in-kingdom total value add (iktva) program
TRANSCRIPT
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
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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
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Saudi Aramco: Confidential
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
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Saudi Aramco: Confidential
The In-Kingdom Total Value Add (IKTVA) Program
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 ($)
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Saudi Aramco: Confidential
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
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Saudi Aramco: Confidential
IKTVA metric guidelines booklet
Calculation guidelines
Certification guidelines
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Saudi Aramco: Confidential
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
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Saudi Aramco: Confidential
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
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Saudi Aramco: Confidential
Doing Business with Suppliers
IKTVA is imperative for doing
business with Saudi Aramco
Competitive cost
Quality
Schedule
Environment
Safety
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Saudi Aramco: Confidential
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
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Saudi Aramco: Confidential
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
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Saudi Aramco: Confidential
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
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Saudi Aramco: Confidential
Supplier Solution Center
Single Window to Saudi Aramco
Dedicated
Supplier
Relationship
Managers
Registration
Support
Pre-Qualification
Technical
Support
Liaison with
external
stakeholders
www.saudiaramco.com\iktva
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Saudi Aramco: Confidential
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
Procurement
approach
Level playing
field,
Transparency and
clarity
Access to information
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Saudi Aramco: Confidential
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.
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Saudi Aramco: Confidential
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
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Saudi Aramco: Confidential
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
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Saudi Aramco: Confidential
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
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Saudi Aramco: Confidential
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
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Saudi Aramco: Confidential
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
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Saudi Aramco: Confidential
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
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Saudi Aramco: Confidential
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
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Saudi Aramco: Confidential
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
Procurement
approach
Level playing
field,
Transparency and
clarity
Access to informationBeyond
procurement
enabling success
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Saudi Aramco: Confidential
Creating Value in the Kingdom
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Saudi Aramco: Confidential
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