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Well Construction Services Strategic Sourcing Event

Well Construction Services Strategic Sourcing Event. April 2008 TCO HQ. Opportunity Statement. Source & execute long-term contract(s) for well construction services that create superior value for TCO’s stakeholders by optimizing the 4+1 Strategic Intents. Superior Operational Performance

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Well Construction Services Strategic Sourcing Event

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  1. Well Construction Services Strategic Sourcing Event April 2008 TCO HQ

  2. Opportunity Statement • Source & execute long-term contract(s) for well construction services that create superior value for TCO’s stakeholders by optimizing the 4+1 Strategic Intents

  3. Superior Operational Performance Safety, facility availability and reliability are a priority Safety & Environmental Leadership Hold contractor to TCO safety standards or better Perform safety audits during tender process Strategic Fit 4+1 Alignment Superior Operational Performance Safety & Environmental Leadership Develop Our Workforce Respected in Kazakhstan Organizational Capability Respected in Kazakhstan • Consider qualified local contractors to compete in tender process • Ensure aggressive local content goals in final contract Develop Our Workforce • Provide development opportunities for sourcing team members Organizational Capability • Follow Chevron’s world class sourcing processes • Combine people, processes, and culture to achieve a successful sourcing event • Utilize Ariba suite of on-line sourcing tools

  4. Decision Review Board • Endorser Todd Levy, TCO General Director • Decision Executive Robert Bearden, GM Operations • Decision Review Board • Dick Lambert Drilling Manager • Renee’ Lagorio-French Supply Chain Management, Mgr • Dennis Longhorn Reservoir Mgmt, Mgr (DOA)* • Kirk Tinsley OE/HES • Marat Saparov Marketing Business Manager

  5. Current Project Team Core Team Sourcing Project ManagerGreg Hogg D&C Category Manager Teresa Blackburn Drilling Engineering Manager Mike Marquez Drilling Engineer Samat Mukhitov SCM Contract Formulator Gulmira Murunova CGU WCS Category Specialist Jerry Hunter CGU Strategic Sourcing Specialist Chuck Parr CGU Decision Support Analyst Tom Blank KMG Representative Kanat Katrenov Extended Team/Resources Monte Leicht Drilling Engr Advisor Steve Tehven Field Prod Engr Jeff Sleigh Drilling Engr Advisor Phil Fader Well Test Engr David Williams Well Test Engr Don Hicks Drilling Rep Mark Skalinski Formation Eval Supvr Mike Sullivan Sour Gas Prod Engr Dave Belanger Sour Gas Prod Engr Henry Bergeron Drilling Engr Advisor Ezequias Chivango HES CSP Advisor Mark Edgerton Staff Prod Engineer Gadilbek Mursaliev Legal Neal Kebert Field Prod Engineer Marat Dauletyarov Local Content Dev Mgr

  6. Well Construction ServicesSourcing Event • Current State • Current contract expires 22 June 2008. • Original contract bundled 16 PSLs with work scope and pricing modified during each 2 year extension • At last extension, some PSLs, such as coiled tubing, were de-bundled from contract because of incumbent’s excessive pricing • Desired State • Contracts with competitive market pricing based on current availability of services and equipment • Contracts structured for forecasted drilling but with the ability to react to work scope changes • Contracts that leverage best practices and lessons learned to date from the current contract • Sourcing for new contracts is following Chevron’s CPDEP Process for Strategic Sourcing • Ariba’s eSourcing platform being used for the sourcing event • Term for the new contracts will be 5 years plus a 2 year (TCO sole discretion) option • Cost estimate for all services is $550 million Background

  7. CPDEP Sourcing Roadmap

  8. Project Timeline

  9. Bidder’s LONG LIST • Baker Hughes • BJ Services • Corpro • Expro • Halliburton • KIOS • MI Swaco • Schlumberger • Weatherford • Brandt NOV • KMC Oiltools • TWMA SHORT LIST • Baker Hughes • BJ Services • Expro • Halliburton • MI Swaco • Schlumberger • Weatherford • Brandt NOV

  10. Activities • Partner approval gained for sourcing • Completion Equipment which was initially excluded from scope was added back – resulting in a further 3 PSL’s (Flow Control, Packers, DHP Gauges) • A new PSL was created for Perforating as it overlaps various PSL’s. More leverage will be gained by having it separate. Was removed from Cased Hole Logging and Coiled Tubing • There are now 20 PSL’s including the 4 additions above • One customized RFP was sent to each of the 8 suppliers which included all PSL’s for which they were qualified • General Scope of Work and Work Scope for each PSL developed • Market Baskets were developed for each PSL • Each MB consists of a detailed breakdown of the service, tools, consumables and personnel needed to perform the service • MB’s and RFP developed in such a way as to not allow ‘nickel and diming’ where services or equipment could be charged twice

  11. Well Construction ServicesSourcing Event • Final Supplier Short List and PSL’s • Pumping – Cement/Stimulation • Open Hole Logging • Cased Hole Logging and Pipe • Recovery • Slickline Operations • Drilling/Completion Fluids • Completion Equipment/Packers • Coil Tubing Operations • Well Testing • Mud Logging • Directional Operations • Conventional Coring • Liner Hanger Equipment • Casing / Tubing Running Services • Fishing Tools/Drill String Rentals/Hot • Tapping • Pipe and Rig Equipment Inspection • CHCD • Solids Control • Completion Equipment/Flow Control • Completion Equipment/ DH Gauges • Perforating - Wireline and Tubing • Conveyed (TCP) Baker Hughes Expro Schlumberger Brandt NOV Weatherford BJ Services Halliburton MI Swaco

  12. RFP Development Examples of Cost Saving/Value Creation/Best Practice built into RFP and MB’s • Easy switching between daily rates and monthly rates will enable cost savings. • In addition to MB pricing for all items listed, the RFP asks for a default price list on items and services offered in the Caspian region and a discount off list price to be negotiated. • Participants of the RFP will be asked for their recommendations for bundling the services for final contracts. Asking for their input to identify synergies • MB’s are flexible which is essential given the dynamic scope • The sealed RFP template is being used for the RFP • MB’s being used are complex and cannot be built in the pricing model of the RFP template

  13. Cost Model Development Methodology • Cost Models are based on the number of rigs • Personnel, equipment and services vary based on rig count • Once MB’s are received from suppliers, details are added into cost model • MB’s structured to capture volume discounts • It is possible to accurately estimate the total cost of ownership based on pricing and the duration of the contract • There are allowances in the model for costs that are not related directly to rig count

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