LNG Project Design Competitions - A contractor s viewpoint By Charles Durr Vice-President LNG-GTL-Gas Processing Tech

1. LNG Project Design Competitions - A contractor’s viewpointByCharles DurrVice-President LNG-GTL-Gas Processing TechnologiesDon HillPankaj ShahMarch 2004 ..

2. Contractor selection for LNG projects Design competition strategies Key issues for design competition Scope and structure of design competition Conducting a design competition Recommended guidelines

3. LNG Project Contractor Selection –Traditional Approach

4. LNG Project Contractor Selection –Design Competition Benefits overall project Promotes innovative solutions and competition

5. Benefits overall project Promotes innovative solutions and competition LNG Project Contractor Selection – Design Competition

7. Strategies for Design Competition Dependent on several factors Project drivers, goals, ownership structure, liquefaction technology, type of facility (grassroots/expansion), etc. Two primary approaches Based on owner specifications Owner provides detailed specifications and requirements Less freedom for contractor to make technical changes Based on ‘fit-for-purpose’ philosophy Owner specifies overall requirements and guiding principles Contactor designs fit-for-purpose plant

8. Choosing Contractor for Design Competition Contractor selection has impact on cost of facility Demonstrated experience in developing and managing novel technology and execution innovations Competition should be among peers Design competition process relatively new and evolving Past design competitions generally well managed Lessons learned

9. Issues with Design Competition Scope of design competition “What to include and what not to include”? That is the Question! Structure of design competition The “Fairness Factor” Methodology of design competition Many things have worked well in past design competitions. However, the purpose of this paper was to highlight the things that could be improved. Hence the examples are a one sided view of design competitions.

10. What to include and what not to include? Determination of level at which design competition is conducted Scope restriction results in less room to innovate Mind reading should to avoided Key issues Confidentiality of information Rely upon items Avoid a liar’s contest Do not confuse design basis issues versus ideas Protecting competitive advantage Identify what is in best interest of the project

11. Common Elements of Design Scope Minimum safety requirements Site data Feed gas compositions/contaminants Product specifications Definition and requirements for proven equipment vs. prototype

12. Common Elements of Design Scope Licensed technologies selected Guarantee philosophy Availability of plant Plant O&M philosophy Plant capacity EPC Schedule ? (liar’s contest)

13. What to include in a design competition?…some examples… Execution strategy Plant configuration Compressor and driver configuration Cooling medium selection Equipment specifications Design philosophy; sparing, flaring, etc. Plot plan Design optimizations Rotating equipment maintenance cost

14. Structuring a Design Competition Similar to a tendering process Set and implement guidelines Decide on evaluation criteria early Owner’s team Composition, role, and behavior Set procedures for handling of confidential information and intellectual property rights Basis of design versus owner preferences Explicit economic evaluation guidelines Equalize scope and compensation Cross pollination of ideas and impact on innovation

15. Recommended Guidelines for Design Competition All designs must be based on a workable LNG process technology Guideline applies to not just the technology but also the critical equipment and other design aspects Whatever definition of “workable” is, it should be applied consistently with all contractors All designs must use the same design basis and design philosophy Owner shall define the level at which the design competition is implemented Guidelines set at beginning of design competition should be closely followed to ensure fairness and integrity of competitive process

16. Recommended Guidelines for Design Competition (continued) Define evaluation criteria and terms of EPC contract prior to start of FEED Equal treatment of competing teams in terms of scope, compensation, schedule and terms/conditions All competing bids should be submitted at the same time (Sequential bidding should not be considered) Owner should specify certain items, whose claims cannot be verified at the time of the award, e.g. schedule, etc. All competing teams should be free to chose vendors, sub-contractors and partners from an approved list

17. What does it take to conduct a design competition? All parties working towards the benefit of the overall project Setting uniform guidelines to ensure fair competition

18. Is design competition right for you? Design competitions are effective but may not be a good solution for every project The owner has to decide if this strategy is good for his specific project