Operational Excellence Digital Making it Work CONTENT MARKET

Operational Excellence + Digital Making it Work

CONTENT • MARKET CONTEXT AND BUSINESS CASE • OPERATIONAL EXCELLENCE + DIGITAL: TRENDS & LEADERSHIP COMPETENCY • CHALLENGES • HOW TO MAKE DIGITAL WORK • NATHAN ASSOCIATES OPERATIONAL EXCELLENCE + DIGITAL SERVICES • DIGITAL EXPERIENCES – GOOD & NOT SO GOOD 2

MARKET CONTEXT – PERFECT STORM… It’s all about: 1. Pressure on margins, cost cutting & productivity About 90% of costs are in feedstock and operations 2. Capex reduction Increase asset lifetime and improve asset availability 3. Commodity market volatility Improve trading and integrate with logistic, production and B 2 B 3

DIGITAL FOR BUSINESS PROCESSES Medium Commercial Optimization P&S Planning and Scheduling CPM Commercial Performance Management EUM Energy & Utility Management Operations SOP Which processes are most relevant as primary candidates for digital? Sales and Operations Planning SCM Supply Chain Optimization WC Work Controls OE Operations Execution BO Blending Operations OM Oil Movement PPM Production Performance Management High Potential Items Digital Transformation Potential Commercial Development EUM P&S TKM CD SCS EO ASP LIP Rt. P SP RP M CM MS SOP CSM EM PRM High PM SCM MWP ME PA PSM LQA PS MPS W&L TRM SCM MST EPD R&D PE S&R CPM PSM DES PPM WC OE Medium Asset Strategy & Performance MS Define Maintenance Strategy Sourcing Strategy and SCM Contractor Management DES Develop Equipment Strategies MPS Maintenance Planning and Scheduling ME Maintenance Execution MST Manage Shutdowns and Turnarounds MWP Monitor Work and Asset Performance Capital Projects BO OM Business Value Technology & Engineering Non-Hydrocarbon Supply Chain R&D Research & Development EM Engineering Management EHS & Operations Support S&R HSSE Strategy and Reporting SCS Supply Chain Strategy M HSSE Management RP Requirements Planning PE Process Engineering W&L Warehousing & Logistics PA Process Automation PSM Process Safety Management ASP Manage Maintenance CD Asset Management High PRM Portfolio & Risk Management PM Project Management & Assurance EPD Engineering & Project Data PS Project Support Hydrocarbon SC TRM Trading & Risk Management EO Envelope Optimization CM Compliance Management Rt. P Requisition to Pay TKM Technical Knowledge Management CSM Crude Supply Management LQA Laboratory & QA Management SP Sourcing and Procurement LIP Manage Licensing & IP PSM Refined Product Supply Management 4

VALUE CREATION FROM OPERATIONAL EXCELLENCE + DIGITAL Which Value Levers are most relevant? $2 B Facility EBIT Improvement $165 M ~ 33% Improvement VALUE DRIVERS VALUE LEVERS FOCUS AREAS BENEFITS Revenue $120 M Increase Uptime Asset Strategy Production Throughput (3 -10%) Asset utilization (3%-5%) Opex $15 M Reduce Materials & Services Preventive maintenance Maintenance Productivity (5 -10%) Reduce Labour Integrated planning Procurement Costs (15 -25%) Investment postponing Long Term Asset Planning Capital Deployment $10 M Capital Efficiency Working Capital Reduction Optimized Reduce Asset Risk Mechanical Operational Risk Integrity People Safety Maintenance Service Costs (10 -20%) Reduce Raw Material Inventory (2 -5%) Reduce MRO Inventory (5 -10%) Asset Lifecycle / Age (15 -20%) Reduce risk for corporate liability Reduce insurance cost HSE Work Control Brand Image / License to operate 5

TYPICAL VALUE REALIZATION TIMING FOR DIGITAL Are such value realization times look realistic? Too Short? Or Too Long? Technology Variable Tables Using MS Excel The value realization Timing post implementation ~ 25% by 6 months (work processes), ~ 60% by end of first year (variable tables) and 100% by year 3 (full deployment with embedding of processes and tools). Process Changes § Digital implementation cycle is getting shorter (in many cases less than ½ of time of that used to take 5 -6 years ago) driven by: • • Urgency of the business to achieve sustainable and competitive benefits (un-tangible and tangible) Front line need to communicate with experts located at remote locations New generation of crafts and engineers are more inclined to utilize technology for their work New way of working is driving digital to become part of the work processes

DIGITAL TRANSFORMATION IS PUTTING ORGANIZATIONS’ ADAPTABILITY TO THE TEST The digital dialog is redefining the context but it raises the same basic questions around, People – Process – Technology Organizations have chosen a different language to answer them, alienating digital pathways from the rest of the organization Leading to suboptimal outcomes… 7

THE DIGITAL MATURITY MODEL* Resistors Business and Digital initiatives are disconnected and poorly aligned with enterprise strategy. There is no focus on customer experiences. Passive, indifferent to Digital Leadership Explorers Business has identified a need to develop a digitally enhanced, customer-driven business strategy, but execution is on a project basis. Success is not predictable or repeatable. Leader initiate Digital dialog in business settings Players Business-Digital goals are aligned at enterprise level around the creation of digital products and experiences, but not yet focused on the disruptive potential of digital initiatives. Leaders not only initiate but actively encourage the digital dialog Transformers Integrated, synergistic business-Digital management disciplines deliver digitally enabled product/service experiences on a continuous basis. Leaders themselves are willing to take risk on Digital! Disrupters Business is aggressively disruptive in the use of Digital technologies and business models to affect markets. Ecosystem awareness and feedback is a constant input to continued business innovation. Leadership Willing to reward the risk takers within their organization within the Digital space Many – Many………. Many, ……Deere…………Disney……………. . Square… Amazon…………. Air. Bn. B, Square, Uber, Netflix *Source - IDC Maturity. Scape model 8

DIGITAL CHALLENGES* DIGITAL SUCCESS TRAITS § THE “HI-TECH” WORLD • Has clear winners & losers over long periods of time (“sustainable competitive advantage”) • Winners don’t follow “low-cost producer”, 1 st to market or other conventional strategies • Winners are those that have developed the capabilities to adapt quickly and well § DYNAMIC CAPABILITIES IS WHAT “WINS” IN HIGH-TECH § SHALE 2. 0 REQUIRED THESE SAME CAPABILITIES IN COMBINATION WITH OPERATIONAL EXCELLENCE! *Source – Altimeter Group Report 2016 9

SHALE 2. 0 WITH DYNAMIC CAPABILITIES + OPERATIONAL EXCELLENCE Dynamic Capabilities Require that Operational Excellence is in Place and Operating Efficiently and Effectively 10

REDUCING SURPRISES FROM DIGITAL TRANSFORMATION Industry has struggled to leverage Digital but solutions are surprisingly simple! PROCESS PEOPLE CONTEXTUALIZE THE DIGITAL DIALOG • What’s in it for me? • Why should I care? • How it is going to improve my life? • Is the process going to be any simpler? • Is technology a black-box? • Why should I trust the technology? • What is the business case? TOMORROW THE VALUE GAP • Fight the winnable battles in the digital space; not all battles! • Recognize the extent of change digital will bring!! • Promote the right behaviors to succeed in digital!!! • Can the processes be standardized? • How steep is the learning curve? TECHNOLOGY TODAY FOCUS ON CUSTOMERS REACTIVE SOLUTIONS • Are customers experiencing a lower actual vs. should’? • Can Digital analytics and automation solutions close the ‘actual vs. should’ gap? • Does it make business sense? PROACTIVE SOLUTIONS • Can information and analytics tell us what could go wrong? • Can automation and controls prevent it from going wrong? • Is the cost of digital solution lower than the cost of risking the operation?

NATHAN ASSOCIATES SERVICES FOR OPERATIONAL EXCELLENCE + DIGITAL ARE DELIVERED IN FOUR MAJOR WAYS Nathan Associates helps clients build the digital roadmap, prove the vale and capture it through digital solutions and long term service execution Deliver Digitize Pilot Assess Capability and Build Roadmap Execute services Implement Integrated Digital Solutions Rapid Pilot of Digital Solutions Nathan can leverage the Digital service platform and its Operations to deliver end to end capabilities in a efficient and effective way Nathan’s Digital service platform incorporating prebuild integrations and analytics can be implemented on premise to support clients optimized execution Nathan’s Digital Service platform provides an accelerator for proving the value of digital solutions with a low cost and fast approach Nathan’s Operational Excellence services provide insight into the performance potential and helps prioritize initiatives and develop the capability roadmap 12

NATHAN ASSOCIATES’ DIGITAL OPERATIONAL EXCELLENCE SOLUTIONS ENABLE US TO DIAGNOSE, TRACK, IMPROVE CORE CAPABILITY AND NAVIGATE THE CHANGE Digital dashboard analytics solutions track and steer the financial benefits of operational excellence improvements Performance Digital people and perception analytics solutions target more precisely the change management required during operational improvement Change adoption and perception Digital “Integrative Improvement” solutions track Individual level core capability, accelerating operator and technician capability improvement 13 Business Value Insight – rapidly diagnose capability gaps, prioritize and plan improvements Core Capabilities

DIGITAL IMPLEMENTATION EXPERIENCES: GOOD & NOT SO GOOD Digital implementation needs to start with people and process and must include business members in the development and implementation Leading Global Refining and Chemical Company – Capital and Asset Management A Major Integrated Energy Company in North America – End to End transformation THE SETTING • Need for a globally consistent operating model to leverage a shared service model • Project included operating model definition, business process optimization, and pilot activities across supply chain, product lifecycle management, engineering data management, and maintenance THE SETTING • Multi-year enterprise transformation program Operations, maintenance, supply chain, finance, human resources, and information management • Operating model redesign • Process alignment • Technology integration APPROACH ü Performed with business involvement ü Started with people and process transformations ü Piloted at a site • Developed and implemented technology and rolled to all sites RESULTS Full benefits were realized over 18 months APPROACH x Performed at headquarters x Stated with technology - On hold after completing design • Had to perform people and process transformations • Implemented technology across all sites RESULTS Benefits started to realize after 2 years and took additional 2. 5 years to obtain full benefits 14

CONTACTS WALTER PESENTI Senior Vice President wpesenti@nathaninc. com Office: +1 424. 888. 3506 Mobile: +1 310. 871. 5345