USSaudiForum - Panel 10 - Chuck Montgomery - Opportunities in the Oil and Gas Sectors

FLOWSERVE | TECHNOLOGY TRANSFER – SAUDI ARABIA

SEPTEMBER 18 , 2013

Brief Introduction to Flowserve

Europe, Middle East & Africa

MFG QRC

28 53

N America

MFG QRC

19 58

Latin America

MFG QRC

6 23

Asia Pacific

MFG QRC

12 41

•$4.76B in revenues in 2012

• 65 manufacturing and 175 QRC sites globally

•Five business platforms‒ Engineered Pumps‒ Industrial Pumps‒ Seals‒ Valves‒ Aftermarket Services

• Customers and products span diverse markets

• Flowserve has a long history in Saudi Arabia with significant installed base of pumps, valves and seals

• $110M+ investment in three plants in Dammam in the last five years

• 186 employees with 47% Saudi employment

• Initial focus is on customers in Saudi Arabia, but future expansion plans include supplying to the GCC

Presence in Saudi Arabia

Localization

• The Flowserve investment in recent years has been the result of Saudi Aramco programs‒ The Corporate Procurement Agreement (CPA) was signed in November of 2008 and provides the

framework for: Localization of Flowserve products and aftermarket services Technical collaboration

‒ The first Local Manufacturing Development Program was signed in April of 2012 Provides a commitment by Saudi Aramco for annual purchases that justifies and promotes the

investment in local manufacturing facilities and supply chain to achieve 75% local content

Lead Plant

Product Configuration

& Proliferation Product

Localization

Low Cost Country Sourcing

Product Lifecycle

Management

Training & Technical Support

After Sales/Service

Support

Technology Sharing

Product cost Reduction

Product Certifications• Localization of manufacturing

‒ The major challenge for localization is to meet the expectations of the local customer without sacrificing quality or technical competence

‒ Programs should exist to transfer manufacturing and product technology in a controlled manner

‒ Development of the local supply chain is important from a lead time and quality perspective

Localization

• Localization of Aftermarket Services‒ There is a significant demand from Saudi Aramco and the other

Saudi end users to provide local aftermarket service Start-up and commissioning assistance Technical programs and assistance with improving

productivity, reliability, and driving life cycle cost reductions

‒ Speed of response is a key requirement in Saudi Arabia that includes:

On-site technical support with qualified technicians Short deliveries of parts or replacement product

‒ Engineering resources are crucial Problem solving Upgrades

‒ Training programs for employees and customers are in demand

• Saudi Aramco have resources and programs to assist manufacturers who want to localize operations and services

• The investment must be made on the front end, and the plant approved before orders can be received

‒ “Store Fronts” will not be approved• Local consulting firms are advised to understand procedures and regulations

concerning licensing, taxes, visas, etc.• Develop a solid support plan (commercial and technical) for the local plant

‒ Be prepared to send support resources from outside Saudi• A robust Saudization plan is necessary to insure:

‒ The early involvement of expats for expertise and training‒ The eventual transition of jobs to qualified Saudi employees

• The market for Saudi employees, especially engineers, is very competitive‒ Higher end compensation packages and career plans for key employees are a

must‒ Partnerships with local technical universities is helpful

Conclusions

Thank You