Hydro Oil & Energy

TEMADAG NSP 18 FEBRUAR

Fleksibilitet i prosjektgjennomføring

Date: 2004-01-28 • Page: 2 • Hydro Oil & Energy

Norsk Hydro accomplishment last five years

VAW

0

100000

200000

300000

400000

500000

600000

Oil/gas production

1998 2003

BPD

01020304050607080

Aluminium production

1998 2003

Billion NOK

0

5

10

15

20

Improved earningsBillion NOK

1998 2003

Sales and AssetsDivested

NOK 25 billion

Project Execution Volume

75 BNOK

Same volume anticipated next five years

Aquisitions

Date: 2004-01-28 • Page: 3 • Hydro Oil & Energy

Hydro Stage Gate System (Capital Value Process)

OperationExecutionPreparation

ForExecution

ConceptSelection

Phase

FeasibilityStudyPhase

BusinessDevelopment

DG1 DG2 DG3 DG4 DG5

Oil and energy Light metal Agri

To achievePredictable and competitive projects

Divest next year

Date: 2004-01-28 • Page: 4 • Hydro Oil & Energy

Hydro Capital Value Process OUR FOCUS AND ROLE

DG 0 DG 1 DG 2 DG 3 DG 4

Value creation Project Development

Value control Project Execution

DG 5

Next slides will mainly include tools and methods up to Project Execution DG4

We need improvement in integration of multicompetence

Our performance is of high professional standard

Date: 2004-01-28 • Page: 5 • Hydro Oil & Energy

Capital Value Process (CVP) overview

Decision Gates

Gatekeeper (Project owner establish drivers and expectations)

Decision Gate review

Decision Gate Support Package

OperationExecutionPreparation

ForExecution

ConceptSelection

Phase

FeasibilityStudyPhase

BusinessDevelopment

DG1 DG2 DG3 DG4 DG5

Evaluation of project after one year of operation

Date: 2004-01-28 • Page: 6 • Hydro Oil & Energy

Hydro Best PracticesPURPOSE• Consistent approach in Project Development

• To understand the business drivers

• Consistent approach in estimates

• Integrated teams

• Common terminology to avoid misunderstanding

(Integrated team)

(Project maturity)

(Experience transfer)

(Technical, safety andQuality control beforeStart-up)

(Adequate to makeA decision)

Date: 2004-01-28 • Page: 7 • Hydro Oil & Energy

Start-up Arena

Purpose Ensure

– Common understanding of the strategic fit– Common understanding of scope and necessary level of

details– Alignment on objective, deliverables, critical success factors

and goals.

Decide appropriate level of CVP implementation

Date: 2004-01-28 • Page: 8 • Hydro Oil & Energy

Start-up Arena – Key Focus

Allign those who generate income possibilities (geologists, reservoir engineers, drilling engineers)

WITH

Those who generates cost (facility engineers)

TO

Balance risk and opportunities

AND

Achieve best overall business result for Hydro and Partners

Date: 2004-01-28 • Page: 9 • Hydro Oil & Energy

Capital Value Process Quality Control

Abbreviations:

DG – Decision Gate

PRM – Project Risk Managment

PDRI – Project Definition Rating Index

DGSP – Decision Gate Support Package

IDC – Interdiscipline Check

Date: 2004-01-28 • Page: 10 • Hydro Oil & Energy

Benchmark Statistics to measure our performance

PROJECT TEAM DID NOT UNDERSTAND BUSINESS

OBJECTIVES

PROJECT TEAM UNDERSTOOD BUSINESS OBJECTIVES

Sch

ed

ule

Pe

rfor

ma

nce

Co

st P

erf

orm

ance

Pro

duct

ion

Pe

rfor

man

ce

Pe

rfo

rman

ce

Source: IBC 2003Industry Average

Volatility

Date: 2004-01-28 • Page: 11 • Hydro Oil & Energy

External benchmark

Norsk Hydro uses IPA to benchmark our competitiveness both in project development and project execution phase.

Learning Integrated teams through project development,

consisting of business owner, reservoir engineers, petroleum technology, drilling and facility engineers, is imperative for success.

Date: 2004-01-28 • Page: 12 • Hydro Oil & Energy

Our focus during Project Execution Frames

Contractors does most of the work through EPC or split contracts

Owner has a strong & competent team to: Manage contractual & technical interfaces Control safety through strong leadership Avoid scope changes Schedules trending & control Control cost Control quality

All based on standard systems

Date: 2004-01-28 • Page: 13 • Hydro Oil & Energy

Closing remarks Designing a consistent system is 10% of the work Implementation in work processes, people and

organisations is 90% of the work

Results are: Highly motivated workforce because they understand the drivers & overall issues Efficient use of resources. We do no more than what is necessary

We have therefore designed a training camp with real business cases to capture Capital Value Process way of thinking and working into our employees mind