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Smart and Fair Contract(Win-Win Solution for Offshore Plant Business)Distinguished Professor of KAISTProfessor Emeritus of Korea Maritime UniversityChairman/CEO of OPT(Offshore Plant Technology Service)Advisor of Samsung Engineering Company 1By Dr. Daniel C.S. Ahn

7 ContentsMarket Generals Offshore Business and Contract ManagementFixed Platform (Samugel & EXXON Heritage)Drilling Rig (Jack up, semi, Ship)Production (Fixed, FPSO,FLNG)Super FPSO Construction (Large Oil field)FPSO Lease Business (Marginal Field)Conclusion (Economic Alliance) Offshore Contract Management Tough Offshore Environment. Ship Building-> Shipping Co -> (Operation)-> Problems (Ship Repair yard) -> Easy. Offshore Fablication -> -> Operation -> (25 some year) Problems (disasters)

Oil Company very strict in Quality & Safety

Contract (dictated by oil company weak voice of contractor)

TransportInstallationCommission Offshore Business Lumpsum contract -> approx 25% change(Variation) order

Bidding -> Short list -->contract -> Project Execution -> Delivery signing(Profitable contractor has strong voice)(Contractor weak voice)Before signing(both owner and contractorWork together)(Better Keep)When insist Fairness? before signingRepeated order -> preferred EPC contractor by Major Oil co.

Win Win solution (Smart & Fair contract)ENGINEERING Phase: most important (Spec ,Schedule, PM)10

16Topside & Hull Integration - SUPER LIFTING

Semi-Submersible Drilling Units Deepwater Nautilus

21Super FPSO Construction Business (Large Oil Field)Range: 200,000BPD, 2M BBL Storage 20%EXXON KIZOMBA A&B -> Close Coordination-> Ahead of ->Profitable-> Win-Win Contract (Among O.C.E) Schedule Bonus Total USAN Standardization Repeat OrderBP Plutonio -> Unit order Contract -> Keep Schedule -> Even -> So & SoAKPO -> Keep Changing E -> Schedule Delay -> C Strain-> Final O.K C.O (40->46M)

Conclusion: With little more Time & Money by MOC -> Clear Feed E & Detail E -> C.Keep Schedule Project -> Win-Win AllBack Log Orders: 3322Win-Win For Super FPSO Construction(Spend Little More Time &Money)MOCKeep Cost & Delivery Schedule(Bonus)F Engineering -> B&D. Engineering L.L.E ConstructionContractorLeast Variation StandardizationRange: 200,000 BPD 20% 2M BBL Storage ClientFair Contract 23Win-Win For FPSO Lease BusinessClient NOC, IOCOperator ContractorLease/HireFair Contract No Cost OverrunDeliver Quality Product Conversion or New Building Sub ContractorsInstallation SubcontractorsHull, Topside, MooringShip yard, Engineering CoShipping Co.F. Engineering

1, Relax Qualification(O&M Experience) 2, Clean F. Engineering 3. StandardizationRange 20%: 50,000BPD, 600,000 BBL StorageRange 20%: 80,000BPD, 1M BBL Storage O & MConclusion Win - Win Solution ->

Economic Alliance of all the parties involved, Especially between Oil Company and EPC Contractors Message1 , 2 Fair() . 3 253Oil Production and Prospect

Regional Oil & Gas ReserveArea (Potential Floaters) OilGasGulf of Mexico (17)5,80213,986 Brazil (50)8,8973,788Asia, Australia (48)1,64322,349North & Arctic sea (22)3,58930,450West Africa (36)11,6355,280(Unit: Oil 1 MBBL , Gas: 1 Bil Cuft)Min. Max.5 Regional Capex & Opex

Min. Max.4 Offshore Production Facilities Global Oil Production

Presently (2011.8)

256 Floating System are in Service 62% FPSO 17% Semi-Sub P.U. 9% TLP 7% Spars 5% FSRU100% Total floating SystemSince March 2011

14 Construction orders 9 FPSO (1 Purpose- built 6 Conversion 2 Modification) 2 Production Spars 2 Purpose-built FSRU 1 Purpose-built FLNGMin. Max.18

13 Client :Esso Exploration Angola, Ltd.

Location: Offshore Angola Scope of Work : EPC of New Building FPSO

Capacity - Production Capacity:250,000 bopd - Gas Production:400 mmscfd - Oil Storage Capacity:2.2 mmbbl

Project Particulars - Size (LxWxD):285mx63mx32.3m - Accommodation:100 Persons - Lightship Weight:78,000 Tons - Weight:Topside:24,400 TonHull:56,300 Ton - Spread Mooring

Project Duration : Jul. 2001 ~ Aug. 2004ExxonMobil, KIZOMBA A - FPSO

FPSO New Building8

21FPSO Lease Business (Marginal/ Medium Field)Range:60,000BPD, 800,000BBL Storage 30% Client Field Owner(NOC,IOC)Lease/HireContractor(Leasing Operator)1. Tough Bidder Qualification: a. 10years Lease/ Hire Business, O&M Experience b. Double Hull, Life Cycle c. Tough Decision: Quality (wide range) Vs Cost(Rate)2. Win-Win Solution a. Relax, Qualification b. Standardization C. clear Feed EngineeringOperationMaintenanceBidder Qualification(FPSO Lease, O&M Experience)ResponsibilityMatrixCommitment LetterRegistration DocumentsSubcontractorsConversion Or New Building 1.Hull(VLCC/AFRAMAX)