Lack of clarity relating to contract responsibilities leads to unwanted surprises Quantify delays, cost overruns and examine the reasons behind the ailing fpso supply chain Role of the oil companies, development complexity, regulation and conflicts of interest within the value chain

1. Supply Chain Management of Rig &
FPSO- Floating Production, Storage
and Offloading systems
Presented By: Tochukwu Ben Anozie
4th Annual Logistics in oil, gas & petrochemicals Summit
15th April,2015

2.  Oil & gas supply chain network & analysis
 Rig supply chain network & process
 FPSO Supply Chain Network
 Rig and FPSO relationship
 Lack of clarity relating to contract responsibilities leads to unwanted
surprises
 The unwanted surprises in rig and FPSO supply chain
 Reasons behind the ailing FPSO supply chain
 Role of companies , development complexity, regulations and conflict of
interest within the value chain
OUTLINE

3. OIL & GAS SUPPLY CHAIN NETWORK & ANALYSIS
Upstream
Midstream Downstream

4. OEM
OEM Operators
3PL Rig location
Raw Material
Raw Material
Tier 1 supplierTier 2 supplierTier 3 supplier
Warehouse
RIG SUPPLY CHAIN NETWORK & PROCESS
3PL
•Planning
•Vendor selection
•PO creation and
approval
•Engineering
•Production
•Material handling
•Logistics
•QC and QA
•Inventory
management
•Material handling
•Logistics
Manufactured Transported Stored DeliveredOrdered
Rig Supply Chain Process
Rig Supply Chain Network
Material & Product Flow
Information Flow &Cash Flow
OEM- Original equipment manufacturers
3PL- Third Party Logistics
EPC contractors

5. FPSO SUPPLY CHAIN NETWORK
Raw Material
Raw Material
Raw Material
FPSO builder
FPSO
Contractors
Operator
FPSO Location
Material & Product Flow
Information Flow &Cash Flow
Typical FPSO Supply chain consist:
•Raw Materials Suppliers, FPSO Builders
•Oil Companies(operators), FPSO Contractors & EPC contractors
•FPSO location
Tier 1 supplierTier 2 supplierTier 3 supplier

6. RIG & FPSO RELATIONSHIP

7. LACK OF CLARITY RELATING TO CONTRACT RESPONSIBILITIES LEAD TO UNWANTED
SURPRISES
GUIDELINES FROM OPERATORS: There are many standards and requirements to
build one-off design that substantially increase the cost.
CONTRACTING CHALLENGE: EPC contractor don’t sign a long time contract any more
due to fluctuation in day rate.
POOR PRESENTATION OF SPECIFICATION BY OPERATOR: Standard & requirements
are presented in stacks of documents and it is very difficult for contractors to deal with
and makes the process side of the business much more expensive
SCOPE CREEP: This usually occur in every FPSO project. This may be important but it
will always delay the building process
ENGINEERING SPECIFICATION CHANGES: review in specifications as a result of
technological changes or need to add special features.

8. THE UNWANTED SURPRISES IN RIG AND FPSO SUPPLY CHAIN
QUANTIFY DELAYS
These are disruptions within the rig and FPSO supply chain that can be measured in
figures either by (Days Weeks &Months)
Rig & FPSO SC quantify delays analysis in months
Source: Douglas wood 2014

9. THE UNWANTED SURPRISES IN RIG AND FPSO SUPPLY CHAIN
OVERRUN COST
The Amount by which the total cost of ownership for rig and FPSO project exceeds the
budgeted, or target cost.
Months
Adapted: Douglas wood 2014
•Forecasting Error (price, project
timeline)
•Uncertainty (Natural disaster)
•Inadequate planning process
•Unclear scope of work
•Inadequate material and information flow
•Inadequate resources
•Inefficient financing
•Inefficient use of resources
•Inefficient contract management
Technical factors Economical factors
Rig and FPSO SC overrun cost Analysis in months
Causes of Rig and FPSO SC overrun cost

10. REASONS BEHIND THE AILING RIG & FPSO SUPPLY CHAIN
Governing conditions
Project complexity
Regulation Challenges
Local content
Floating industry suppliers
challenges
Supply chain complexity
Organisational learning
Nature and size of project
Shipping industry
influence
Industries Comparison
Comparison of drilling
industry
Rig & FPSO SC Issues
•Overrun Cost
•Risks
•Quantify delays (disruptions)
The reasons behind ailing rig & FPSO supply chain are grouped into 3 categories:

11. ROLE OF OIL COMPANIES , DEVELOPMENT COMPLEXITY, REGULATIONS
AND CONFLICT OF INTEREST WITHIN THE VALUE CHAIN
OIL COMPANIES
Regular cost examination: This encourage change in rig and FPSO procurement
procedures.
supply chain development: Continuous improvement in the SC will result in achieving
resilient and robust SC at lowest cost and reduction in delays.
DEVELOPMENT COMPLEXITY
Execution quality and efficiency is enhanced: due to project development that builds
on industry experience.
Repeatability: helps the supply significantly in area of right material selection in
terms of quality vendor selection and lead time management
REGULATION
Changes in the regulatory framework: This may bring about meaningful impact on
the SC to meet future demand.
Complexity and underdevelopment of FPSOs regulation: this have affect FPSOs
relocation and other mobilisation as well as treating each FPSOs as a separate entity.
CONFLICT OF INTEREST
Increase the project complexity: it make the project execution cumbersome which
adversely affect the suppliers and the projects efficiency.

12. RECOMMENDATIONS TO AILING RIG AND FPSO SUPPLY CHAIN
 Collaboration among stakeholders along the value chain-executive support
 Adopt lean Six Sigma methodologies in Supply Chain for process improvement.
 Institutionalise Supply Chain best practice
 Commitment to procurement resources management
 Develop performance metrics for monitoring Supply Chain

13. Thank You