Module 7
Principals SEC
Oil & Gas introduction Course for NonEngineers SEC
1. EPC
Scope of Supply includes Engineering, Procurement and
Construction
Contractor is responsible for the complete construction
process and is compensated a fixed Lump Sum.
Scope is divided in Mile stones upon which payments will
be made to the Contractor.
Procurement = Buying
Phu My 4
Example Mile stones EPC;
1. Foundation completed
2. Turbine placed
3. Buildings completed
4. As built documentation submitted
10%
50%
30%
10%
EPC: Alstom, Marubeni, Lilama
Oil & Gas introduction Course for NonEngineers SEC
2. EPIC
Scope of Supply includes Engineering, Procurement, Installation
and Commissioning
Contractor is responsible for the complete construction
process and delivers the installation working according to
pre agreed standards and is compensated a fixed Lump
Sum.
Song Doc FPSO
Contractor and customer have detailed discussions on the
division of the risk
Example Mile stones EPIC;
1. Foundation completed
2. Turbine placed
3. Turbine commissioned
4. First power delivered
5. As built documentation submitted
10%
30%
20%
30%
10%
Oil & Gas introduction Course for NonEngineers SEC
EPCI: MODEC
+ Operation and Maintenance
3. Agent / Dealer / Principal
Agent = Party assisting the manufacturer in a country
or territory to sell its products. Contractual relationship is
directly between manufacturer and end-user. Agent
receives a pre-determined fee when the sales is
completed.
Payment risk is with the manufacturer.
SEC ?
Dealer = Party represents the manufacturer in a
country or territory and sells its products. Contractual
relationship is directly between manufacturer and Dealer.
Dealer sells to end user with a mark-up.
Payment risk is with the dealer.
Principal = Manufacturer or OEM that the agent or
dealer represents.
e.g. SEC has a Dealer-Principal
relationship with IHC
Oil & Gas introduction Course for NonEngineers SEC
4. Buy - Sell
Buy-Sell = Trading activity whereby trader buys from
manufacturer and sells to end-user. Payment risk is with
the trader.
Generally refers to a trading deal where trader has no in
depth knowledge of the product and only serves as
intermediate for relatively small commission.
Added value is based on the imbalance of information,
knowledge of local rules and regulations with regards to
logistics and documentation or economy of scale.
Oil & Gas introduction Course for NonEngineers SEC
5. Transfer Pricing
Transfer Pricing = Arrangements between internationally related parties to minimize CIT
tax payable.
CIT = Corporate Income tax
Country B
Country A
Payment
Raw materials
CIT = 30%
CIT = 10%
Subsidiary LTD
Ownership?
Mother Company LTD
Arms Length?
2007-2012 Increase in turnover from 50
Million USD to 150 Million USD per year.
Average Losses 5 Million USD per year.
Coca-cola beverages Vietnam Ltd.
Oil & Gas introduction Course for NonEngineers SEC
6. Letter of Credit
L/C = Letter of Credit: A bank product that guarantees the Seller payment upon submittal
of pre-agreed documents to the issue-ing bank.
Who asks?
Pre-agreed documents?
Who issues?
Who pays Seller?
Concerns for Buyer:
- Quality of the goods (third party inspection)
- Costs of the L/C
Oil & Gas introduction Course for NonEngineers SEC
7. Bond (Bid / Performance / Warranty)
Bid Bond = A financial guarantee issued by the bank of the Bidder to the issuer of the
Tender that the Bid will be honored upon award.
Percentage?: 1-3%
When pulled?: When the Supplier participates in the tender, but declines when awarded.
Costs?: 1-2% per year of amount guaranteed
Performance Bond = A financial guarantee issued by the bank of the Supplier to the
Client that guarantees performance by the Supplier.
Percentage?: 5%-20%
When pulled?: When the Supplier cannot deliver on its promises.
Costs?: 1-2% per year of amount guaranteed
Warranty Bond = A financial guarantee issued by the bank of the Supplier to the Client
that guarantees that the guarantee commitments are honored.
Percentage?: 5%-10%
When pulled?: When guarantee commitments are not met.
Costs?:1-2% per year of amount guaranteed
Oil & Gas introduction Course for NonEngineers SEC
8. Industrial Service
Wide range of activities that Industrial operators wish to outsource
- Maintenance
- Emergency Repairs
- Overhaul
- Installation
- Special fabrication
- In-situ Machining
- Cleaning
- Blasting
- Painting
Oil & Gas introduction Course for NonEngineers SEC
9. Engineering
Invent, Design, Calculate, Built and Test a new object, process or technique
- Mechanical Engineering
- Automation Engineering
- Civil Engineering
- Electrical Engineering
- Software Engineering
- Petroleum Engineering
- Chemical Engineering
JV with PV Engineering
(49%)
Worleyparsons
Petrovietnam Design JSC
Oil & Gas introduction Course for NonEngineers SEC
10
10. Subcontractor
Company that is awarded a scope of work that forms part of a bigger scope of
work under the Main Contract.
Client
Main Contractor
Subcontractor
Subcontractor
Subcontractor
Supplier
Can be Company or Consortium
Supplier
Tier 2
Tier 3
Subcontractor vs Supplier
Oil & Gas introduction Course for NonEngineers SEC
11
11. Mob / Demob
Mob / Demob = Fixed Lump Sum costs required to
prepare the equipment before starting a job and
dismantle It after the job.
Generally used in offshore construction industry and
refers to the costs involved to prepare a construction
vessel for a certain job and sail it to the project location.
Example of rate structure for a construction vessel;
Mob / Demob costs: USD 800.000 (all costs to prepare
the vessel in the departure port and sail to the location)
Day rate: USD 65.000 (costs per day that the vessel is
on location working for the customer)
Costs for the Client = USD 800.000 + (number of days) * USD 65.000
Oil & Gas introduction Course for NonEngineers SEC
12
12. IPEC/DMI
International Pipeline Equipment Company Ltd.
(Trading Company)
60,000 300,000 USD, mainly Spare parts
Mr. Bob Buchanan Director/Owner DMI (American)
Mr. James Menzak Sales Manager IPEC (Canadian)
Oil & Gas introduction Course for NonEngineers SEC
13
13. Uni Splice
Equipment for manufacturing
wire rope slings
80,000 250,000 USD, mainly Spare parts and Ferrules
Mr. Richard Money Sales Director (UK)
Oil & Gas introduction Course for NonEngineers SEC
14
14. Rosen
Inspection and pigging services
200,000 600,000 USD, cleaning projects, Ca Mau
Mr. Adira, Project Manager (Malaysian)
Oil & Gas introduction Course for NonEngineers SEC
15
15. IHC Hydrohammer
IHC Hydrohammer BV Hydraulic Operating Piling Hammers
(Soon to be sold off from IHC)
Piling
Hammer
50,000 5,000,000 USD, Spares, Dai Hung Phase II, S-280/750 VSP
Mr. Bastiaan Stuurman Area Sales Manager Asia IHC Hydrohammer (Dutch based in Singapore)
Mr. Ruud van den Bogaard Sales Engineer South East Asia (Dutch based in Singapore)
Mr. Egbert van t Hooft Sales Director Head Office (Dutch)
Oil & Gas introduction Course for NonEngineers SEC
16
16. IHC Handling Systems
IHC Handling Systems Vof Handling tools for Offshore Construction
Up ending Frame
Internal Lifting Tool (ILT)
Leveling tool for VSP 2011
Mr. Coen van Ruitenburg Sales Engineer (Dutch based in Singapore)
Mr. Marc Doorduin General Manager IHC Handling Systems (Dutch)
Oil & Gas introduction Course for NonEngineers SEC
17
17. IHC Dredgers
IHC Holland BV Dredging equipment
Cutter Dredger
Hopper Dredger
Lung Lo 2012: 5 Million EUR
Mr. Philip de Bats Area Manager South East Asia (Dutch)
Mr. Gijs Busser Area Manager South East Asia (Dutch based in Singapore)
Oil & Gas introduction Course for NonEngineers SEC
18
18. PRONAL
Rubber products for Jacket Installation
500,000 USD, Dai Hung Phase II
Mr. Sylvain Ehrhart Director (French) In Kuala Lumpur
Oil & Gas introduction Course for NonEngineers SEC
19
19. BAF Valves
Valves
5,000 250,000 USD, Multiple Valve Orders
Mr. Desmond Ang Sales Manager (Singaporean)
Mr. Roland Sweep Director/Owner (Dutch)
Oil & Gas introduction Course for NonEngineers SEC
20
20. Austcold / Howden
AustCold Refrigeration Pty Ltd
Process Refrigeration and Compression
500,000 5,00,000 USD, 2 skids for PV Gas in 2009, 2 skids in 2013
Mr. Gary Bradshaw Sales Manager in charge (Australian)
Mr. Livio Silvestro Director Howden (Australian)
Oil & Gas introduction Course for NonEngineers SEC
21
