EY’s focus is on enabling clients to

“Make the Right Promise, and Deliver on the Promise Made”

Select Best project Describe Best Project Implement Best Project

Operation and
Identification G1 Selection G2 Definition G3 Execution G4
Control
Concept Pre-Feasibility Feasibility
Is the Is it the Should the Project Can operations
opportunity aligned with best alternative to proceed? start?
Company strategy? implement the project?

Stage-Gate Objectives
Identify
opportunities in
line with Company
strategy.
Select the best Finalize project Execute the Operate and
alternative to scope, cost and project, assess ensuring
implement the plan and obtain considering the performance and
project. approval of funds. scope, cost and maximum return
plan. for the company.

Benefits of Stage-Gate Governance

• Alignment of resource commitment (e.g. financial, organizational) to project definition, leading to investment
optimization and cost savings
• Optimized effort in project development, by addressing critical success factors defined for each stage-gate;
investment in early-stage planning (or Front End Loading)
• Effective mitigation of risks through effective stakeholder engagement, by ensuring dependencies/ unknowns
are analyzed progressively, stakeholder inputs are duly considered and carry-over of risk is minimized to
subsequent stages

Page 1 Thursday, February 11, 2021 Introducing EY's Capability in Capital Program Management
Key Imperatives before RRPL
FEL 1
Concept
Eliminate Options & Select Best project
► Have options (e.g. capacity/ location/
technology) been identified for the
opportunity under consideration?
► Has technology assessment been
completed for listed options?
► Has site evaluation been initiated?
► Have conceptual layouts and
conceptual engineering definition
been completed?
► Have major risks associated with the
opportunity, along with critical
success factors for the project been
identified?
► Has the Class 5 Cost Estimate (-50%
to +100%) been prepared?
► Have major milestones for the
opportunity/ project been identified?
► Has Conceptual Procurement Plan
been prepared?
► Has Long Lead strategy worked out?
Page 2 Thursday, February 11, 2021 Introducing EY's Capability in Capital Program Management
G1
FEL 2 G2
FEL 3 G3
FEL 4 G4
FEL 5
Pre-Feasibility Feasibility Execute Operate
Define Best Project Execute Best Project
► Have we evaluated and finalized the technology► Has the Execution & Contracting ► Has All engineering ► Is the operation
option for further definition? Strategy been prepared? deliverables prepared organization in place?
► Have we evaluated and finalized the site for the► Has the Environmental Impact timely & to the correct ► Is the operation
project? Assessment been approved? standard? philosophy defined?
► Have the Lessons Learnt from similar projects ► Has the Geo-Technical Study been ► Has all equipment & ► Is the Raw Material &
been reviewed and incorporated? completed? Have plot plans/ plant material purchased and Consumable sourcing
► Has the preliminary Project Execution Plan layout been prepared? being delivered within time strategy defined &
been prepared? ► Has the mandatory engineering & budget? infrastructure is in
► Has the preparation of Environmental Impact definition been achieved? ► Has all the statutory place?
Assessment been initiated? ► Has the Class 3 Cost Estimate (-20% clearances for build has ► Is the product
► Have project sustainability objectives been to +30%) been prepared? been obtained? evacuation strategy
frozen? ► Has the Level-1 Integrated Project ► Has the execution defined & infrastructure
► Has initial Geo-Technical study been initiated? Schedule been prepared, duly organization in place? in place?
Have preliminary plot plans been prepared? sequenced and networked? ► Are all execution ► Are maintenance
► Has the process of detailed risk identification ► Have project risks been identified & manpower & other strategies defined and in
been initiated? qualified, mitigation plans prepared resources are deployed? place?
► Has the evaluation of Execution and and contingencies estimated? ► Have all services contract ► Are all CSR being
Contracting Strategy been initiated? ► Has Constructability Assessment been been laid out? implemented as per the
► Has the Class 4 Cost Estimate (-30% to +50%) initiated? ► Are all HSEQ need of the vision adopted?
been prepared? ► Has Baseline Procurement Plan project addressed?
► Has the preliminary L-1 schedule been prepared?
prepared, duly sequenced and networked? ► Has Order Placed for Long Lead
► Has Draft Procurement Plan prepared? Items?
► Has Enquires floated for Long Lead Items?
Our Framework for Feasibility Assessment
and Business case
FEL 1 FEL 2 FEL 3 FEL 4 FEL 5
G1 G2 G3 G4
Identify Assess & Select Define Execute Operate
Is the Is it the
opportunity aligned with best alternative to Should the Project Can operations
Company strategy? implement the project? proceed? start?
Identify Options Select Best Option Define Best Project Execute Defined Project Realize Value

“Make the right promise” “Deliver on the promise made”

► Define Objective ► Business ► Review Business
► Market Study Objectives Case FID
► High Level ► Detailed Market ► Technology Eval.
Activities

Technical Study Study ► Facilities Design

► Financial Analysis ► Technical Study Basis
► Business Case ► Statutory Approvals ► CAPEX estimation
Definition ► Financial Analysis ► Financial Design
► High Level Basis
Business Case ► PEP
► High Level Project ► High Level Project ► Updated Business
Definition Objectives Case
► High Level Demand ► Customer, Supplier, ► Technology
Supply Analysis Competition, Market Recommendation
► High Level Environment, ► Design Basis
Technical Study Substitutes ► CAPEX
Deliverables

► High Level ► High Level ► Financial

Financial Analysis Technical Study Requirement
► High Level ► Statutory Approvals ► Project Executive
Business Case Requirement Summary
Details ► Project Execution
► Financial Analysis Plan
► High Level ► Detailed Business
Business Case Case

Page 3 Realizing Value from Capital Projects

Project Development, Review and Approval
Key Questions
FEL 1 FEL 2 FEL 3
G1 G2 G3
Identify Assess & Select Define
Is the Is it the
opportunity aligned with Company best alternative to Should the Project proceed?
strategy? implement the project?
Identify Options Select Best Option Define Best Project
“Make the right promise”
FID
► Have options (e.g. capacity/ location/ ► Have we evaluated and finalized the ► Has the Execution & Contracting Strategy
technology) been identified for the opportunity technology option for further definition? been prepared?
under consideration? ► Have we evaluated and finalized the site for ► Has the Environmental Impact Assessment
► Has technology assessment been completed the project? been approved?
for listed options? ► Have the Lessons Learnt from similar projects ► Has the Geo-Technical Study been
► Has site evaluation been initiated? been reviewed and incorporated? completed? Have plot plans/ plant layout been
► Have conceptual layouts and conceptual ► Has the preliminary Project Execution Plan prepared?
engineering definition been completed? been prepared? ► Has the mandatory engineering definition been
► Have major risks associated with the ► Has the preparation of Environmental Impact achieved?
opportunity, along with critical success factors Assessment been initiated? ► Has the Class 3 Cost Estimate (-20% to
for the project been identified? ► Have project sustainability objectives been +30%) been prepared?
► Has the Class 5 Cost Estimate (-50% to frozen? ► Has the Level-1 Integrated Project Schedule
+100%) been prepared? ► Has initial Geo-Technical study been initiated? been prepared, duly sequenced and
► Have major milestones for the opportunity/ Have preliminary plot plans been prepared? networked?
project been identified? ► Has the process of detailed risk identification ► Have project risks been identified & qualified,
► Has Conceptual Procurement Plan been been initiated? mitigation plans prepared and contingencies
prepared? ► Has the evaluation of Execution and estimated?
► Has Long Lead strategy worked out? Contracting Strategy been initiated? ► Has Constructability Assessment been
► Has the Class 4 Cost Estimate (-30% to initiated?
+50%) been prepared? ► Has Baseline Procurement Plan prepared?
► Has the preliminary L-1 schedule been ► Has Order Placed for Long Lead Items?
prepared, duly sequenced and networked?
► Has Draft Procurement Plan prepared?
► Has Enquires floated for Long Lead Items?

Page 4
 Stage Gate Framework (2/3)
► StageGate Framework is flexible in terms of number of Gates to be followed depending on
nature of Project
Project Classes Number of Gates Criteria

► CAPEX: > 25 M USD

FEL 1 FEL 2 FEL 3 FEL 4 FEL 5
Critical Projects Concept
G1
Pre-Feasibility
G2
Feasibility
G3
Execute
G4
Operate ► High Complexity
► High Risk

► CAPEX: > 5 M USD

Significant FEL 1 FEL 2 FEL 3 FEL 4 FEL 5
G2 G3 G4 and <= 25 M USD
Projects Concept Pre-Feasibility Feasibility Execute Operate
► Medium Complexity

FEL 1 FEL 2 FEL 3 FEL 4 FEL 5 ► CAPEX: <= 5 M USD

Routine Projects Concept Pre-Feasibility Feasibility
G3
Execute
G4
Operate
► Low Complexity

Examples
► Critical Project: Setting up New Refinery /Petrochemical Complex
► Significant Project: Adding New Unit in Existing Complex (New Diesel Hydrotreater for Euro IV quality Diesel)
► Routine Project: Revamping Existing Unit for improvement of Quality / Quantity of Product

Page 5 Oil and gas sector — Statement of credentials

 Stage Gate Framework (3/3)
► Stage wise functions and involvement

Stages
FEL 1 FEL 2 FEL 3 FEL 4 FEL 5
Functions
Business
Technology
Project Management
Project Control

Engineering
Procurement &
Contracts
Vendors & Contractors

Construction
Operations and
Management
Support Services

Management

No Involvement Low Involvement Medium Involvement High Involvement Responsible

Page 6 Oil and gas sector — Statement of credentials

 Stage wise Level I Deliverables
Stages FEL 1 FEL 2 FEL 3 FEL 4
Level of Engineering <5% <20% <40% 50% to 100%
Definition
Engineering
Process Design Preliminary Issued for Information Issued for Design Issued for Construction
Layout Definition Block Diagrams Major Equipment laid out Major Equipment & Structures Multi disciplinary model
(long leads/critical) laid out complete
Material Take Offs - Benchmark estimates Information Actual
Procurement Plan Conceptual Draft Plan Baseline Plan Updated Plan
Sche-dule Const, Comm & Operations Procur-ement

Long Leads Strategy Identified Enquiries Issued Order Placement Delivered

Modularization/ Pre - Conceptual Preliminary Final

Assembly
Constructability - Planned Reviewed Implemented
Logistics and Installation - Planned Reviewed Implemented

Project Master Schedule Level 1 Level 1 Level 1-5

Progress Reporting - - Preliminary Final

Purpose of Estimate Concept Study and cost of Viability Base line Detailed base line
prefeasibility study
Project Budget

Methodology Parametric or capacity Budget vendor quotations MTO’s from defined work pkgs; Detailed MTO’s and final vendor
factored firm vendor quotation bids
Page 7 Contingency Oil +30% to 40%
and gas +20 of
sector — Statement to credentials
+30% +10% to +20% +05% to +10%
Accuracy Range L: -20% to -50% L: -15% to -30% L: -10% to -20% L: -05% to -15%
 Stage wise Accuracy of Cost Estimation and Contingency
Stage FEL 1 FEL 2 FEL 3 FEL 4
Estimate Class CLASS 5 CLASS 4 CLASS 3 CLASS 2

Screening Concept Study Budget, Authorization, or Control

Estimation Purpose
Control
Capacity Factored, Equipment Semi-Detailed Unit
Cost Estimation Methodology Parametric Models, Factored or Detailed Unit Cost
Costs
Judgment Parametric Models
L: -20% to -50% L: -15% to -30% L: -10% to -20% L: -05% to -15%
Accuracy of Cost Estimation
H: +30% to +100% H: +20% to +50% H: +10% to +30% H: +05% to +10%

Percentage Contingency +30% to 40% +20 to +30% +10% to +20% +05% to +10%

Page 8 Oil and gas sector — Statement of credentials

 Stage wise Level II Deliverables for Engineering
Stage FEL 1 FEL 2 FEL 3 FEL 4 FEL 5
Estimate Class CLASS 5 CLASS 4 CLASS 3 CLASS 2 CLASS 1
Project Scope Description General Preliminary Defined Defined Defined
General Project Data

Plant Production/Facility Capacity Assumed Preliminary Defined Defined

Plant Location General Approximate Specific Specific Specific Specific
Soils & Hydrology None Preliminary Defined Defined Defined Defined
Integrated Project Plan None Preliminary Defined Defined Defined
Project Master Schedule None Preliminary Defined Defined Defined
Escalation Strategy None Preliminary Defined Defined Defined Defined
Work Breakdown Structure None Preliminary Defined Defined Defined
Project Code of Accounts None Preliminary Defined Defined Defined
Contracting Strategy Assumed Preliminary Defined Defined Defined
Block Flow Diagrams Started/Preliminary Preliminary Completed Completed Completed
Plot Plans Started Started/Preliminary Completed Completed
Process Flow Diagrams Started/Preliminary Preliminary/Completed Completed Completed
Utility Flow Diagrams Started/Preliminary Preliminary/Completed Completed Completed
Piping & Instrument Diagrams Started Preliminary/Completed Completed Completed
Engineering Deliverables

Heat & Material Balances Started Preliminary/Completed Completed Completed

Process Equipment List Started/Preliminary Preliminary/Completed Completed Completed
Utility Equipment List Started/Preliminary Preliminary/Completed Completed Completed
Electrical One-Line Drawings Started/Preliminary Preliminary/Completed Completed Completed
Specifications & Datasheets Started Preliminary/Completed Completed Completed
General Equipment Arrangement Drawings Started Preliminary/Completed Completed Completed
Mechanical Discipline Drawings Started Preliminary/Completed Completed
Electrical Discipline Drawings Started Preliminary/Completed Completed
Instrumentation/Control System Drawings Started Preliminary/Completed Completed
Civil/Structural/Site Drawings Started Preliminary/Completed Completed

Page 9 Oil and gas sector — Statement of credentials

 Stage Gate Process (TBD)
The project stage gate process framework will establish the decision criteria and
processes for progressing the project from one stage to the next

DM DM DM DM

Initiation SG Planning SG Execution SG Close-out SG Operation

DP DP DP DP

Long term and

Safely implement Review and close Operate and
short term plans
Finalize project project consistent project set-up and evaluate
for engineering,
scope, design, cost, with scope, undertake performance
procurement,
& schedule specifications, cost commissioning relative to business
construction and
and schedule activities strategy
commissioning

DP
DP: Decision Package DM
DM: Decision Maker SG
SG: Stage Gate

Page 10
10
EY’s expertise in Capital Investment Projects

Appraise Select Define Execute Operate

Project life
cycle

Development
Opportunity

Design basis

Commission
Negotiation

Maintain &
Execution
Initiation

selection
appraisal

Design &
Business

Improve
Concept

Strategy

Operate
FID
FEED
Data
Case

Plan

Plan
Test
What are
Shell’s
Challenges?

 Poor strategic alignment  Fail on market analysis and valuation  Failure to set standards  Lack of contract strategy and alignment to  Ineffective handover operational handover
 Lack of project detail • Lack of clarity surrounding the  Failure to optimize design (value work scope  Poor asset register
 Unrealistic assumptions (market, appropriate contracting model engineer) for project  Selecting the wrong contractor (Price  Poor asset management strategy and
technical, regulatory etc) • Resource planning / availability  Failure to optimize design across multiple rather than value or maturity) processes
EY’s  Capital scarcity competing projects - challenges projects  Poor understanding of the supply chain and  Asset integrity is not fully understood
Commonly investors require a far quicker +ve NPV • Estimating realistic capital costs  Over-engineering or inadequate current market conditions  Poor investment case
Occurring than before the banking crash • No common project/ programme engagement of operations including  Fraud risk/ counterfeit product risk  Poorly Optimised spares management
 Far greater scrutiny on ROI and management processes consideration of full lifecycle costs  Ineffective management reporting
Lifecycle  Minimisation of overheads as plants move
difficulties managing stakeholder • Poor understanding of where risk is best  Procurement functions are overwhelmed -  Health, safety, environment (TRIR) towards decommissioning
stage expectations managed (client vs supply chain) creates a bottleneck and loses control  Inexperienced project management  Infrastructure and equipment sabotage
 Unpredictable market conditions • No culture of "programme delivery" vs functions
challenges  High level of Project asset operator
optimism/misplaced commitment

Business Case Analysis for gas Independent Investment Improving Contractor Proj Mgt Plan Smart metering Procurement
9 interconnection 17 Cost Verification 27 Review 1 Mgt
32 Development 6 delivery design 35 Process
Project Mgt Improvement
Smart metering – Regulatory Positioning 24 Expansion Diagnostic Governance Structure Revised Contracting Construction Cost
10 29 7 34 & Schedule 19 Capability
Review Design Process Contract Mgt
Lifecycle Review
Enhancement 39 Review
Investment Appraisal Tendering Methodology & EPCM Incentive Transforming
stage specific 38
Oil Sands Org. 3 Process
30 Sourcing Strategies 8 Review 25
Contractor 20
operations
Design Review
credentials
Supply Chain and Skills Requirements for 33 Construction Cost Compliance &
12 construction mgt Project Mgt
37 Process Review
Resource Planning
14 Process
50 Evaluation
Onshore O&G
Contract Mgt System
48 Supply Chain Process Security &
23 Resilience 15 Enhancement
Management

Capital Projects Contracts Upstream Risk 45 Budget / Contractor

11 Risk Assessments 21 Programme Assurance 31 Construction Advisory 41 Management
2 Gaining control of Audit
Revision
Capital Investment
Cross- Project Assurance
13 System Review 22 Organisational Design
Upstream Project
42 Coordination 46
Project Spend Analysis

Lifecycle 4 Program and vendor 36 Finance Community of

management Practice Financial Expenditure
credentials 16 Internal Audit 28 Internal Audit 43 Critical Resources Mgt 47 Analysis
Capital Commercial Integrated Planning &
5 Station Redevelopment
18 Process
Assurance & Program 40 44 JV Process 49 Project Expansion Audit
Excellence 26 Management Capability Project Practices Management

N.B. The number within in each circle

Credentials X UK&I Cred provides a link to the detailed
X Oil & Gas Cred X Power & Utilities Cred X Mining & Metals Cred X Infrastructure Cred
Key X credential which can be found in the
Global Cred appendix