Session 3: Extractive companies’ perspective on local value creation
Methodology To Cost Effectively
Accelerate Local Value Creation
World Bank Conference on
Reconciling Trade and Local
Content Development
Mexico City, January 27-28, 2016
Jim Walton
Fluor
Director, Corporate Strategy and Local Content
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AV20140358-004.pptx
Agenda
A
How Do You Create the Optimal Balance Between Local
Content and Project Cost?
B
What Kind of “Team Work” Will Be Required Between Key
Stakeholders To Be Successful?
C
How Do You Perform A “Transparent Evaluation” of a
Project in Multiple Areas?
D
How Do You Evaluate The Local Content Impact On A
Project vs Cost?
Botswana - Mining
Kazakhstan – Oil & Gas
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2
Fluor Overview
 One of the world’s largest Engineering, Procurement,
Fabrication, Construction & Maintenance companies
 Oil, gas, chemicals, mining, metals, power, infrastructure,
industrial and government
 Over 1,000 projects annually
 Workforce of over 40,000 Operates in 81 Countries for 600 Clients
Revenues:
$21.5 B
New awards: $28.8 B
Backlog:
$42.5 B
December 31, 2014
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3
Fluor’s Local Content Activities
Mexico
Mexico
JV with ICA started in 1993.
3,300 personnel in Office
99.7% Local, Construction
7,000 persons 100% Local,
Equip & Material 40% Local
Poland
Began in 1995
400 personnel
and 96%+Local.
FEED and EPCM
Kazakhstan
Russia
Began in 1982. JV with 2
Kazakh Design Institutes, 400
person office.
office. Qualified
person
Qualified 100’s
100’s
Kazakh suppliers &
contractors.
Univ’s
contractors. Work
Work w/
w/ Univ’s
Began in 1980. Achieved
80% Russian Personnel for
Sakhalin- 1 construction.
Russian JV for EPCM and
O&M. Training Center
China
Trinidad &
Tobago
Started in 1978
600 persons.
About 85% Local
Began In 2003.
FEED and EPCM
120 personnel
80% Local
Thailand
Chile
Began in 1979.
Team with local
firm
Began In 1978.
Local Content.
Mining Projects
Philippines
Began in 1987.
2,400
in Manila
Manila
2400 in
and Cebu. 97%+
Local. FEED,
EPCM and JV for
Fab Yard
Brazil
CFPS JV with
Construcap 75
personnel in Sao
Paulo
Legend
Other Local
Content
activities
Argentina
Began in 1993.
Trained 3,000
craft. Have 110
personnel in
Buenos Aires
South Africa
Saudi Arabia
Began in 1960. 600
Began in 1947.
personnel. Trained
600 personnel in
35,000 craft. About 95%
Kingdom. FEED
Local. FEED,Company
EPCM
&
Confidential
and Proprietary.
and EPCM
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Self Perform Construct
India
Began in 1995.
2,100 personnel
3,000
98% local.
Performing
FEED and EPCM
Indonesia
Began in 1973.
Trained 10,000+
craft. Own 20% of
500 person firm
4
Many People Benefit from Projects
Optimized for Local Content
Governments
NOCs / Mining Co’s
Local Engineering
Local Mat’l Supply
Local Equip. Fab
Project
Optimized for
Local Content
Local Construction
Local Oper. & Maint.
Training Centers
Universities
Small & Med. Enterprises
Community Development
IOCs / Mining Co’s
EPC Firms
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5
AV20150349-001.pptx
Project Must Also Be Cost and
Schedule Optimized
Governments
NOCs / Mining Co’s
Technology Selection
Local Engineering
Process Configuration
Local Mat’l Supply
Industry Standard
Equipment & Specs
Low Cost Country
Sourcing of Equipment
Modular Fabrication
Project
Optimized for
Cost and
Schedule
Optimal
Balance
Local Equip. Fab
Project
Optimized for
Local Content
Local Construction
Local Oper. & Maint.
Training Centers
Integrated EPFC
Universities
Constructability in
Design
Small & Med. Enterprises
Community Development
Advanced Workface
Planning
IOCs / Mining Co’s
EPC Firms
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AV20150349-001.pptx
Strong Team Work Required to be
Successful
Owners:
Government
and Regulators
NOCs, IOCs or
Mining Companies
Project
Optimized for
Cost and
Schedule
Optimal
Balance
Project
Optimized for
Local Content
Local
Engineering,
Equip., Materials
& Construction
EPC
Firms
Approved Investment
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AV20150349-001.pptx
Build Trust By Performing A Transparent
Evaluation of Local Content and Project Cost
STEP #1
Determine the Project’s Design, Material & Construction Requirements
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Determine the Project’s “Demand vs Local
Supply” and Develop Growth Plan
Demand
Demand for
Equipment and
Materials
Local Supply
Profile Local
Equipment &
Material Suppliers
Benchmark
The Local Firms
Growth Plan
Inspect & PreQualify Stronger
Local Firms
Match Some Local
Firms with Global
Firms
Project
Detailed Facility
Evaluation
& Enhancement Plan
Infrastructure
Country
Power
Oil Production
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9
Modify Design To Include More "Local
Equipment” and Use Local Firms
Material & Equipment
Piping
Valves
Vessels and Internals
Pumps
Drivers
Heat Exchangers
Structural Materials
Instrumentation
Electrical
Storage Tanks
Insulation/Refractories
Paints/Coatings
Must Not Compromise Plant Operations
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Increased Local
Equipment & Material
10
Strengthen Local Suppliers in Areas
of Greatest Spend
Material & Equipment
Requirements For Next 5 Years
Type of Equip. &
Material
Existing Local
Suppliers
Enhanced Local
Suppliers
Cost
$Millions
Supplier 1
Piping
$440
Supplier 2
Valves
$200
Supplier 3
Vessels and Internals
$240
Supplier 4
Supplier 4
Pumps
$200
Supplier 5
Supplier 5
Compressors
$ 160
Mixers/Agitators
$ 40
Drivers
$240
Heat Exchangers
$440
Structurals
$120
Instrumentation
$760
Electrical
$360
Furnaces/Boilers
$240
Storage Tanks
$ 160
Insulation/Refractories
$ 160
Paints/Coatings
$40
Buildings
$40
Other Equipment
Total
Increase # of
Qualified
Suppliers
Supplier 1
Supplier 2
Supplier 3
Supplier 2 = Qualified Supplier
Supplier 3 = Unqualified Supplier
Increased Local
Equipment & Material
$160
$4,000
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11
Identify Roles for Small and Medium
Enterprises (SMEs)
Identify SME Opportunities
Advertise Project Opportunities for
SMEs on Website or in Newspaper
Provide Training for SMEs
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Increased Local Content
12
Evaluate Modular Construction Options
Oil & Gas Processing Unit
Fabricate Smaller Modules In
Country with Local Firms
Large Modular Units
for Cost & Schedule
3rd Gen Modular Units
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and Proprietary.
forCompany
Local
Content
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Evaluate Each Piece of the Local Content Plan Based on
LC Impact vs Cost Impact
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14
Estimate The Cost and Schedule Impact of
Achieving Higher Local Content Levels
80%
70%
60%
Enhanced Local Content
Current Local Content
46%
50%
40%
40%
30%
20%
10%
0%
Home office
Services
Engineering
Mechanical
Equipment
Electrical
Equipment
Instruments
and Controls
Piping
Structural
Steel
Procurement
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Electrical
bulks
Construction
TOTAL
Construction
15
Start Local Content Planning Earlier In The Project
Modular
Fabrication?
JV with Local
Firm
Benchmark
Local
Engineers
Work with
Universities
Benchmark
Local Firms
Pre-qualify
Suppliers
Use Local
Equipment?
Supplier Forums
& Match Making
Benchmark
Local Firms
JV with Local
Firm
Evaluate
Local Training
Craft Training &
Mod Fabrication
Benchmark
Local Firms
Develop SME
Enterprise Center
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Conclusion: You Can Cost Effectively Accelerate
Local Content Implementation
 Everyone benefits if Local Content and project costs are optimized.
 Key stakeholders need to work as a team
 A “transparent evaluation” of a project should be performed
 Local Content actions can be prioritized
 Local Content planning must start earlier in the project lifecycle
 Optimized Local Content and project costs can be achieved
Copper Mine in Mongolia
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AV20150349-001.pptx