In-Kingdom Total Value Add (IKTVA) Program · The In-Kingdom Total Value Add (IKTVA) Program ... business with Saudi Aramco Competitive cost Quality Schedule ... is made or given

Tuesday, December 01, 2015

Dammam Office Building

In-Kingdom Total Value Add (IKTVA) ProgramCreating Value in the Kingdom

Journey

Local sources preferential policy

• Introduced Contracting Policy for local contractors

• Introduced Local Enterprise Support Policy

Seeds for a vibrant chemical industry

• Master gas system

• Massive development of the Company’s human capital1980

1990

2000

Concrete steps to increase local content development

• Established NBD in 2003

• Merged services & procurement functions

• Mandated Saudization in major contracts

Journey

2015-

2011Competitive Saudi energy sector

• Serving Saudi Aramco’s needs

• Exporting to the region & the world

• Growing & diversifying the Kingdom’s economy

4

Saudi Aramco: Confidential

Today’s Key Messages

2021 TARGETS ARE:

IKTVA is a program,

not a metric

IKTVA will work with

suppliers in a new

way for success

IKTVA is a Saudi Aramco

Strategic Imperative

Saudi Aramco vision is to enable

a globally competitive Saudi

Industrial Base

70% Local Content 500,000 Jobs 30% Exports

5


The In-Kingdom Total Value Add (IKTVA) Program

70% localization

by the year 2021

70 by 21

Access to

information

Procurement

approach

Beyond

procurement

enabling success

LEVEL PLAYING

FIELD,

TRANSPARENCY

AND CLARITY

Level playing

field,

Transparency and

clarity

6



The objective is to drive key activities towards localization and job creation, which will be assessed

against the following metrics:

A. Localized goods and services ($)

B. Salaries paid to Saudis ($)

C. Training & Development of Saudis ($)

D. Supplier Development Spend ($)

E. In relation to revenue (spend from Saudi Aramco)

Supplier IKTVA Formula

% IKTVA = 𝐴+𝐵+𝐶+𝐷

𝐸∗ 100DEFINITION

The IKTVA program

drives, measures and

monitors the “added-

value” brought to the

Kingdom by a supplier.

Additional Info.

• Number of Saudi Employees

• Investment ($)

• R&D spend ($)

• Exports ($)

7


Key points

UNIFORM EVALUATION

FOR BOTH

Service Contractors

Materials Providers

SUPPLIER FOCUSED

Co-developed with

the suppliers

MUCH SIMPLER THAN

THE OTHER

INTERNATIONAL

PRACTICES

ASSESSMENT &

TRANSPARENCY

Validation by 3rd party

8


IKTVA metric guidelines booklet

Calculation guidelines

Certification guidelines

9


Suppliers’ Representative IKTVA Footprint

$0

$500

$1,000

$1,500

$2,000

$2,500

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Spend (

$)

% IKTVA

10



70% localization

by the year 2021

70 by 21

Access to information

Procurement

approach

Beyond

procurement

enabling success

LEVEL PLAYING

FIELD,

TRANSPARENCY

AND CLARITY

Level playing

field,

Transparency and

clarity

11


Doing Business with Suppliers

IKTVA is imperative for doing

business with Saudi Aramco

Competitive cost

Quality

Schedule

Environment

Safety

12


Saudi Aramco Contracting & Execution View

IKTVA will be imbedded from start to finish

Operations

• Facilities Operation

• Field & Well

Services

Planning

• Design Basis Scoping

• Drilling Schedule

Development

• Services Schedule

Development

Design

• FEED

• Requirements Master

Plan

• Scope design

Construction

• Detail Engineering,

Procurement, and

Construction

• Contract execution

13


Sourcing

EXCLUSIVITY FOR IK

MANUFACTURERS

• Capacity

• Capability

• Cost

• Schedule

SOURCING CRITERIA

• Technical & Quality

• Regional Distribution

• Cost Competitiveness

• New Technologies

NOVATION FOR IK

ENGINEERED EQUIPMENT

• Capacity

• Capability

• Cost

• Schedule

14


Contracts

Set IKTVA targets for major contracts

Imbedding Supply Agreements into LSTK … Contracts

Master Service Agreements

Contracts IKTVA targets

• Based on sectorial IKTVA Baselines

• Part of the scope

• Part of the evaluation

• Part of supplier performance

Imbedding Supply Agreements into LSTK … Contracts

• Corporate Procurement

Agreements

• Local Manufacturing

Development Agreements

Master Service Agreements (MSAs)

• End-to-End Agreement

• Includes: Engineering, Design,

Fabrication, Installation,

Commissioning, MRO, and

Supplier Managed Inventory

• Multi-Year

15


Supplier Solution Center

Single Window to Saudi Aramco

Dedicated

Supplier

Relationship

Managers

Registration

Support

Pre-Qualification

Technical

Support

Liaison with

external

stakeholders

[email protected]

www.saudiaramco.com\iktva

16



70% localization

by the year 2021

70 by 21

ACCESS TO

INFORMATION

PROCUREMENT

APPROACH

Beyond

procurement

enabling success

LEVEL PLAYING

FIELD,

TRANSPARENCY

AND CLARITY

Procurement

approach

Level playing

field,

Transparency and

clarity

Access to information

17


Awareness (Web and

Investor Forums)

• Sectors of spend in

USD

• Total Company

spend

GENERAL

IKTVA Information Access Summary

Information

Type

Information

Purpose

Awareness (Web and

Investor Forums)

• Sectors of spend in

USD

• Total Company

spend

SPECIFIC COMPANIES

AND SECTORIAL

FORUMS

Investment Plans

• Specific Products

and/or services

• Annualized Units for

grouping of years

SPECIFIC INVESTOR

Disclaimer:

This presentation contains forward-looking statements regarding future events based on current expectations, estimates, forecasts, and projections. The presentation is

subject to updating, revision, further verification and amendment without notice. No reliance may be placed for any purpose on the information or opinions contained in this

presentation or any other document or statement, or on the completeness, accuracy or fairness of such information or opinions therein. No representation or warranty, express

or implied, is made or given by or on behalf of Saudi Aramco or its employees, or any other person as to the accuracy or completeness or fairness of the information or opinions

contained in this presentation and no responsibility or liability is accepted by any of them for such information or opinions or for any errors, omissions, misstatements,

negligent or otherwise, or for any communication written or otherwise, contained or referred to in this presentation.

18


Forecast 2015 – 2025

Drilling Well Count

Average Spend / Year is 33 Billion USD

Capital Program Forecast

31%

11%42%

10%

6%Surface Facilities

Infrastructure

Drilling

UR

Other

$334 Billion

19


Drilling Materials Spend Forecast 2015-2025 = $57 Billion

Quantities Examples

OCTG API, 11

Million units

Trees

20,000 units

Casing heads

15,000 units

Hanger

assemblies,

24,000 units

Cement

5.8 million Tons

Mud Products

(Liquid)

298 million

gallons

Percentage of Total Material Spend

20


Rigs and Well Services Forecast $119 B (2015 -2025)

Rig Drilling Ops Services = $60 B Well Services Total Spend = $59 B

136

84

4330

3

OnshoreOil

OnshoreGas

OffshoreOil

UR OffshoreGas

Average Rig Count/Year

21


Forecast 2015 – 2025

Surface Facilities

0.5

3

9

10

19

24

29

39

Renewables

Power

Pipelines

Oil Facilities

Other

Gas Facilities

Refining & Petrochem

Maintain Potential

Average Spend / Year is 33 Billion USD

Capital Program Forecast

31%

11%42%

10%

6%Surface Facilities

Infrastructure

Drilling

UR

Other

$334 Billion

22


Examples of Surface Facilities Materials Forecast (2015 – 2025)

0 1 2 3 4 5 6 7 8 9 10

CABLE, Low V, 56,420 KM

PUMPS CS, 3,789 Units

BOILER PLANT EQUIP, 185 Units

STORAGE TANKS, 1177 Tanks

AIR COOOLERS, 554 Units

STAINLESS STEEL PIPING (SS314/316), 135,348 Tons

CONCRETE, 20205 Cubic Meters

COMPRESSORS, 514 Units

OTHER EQUIPMENT, 2000 Items

PROCESS VESSELS SS, 800 Units

CONTROL VALVES, 86000 Units

STRUCTURAL STEEL, 734000 Tons

FIELD INSTR, ANALYZERS, GAGES - 66000 Units

CARBON STEEL FITTINGS & VALVES - 15.8 Million Units

STAINLESS STEEL FITTINGS & VALVES - 5.7 Million Units

HEAT EXCHANGERS - 4300 Units

CARBON STEEL PIPING - 3.1 Million Tons

PROCESS VESSELS CS - 6000 Units

Surface Facilities Materials

$56 Billion

Surface Facilities

Construction

$75 Billion

Thousands

23


Total Manpower Forecast (2015 – 2025) is 280,000 Direct Jobs

* This demand is for industrial projects only. It does not include

Commercial, Residential, or Infrastructure Projects.** Inclusive of all disciplines

DRILLING AVERAGE MANPOWER/YEAR*

SKILL LEVEL EXAMPLES

PROCESS FACILITIES AVERAGE MANPOWER/YEAR*

SKILL LEVEL EXAMPLES

24


Information Sharing

SAUDI ARAMCO

INTERNAL USERS

Strategic Procurement

(MS, PM, D&WO, NBD …etc.)

HR Development

(T&D, UCG, PM, MS, CP,

D&WO…etc.)

IKTVA (MS, NBD, and

Proponents)

EXTERNAL USERS

Suppliers /Contractors

(10 Years Demand)

TVTC / HRDF/ Others

(10 Years Demand)

Investment Promotion

(10 Years Demand)

INFORMATION

25



70% localization

by the year 2021

70 by 21

ACCESS TO

INFORMATION

PROCUREMENT

APPROACH

BEYOND

PROCUREMENT

ENABLING SUCCESS

LEVEL PLAYING

FIELD,

TRANSPARENCY

AND CLARITY

Procurement

approach

Level playing

field,

Transparency and

clarity

Access to informationBeyond

procurement

enabling success

26


Creating Value in the Kingdom

27


Take away messages

WIN – WIN PROPOSITION

SIGNIFICANT OPPORTUNITIES LIE AHEAD

EXCELLENT SUPPORT FROM KEY STAKEHOLDERS

Iktva IS A BUSINESS REQUIREMENT THAT NEEDS TO BE MET

Documents

In-Kingdom Total Value Add (IKTVA) Program · The In-Kingdom Total Value Add (IKTVA) Program ... business with Saudi Aramco Competitive cost Quality Schedule ... is made or given