Fleksibilitet i prosjektgjennomføring

TEMADAG NSP 18 FEBRUAR Hydro Oil & Energy

Norsk Hydro accomplishment last five years

Oil/gas production BPD 600000 500000 400000 300000 200000 100000 0 1998 2003 Aluminium production Billion NOK 80 70 60 50 40 30 20 10 0 1998 2003 Improved earnings Billion NOK 20 15 10 5 0 1998 2003 Project Execution Volume

75 BNOK Same volume anticipated next five years

Sales and Assets Divested NOK 25 billion Aquisitions VAW

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

Hydro Stage Gate System (Capital Value Process)

Business Development

DG1

Feasibility Study Phase

DG2

Concept Selection Phase

Oil and energy Light metal

DG3

Preparation

For Execution

DG4

Execution

DG5

Operation

Agri

Divest next year

To achieve Predictable and competitive projects

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

Hydro Capital Value Process OUR FOCUS AND ROLE

Value creation Project Development DG 0 DG 1 DG 2 DG 3 We need improvement in integration of multicompetence DG 4 Value control Project Execution DG 5 Our performance is of high professional standard Next slides will mainly include tools and methods up to Project Execution DG4 Date: 2004-01 28 • Page: 4 • Hydro Oil & Energy

Capital Value Process (CVP) overview

Business Development

DG1

Feasibility Study Phase Decision Gates

DG2

Concept Selection Phase

DG3

Preparation

For Execution

DG4

Execution

DG5

Operation Gatekeeper (Project owner establish drivers and expectations) Decision Gate review Decision Gate Support Package

Evaluation of project after one year of operation Date: 2004-01 28 • Page: 5 • Hydro Oil & Energy

Hydro Best Practices

PURPOSE • Consistent approach in Project Development (Integrated team) • To understand the business drivers (Project maturity) (Adequate to make A decision) (Experience transfer) • Consistent approach in estimates • Integrated teams (Technical, safety and Quality control before Start-up) • Common terminology to avoid misunderstanding Date: 2004-01 28 • Page: 6 • 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: 7 • 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: 8 • 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: 9 • Hydro Oil & Energy

Benchmark Statistics to measure our performance

Source: IBC 2003

PROJECT TEAM DID NOT UNDERSTAND BUSINESS OBJECTIVES PROJECT TEAM UNDERSTOOD BUSINESS OBJECTIVES

Industry Average Volatility Date: 2004-01 28 • Page: 10 • 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: 11 • 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: 12 • 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  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  Results are:  Highly motivated workforce because they understand the drivers & overall issues  Efficient use of resources. We do no more than what is necessary Date: 2004-01 28 • Page: 13 • Hydro Oil & Energy