p • If no, there are no Diverse Suppliers or Local content opportunities related to this category. • If yes, the category plan should address Supplier Diversity/ Small Business and Local Content opportunities and related initiatives should be identified and prioritized. Opportunity Identification Potential Spend • Which of the following potential Supplier Diversity/Small Business and Local Content support opportunities apply? • Can suppliers for this category potentially: • Qualify as a Small Business? yes p no p • Qualify as a Diverse Supplier i.e. (Women-owned, Small- • Disadvantaged, Historically Underutilized, Veteran-owned, or Service Disabled Veteran-owned Business)? yes p no p • Operating in International Location? yes  no  • Developing indigenous suppliers in international locations? yes  no  • Hiring of local citizens? yes  no  • Procure local merchandise? yes  no  List opportunities (yes answers to left) and potential cost savings associated with each OpportunityPotential Spend $K _______________________ _________ _______________________ _________ _______________________ _________ _______________________ _________ _______________________ _________ _______________________ _________ _______________________ _________ _______________________ _________ Due Diligence Confirmation Have you discussed and validated opportunities (or lack there of) with suppliers? yes p no p Have you discussed and validated opportunities (or lack there of) with Supplier Diversity? yes p no p Have you added an initiative for each identified Supplier Diversity opportunity to the category plan? yes p no p

13. Supplier Diversity/Small Business - Local Content Guide Due Diligence Questions Spend North America International Current Annual Total $ MM Domestic $ MM Int’l $ MM • What are your high-level Corporate Supplier Diversity goals & strategies? • What countries will be utilizing your Category Plan? • What is the Supplier Diversity Training Plan for: • Category Managers & Team • Suppliers • What is your estimated spend by country? Forms • What are your goals & Strategies to utilize Local Content? • North America • For POs or Contracts > $100k (required) • What are the data resources utilized for this category? • What are your outreach efforts? • What are the data resources utilized for this category? • What are your outreach efforts? Targeted Annual North America Spend by 1st Tier Diverse Supplier Type • Suppliers with Spend > $500k (required) • Supplier Subcontracting Plan (required) Targeted Annual International Local Content Spend International 1. BU Initiative Examples

14. Extended Enterprise Category Planning Guide Due Diligence Considerations • All suppliers to Chevron have connections to other supplies or services that Chevron can a) Jointly Leverage in collaborative purchasing, b) Use in conjunction with other agreements to lower the cost of supply c) use Chevron Energy, Fuels and Lubricants in performance of the contract or d) Utilize our pre-negotiated agreements to lower their cost of good sold. • Screening Question – Is this a strategic, core or leveraged supplier that would benefit from a more collaborative approach in lower the costs that Chevron incurs in getting this good or service (ex use of travel for contractors; use of our negotiated rates on Trucking) • Check one: yes p no p • If no, there are no EE opportunities related to this category. • If yes, the category plan should address Extended Enterprise opportunities and related initiatives should be identified and prioritized. Opportunity Identification Potential Savings • Which of the following potential Extended Enterprise opportunities apply? • Can suppliers for this category potentially: • Use of Chevron Travel in lower costs? yes p no p • Use of Chevron vehicle deals to lower costs? yes p no p • Use Chevron produced products (Lubes Fuels or energy • in performance of contract? yes  no  • Interested in Collaborative purchasing opportunities? yes  no  • Be able to use pre-negotiated deals on cell phones, • office supplies, vehicles? yes  no  • Buy back our surplus assets/spare parts or help us sell • them to their other customers? yes  no  • Have capabilities that could be used elsewhere in the Corp.? yes  no  List opportunities (yes answers to left) and potential cost savings associated with each OpportunityPotential Savings $K _______________________ _________ _______________________ _________ _______________________ _________ _______________________ _________ _______________________ _________ _______________________ _________ _______________________ _________ _______________________ _________ Due Diligence Confirmation Have you discussed and validated opportunities (or lack there of) with suppliers? yes p no p Have you discussed and validated opportunities (or lack there of) with EE Category Manager? yes p no p Have you added an initiative for each identified EE opportunity to the category plan? yes p no p