Manufacturing An Oilfield Services Perspective J David Rowatt

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Manufacturing An Oilfield Services Perspective J. David Rowatt, Ph. D, PE Research Director 27

Manufacturing An Oilfield Services Perspective J. David Rowatt, Ph. D, PE Research Director 27 -Oct-2011

Agenda • • • Schlumberger at a glance Manufacturing – Perception & Problems Manufacturing

Agenda • • • Schlumberger at a glance Manufacturing – Perception & Problems Manufacturing Technology Manufacturing Careers Policy

Energy is Our Business Since the early years of the 20 th century, Schlumberger

Energy is Our Business Since the early years of the 20 th century, Schlumberger has been measuring the sub surface. Intellectual curiosity and commitment to research and technology are in our roots. Today Schlumberger is the world's leading supplier of technology, project management, and information solutions to the oil and gas industry.

Schlumberger at a Glance Reservoir Characterizati on • • • Western. Geco Land Marine

Schlumberger at a Glance Reservoir Characterizati on • • • Western. Geco Land Marine Seismic Wireline Logging Testing Services Schlumberger Information Solutions Data & Consulting Services 2010 Financial Highlights Drilling • • Smith Bits & Advanced Technologies M-I SWACO Geoservices Drilling & Measurements and Pathfinder Drilling Tools & Remedial Services Dynamic Pressure Measurement Integrated Project Management Reservoir Production • • • Well Services Completions Artificial Lift Subsea Schlumberger Production Management Approximately 110, 000 People • • • Revenue: $27. 4 Billion Net Income: $4. 2 Billion Total 2011 R&E: >$1 Billion • 4 Areas - 27 Geo. Markets Technolog y Solutions Representing 140 Nationalities Working in more than 80 Countries Deep Industry Knowledge Global Culture

Technology R&D – REMS Boston, Mass, USA R&D Centers Cambridge, UK Dhahran, Saudi Arabia

Technology R&D – REMS Boston, Mass, USA R&D Centers Cambridge, UK Dhahran, Saudi Arabia Moscow, Russia Stavanger, Norway Sugar Land, Texas, USA Clamart, France Fuchinobe, Japan Rosharon, Texas, USA Oslo, Norway Beijing, China Houston, Texas, USA Stonehouse , UK Princeton, New Jersey, USA Abingdon, UK Edmonton, Alberta, Canada Stavanger, Norway Calgary, Alberta, Canada Novosibirsk, Russia Richmond, California, USA Gatwick, UK Pune, India Singapore Baden, Austria Bartlesville, Oklahoma, USA Belfast, UK Singapore Houston, Texas, USA Tyumen/Ufa, Russia Shanghai , China Aberdeen, UK Penang , Malaysia Kansas, Locations USA 65 Lawrence, Center Alberta, Canada 700 Edmonton, Projects Curacao, Netherlands Antilles 2, 500 Products Argentina (Villa regina, Neuquen) 15, 000 Employees (6000 Mfg) Hammond, Louisiana, USA >$4 B Int. Mfg. Rev. Abbeville, France Barrow, UK Southampton, UK Research, Engineering, Manufacturing, Sustaining Research Engineering Manufacturing

Schlumberger Manufacturing at a Glance • • • Historical base in the US and

Schlumberger Manufacturing at a Glance • • • Historical base in the US and France Significant growth through acquisitions Global expansion to support business Multiple manufacturing models Wide variety of activities – Foundry – Machining – Assembly and Test – Sensors – Nuclear Sources – Explosives – Trucks & Pumping Equipment – Marine Vessels Rapidly evolving needs and technologies • Mixed perception of manufacturing as a good long term career choice – – – Manufacturing is seen as being easily commoditized and exported to low cost countries Innovation is not clearly connected to manufacturing Lack of career defined career path and technical recognition Platt’s Model • Looking forward – There are many considerations in manufacturing strategy – Where is the oil and gas industry going? – What are the technology drivers?

Costing Production Costs v. Acquisition Costs Material Costs Labor Burden Overhead Logistics • Raw

Costing Production Costs v. Acquisition Costs Material Costs Labor Burden Overhead Logistics • Raw Materials • Purchase d compone nts & subassemblie s • Labor cost / hour • OT policies • Labor productivi ty • Opex costs • Capex costs • Maintenan ce costs • Start up costs • Managem ent structure • Reorganizati on costs • Shipping costs • Storage costs • Tariffs

Manufacturing Technology & Processes Factors to Consider • Manufacturing technology & equipment (standard v.

Manufacturing Technology & Processes Factors to Consider • Manufacturing technology & equipment (standard v. custom) • Technical support (in-house v. out-sourced) / Co-location of engineering (New Product Development) • Manufacturing capacity & global footprint • Labor skills & availability including Manufacturing Engineering • Automation and process control

R&E Investment and Hydrocarbon Resources Unconventional oils and gases Underexplored and underdeveloped areas Increased

R&E Investment and Hydrocarbon Resources Unconventional oils and gases Underexplored and underdeveloped areas Increased recovery from producing fields Harsh and hostile environments

Industry Drivers & Manufacturing Technology Industry Drivers • Pace of technology development – Is

Industry Drivers & Manufacturing Technology Industry Drivers • Pace of technology development – Is it fast enough? • Harsh environments (Temp. , Press. , Flow, Corrosion, Abrasion, Erosion) • Operational timescales - one day to 20+ years • Reliability • Ease of use & maintainability • Operational and energy efficiency • Environmental concerns (emissions, hydraulic fracturing, waste materials) • Governmental regulation Manufacturing Technology • Drivers Advanced Materials – New materials and • • • processing techniques. Alternative Materials – Scarcity or control of traditional and/or strategic materials Managing the environment - Robust design and packaging Miniaturization – MEMS, nano-X Sensing – Embedded sensors, condition monitoring System integration & testing Automation & precision manufacturing Green manufacturing – Emissions, Ro. HS Flexible manufacturing – adaptable facilities, lot size, Df. M Increased reliance on suppliers

Opportunities & Challenges for US Manufacturing • Opportunities – R&E investment areas are well

Opportunities & Challenges for US Manufacturing • Opportunities – R&E investment areas are well aligned with US natural resources plays – US academic institutions are leaders in R&D of technologies that benefit the energy industry – Manufacturing benefits from co-location with engineering (concurrent engineering) – There is significant technology overlap with other industries • Challenges – Deterioration of US as a manufacturing leader – Industrialization of new technologies – The “big” crew change and development of manufacturing talent and expertise – Government policy

Education & Hiring Challenges • Motivation - Career expectations and opportunities – Manufacturing Careers

Education & Hiring Challenges • Motivation - Career expectations and opportunities – Manufacturing Careers – Technical Careers • Change Management – Fast pace of technology change - Strain on internal expertise in the company – Availability of expertise – Fresh Out vs. Experienced Professional Hire – Hiring a specialist vs. a generalist • Knowledge Management – Knowledge capture – Aggregation and organization of knowledge – Dissemination of knowledge across the organization • Developing talent – Recognition at the university level of manufacturing as a discipline – A mixture of skills and degree levels is needed • Theoretical and applied skills • BS, MS and Ph. D – Graduate level education is vital due to the level of advanced technology – Internal training and development programs demonstrate commitment to people development – External continuing education is vital due to the pace of technology change • Academia • Professional Societies

Manufacturing Careers • • Clearly defined job descriptions and requirements Career paths in multiple

Manufacturing Careers • • Clearly defined job descriptions and requirements Career paths in multiple domains Ability to select top job preferences for career planning Competency management + Training & Development

Schlumberger Eureka Technical Careers (SETC) SETC Goals SETC Pillars • Recognition • Motivation •

Schlumberger Eureka Technical Careers (SETC) SETC Goals SETC Pillars • Recognition • Motivation • Retention • Parallel technical and management ladders • Decoupling of SETC status from job/position • Objective technical evaluation open to all Eureka members Leading in SLB/Industry Leading at project level: Contributing independently Senior Leading locally: Geomarket/ REMS center Principal Leading widely: Area/ Service Segment/ REMS Advisor Schlumberger Fellow

Policy • Encourage global partnerships at the governmental, industrial and academic levels. • Foster

Policy • Encourage global partnerships at the governmental, industrial and academic levels. • Foster meaningful government /industry partnerships (a Singapore example) – RISC – Research Incentive Scheme for Companies (targeted at Research and Technology activities) – IDS – Innovation Development Scheme (targeted at Development activities) – DEI – Development and Expansion Incentive (targeted at Mfg activities) – SDI – Supplier Development Incentive (targeted at Supply Chain activities) • Keep the regulatory environment as simple as possible – Partnership and dialogue for sensible regulations – Need for stability as a means of fostering investment

Conclusions • The US is the leader in developing Oilfield Services technologies … but

Conclusions • The US is the leader in developing Oilfield Services technologies … but it is a global business • The US is the leader in innovation … but other countries are aggressive and catching up • Industrialization is very important … making the leap from the research to the shop floor. The US must maintain skill and leadership in this area. • Manufacturing will locate where the best combination of people, technology, supply base, logistics and cost converge • Leveraging technology overlap between industries can give the US a significant advantage due to size and diversity of its manufacturing base • The development of manufacturing talent is imperative to the growth and stability of US manufacturing • Government policies are important and influential in business decisions on where to locate R&D and manufacturing operations