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COUNTRY ISSUES

CPOI Experience of Operating i n Province: Level of practical experience of working in the province/country, either by PRE or our
Partners. This can also encompass local experience by another Business Stream.
CP02 Political Stability: The relative stability of the Federal Government andlor local authorities, plus power dependence on key
groups (eg Military) and any subversive insurrection activitylactive tribal rivalries. This should encompass both the host country
and similar problems in bordering countries (eg Azerbaijan, Armenia, Chechnya).
CP03 Security of Proprietary Information: The impact of losslleakage of prop'rietary information as a consequence of operating in
certain developing countries, eg China.
CP04 Currency Risk (vs US$): The impact of any foreign exchange fluctuations relative to US dollar from investment or operating
costs or product sales incurred in either local currency or other leading currencies (eg Yen, Euro, or Sterling). This should take
account of any arrangements in-place to hedge against such risks.
CP05 Fiscal PolicyITax (etc): The perceived degree of uncertainty associated with unforeseen changes in fiscal policy by host
governments & the attendant impact on ongoing business. Due recognition should be taken of initiatives to impose
environmental taxes (eg C02 in Norway). Account should be taken of any contractual agreements, eg in Production Sharing
Agreements, which protect us from subsequent changes.
CP06 Safety & Security of Personnel: The plans in place, together with the degree of associated costs, for the safety & security of
our staff working in third world countries where there is a perceived threat to their well being. This should include separate
consideration where the perceived threat is different at "working sites" to cities (ej: Colombia).
CP07 Regulatory Environment (Federal & Local): The degree of understanding of the federal regulatorylpermitting requirements -
plus likely changes - and any additional more localised requirements. This should include the appropriate degree of
understanding of the likely timescales for meeting such requirements & their approval by the authorities.
CP08 Local Culture: The uncertainty in impact of differing cultural differences on business performance - which may lead to reduced
flexibility in meeting schedule objectives in different parts of the world & hence impact costs.
CP09 EmploymenffLocal Sourci nq Expectations: The impact of expectations of both host governments & localised authorities to
optimise sourcing of goods & services with local suppliers & contractors, ie to help developlgrow their local infrastructure &
hence local employment, balanced against our own requirements for eg qualityltechnical integrity and effective contractor
management.
CPIO Infrastructure: The uncertainty in the qualitylreliability of existing local infrastructure, eg in terms of utility supplies, existing
pipelines and local fabrication facilities & associated impact on our development. This should also take account of any positive
benefits from our Global Social l nvestment Policy.
CPI I Group Re p u t a t i s The impact of any event that could have a measurable impact on our reputation whether it be with the
financial community (impact on share price), partners (their view of our ability to deliver promises), with host governments (risk
to future business opportunities) or active lobbying from global Non-Governmental Organizations (NGOs), such as Amnesty
International or Greenpeace. Given our Brand name is key to our success effective understanding of reputational risks
are vital; even a relatively small issue can adversely affect our reputation with very damaging consequences for the
whole organisation.
CP12 Ethical Conduct: The impact of any issues, eg inappropriate business practiceslconduct, or local Human Rights abuse which
is at odds with our Ethical leadership values.
CP13 ExpropriationIRevenue Security: The impact of uncertainty in either asset expropriation or risk of disruption to production (&
hence revenue) from terrorist activities (eg blowing-up export pipelines). This should also include risk to not receiving payment
for deliveries made - eg where there is significant dependence of product uptake in third world countries.
M ARKETSICOMMERCIAL CONTEXT
EPOI Partner Aliqnment: The impact of lack of alignment between each Partner in joint venture developments & the subsequent
impact on pace of development. This should also take account of views of differing Partner priorities with other competing
opportunities each may have & also their own objectives in terms of optimising utilisation of their own export infrastructure
systems.
EP02 Partner Fundi nq Constraints: The uncertainty in the ability of small Partners & state-owned enterprises to effectively fund
their share of agreed developments (eg as per our experiences in Colombia). Differing funding pri ori ti es by other maj or
Operators (such as Shell) shoul d be covered by E01.
EP03 Development of Product Markets: The basis for Products marketing including degree of uncertainty in global/local macro-
economic growths and how this could impact product sales predicated on specific market penetrations. This should include
taking account of any long-term supply contracts plus any cross-Stream supply issues.
EP04 Sources of Value Complexitv: The degree of dependence on business success of linked downstream projects proceeding -
eg dependence of Gas projects on downstream LNG, Power Generation and/or Petrochemical investments. Recognition of
advantageous use of C02 for EOR and optimisation of heat & power for cross business or 3rd party usage. Key here i s t o
ensure "OptionValue" gets effectively captured.
(There is some si mi l ari ty here to eg Opportunities wi thi n TO1 where there coul d be addi ti onal value f r om further
Exploration success in eg Deeper Reservoi r Horizons o r in TO2 from subsequent Secondary recovery.)
EP05 Feedstock & Product Values: The uncertainty in net impact on NPV of variation in eg oil price fluctuations in different
countries from our established Mid-cycle price scenario (eg our high bottom line leverage to higher oil prices in the USA vis-a-
vis eg Middle East). Similarly for Gas & Power and Downstream developments the uncertainty in Feedstock/Product value
differential assumptions on NPV.
EP06 Product Differentials: The uncertainty in impact of product quality discounts/premiums on reference case assumptions
including anyimpact of local volume discounts as a consequence of significant increases in local supply market.
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EP07 Managing Executive Mngt Peformance Expectations: The uncertainty in ability of our Asset Development Team to manage
Executive Management Peformance expectations and hence to deliv& reference case promises due to eg, resource limitations
and/or inappropriate functional mix/skills/competencies (including the uncertainty in ability to effectively communicate these
limitations early enough during project development) including ability to effectively develop appropriate quality external
relationships needed to deliver performance.
EP08 Brand Issues: The uncertainty in value gained by optimising the positive strength of our Brand Image - ie any cross-stream
value through real focus on the PRE name rather than a narrower Project -focused approach.
EP09 Competitor threats t o economic success: The uncertainty in the overall asset life/NPV as a consequence of either active
competitive production/expansions etc and/or significant technological enhancements which render our process relatively
uncompetitive.
EPIO Feedstock AvailabilitylProduct Offtake Agreements: The impact of uncertainty in sources of feedstock supply (& attendant
implications for Feedstock prices) & uncertainty in assumptions for contractual take-up of products (particularly in developing
countries).
EP11 Terms Uncertainty: The uncertainty in commercial terms, whether it be in terms of Production Sharing Agreements (eg Price
fluctuation clauses, Contract Term, and/or Royalty payments), access over host third party facilities, or tariffs to third party
export infrastructure.
HEALTH, SAFETY & ENVIRONMENT
HPOI Safety of Design: The uncertainty in current understanding of the impact of any safety related design issues, eg the impact
from very high pressure operations, not currently fully evaluated. Examples could include very low probability risk of
catastrophic equipment failure (eg Piper " A) .
HP02 Emissions/Spills: The uncertainty in impact of any spilllunexpected emission on business outcome (albeit of very low
probability). Examples could include impact of eg spill in Deepwater GOM which impacted the business opportunity at
maximum cost exposure (including the associated Impact of cost of clean-up).
HP03 Environmental Sensitivities: Covers the impact of expectations of local communities in respect of their local environment
(including those concerns which relate to operations causing eg seismic instability). Also includes the uncertainty of impact of
environmental pressure groups such as Greenpeace leading to eg schedule related impacts.
HP04 Waste Management (eg Drill cuttings): The uncertainty in current understanding of the impact of any subsequent further
strengthening of our "Green Agenda" & subsequent impact on business outcome.
HP05 Differinq Partner Standards: The uncertainty in impact of differing Partner philosophies to our HSE policies & the potential
schedule related impacts plus any additional PRE "carry costs".
HP06 Health Sensitivities: Covers the impact of all types of health risks, including location-specific stress, increased mobilityltravel
etc, associated with our evolving working environment, and its potential impact on individual projects.
HP07 Construction Safety: The uncertainty in current understanding of the impact of issues associated with working on a
construction site (incl contractor fabrication yard or offshore installation and hook-up). This will also cover the potential impact
on operations of modifications and expansions to existing plant. E.g. Heavy lifts over live piperacks, pressure testing of new
equipment systems, vehicle accidents.
TECHNICAL CHALLENGE
TPOI Subsurface DelineationlComplexity: The impact of uncertainty in subsurface volumes, delineation/complexity & the
associated impact on hydrocarbons-in-place (STOIP) reserves size (& the attendant impact of this uncertainty on NPV). (If
Teams use this Factor to capture Uncertainty in Recoverable Reserves then any additional lmpact from TO2 should not be
skewed .)
In particular circumstances there could be merit in utilising either TO1 or TO2 (or possibly E04) to help illuminate
risked lmpact of potential additional value from additional Exploration success in, eg Deeper Horizons. In such
circumstances the lmpact on NPV needs to be net of additional costs to capture such incremental value. It is
important from a "Real Options" perspective that such opportunities can
be appropriately illuminated from the ALERT process.
TP02 Recovery Factor: The impact of uncertainty in Recovery Factor & the associated impact of uncertainty in recoverable
reserves.
(Similarly to comments in TO1 above it is important that any opportunities to subsequently capture potential
incremental recovery volumes, eg by retrofitting secondary recovery plant on pre-installed space are illuminated -
including the impact of that subsequent incremental retrofit costs on incremental NPV.)
TP03 GORlGCRlWater ProductionlFluid Injection: The impact of uncertainty in GOR and/or GCR or water production or fluid
injection requirements & the associated impact on Facilities Processing requirements, eg Gas Handling/compression &
associated Power Generation requirements.
TP04 Reservoir Fluids Characteristics: The uncertainty in knowledge of fluid characteristics (eg H2S but particularly C02 content
and it's environmental tax implications) across the reservoir & the associated impact on eg flowlines/facilities/wells
design/metallurgy & requirement for additional gas treatment facilities.
TP05 Well Productivity: The uncertainty in impact of wells productivity & the associated uncertainty in both the number of production
wells and injection wells (including the impact of any changes in assumed ratios). This should take account of both initial well-
flows plus a;;sumptions in rate of fall-off of individual wells.
TPO6 TerrainlTopographvlWater Depth: The uncertainty associated with understanding of the terrain, topography or water depth in
which the development is to be undertaken and the impacts these may have on the development concept (eg current limitations
with respect to Riser technology in deep water developments).
TP07 SeismologvlSoillMet-ocean Conditions: The uncertainty associated with local seismology, soil conditions or met-ocean
conditions and the impact these may have on the development concept.
TP08 Facilities Concept (choicelstretch incl Energy Efficiencv): The uncertainty associated with the reference case assumptions
made in the choice of Facilities concept, including degree of real experiencelknow how of the technology plus the assumed
degree of stretch involved. Particular focus on optimising energy efficiency through best use of technology (eg onshore power
generation).
TP09 Drilling Complexity: The uncertainty associated with the degree of complexity pf wells (eg degree of step-out, length of
horizontal sections, proximity of salt-domeslshallow-gas etc) and the assumptions made in reference case in terms of
technology know howlstretch, well design, learning, side tracks plus weatherloperational downtime.
TPIO Completions Complexity: The uncertainty associated with the complexity of the completions philosophy and the assumptions
made in reference case in terms of technology know howlstretch, completions design, learning, tree-running plus
weatherloperational downtime.
TPI I Mid-StreamlExport: The uncertainty in respect of Export system (type andlor size etc), the degree of stretch involved (eg
arctic pipelines etc), understanding of terrain, and the understanding of any revolutionary high grade steel and/or welding
techniques assumed.
PROJECT DEFINITION & EXECUTION COMPLEXITY
XPOl Availability of Kev Skills: The uncertainty associated with the likely availability and appropriate skills
competencieslexperience of key OperatorIOwner staff both for the overall development and in the construction locality.
XP02 Early Team Alignment (incl. Partner Staff): The uncertainty in ability to build early cross-functional team alignment of Project
Objectives etc including alignment of seconded Partner staff to be able to effectively influence BU Mngt/Partners/Operators with
detailed scopi ngldefi nitionlexecu tion phi losop hies (Differs from C01 with relates to broader partner alignment.)
XP03 ModificationlRevamp content: The uncertainty associated with the degree of ModificationIRevamp content associated with
the development and assumptions made in terms of provisionlreplacement of existing plant & materials (eg status of
underground/corroded pipe work, electricallinstrumentation, etc). This needs to include understanding of interactions with
associated shutdownslturnarounds. It also needs understanding in uncertainty in quality of "as-built" information on existing
plants & basis for how work within existing plants will be scheduled (given permitting constraints).
XP04 Schedulinn Basi s Risk (to First Production): The overall uncertainty associated with the scheduling basis & norms used to
model the pace of development including degree of stretch - both in terms of reference case sanction date, project execution
duration, and overall cycle time to first beneficial production (ie DiscoverylStart of Appraise to Start of Operate). For Gas
projects inability to meet contractual gas delivery dates can result in significant penalty payments & lead to significant
erosion in value.
It should be borne in mind that there are a raft of schedule related factors (eg Partner alignment) already captured &
hence careful consideration is required to minimise "double dipping".
XP05 Estimating Basi s Risk: The overall uncertainty with the cost estimating basis for the development
(Facilities/wells/export/special infrastructure costs - eg Security) including degree of stretch in terms of reference case (eg
appropriateness of key benchmarkslnorms for major cost drivers).
I t shoul d be borne in mind that there are a raf t o f capi tal cost rel ated factors already captured (eg Facilities
conceptlExport system/Drilling compl exi ty etc) & hence careful consideration is requi red to mi ni mi se "double
dipping" (eg limit as appropriate in this category to rat eshorms uncertainties rather than scope-related uncertainties
consi dered elsewhere).
XP06 Work FrontsIKey Interfaces: The uncertainty in the impact of key development interfaces (eg Sub-
surfaceNVellslFacilities1Export including contractorlvendorlrelationship interfaces) & the associated impact on cost & schedule
assumptions.
XP07 Quality of Design BasisIDefinition: The uncertainty in the definitionlquality of design basis of reference case & current Front
End Loading status.
XP08 Remoteness/Access/Lo~istics Complexity: The uncertainty associated with remoteness eg, difficulty in delivering equipment
& materials to construction site, including status of understanding of roadlrail infrastructure & customs clearance procedures
plus site accornmodationlcatering needs.
XP09 Climatic Weather Windows: The uncertainty associated with climatic weather windows (eg hurricanes, ice, abnormal waves,
tropical storms, shallow water etc) & their impact on schedule assumptions (both in terms of direct constructionlinstallation
activities or in transportation assumptions to construction site).
XPlO ContractorIVender Sourcing: The uncertainty associated with sourcing of goods & services plus the quality of contractors
management including the market-related activity impact on availabilitylpricing of same and assumptions made in terms of
internationalllocal contents. This should also consider implications from eg local trade union andlor alliancing agreements.
XP11 Rigllnstln. Vessels Availability: The uncertainty associated with availability of appropriate duty drill rigslinstallation barges
and assumptions made in terms of market-related pricing for these.
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XP12 Labour Market: The uncertainty associated with both the availability, competency, and productivity of local labour pools & their
possible impacts on cost & schedule assumptions.
XP13 Project Strategy Development: The uncertainty associated with the development & structure of the Project Strategy & the
associated Contracting strategy.
OPERABlLlTYlPRODUCTlON RAM P-U P
YPOI Availability of Experienced Operations Staff: The uncertainty in the availability (& sourcing of) experienced Operations &
Maintenance staff.
YP02 Operating Cost Risk: The uncertainty in the estimates of operating costs, including key assumptionslratesloperating
efficiencies made.
YP03 Systems Availability (eg PlantlExport/Wells~: The uncertainty in the availability of Wells plus third party host facilities andlor
export systems & their potential impact on production forecasts.
YP04 Level of New Technoloqy Equipment Items: The uncertainty of New Technology equipment installed impacting production
forecasts.
YP05 Sparing Philosophy (Critical Itemsk The uncertainty of the sparing philosophy of critical items, ie those utilising significant
space, such as power generators andlor compressors and potential impact on overall availability & hence production forecasts.
YP06 Operability of Design: The uncertainty of the design basis impacting overall availability and hence production forecasts.
YP07 Technical Integrity (incl. QAIQCJ: The uncertainty of the technical integrity philosophy impacting overall reliabilitylavailability
and hence production forecasts.
YP08 Decommissioninq Philosophy: The uncertainty in the decommissioning philosophy (including possible future changes eg
dictated by regulatory needs or changes in company philosophy) impacting overall economics.
YP09 Planned Rate of Ramp-up: The uncertainty in the assumed rate of ramp-up in production, and the associated impact on initial
Production Forecasts.

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