In-Kingdom Total Value Add (IKTVA) Program

Creating Value in the Kingdom

Tuesday, December 01, 2015
Dammam Office Building

Journey

Seeds for a vibrant chemical industry

1980

Master gas system

Massive development of the Companys human capital

Local sources preferential policy

1990

Introduced Contracting Policy for local contractors

Introduced Local Enterprise Support Policy

Concrete steps to increase local content development

2000

Established NBD in 2003

Merged services & procurement functions

Mandated Saudization in major contracts

Journey

2011
2015

Competitive Saudi energy sector

Serving Saudi Aramcos needs

Exporting to the region & the world

Growing & diversifying the Kingdoms economy

Todays Key Messages

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

2021 TARGETS ARE:

70% Local Content

500,000 Jobs

Saudi Aramco: Confidential

30% Exports

The In-Kingdom Total Value Add (IKTVA) Program

LevelPLAYING
playing
LEVEL
field,
FIELD,
Transparency
and
TRANSPARENCY
ANDclarity
CLARITY

Procurement
approach

70 21
by

70% localization
by the year 2021
Beyond
procurement
enabling success

Access to
information

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.
B.
C.
D.

Localized goods and services ($)

Salaries paid to Saudis ($)
Training & Development of Saudis ($)
Supplier Development Spend ($)

E. In relation to revenue (spend from Saudi Aramco)

Supplier IKTVA Formula

DEFINITION
The IKTVA program
drives, measures and
monitors the addedvalue brought to the
Kingdom by a supplier.

% IKTVA =

+++

100

Additional Info.
Number of Saudi Employees
Investment ($)
R&D spend ($)
Exports ($)

Saudi Aramco: Confidential

Key points

UNIFORM EVALUATION
FOR BOTH

SUPPLIER FOCUSED
Co-developed with
the suppliers

Service Contractors
Materials Providers

MUCH SIMPLER THAN

THE OTHER
INTERNATIONAL
PRACTICES

ASSESSMENT &
TRANSPARENCY
Validation by 3rd party

Saudi Aramco: Confidential

IKTVA metric guidelines booklet

Calculation guidelines
Certification guidelines

Saudi Aramco: Confidential

Suppliers Representative IKTVA Footprint

$2,500

$2,000

Spend ($)

$1,500

$1,000

$500

$0

0%

10%

20%

30%

40%

50%

% IKTVA
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Saudi Aramco: Confidential

60%

70%

80%

90%

100%

The In-Kingdom Total Value Add (IKTVA) Program

LevelPLAYING
playing
LEVEL
field,
FIELD,
Transparency
and
TRANSPARENCY
ANDclarity
CLARITY

Procurement
approach

70 21
by

70% localization
by the year 2021
Beyond
procurement
enabling success

Access to information

10

Saudi Aramco: Confidential

Doing Business with Suppliers

Competitive cost

Quality

Environment

IKTVA is imperative for doing

business with Saudi Aramco

Schedule

Safety

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Saudi Aramco Contracting & Execution View

IKTVA will be imbedded from start to finish

Planning

Construction

Design

Design Basis Scoping

FEED

Drilling Schedule
Development

Requirements Master
Plan

Services Schedule
Development

Detail Engineering,
Procurement, and
Construction
Contract execution

Scope design

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Saudi Aramco: Confidential

Operations

Facilities Operation

Field & Well

Services

Sourcing

EXCLUSIVITY FOR IK
MANUFACTURERS

Capacity
Capability
Cost
Schedule

SOURCING CRITERIA

Technical & Quality

Regional Distribution
Cost Competitiveness
New Technologies

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Saudi Aramco: Confidential

NOVATION FOR IK
ENGINEERED EQUIPMENT

Capacity
Capability
Cost
Schedule

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

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Saudi Aramco: Confidential

Master Service Agreements

(MSAs)

End-to-End Agreement

Includes: Engineering, Design,

Fabrication, Installation,
Commissioning, MRO, and
Supplier Managed Inventory

Multi-Year

Supplier Solution Center

Single Window to Saudi Aramco

Dedicated
Supplier
Relationship
Managers

Liaison with
external
stakeholders

Registration
Support

iktva@Aramco.com
www.saudiaramco.com\iktva

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Saudi Aramco: Confidential

Pre-Qualification
Technical
Support

The In-Kingdom Total Value Add (IKTVA) Program

LEVEL
LevelPLAYING
playing
FIELD,
field,
TRANSPARENCY
Transparency
and
ANDclarity
CLARITY

PROCUREMENT
Procurement
APPROACH
approach

70 21
by

70% localization
by the year 2021
Beyond
procurement
enabling success

ACCESS
TO
Access
to information
INFORMATION

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Saudi Aramco: Confidential

IKTVA Information Access Summary

GENERAL

SPECIFIC COMPANIES
AND SECTORIAL
FORUMS

Awareness (Web and

Investor Forums)
Sectors of spend in
USD

Awareness (Web and

Investor Forums)
Sectors of spend in
USD

Information
Type

Information
Purpose

Total Company
spend

Total Company
spend

SPECIFIC INVESTOR

Investment Plans

Specific Products
and/or services

Annualized Units for

grouping of years

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

Capital Program Forecast

Surface Facilities

6%
10%
31%

Infrastructure

$334

Drilling

Billion

UR
Other

42%

11%

Average Spend / Year is 33 Billion USD

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Saudi Aramco: Confidential

Drilling Materials Spend Forecast 2015-2025 = $57 Billion

Quantities Examples

OCTG API, 11
Million units

Hanger
assemblies,
24,000 units

Trees
20,000 units

Cement
5.8 million Tons

Percentage of Total Material Spend

Casing heads
15,000 units

Mud Products
(Liquid)
298 million
gallons

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Saudi Aramco: Confidential

Rigs and Well Services Forecast $119 B (2015 -2025)

Rig Drilling Ops Services = $60 B

136

Well Services Total Spend = $59 B

Average Rig Count/Year

84
43

30
3

Onshore Onshore Offshore

Oil
Gas
Oil

UR

Offshore
Gas

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Saudi Aramco: Confidential

Forecast 2015 2025

Capital Program Forecast

Surface Facilities

Maintain Potential

6%
10%

$334

Drilling

42%

29

Gas Facilities

24

Other

Billion

UR

39

Refining & Petrochem

31%

Infrastructure

Other

Surface Facilities

19

Oil Facilities

11%

10

Pipelines

Power
Renewables
Average Spend / Year is 33 Billion USD
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Saudi Aramco: Confidential

9
3
0.5

Examples of Surface Facilities Materials Forecast (2015 2025)

PROCESS VESSELS CS - 6000 Units

CARBON STEEL PIPING - 3.1 Million Tons
HEAT EXCHANGERS - 4300 Units
STAINLESS STEEL FITTINGS & VALVES - 5.7 Million Units
CARBON STEEL FITTINGS & VALVES - 15.8 Million Units
FIELD INSTR, ANALYZERS, GAGES - 66000 Units
STRUCTURAL STEEL, 734000 Tons
CONTROL VALVES, 86000 Units
PROCESS VESSELS SS, 800 Units
OTHER EQUIPMENT, 2000 Items
COMPRESSORS, 514 Units
CONCRETE, 20205 Cubic Meters
STAINLESS STEEL PIPING (SS314/316), 135,348 Tons
AIR COOOLERS, 554 Units
STORAGE TANKS, 1177 Tanks
BOILER PLANT EQUIP, 185 Units
PUMPS CS, 3,789 Units
CABLE, Low V, 56,420 KM

Surface Facilities Materials

$56 Billion
Surface Facilities
Construction

$75 Billion
0

5
Thousands

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Saudi Aramco: Confidential

10

Total Manpower Forecast (2015 2025) is 280,000 Direct Jobs

DRILLING AVERAGE MANPOWER/YEAR*
SKILL LEVEL EXAMPLES

PROCESS FACILITIES AVERAGE MANPOWER/YEAR*

SKILL LEVEL EXAMPLES

* This demand is for industrial projects only. It does not include

Commercial, Residential, or Infrastructure Projects.

** Inclusive of all disciplines

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Saudi Aramco: Confidential

Information Sharing

INFORMATION

SAUDI ARAMCO
INTERNAL USERS

EXTERNAL USERS

Strategic Procurement
(MS, PM, D&WO, NBD etc.)

Suppliers /Contractors
(10 Years Demand)

HR Development
(T&D, UCG, PM, MS, CP,
D&WOetc.)

TVTC / HRDF/ Others

(10 Years Demand)

IKTVA (MS, NBD, and

Proponents)

Investment Promotion
(10 Years Demand)

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Saudi Aramco: Confidential

The In-Kingdom Total Value Add (IKTVA) Program

Level PLAYING
playing
LEVEL
field,
FIELD,
Transparency
and
TRANSPARENCY
ANDclarity
CLARITY

PROCUREMENT
Procurement
APPROACH
approach

70 21
by

70% localization
by the year 2021
BEYOND
Beyond
PROCUREMENT
procurement
ENABLING
SUCCESS
enabling success

ACCESS TO
Access
to information
INFORMATION

25

Saudi Aramco: Confidential

Creating Value in the Kingdom

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Saudi Aramco: Confidential

Take away messages

SIGNIFICANT OPPORTUNITIES LIE AHEAD

WIN WIN PROPOSITION

EXCELLENT SUPPORT FROM KEY STAKEHOLDERS

Iktva IS A BUSINESS REQUIREMENT THAT NEEDS TO BE MET

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Saudi Aramco: Confidential