1. Our challenge:
reduce costs while preserving human capital
A service company perspective
Thierry PILENKO
Offshore Technology Conference, Houston, May 5th 2009

2. A dramatically different context compared to last year
OTC 2008 OTC 2009
Crude oil price
Economic growth
Oil and gas demand
2

3. The financial impact on oil companies has been
sudden and strong…
► Cash flow available to oil companies for their Capex programs is smaller
than that anticipated a short while ago
► Funding of some projects is challenging
► Some companies, especially the small E&P independents, have difficulties
► Market capitalizations have sharply declined
► Q1 2009 results for our clients generally much lower than last year
3

4. … with first implications already visible
in the service industry
► Projects are postponed to improve economics
• Canadian oil sands
• Ultra deepwater
• LNG
• Petrochemicals
► Equipment stacked or taken away from the market
• Drilling: 22 out of 74 drilling Jackups rig currently stacked in the Gulf of Mexico
• Seismic: a potential of 30 vessels (≤ 6 streamers) and 50 “2D vessels” converted to
shooting vessels or retired
► Headcount reduction has started
• Lay off plans announced by certain operators and service companies
• Massive reduction of construction workforce expected
Sources: Hercules Offshore, CGG Veritas
4

5. History has shown that lower oil prices lead to lower Capex
E&P Capex vs. Oil and Gas Prices
$ in billion $/b $/Mbtu
400 120 10
Henry Hub
350 105
300 90 7.5
Cost inflation
since 2000
250 75
E&P Capex
200 60 5
Current* price of Oil
150 45
Current* price of Gas
100 30 2.5
50 WTI 15
($/b)
0 0 0
1976 1980 1984 1988 1992 1996 2000 2004
2008 (f) 2009 (e) Sources: IFP, EIA
*: April, 29th 2009
5

6. A lower oil price environment should also lead
to lower project costs
Project cost evolution *
240
Q3 2008: 230
220
200
- 10% ?
Q3 2008: 187
180 - 20% ?
Upstream
160
- 10% ?
140
- 20% ?
120 Downstream
Index
(2000 = 100)
100
80
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: IHS / CERA
*: IHS/CERA - Capital Cost Index
6

7. The required cost reduction implies that
all cost items be optimized
EPC project costs
100%
Construction
Procurement
Engineering +
Project Management
7

8. A large share of the costs is directly driven by the performance
of engineering and project management activities
EPC project costs
100%
Construction
► Need to be involved earlier in the project
Procurement ► New contract schemes (Ex: convertible)
► Drive simplification and eliminate redundancies
► Force standardization
Engineering + ► Top down cost cutting implementation
Project Management
8

9. Significant savings on procurement must be targeted
EPC project costs
100%
Raw materials prices (Index 100 in Jan. 2003)
Construction 700
600
500
400
Copper
300 Carbon steel
Stainless steel
200
Nickel
Procurement
100 Aluminum
04
07
08
09
03
05
06
n-
n-
n-
n-
n-
n-
n-
ja
ja
ja
ja
ja
ja
ja
Engineering +
Project Management
Source: CRU Monitor
9

10. Similarly, the current context should drive construction
costs down and bring back productivity
EPC project costs
100%
Construction productivity index *
Construction 1
0.66
Procurement 0
2003 2004 2005 2006 2007 2008 2009 2010 2011
Engineering +
Project Management
* In Middle East (Technip estimates) Source: Technip
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11. In most cost reduction initiatives, people are a key element
EPC project costs Personnel costs
100%
Construction
~ 40 to 50 % of
costs in an EPC
project relate to
personnel
Procurement
Engineering +
Project Management
Source: Technip estimate
11

12. The service industry has made a tremendous
recruiting and training effort
Headcount growth estimate
(Technip and main competitors) *
150
External
+45% growth
125 Annual recruiting effort
100 ► Net Hiring ~ 6 %/y
► Turnover ~ 10%/y
75
► Retiring ~ 2%/y
50
25 ~ 18 %/y
0
2004 2005 2006 2007 2008
* Based on a sample of Technip and 10 companies ; index 100 in 2004 Sources: Company reports, Technip
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13. But the overall HR age pyramid has generally
shifted to the right
40%
35%
30%
25%
20%
15%
10%
5%
0%
20-29 30-39 40-49 50-59 60+ 20-29 30-39 40-49 50-59 60+ 20-29 30-39 40-49 50-59 60+
SPE members 1998 SPE members 2008 Technip 2008
Sources: SPE, Technip
13

14. Complexity of projects is increasing: interpretation
Seismic interpretation and reservoir modeling
St Malo, Gulf of Mexico Tupi, Brazil Reservoir modeling
► Deeper development (3000 m)
► Sub-salt imaging
► Increased reservoir complexity
Courtesy of CGGVeritas
14

15. Complexity of projects is increasing: Subsea development
PAZFLOR
► 600 km2 at water depths
between 600 to 1,200
meters (i.e. 6 times the
area of Paris)
► Extraction of heavy
(17 to 22°API) and
highly viscous oil
► $ 1.7 bn (Subsea
development)
► 175 km of flowlines and
90 km of umbilicals
Source: Technip
15

16. Complexity of projects is increasing: Onshore
3 LNG Qatar
► 6 trains of 7.8 Mt/y
► 100,000 tons of steel
(14 times the Eiffel
tower)
► 75,000 people at peak
► 700 million
construction man-
hours
Source: Technip
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17. Lead times to build critical competencies
Competencies
Processor / Field engineer 6 months / 1 year
Interpretation geoscientist /
4 years
Process engineer
Construction site supervisor 5 years
Manager – Small / medium
10 years
size project
Technical experts > 10 years
Manager - Large size project 15 years
Source: Technip
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18. What we need to do to deliver projects
and mitigate HR impact
► As contractors and service companies
• Work the supply chain – select the best (costs and competencies)
• Maintain R & D investment
• Use spare capacity to re-think core processes and improve efficiency
• Invest in the development of competencies and lessons learnt
18

19. What we need to do to deliver projects
and mitigate HR impact
► As Oil & Gas Operators
• Stay engaged on future projects (particularly large and complex projects)
• Involve contractors and service companies earlier on in the projects
• Drive standardization
• Drive simplification and eliminate redundancies
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20. What we need to do to deliver projects
and mitigate HR impact
► As industry at large
• Avoid the “Stop and Go” attitude which is detrimental to our industry’s image
• Continue to hire university graduates to avoid future generation gaps and
maintain credibility
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21. THANK YOU
Offshore Technology Conference, Houston, May 5th 2009