In-Kingdom Total Value Add (iktva) Program€¦ · representation or warranty, express or implied,...

Saudi Aramco: Public

In-Kingdom Total Value Add (iktva) Program


“A thriving economy provides opportunity for all…we will develop our investment tools to unlock ourpromising economic sectors, diversify our economyand create job opportunities.”HRH Deputy Crown Prince Mohammed bin Salman

We have a clear Vision…

• Strong, high-skilled Saudi workforce

• Bigger role for SMEs

• Robust manufacturing sector

• Business friendly environment

• Greater strategic trade relations


… and understand Saudi Aramco’s contribution

Saudi Jobs Saudi Content Exports

• Create technical and professional jobs and careers

• Double locally manufactured materials and services

• Enable sustainable economy, supply chain and energy sector


Value Creation through Procurement

Manufacturing

Traders• Shipping & Customs

Clearance

• Expediting On-Time Delivery

• Financial Risk Management

• Spare Parts Inventory

• Local Service Facility

• Pre-Sales & Warranty Support

• Coordinate Customer Relation

Full Service Suppliers

• Design & Engineering

• Fabrication

• Assembly

• Packaging

• Manufacturing

4


Agenda

In-Kingdom Total Value Add (iktva) Overview

iktva Execution

Business Opportunities

Chemicals Localization Initiative

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I

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VI


The In-Kingdom Total Value Add (iktva) Program

iktva is a program,

not only a metric

iktva works with

suppliers in a new

way for success

iktva is a Saudi

Aramco Strategic

Imperative

enabling a globally

competitive Saudi

industrial base

6

DEFINITIONThe iktva program drives, measures and monitors

the “added-value” brought to the Kingdom

by a supplier

Localized Goods and Services ($)

Compensation Paid to Saudis ($)

Training & Development of Saudis ($)

IK Supplier Development Spend ($)

IK Research & Development ($)

a

b

c

d

r

E = Targeted Saudi Aramco spend ($)

= a+b+c+d+r

Ex 100


Key Points – Simple & Transparent

UNIFORM EVALUATION

Service & Materials

SUPPLIER FOCUSED

Co-developed with the suppliers

SIMPLE

Compared to other international practices

3rd PARTY ASSESSMENT

Offering transparency & confidentiality

7


iktva Engagement Framework

Suppliers 5-Year Action Plans Process

Contract iktva Target = XX%

iktva Target Breakdown

o Goods & Services

o Saudi Compensation (Salaries)

o Saudi Training

o Supplier Development

CONTRACT (2)

CONTRACT (1)

CONTRACT (3)

Company ContractSuppliers 5-Year Action Plans Process

Baseline iktva Score = XX2021 iktva Target = YY%

o Goods & Services: Expanding IK manufacturing, and Sourcing

o Increase Saudization to XX%

o Supporting established training schools and expanding their training

o Develop IK suppliers

Supplier B

Supplier A

iktva Baselines & Action Plans

Supplier C

iktva Baseline1 Monitoring4iktva Action

Plan2

Contract Targets

3

8


Access to Information

Strategic Demand Forecasting (SDF)

Structured approach to collecting, analyzing, creating, and disseminating information to internal and external stakeholders

10-Year CAPEX Expenditure

Building Blocks Breakdown

Aggregate and analyze (G&S)

Total Labor Demand

9


Agenda


iktva Execution



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iktva Execution Pillars

SUPPLY CHAIN DEVELOPMENT

iktva is imperative for doing business

with Saudi Aramco

Quality

Schedule

SafetyEnviron-ment

CompetitiveCost

ANCHOR PROJECTSWORKFORCE DEVELOPMENT

11

Disclaimer:The following slides contain forward-looking statements regarding future events based on current expectations, estimates, forecasts, and projections. The slides aresubject to updating, revision, further verification and amendment without notice. No reliance may be placed for any purpose on the information or opinionscontained in this presentation or any other document or statement, or on the completeness, accuracy or fairness of such information or opinions therein. Norepresentation 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 orcompleteness or fairness of the information or opinions contained in this presentation and no responsibility or liability is accepted by any of them for suchinformation or opinions or for any errors, omissions, misstatements, negligent or otherwise, or for any communication written or otherwise, contained or referred toin this presentation.


2016 PLACEMENT WITH LOCAL MANUFACTURERS

$2.7 Billion

• Significant increase (up by 16%) from 37% in 2015 to 43% in 2016

• Local manufacturing spend captured $2.7 Billion

JUNE 2016 TO DATE iktva IN CONTRACTS

• Drilling & OFS: $12 Billion

• PM: $5.5 Billion

• Operations: $3.5 Billion

$21 Billion

PROCUREMENT POLICIES & PROCEDURES

Systems and governance are in-place

Hardwired into Procurement

• iktva targets setting

• Bid evaluation

• Supplier Performance

• Market share & business allocation

Execution – Supply Chain Development

12


iktva BASELINES & TARGETS

Strategic suppliers engaged for baselines and 5 years action plans:

• Sectors iktva targets set

• Action Plans depicting how to reach those targets

24%

35%

60% 60% 60%

70% 70% 70% 70%

75%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Offshore FacilitiesEPCs

OEMs CivilConstruction

PipelineConstruction

Pipe/OCTGMfg

OFS /Seismic

DrillingOperations

FacilitiesSvcs

GES

2021 iktva targets

13



LOCAL INVESTMENTS

14

$5.5 Billion

Local Manufacturers Commodity Type

Modern Factory for Steel Static Equipment NewEast And West Factory Instrumentation NewTayseer Saeed Alsheikh Factory Chemicals NewGE Energy Manufacturing Technology Center Rotating Equipment ExpansionIndustrial Systems Group (ISG) Electrical ExpansionCooper Industries Middle East LCC Electrical Expansion

Sectors

Chemicals

Compressors, Pumps, Motors

Modular Skids

Non-Metallic Pipe

Steel Ecosystem (Casting & Forging, Steel Plate, Billets)

2016 and 2017 YTD Investments:

Future Investments:


Saudi Aramco: Public15

– Significant potential - Saudi Aramco will continue to build capacity

– Long-term corporate purchase agreements

– Preference for local manufacturers

– Exclusivity to local manufacturers in certain sectors

– iktva based market share and business allocation

Execution – Supply Chain Incentives





with Saudi Aramco

Quality

Schedule

SafetyEnviron-ment

CompetitiveCost


16


Execution – Workforce Skills Required

17

DRILLING AVERAGE MANPOWER/YEAR*SKILL LEVEL EXAMPLES

632

992

1058

1080

1220

1231

1258

1328

1372

1751

2093

2169

2249

2508

2701

3133

3337

3784

4050

4066

4181

4632

8663

9203

Superintendent

Derrick man

Mobilization/ demobilization

Rig technicians

Geophysicist/Geologist

Electrician

Driller

Project management

Logistics

Truck Driver

Admin*

Rough necks / rig hand

Total MP Peak = 69, 000 jobs

** Inclusive of all disciplines

1,000

1,100

2,100

2,900

3,500

4,300

4,400

5,800

5,900

8,800

9,100

9,800

11,500

11,800

12,500

19,100

29,200

42,000

Insulator

Instrument Fitter /technician

Cement Finisher / Mason

Millwright

Iron Worker - Rebar

Painter

Carpenter

Rigger

Vehicle Driver (Light-Heavy)

Electrician (line, wiring, cable …

Craft Helper

Equipment Operator (Light-Heavy)

Professional

Foreman

QA/ QC

Welder

Laborer

Pipefitter

Total MP Peak = 185,000 Jobs

PROCESS FACILITIES AVERAGE MANPOWER/YEAR*SKILL LEVEL EXAMPLES

* This demand is for industrial projects only. It does not include Commercial, Residential, or Infrastructure Projects.


28TRAINING CENTERS

360,000GRADUATES BY 2030

18

TRAINING CENTERS UNDER DEVELOPMENT

1. Aviation Academy

2. National Power Academy (NPA)

(2 branches)

3. National Construction Training Center

4. Facility and Hospitality Management (FHM)

(3 branches)

5. Engineering Program

6. Information Technology Academy

(2 branches)

7. National Civil Security Training Academy (AMAN)

(4 branches)

AVAILABLE TRAINING CENTERS

1. Saudi Petroleum Services Polytechnic:1. Operation & Maintenance- Dammam

2. Drilling & Construction- Dammam

3. Saudi Petroleum Services Polytechnic – Khafji

2. Jazan Contractors Consortium JCC Training Institutes1. Al-Hago Constructions Training Institute

2. Al-Darb Constructions Training Institute

3. Abu Arish Constructions Training Institute

4. Crane & Heavy Equipment Training Institute

5. Saudi Electric Services Polytechnic (SESP)

3. Inspection Technology and Quality Assurance National

Institute (ITQAN)

4. National Industrial Training Institute (NITI)

5. Saudi Arabian Drilling Academy (SADA)

6. Maritime Academy

Execution – Workforce Skills Development





with Saudi Aramco

Quality

Schedule

SafetyEnviron-ment

CompetitiveCost


19


Execution – Anchor Projects

20

King Salman International Complex

for Maritime Industries and Services

Establish an offshore manufacturing &

services hub for rigs and commercial /

service vessels

$5.8 Billion investment

80,000 Jobs

Objective:

Impact:

Energy Industrial City

Fully integrated industrial

city

$4.4 Billion investment150,000 Jobs

Objective:

Impact:

Rig Operations

Own, manage and operate

Onshore and Offshore drilling rigs

$6.4 Billion investment5,000 Jobs

Objective:

Impact:

Casting & Forging

world-class casting and forging

facility

$507 Million investment6,900 Jobs

Objective:

Impact:

Land Rig Manufacturing

land rig manufacturing supply

chain

$235 Million investment1,100 Jobs

Objective:

Impact:

Engine Manufacturing

major diesel engines factory

$400 Million investment

1,350 Jobs

Objective:

Impact:


Agenda


iktva Execution



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Capital Program 10-Year Demand Forecast

$37.3 Billion Annual Forecasted Spend

Unconventional Resources

8%

Other4%

Pipeline3%

Infrastructure7%

Process Facilities12%

Maintain Potential14%

Drilling 52%


Drilling Materials 10-Year Forecast

Trees 13,900 units

Hanger assemblies,33,000 units

Cement6.8 million tons

Mud Products (liquid)

636 million gallons

Casing heads 14,000 units

ICDS & ICD-screens

1.2 million units

Quantity ExamplesPercentage of Total Material Spend

$66 Billion

OCTG - Premium17%

TREE ASSY 5%

OCTG - API & Semi Premium 6%

ISOLATION PACKERS 4%

ICDS & ICD-SCREENS 14%

other 27%

Additives 2%

Weighting Materials 3%

Stabilizers 3% Circulation Products 6%

Workover/ Completion Products 5%

Mud Products 3%

SPOOL ASSY, 4%


Drilling Services 10-Year Forecast

Rig Drilling Ops Services = $52.5 Billion

112

81

61

5

31

Oil -Onshore

Gas -Onshore

Oil -Offshore

Gas -Offshore

UR Well Services $64.5 Billion

Directional Drilling

27%

Technical Services

22%Operations & Completion

Services 11%

Roads & Locations

5%

Logging9%

Monitoring & Testing

9%

Drilling Equipment Rental 9%

Casing / Tubing &

Handling 4%

Cementing / Pumping

Services 4%


Renewables

Power

Oil Facilities

Pipeline

Other

Infrastructure

Refinery & Petrochem

Gas Facilities

Maintain Potential

Surface Facilities 10-Year Demand Forecast

$40.3 Billion

$25.3 Billion

$25 Billion

$21.6 Billion

$16.3 Billion

$10.7 Billion

$9.9 Billion

$2.1 Billion

$1.1 Billion


BOILER PLANT EQUIP - 160 UNITS

PUMPS CS - 3,500 UNITS

LOW VOLTAGE CABLING - 56,000 KM

STORAGE TANKS - 1,000 UNITS

AIR COOLERS - 500 UNITS

COMPRESSORS - 500 UNITS

STAINLESS STEEL PIPING (SS314/316) - 137,000…

PROCESS VESSELS SS - 620 UNITS

CONCRETE - 24 MILLION M3

STRUCTURAL STEEL - 650,000 TONS

CONTROL VALVES - 90,000 UNITS

FIELD INSTR, ANALYZERS, GAGES - 70,000 UNITS

CS FITTINGS & VALVES - 19 MILLION UNITS

SS FITTINGS & VALVES - 6 MILLION UNITS

HEAT EXCHANGERS - 3,500 UNITS

CARBON STEEL PIPING - 23 MILLION TONS

PROCESS VESSELS CS - 6,000 UNITS

Surface Facilities Materials 10-Year Forecast

Ball valves0.36 MM valves

2%

Check Valve0.17 MM valves, 1%

Gate Valves2.0 MM valves, 10%Pipe Fitting, CS, 16.6

MM fittings, 87%


BOILER PLANT EQUIP - 160 UNITS

PUMPS CS - 3,500 UNITS

LOW VOLTAGE CABLING - 56,000 KM

STORAGE TANKS - 1,000 UNITS

AIR COOLERS - 500 UNITS

COMPRESSORS - 500 UNITS

STAINLESS STEEL PIPING (SS314/316) - 137,000…

PROCESS VESSELS SS - 620 UNITS

CONCRETE - 24 MILLION M3

STRUCTURAL STEEL - 650,000 TONS

CONTROL VALVES - 90,000 UNITS

FIELD INSTR, ANALYZERS, GAGES - 70,000 UNITS

CS FITTINGS & VALVES - 19 MILLION UNITS

SS FITTINGS & VALVES - 6 MILLION UNITS

HEAT EXCHANGERS - 3,500 UNITS

CARBON STEEL PIPING - 23 MILLION TONS

PROCESS VESSELS CS - 6,000 UNITS

Surface Facilities Materials 10-Year Forecast

0

20,000

40,000

60,000

80,000

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Ball Valves – All Types

CS SS Non-Metallic

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2017201820192020202120222023202420252026

150 300 600 900 1500

0

10000

20000

30000

40000

50000

60000

70000

2017201820192020202120222023202420252026

<4" 4" - 24" > 24"


Agenda


iktva Execution



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47%

53%54% 54% 55%

30%

35%

40%

45%

50%

55%

60%

65%

70%

2013 2014 2015 2016 2017

Chemicals Local Content Levels

AVG IKTVA Score: 17%


Barite

Bentonite

Marble

Xanthan

Gum

Starches

Biocides

DGA

Inhibitors

Fuel Additive

Minerals Agricultures

Low

Toxicity

Based Oil

Demulsifiers

Emulsifiers

Lubricants

Hydrocarbon

Chemical Types

JV

Manufacturer

Suppliers


Ethylene

oxide

Propylene oxide

Demulsifiers

Emulsifiers

Corrosion

Inhibitors

Ethylene

oxide

Propylene oxide

Amines

Water Treatment

Processing

Treatment

Engagement with Major Suppliers

Manufacturer


Public Sector Synergies Enabling iktva

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MoF

MoC&I

MoL

MoE

MoH

Meim

MoT

MoC&IT

MoEW&A

Kingdom wide harmonized definition and

measurement of local value add

Unified Kingdom 10-year forecasted

demand for materials, services, and HR

by ministry

Kingdom wide supplier database

Annual reporting of value creation metric

by ministry state owned enterprises

High level guidance for the use of value

creation in Government Procurement

Value Creation plan for each ministry

MoD


Summary

• Recognized and addressing localization challenges

• Developing an integrated economic ecosystem

• Acknowledge that we cannot do this alone

• Leverage business community expertise

• Rely on suppliers and long-term partnerships


Thank you34

In-Kingdom Total Value Add (iktva) Program€¦ · representation or warranty, express or implied,...

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Transcript of In-Kingdom Total Value Add (iktva) Program€¦ · representation or warranty, express or implied,...