BCG - COVID-19 - Oil Supply-Demand Sock

Navigating through
COVID-19 and oil

supply-demand shock
Discussion with PVN CEO
14 APRIL 2020
Your BCG team today
Jamie Webster Jaime Ruiz-Cabrero Asheesh Sastry

Senior Director, Managing Director & Managing Director &
BCG Center of Energy Senior Partner Partner
Impact Head of BCG SEA Head of BCG SEA
Energy
Rebecca Fitz Dave Sivaprasad Yan Li

Senior Director, Managing Director & Project Leader
Copyright © 2020 by Boston Consulting Group. All rights reserved.

BCG Center of Energy Partner SEA expert for PSCM
Impact Lead for Energy in in O&G
Vietnam
Sachin Sharma Marcin Miller Van Dang

Expert Project Leader, Principal Consultant
Expert in Upstream BCG Vietnam BCG Vietnam
O&G
1
BCG has invested extensively over the years on our
relationship with Petrovietnam
[2014] PSC Management Program
[2016] PVN Board Workshop
[2017] BSR 1 week on-site diagnostic – Multiple engagement and

workshop

[2017-2019] BSR Profit improvement proposal
[2017-2019] Extensive public sector engagement on energy
[2016-2020] Extensive engagement with PVN Executive Team on

multiple topics
• Upstream productivity
• Digital transformation
• Gas & LNG
2
Market Perspective (15 min)
Perspectives from IOCs & suggested priorities for PVN (10 min)
Deep Dive: Strategic responses by industry players (15 min)
Deep dive on key transformation topics (45 min)

• Supply Chain Resilience
• Transform core processes to significantly reduce cost base

• Innovation in capital delivery
Deep dive: Enabling through Digital & Technology (10 min)
Discussion on way forward and priorities (15 min)
3
Market Perspective
4

Macro-economic Perspective
5

Reported case count growing rapidly
US has seen world's highest # of new cases in last few days
Data as of 13 Apr
Daily number of new cases detected

150,000 # cases and deaths reported
Total Avg. daily Total
Rapid cases growth1 deaths
expansion to US 558.9 k 24% 22.1 k
100,000 US and RoW Spain 167.7 k 19% 17.2 k
Italy 155.9 k 16% 19.9 k

Europe new heart Germany 128.5 k 18% 3.0 k
of pandemic France 122.2 k 18% 14.4 k
50,000 United Kingdom 83.5 k 19% 10.6 k
China 82.9 k 9% 3.3 k
Chinese outbreak
Iran
under control 72.3 k 15% 4.5 k
Turkey 57.4 k 18% 1.2 k
0 Rest of the world 404.6 k 12% 18.1 k
13- 16- 19- 22- 25- 28- 2- 5- 8- 11- 14- 17- 20- 23- 26- 29- 1- 3- 6- 9- 12-
Feb Feb Feb Feb Feb Feb Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar AprApr Apr Apr Apr
1. Calculated from first day when cumulative # of cases surpassed 100

Source: National Health Commission China (China-specific data through Tencent 腾讯), Johns Hopkins CSSE(Non-China Data through JH.CSSE Github), BCG Henderson Institute analysis 6
Global markets are reacting to COVID-19 with significant decline
Markets looked past COVID- Inflection with virus' spread

19's spread in China to Europe, ME, and U.S. US stock market plummets despite
Federal Reserve’s emergent interest
Feb. 21 Mar. 3 rate cuts, which challenges
The Federal Reserve took the
emergency step of cutting U.S.
traditional crisis mgmt. measures
interest rate to combat COVID-19
Declines can be seen in gold, crude

100
oil, dollars, stock and bond markets
Shanghai SE 50
S&P 500 Chinese market may become a safe

haven for global investment
80 S&P Global 1200 • A shares have rebounded from Feb.
Euro Stoxx driven by liquidity and onshore
sentiment, but has started to
BOVESPA decline again later in mid March
• Morgan Stanley upgrades China,
Singapore, and Australia as new
0 safe haven of assets
Jan 01 Feb 01 Mar 01 Apr 01 May 01
1. 6 emergent cuts over the past 20 years happened during the Internet bubble in 2001, after the 9/11 terrorist attack, and before and after the subprime crisis in 2007; 2. Institutions
like DB, UBS and GS have greatly cut respective forecast on US economic growth in 2020 H1, and DB even expects a negative growth in Q2; 3. Many companies have reduced estimated
demand for crude oil from 1.2Mn barrels/day at the beginning of the year to 0.3-0.6Mn barrels/day; according to the Brent price on Feb. 28th 7
Source: S&P Capital IQ; BCG ValueScience® Center
Unprecedented real economy
freeze now in the data
Weekly initial claims
4/2 print
3/26 print

In level space, ~10x the prior peak or peak in
Global Financial Crisis (arrows)
Subway No. 7 on March 17th at 1:30 PM Source: NBER, Department of Labor, and BCG Center for Macroeconomics analysis 8
between Grand Central and Times Square Photo credit: Author
Testing: Virus testing focus now - will shift to antibodies
Testing (virus) - levels Testing (virus) - scaled Testing (antibodies)
?
Need serological (antibodies) testing to
determine degree of asymptomatic

infections and likelihood of "herd
immunity"
Testing for Virus accelerating in South Korea an example of the Implications for duration of social
multiple geographies (e.g. US) power of extensive virus testing distancing and thus extent of
macroeconomic damage
Source: Covidtracking.com, German Hospital Society (DKG), Korean Center for Disease Control, Ministry of Health and Community Protection - United Arab Emirates, BCG Center for 9
Macroeconomics
What shape will the Covid-19 shock take? Illustrative
V – at least this U – the main risk L – still unlikely

Severe shock, but can bounce Significant and perpetually Significant and perpetually
back to prior growth path lost value growing lost value
Perpetually growing
Post-shock, no Some perpetually lost output
lost output lost output
Lost output
Lost output Lost output

Time periods Time periods Time periods
V shape leaves de minimis impact One-off damage to economy's Recurring or irreparable damage to
on the present value of future supply side (labor, capital, economy's supply side leads to
output productivity) leads to more and perpetually growing loss of present
perpetual loss of present value of value of future output
future output
10
Source: BCG Center for Macroeconomics analysis
V-U-L empirics: same shock, three shapes
V-shape U-shape L-shape
2008 Canada 2008 United States 2008 Greece
Growth never
comes back to
prior trend and
growth rate
remains depressed
Eventually returns to
trend but can take a
Never comes back to prior
long time

growth trend (U) – even as
growth rates approach
their old pace
 Canada closest to V-shape  U.S. clear U-shape (returning to  Greece experienced a sustained
(returns to prior trend) growth rate, but at a lower trend) depression and L-shape
 No systematic banking crisis – no  Driven by severe banking crisis – a  Growth has struggled at a much
damage to economy's supply side one time hit to capital formation slower pace, with recurring
damage to supply side
Note: Canada trend (1985-2008); US trend (2003-2007); Greece trend (1995-2006) 11
Source: NBER, BEA, Statistics Canada, Hellenic Statistical Authority (ELSTAT), BCG Center for Macroeconomics analysis
Leaders forced to make two macro calls in COVID crisis
Strategic macro call Tactical call

What will be the present value of future What will be the depth, speed, and
growth under COVID-19? duration of COVID-19 shock?
I.e. "geometry" of the shock: will it be a I.e. "intensity" of the shock, a different
V, U, or L shape and what does it imply dimension from "geometry"

Will be basis for strategic response (capex Will be basis for near-term response
decisions, business model adjustments,…) (activity, output, staffing, suppliers, etc)
12
Shock geometry vs. shock intensity
Illustrative
Last 3 US recession in terms of geometry vs. intensity

2001 recession 1991 recession
Real GDP
Drawdown
(-0.4%/1Q) (-1.4%/2Q) The last three U.S. recession can provide
grounding for the dimension of the
intensity and form.
V U L • 1991 was a V shape recession – 1.4%
Intensity of shock
(~0%) 2001
1991 GDP drawdown over 2Q, with a hint of

U as for a long time it look as if
(~2.5%) V U L growth wouldn't return to trend

2008 • 2001 was a classic mild V shape – with
only a 0.4% GDP drawdown lasting 1Q
(>6%) V
Trend growth
U L
Trend growth
• 2008 was a severe U shaped recession
as GDP drew down 4% over 6 quarters
unaffected
2008 recession
downgraded and never returned to the prior trend
(-4.0%/6Q)
Geometry of shock (V-U-L)

13
Source: BCG Center for Macroeconomics analysis
At this point, Covid-19 a deep V-shape, skewed on U-
shape Illustrative
What can tip the scenario U-

Scenario description Shape
Current view of This is possible, but policy
Real GDP
Drawdown
COVID-19 impact can reduce risk A "U-shape" downturn would require sustained
damage to the potential of the economy – a
permanently lower level of capital, labor, or
V U L productivity. This type of damage often
Intensity of shock
(~0%) 2001
1991
accompanies financial crises.
(~2.5%) V U L Two paths to a U-shape

1. Financial system problems that cripple
2008 credit intermediation and thus damage
capital formation
(>6%) V
Trend growth
U L
Trend growth
2. Extended real economy "freeze" which
also damages capital formation
unaffected downgraded
Coronavirus has unique risk profile in that both
paths to structural damage are plausible/likely
Geometry of shock (V-U-L) and also interdependent
14
Source: NBER, BEA, BCG Center for Macroeconomics analysis
industry
Global Shock for Oil & Gas
15

Demand: Social distancing
Supply: OPEC+
5
Shocks of
Demand: Economic recession

the oil
market Storage: Overhang, potential fill
Demand: long term shift?

16
The OPEC+ & G20 deal:
Up to 15 mmb/d off market in coming months
9.7 +2
mmb/d additional
TBD
mmb/d other cuts
mmb/d from OPEC+ from Gulf

from US, others
potentially
17
Other production declines may occur via economics
Global uneconomic1 production at low oil prices

2020 Liquids production Uneconomic production
uneconomic (Mbo/d) as % of total
25 24% 25
20 20
15 15

11%
10 10
5%
5 5
Total (%) 1% 1%
Post-tax
0 0
15 25 Pre-tax 35 45 55
Brent oil price (US$/bbl)
1. Not covering production costs and government share

Source: Wood Mackenzie 18
Demand crisis drives oversupply – OPEC+ deal not the
solution
Mbpd
Demand Supply OPEC+ deal Implied storage

11
15
22 4
Source: IEA monthly oil data service, BCG CEI analysis 19

Government response oil demand index begins to fall as
China opens up- will remain elevated
Index
802
1,000 1,000 Index score on April 3
Maximum impact on oil
demand Mar 16- More than
100 countries have
social distancing
policies in place
Jan 20- Wuhan Feb 3- South Korea
province cancels implements

strong policies
500 public events Feb 23- Italy closes
Mar 28- Public
schools, restricts
Jan 26- China transportation
movement
Jan 7- 1st
policy implements broad restrictions lifted in
response as social distancing China
US/Japan restrict policies Mar 9- Spain begins
travel from China to implement
stronger policies
0
Dec-29 Jan-12 Jan-26 Feb-09 Feb-23 Mar-08 Mar-22 Apr-05 Apr-19
Note: Index maximum is 1000, country response is weighted by oil demand

Source: Oxford COVID-19 Government Response Tracker, BP stats, BCG CEI analysis 20
Global demand may be down 25 mmb/d or more, driven
by 3 sectors- economic losses are also now showing
Shipping Transportation Aviation Broader economy

• Global slowdown is • Many countries under • Multiple borders • US with more than 3

reducing overall locked down closed million new
demand • Global road fuel • Daily flights down unemployment
• One exception is oil demand to drop by 5% 100k claims
tankers y/y • Airlines will begin • PMI in nearly all
– Increased activity • Traffic congestion to reach countries down
from expanded indexes down 90%+ in bankruptcy by May sharply as purchases
production, storage most slow
arbitrage major cities
21
The Corona crisis has led to fastest Storage may fill
storage build up ever up
Storage rate (Mbpd)

US storage capacity will
be filled up – on a time
30 scale of months or weeks
20 Locally, storage maximum

can be reached earlier

10
Logistic bottleneck will
0
decouple entire regions
from global markets
-10
Q1 Q1 Q1 Q1 Q1 Local spot prices will be
2001 2005 2010 2016 2020 driven down
Source: IEA monthly oil data service, BCG CEI analysis 22

What will be COVID-19's oil demand growth impact?
Consider V, U, and L-scenarios in levels & growth space Illustrative
V Now unlikely U L
103 103 103
Oil Demand
Oil Demand
Oil Demand
102 102 102
Levels
101 101 101
100 100 100

Oil Demand Growth
Oil Demand Growth
Oil Demand Growth

1% 1% 1%

Series
Growth 0 0 0
-1% -1% -1%

Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10
Classic shock – real recession, Large shock – financial recession Shock + something breaks on
minor policy error or major policy error supply side (structural impact)
An intertemporal displacement of Output path shifted lower, but Output path shift lower with a
demand, resume orig. output path same growth path (slope) lower growth rate (new slope)
Source: BCG Henderson Institute; BCG Center for Macroeconomics analysis, BCG Center for Energy Impact 23
& priorities for PVN
Perspectives from other IOCs
24

Oil Majors
Response Cash
HSSE and
Supply chain preservation
continuity of
(How to fight resilience and cost
operations
the crisis?) cutting
Strategic Pace of
positioning, investment in Optimal
M&A, optimal Climate / size and
Rebound portfolio mix in Energy governance

$30/bbl world transition
(How to
transform
the company New investor
"Majors focus their and employee
New capital New ways of
post crisis?)
initiatives primarily structure and working & new
story – The
around business health" capital operating
'Purpose' of the
allocation model
company
25
Source: BCG experience, BCG analysis
3 key risks triggered by COVID-19 on ongoing operations
Restrictions on • Maximize local employees - hiring temporary local staff

international crew • Engage authorities to secure “essential services” classification for
Potential disruptions in operations key roles
due to restrictions on foreigners • Minimize or fully eliminate optional activities
movements in the country
• Team A & B split working offshore
• Skeleton crews – remain essential personnel & services only
Unplanned production • Use boats to maintain safe distancing between personnel
shutdowns • Extend offshore rotation periods

Due to restricted crew rotations, • Isolation quarters offshore and immediate heli-evac for infected
unplanned delay in maintenance staff
• Extend operating inventories to reduce frequency of interactions
• Mandatory quarantine before crew change
• Develop joint supplier plans to arrange critical items

Operational disruptions
• Engage with other operators to enable co-ordination
with suppliers
• Enforce visibility on critical equipment & long-lead-time items
Logistics disruption or financial
distress • Establish connection & engage with new suppliers available in
Vietnam
26
Many oil & gas players have revised their business plan,
committing significant CAPEX reduction
Capex cut
($B) Capex cut (%) Notes
• Continue CAPEX for large oil development program, e.g. Tengiz field
• Stop spending on small capital projects across upstream & refining
Chevron ~4 ~20
• Abolish T/A program across CVX refineries
• Reduce spend on drilling within Permian basin
Total ~3 ~20 • Reduce spending on exploration & production, gas, renewables &
power, refining & chemicals, and marketing & services
• Continue investment in midstream and supertankers for storage
Shell ~5 ~20
• Exits US LNG Lake Charles

• Reduce CAPEX in US based assets
BP ~3 ~20 • Halt drilling program in North Sea
• Consider organization transformation program in 12 weeks time
• The bulk of the CAPEX reduction will take place in the Permian
Exxon Mobil ~10 ~30
• Reduce the pace of drilling and well completions
• Conduct direct contractor negotiation
Saudi Aramco 3-8 9-24
• Ensure volume must meet mandated increases
• Pursue cost transformation wave 2, targeting savings of $1-2 Bn
Petronas 1-2 9-17
• Significant focus on ensuring National vendor survival during crisis
Source: Bloomberg, WSJ, CNBC, Market Watch 27
Command center: Draft structure for the rapid response team
Management Team
Replication needed across all subsidiaries
Advisory expert group

Rapid Response Leadership • Consists of HR/Legal/Health
care/Crisis Management experts
• Has authority for entire response effort and critical decisions • Advises on legal, regulatory and
• Oversees overall progress and provides daily guidance health related matters
• Reports to Management Team
Commercial, Operation
People Health Cash & Financial Health Supply Chain Health Digital & Tech Health
& project Health
• Assess potential impact of • Zero Based Budgeting • Prioritize scenarios and • Categorize ops by business • Assess current IT structure
virus spread on company evaluate potential impact criticality and develop plan support
• Monitor real-time

workforce on financials and new way of working
developments • Monitor and maintain
operations & stakeholders
• Develop hygiene program operational data to inform • Identify new ops of using
• Comprehensive OPEX and
and staff rotation and • Create tailored response scenario assessment technology to support
CAPEX reduction plans
protection programs plans to mitigate scenarios people and financial health
• Define clear contingency
• New organization set-ups
• Design a communications • Cash management office plans for critical ops
for decisive information • Prepare to win in post
exchange COVID world
Team setup: Team setup: Team setup: Team setup: Team setup:
• Health experts • Health experts • Strategy & Finance • End-2-end supply chain • IT
• Human resources • Financial data analysts • Commercial leaders leaders & analysts across • Digital team
• Marketing communications • Human resources • Supply chain leaders regions (incl. procurement, • Strategy & Finance
• Operations • Economists, data analysts logistics, manufacturing) 28
• Projects
PVN organizational structure (to 2025) and key considerations
President & Key considerations

CEO
• Gas and Power are managed as

Internal Functional Research and
Control Divisions Training Units one subsidiary in most of IOCs
Project The academy
Management (VPI+PVU) • E&P majors in recent
restructuring focused on themes –
Branch's PVMTC
Subsidiaries play type, technology
E&P Processing Gas Power Service • Centralized technical functions

PVEP BSR PVG as PVPower PVOil to drive functional excellence
IPO 51% 95.78% 51% 36%
Rusvietpetro NSRP PVD • Customer focused organizational
49% 25.1% 36% segments (e.g. BP)
VSP PVCFC PTSC
51% 36% 54.37% • Growth and new venture
Gazpromviet PVFCCO PV Trans. development
49% 35% 36%
Three values chains PVChem
• E&P and petroleum services 26%
• Gas. Power and natural gas fertilizer
• Refining and Petrochemicals—Distribution
29
BP's undertakes reorganization to realize its ambitions
of net zero emission by 2050
Putting sustainability & net zero emission by

New structure of BP
2050 as their first priority
• Production & Operations Aggressive expansion & business development in non oil & gas sector;
focus on creating low carbon solutions for all BP operations
• Customers & Products
Business • Gas & Low Carbon Energy Foster development and pursue new value chain of decarbonization
• Innovation & Engineering technology (e.g., Hydrogen, CCUS)
Groups

• Strategy & Sustainability Embeds sustainability at the top of BP & apply group wide approach to
capital allocation
• Regions, Cities & Solutions
Integration • Trading & Shipping Aim to develop integrated energy & carbon solutions at a larger scale
beyond BP (e.g., other large corporations, cities etc.)
function
• Finance Support recommendations of TCFD (Taskforce on Climate-related

Financial Disclosures) to promote transparency of reporting and act as a
• Legal role model
• People & Culture
• Communication & Advocacy Embed relevant cultures, rules & regulations to achieve set target of net
Enablers zero by 2050 30
Source: BP website
Priority areas for Petrovietnam
Strategic options to improve PVN's competitive position e.g.

• Potential M&A targets
Evaluate Strategic
• Rebalance mix in the portfolio - oil and gas; asset types
options • Strategic alliances Portfolio high grading
Build resilience through operational and organizational

transformation
• Supply chain resilience

Build resilience • Zero based design and transformation
through operational • Innovation in capital delivery
and organizational
transformation
Accelerate digital transformation

• Big data analytics, AI/ML, AR/VR, Cloud based infrastructure
• Block Chain
Digital and • Digital Twin, Rig for the future, Digital drilling
technology
31
industry players
Strategic responses by
32

~$61/boe: Big Oil 2019 dividend breakeven
At sub-$50 pricing, buybacks and dividend growth are off the table, and investors fear dividend cuts
$/boe
100
88 89
72 73 73
67 69 67 2019 avg
63 65 65
61 58 61 63 60 Dividend BE =
54
48 47 48 50 $61/boe
50 47
43 43 $50/boe

38
33 35
$30/boe
Capex breakeven Dividend breakeven Buyback breakeven
Source: BCG Center for Energy Impact 33

Significant pressure to reduce
To preserve dividends,
capex capex reduction efforts
will be prioritized
Required capex reduction for leaving dividend constant
(& all else unchanged) at $30, $40, $50 per bbl (%)
After cost cutting since
50% Breakeven Capex reduction at $30/bbl
at $40/bbl
2014, the scope for
at $50/bbl additional cost cutting is
0 unclear; technology
application is key

-50% Access to capital and
debt financing a
-100%
competitive
differentiator in a price
war – American Majors
2019 Capex $31.2 $22.9 $19.4 $19.2 $14.1 $10.2 $8.4 $6.6 $3.5
advantaged
Note: Breakevens reflects the Brent price required for 2019 Cash Flow from Operations to cover Capex, Dividends,
and Shareholder buybacks assuming cash flow has a direct linear relationship to Brent
Source: BCG Center for Energy Impact Analysis; S&P Capital IQ 34
In 2014 E&Ps could turn to debt to survive – now they cannot
E&Ps face deeper crisis than Majors, with many confronting consolidation or bankruptcy
Higher portfolios breakevens with Investors no longer have appetite to Lower valuations both a motivation
less available internal funding finance US E&P capital budgets & a block to consolidation
$/bbl $bn Avg. EV/EBITDA
100 100 20
80 78 15x
74 75
71 71
64 66 70 15
50 $50/boe 50 10 9x 8x

US E&P 7x 6x 6x
$30/boe equity issuance 5x
5 4x 3x
US energy high yield
bond issuance
0 0 0
Diversified Large Gas-
2009
2008
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Diversified Large Gas-
NA E&P Permian focused NA E&P Permian Focused
Focused NA E&P Focused NA E&P
Capex Breakeven Payout Breakeven 2017 2018 2019

Dividend Breakeven
Diversified NA E&P: Chesapeake, Apache, Hess, Noble, Oxy, Marathon, and Continental Large Permian Focused: EOG, Pioneer, and Diamondback
Gas-Focused NA E&P : Southwestern and Range Resources
Source: S&P Capital IQ 35
Significant capex reductions already announced, along
with halt to buybacks
US E&Ps cut >30% from original budgets Global Integrated cut ~25% from originals budgets
-31%
8 -11%
40
Capex Budget, $bn
-30%
Capex Budget, $bn

-47%
6 -45% -44%
-41% 30 -20%
-29%
-27% -20% -21%
4 -37% -34%

-26% -45% -25%
-21% -27% -53% 20
-18% -43% -19%
-8% -25%
2 -23% -21%
10 -26%
0 0
EQT
Shell
Occidental
Chevron
TOTAL
BP
COP
Marathon Oil
ExxonMobil
Hess
Diamondback
Repsol
Noble
QEP
EOG
Devon
Cimarex
Callon
Pioneer
WPX
Apache
Equinor
Eni
Talos Energy
Concho
Parsley
Murphy
PDC
Source: Company disclosures

Original 2020 Budget Revised 2020 Budget 36
Major restructurings have followed periods of oversupply
Upstream Corporate Transaction Value ($B) Brent ($/bbl)

2005:
200 1998: 1999: 160
COP/Burlington
Exxon/Mobil TOTAL/Elf 2009:
BP/Amoco BP/ARCO ExxonMobil/XTO 2015:
Shell/BG
2006: 2019:
150 2000: Oxy/APC 120
Statoil/Hydro
Chevron/Texaco
2001:
Conoco/Phillips

100 80
50 40
0 0
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2020
ytd
Brent Oil Price No. of deals Corporate Transaction Deal Value
Note: Excludes individual Asset Sale; Excludes downstream, midstream and OFS companies
Source: IHS Markit 31
37
1
New conventional wisdom on deal pricing – $40/bbl,
What would drive a not $60/bbl
new consolidation
model in the sector? 2
Scale, and scalable targets. This is unique for each
potential acquirer
Brent Forecast $/b

3
60 Worst-case
Portfolio replenishment requirements, as exploration
Best-case
disappears as a tool for reserve replacement in near term
reserved.
rights reserved.
40
4
Allrights
Sustained low prices drive push to remove duplicative
Group.All
20 corporate costs
ConsultingGroup.
Boston Consulting
5
by Boston
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Weak-economy deals tend to add more value than
2020 by
Copyright © 2020
'19 '19 '19 '19 '20 '20 '20 '20 strong-economy deals
38
Source: BCG Center for Energy Impact
Deal count falls to 2-decade lows … but deal pricing for oil hasn't
as market conditions for yet been tested in lower price
transactions deteriorate … environment
Quarterly worldwide deal count 1999-Q1:2020 Deal pricing for gas collapsed in 2019 on low
prices, but held up for oil transactions
Deal Count Indexed implied Upstream deal value oil vs gas
150 250%
200%
100
150%

100%
50
50%
0 0
'02-01
'98-01
'00-01
'04-01
'06-01
'08-01
'10-01
'12-01
'14-01
'16-01
'18-01
'20-01
'04 '06 '08 '10 '12 '14 '16 '18 '20
Blended avg. commodities prices

Oil wtd. asset 1P wtd. avg. implied value US$/boe
Source: IHS Markit
Gas wtd. asset 1P wtd. avg. implied value US$/boe 33
Valuations at their lowest since Acquisitions premiums remain
2009 and likely to fall fast historically high and will be moved
downward for deals to proceed
Valuation multiples of Oil and Gas M&A over last 30 yrs. Premium of Transaction value to EV over last 30 yrs.
15 120
Median deal premium (%)

90
acquisition multiple
Median EV/EBITDA
10
Ø8

60
5
30 Ø 33
0 0
'90 '95 '00 '05 '10 '15 '20 '90 '95 '00 '15 '10 '15 '19
Note: A review of completed Oil & Gas industry M&A from 1990 to March 20, 2020 with
deal value greater than 25 million with at least 75% of shares owned after transaction
Source: Refinitiv; BCG Analysis 34
40
Cash currently at low levels… and getting lower
Cash on Hand over total debt
Cash & Near Cash Items over Total Debt, %
40% 35 -18%
31 30 29 29 29 31
28 26 25
20%
0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Total Cash & Near Cash Items ($Bn)
229 221 238 253 274 283 267 293 290 250
• E&P: Continental, Concho, Apache, Hess, BHP, Cabot, Devon, EOG, EQT, Noble, Oxy, Pioneer, COP, Marathon, Chesapeake, CNX, Antero,
Cenovus, Diamondback
Companies • Asian Integrated: PetroChina, ONGC, PTT, JXTG, Mitsui
• Majors: BP, Chevron, ExxonMobil, TOTAL, Shell,
included
• Euro Integrated: Eni, Equinor, Repsol, OMV, Galp, BASF, MOL
• Latin Integrated: Ecopetrol, Pampa Energia, Petrobras, YPF
• Russian Integrated: Lukoil, Tatneft, Gazprom Neft, Gazprom, Rosneft
35
41
Source: S&P Capital IQ
Vulnerable targets have high debt, low operating costs
but many lack sufficient scale to move the dial for large IOCs
Operating costs versus Debt/EV
Consolidators Stressed Vulnerable

16
Est. 2020 Opex/boe
CNRL Clearly vulnerable, but most lack obvious strategic fit

14
and desired scalability for a large IOC portfolio
Aker BP WPX
QEP
12 COP Antero
Hess
XOM
Shell Devon NBL Apache Oxy Callon
10 CHK

TOTAL Parsley Ovintiv
EOG Chevron Repsol
Pioneer
8 Concho Eni
PDC
EQT Range
BP Cimarex Sanchez
Equinor CNX
FANG Continental
6 SWN
Lundin
Comstock
4
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95
Large IOCs' preferred targets are financially viable at Net Debt/EV

lower prices, but with depressed valuations
1. Bubble Size represents size of production 2. Estimated OpEx is Upstream only

Source: Rystad UCube (March 2020) S&P Capital IQ 36
42
Perspective and considerations Petrovietnam
Strategic positioning
1• Reevaluate plans for $30-40/bbl, not $60/bbl

2• Plan for a manageable downside below $30/bbl;
3• Spend time to think outside the box
4• Screen and evaluate strategic M&A options
37
transformation
Operational and organization
44

Supply Chain Resilience
45
Global Oil & What we hear from the market
Gas Supply
Chains are ~50% of suppliers might not survive COVID lock down and low
oil price shock
under high Major cost categories might see at least 5-20% price
stress reduction in the next 6-12 months
~20-30% CAPEX & OPEX reduction affects demand for

equipment/services putting further stress on critical suppliers

COVID disrupts simple logistics
• Almost impossible to mobilize experts & expats
• Difficult to ship critical spares
• Offshore logistics vendors are disrupted
Operators face difficult trade off – support vendors in time of

distress vs. deliver savings at low oil prices
46
Energy Operator View: Both demand and supply for energy equipment and
services are impacted by global shocks
Global Shocks Implications Business Outcomes
• Energy players reduce and defer

• Manufacturing facilities are demand for to improve profitability
Immediate cost savings
shutting down or operating of operations from BU demand reduction
at reduced capacity
COVID • Logistics disruptions due to
• Critical demand to be re-evaluated
given supply chain disruptions

extra quarantine measures Demand • Opportunity to secure longer term Savings from better prices
contracts at attractive prices in longer-term contracts
• Profitability pressures on oil

Lead Time management
• Suppliers facing financial distress
and gas and power operators
Low Oil and bankruptcy
• Significant drop in Market
Price capitalization of many
• Reduced production capacity
causing longer lead time
equipment and service Supply
Supply Assurance
vendors • Logistics network disruptions
amplifying Longer lead time
47
Example | Transformer OEMs global value chain disrupted
Key steps in Power

Transformer value chain
1 Silicone is imported from
Japan, Korea or US
2 Copper is imported
from Europe
3 Insulation material is imported
from Sweden
4 Radiators and tanks are

procured in China
5 Bushing and tap changers are
sourced in Germany
6 Accessories and consumables are
sourced from India/China/UK
7 Final assembly and testing
in Chongqing
8 Products shipped through
Chongqing Port/Shenzen
Port Worldwide
48
Source: BCG analysis, Expert Interview
Different price dynamics expected across key O&G and Power categories
Cost Intelligence based on should cost models for key categories and forecast for raw materials & cost factors prices
Top O&G and Power Categories

6 month forecast % price change 12 month forecast % price change
(September 2020) (March 2021)
Service type Low case (%) Base Case (%) High case (%) Low case (%) Base Case (%) High case (%)
Circuit Breakers -6 -3 0 -7 -4 -1
Drilling Services -23 -16 -9 -27 -18 -9
Electric Submersible Pumps -11 -7 -3 -15 -9 -3
Engineering -1 0 +1 -2 0 +2
Fabrication and Machine Shop Services -5 -2 +1 -4 -2 +2
Heat Exchangers -9 -5 -1 -10 -5 0
Hydrochloric Acid -8 -4 0 -10 -5 0

Motors -10 -6 -3 -13 -8 -2
OCTG -15 -8 -1 -22 -12 -2
Storage Tanks -12 -8 -2 -16 -9 -1
Switchgear -5 -3 -1 -8 -5 -2
T&D Maintenance -1 +1 +3 -1 +2 +5
Transformers -8 -5 -1 -11 -6 -1
Valves -8 -5 -2 -11 -7 -3
Wire -18 -11 -4 -17 -8 +1
-1 to -5 -6 to -15 -16 to -30 +1 to +5 +6 to +15 +16 to +30
Notes: Equipment categories are global but assume US manufacturing and pricing in USD. Services categories are regionalized to the US and generally reflect onshore item pricing. %
49
change above generally represents the underlying price movement of a market basket of the most common specs associated with each category
Source: Power Advocate, Raw Commodity Indices, BCG analysis
Potential distress across energy equipment and services vendors
Major energy suppliers have lost ~44% market capitalization on average within in the last 60 days
Drilling Market cap ($B) OFS Market cap ($B) Power Equip Market cap ($B)
Δ since Δ since Δ since
31 Dec 16 Mar 31 Dec 31 Dec 16 Mar 31 Dec 31 Dec 16 Mar 31 Dec
Segment Company 2019 20201 2019(%) Segment Company 2019 20201 2019(%) Segment Company 2019 20201 2019(%)
4.9 1.6 -68% 55.7 20.0 -64% 56.6 43.3 -24%
1.0 0.1 -87% Integrated 16.7 7.6 -54% 97.5 58.2 -40%
Onshore OFS
Drilling Power
0.4 0.1 -72%
21.5 5.2 -76% Generation &
106.1 59.3 -44%
Transmission

9.6 2.6 -73% 29.6 23.1 -22%
0.3 0.1 -69%
Equipment
4.9 2.2 -55% 4.4 2.8 -36%
4.2 0.8 -81%
3.6 1.4 -60% 51.5 34.2 -34%
1.3 0.1 -89% EPCI and
Offshore 3.6 2.4 -33% 11.9 7.3 -38%
Offshore
1.0 0.4 -57%
Drilling 13.3 5.9 -56% 21.8 15.2 -30%
Transmission—
0.3 0.1 -82% Oil Country Power Cable
Tubular Goods
1.9 0.9 -53% 6.3 4.5 -30%
11.9 2.5 -79%
1.4 0.4 -73% 2.1 1.2 -43%
Note: 1. Market capitalization on end of day March 16th

Source: CapitalIQ, BCG analysis 50
Should Cost
Intelligence
Centrifugal PUMP | 47% of total cost affected by COVID

Illustrative
Category profiles Should cost impact
Estimated Cost Key Drivers
Impact (YoY)
Not Affected Affected
• China contributed ~50% of
Labor 23%
global steel production
+5% to +10% • Deliveries of raw materials have
Bearing 6% been held up and mills are
holding trade activities
Steel 7%
• Global consumptions fell by
-20% to -15%
Centrifugal Pump Rubber 8% 18.6% YoY for first 2 months of
2020 taking a hit to the industry
Grundfos, • YoY Rubber price declined by
Key Casting–Foundry Scrap 6%
Flowserve, ITT,

~16.5% (SGX)
Manufacturer KSB, Sulzer +10% to 15%
Casting–Ferrochrome 16%
• Manufacturing/ Process
Historical Spend disruption due to COVID
~USD 11M Casting–Foundry Consumables 10%
(3 years)
+5% to 10%
Freight 3% • Oversupply of chromium ore
Estimated Spend driven by slowing demand as
~USD 15M trade volume shrank
(3 years) Overheads 9%
+10% to +15% • Decline in shipment for the
Criticality for Margin 12%
High Chinese mills in Q1 2020 due to
Operations import/export restrictions and
Centrifugal Pump Should Cost 53% 47% 100% extra infection procedures
Notes: Historical Spend is estimated based on internal database for upstream oil & gas companies
Source: Singapore Commodity Exchange, Shanghai Metal Market database, expert interviews, BCG analysis 51
Should Cost
Intelligence
Power Transformers | 55% total cost affected by COVID

Illustrative
Category profiles Should cost impact
Estimated Cost Key Drivers
Impact (YoY)
Not Affected Affected
Conductor 29% • Rebuild of global copper
inventory and ongoing
Silicon Steel 11% -15% to -10% uncertainty pushed copper's
price to its lowest price in 3
Fittings & Other materials 7% years
Tap Changers 7%
• China contributed ~50% of
Power Transformer Tank & Accessories 6% global steel production
Schneider, CG +5% to +10% • Deliveries of raw materials have
Key Transformer Oil 5% been held up and mills are
Power, XD Group,

Manufacturer ABB, Siemens, GE Insulation Materials &
holding trade activities
3%
Consumables
Historical Spend
~USD 200M Bushings 3% • Highly driven by steel market
(3 years) +5% to +10%
where supply is under pressure
Overhead 15% due to logistics constraints and
Estimated Spend slowing trade activities
~USD 300M Margin 10%
(3 years)
Depreciation 3%
Criticality for
High -5% to +3% • Slowing market demand
Operations Labor 2%
• Benefitted from lower rubber
prices
Transformer Should Cost 45% 55% 100%
Notes: Historical Spend is estimated based on internal database for upstream oil & gas companies and Power Generation & Distribution companies
Source: Singapore Commodity Exchange, London Metal Exchange, expert interviews, BCG analysis 52
Supply Risk
Management
Identify most critical suppliers impacted by global

shocks Illustrative
High Risk Supplier 45
Supplier 40 Supplier 2
Red zone
Degree of supplier affected by COVID and Low oil price
Supplier 28
Supplier 47
Supplier 31
Supplier 48
Supplier 42 • Immediate intervention
Supplier 4
Supplier 10 required to establish joint
Supplier 16
Supplier 29
Supplier 13
Supplier 17
Supplier 46 response to COVID impact
Supplier 38
Supplier 20
Supplier 32
Supplier 23
Yellow zone
Supplier 37
Medium
Risk Supplier 39
Supplier 24
Supplier 34 • Rapid risk assessment to identify
Supplier 43
alternative source of supply

Supplier 41
Supplier 30
Supplier 18
Supplier 12
Green zone
Supplier 15
Supplier 9
Supplier 7
Supplier 19 • Active monitoring and potential
Supplier 44
Supplier 14
Supplier 35
Supplier 25 source of alternative supply to
Low Risk Supplier 5 Supplier 27
Supplier 49
Supplier 3 ensure business continuity
Less Critical Medium Critical

Red zone Degree of supplier importance to operations
Yellow zone
Green Zone Size of spend, in USD
53
Several capabilities required to enable business outcomes
Vendor
Demand Intelligence
Management Vendor Risk Profile and
lead time visibility
Real demand from
business users
DEMAND SUPPLY
Supply Risk
Key Supplier Management

Category Collaboration Supply Risk
Intelligence Segmentation &
Category Risk &

Joint Risk
Management Response Should Cost Opportunity Visibility
Opportunity Visibility Intelligence

Deep visibility
into vendor costs
Savings from
Immediate Cost Lead Time
longer term Supply Assurance
Reduction management
contracts 54
BCG is supporting other majors as well as independents
improve supply chain resilience with a 4-phase approach
2-4 weeks 2-3 weeks Variable – can be
Months
very fast
1 2 3 4
Assess current risk Select actions to

Design your possible Launch actions,
levels of your launch, create
response arsenal monitor, adjust
EP supply chain roadmap

If required: Launch emergency response plan for "about-to-fail"
critical suppliers
Note: The duration of Phase 1 depends only on the quality of the data that can be made available
to BCG on Day 1, and on the governance / validation model on your side
55
Transform core processes to
significantly reduce cost base
56
Deep dive
What we are
seeing oil Zero Based Design Base Capital Upstream rapid
companies (ZBD) Allocation Program diagnostic
doing Line-by-line bottoms Line-by-line review of Quick identification

up budget build up recurrent capex an action plan based
on business levers
Ops-Procurement- SCP/MCP/Maintenance
finance/S&C squads 8 weeks to plan 1 Y+
Elimination of to execute including
Focus on activity and unnecessary no value some quick wins to
unit cost adding CAPEX fund the journey
20%+ non productive
Source: BCG project experience 20%+ cost out achieved 10-30%+ cost out
57
CAPEX out achieved
Five fundamental principles of ZBD
Bottom-up: There is no baseline—the initial activities and budget are “zero”; this
involves a fundamental re-examination of the all necessary activities and associated
costs. The goal is to challenge and rationalise the underlying activity level
Unprecedented transparency: No stone is left unturned; approach must cover all the
elements related to how a basin operates—activities, governance, behaviours, and
organisation. There must be clarity on how each of these elements drive costs
Accountability: Create ownership of costs—owners within specific P&L/operational

areas and owners for specific cross-business cost categories (e.g., travel)
Right behaviours: “Leadership” and the right behaviours are required at all levels—
this is about embedding enduring cost disciplined behaviours
Sustainability: This is not a one time effort; need to focus on enabling the
organisation and ensuring continuous improvement
58
Zero-based designing approach
1. Ambition and transparency:
Set ambition and baseline cost 2. Value identification:
• What is the overall ambition and case Define the zero-base
for change? activities and costs
• What are the key activities by process,
• What does good look like (e.g.,
department and project?
activities, behaviours,
• What are the associated costs linked to
enablers/metrics)?
the key activities?
• How do these costs compare to internal
Iterative • What are the zero-based activities and
resources (“must have”)
and external benchmarks?
process • What is the rationale for additional
activities (i.e., “ought/nice to have”)?

• What is the associated cost base?
4. Embed the change and • What are the impacted budgets and
enable execution quantified levers required?
• What leadership and frontline behaviours
are required?
• What is the implementation and
change plan?
• What governance structures are required? 3. Challenge definition and assess cost outcomes
• How should the exercise be linked to the • Are the changes sufficient to meet the target cost objectives?
financial budgeting processes? • What opportunities are there to further streamline activities/resources?
• How often should the exercise be repeated?
59
Value identification: Define the zero-based activities and costs 2
Activities and costs are categorized based on necessity

and tracked towards affordability thresholds
Definitions to categorize activities Expenditures by activity

Total costs
Must Have: Industry standard, essential
activities to the process that would break the 15
asset if removed
• Regulatory and legal requirements, industry
safety standards, needed to “keep lights on” Affordability Line
10

Activities with good
Ought to Have: Not “must haves” that likely business cases
should be included Zero-base
“Nice to have” if
we can afford
• Group Standards, cross-functional activities 5
Line
• Activities that provide a competitive

Activities with clear business
advantage cases “Ought to have”
Nice to Have: Helpful to the asset but not 0

Essential Optional Optional Optional Optional Total
critical path items Activity: Activity A Activity B Activity C Activity D
• Additional QAs, higher service levels "Must Have"
60
Value identification: Define the zero-based activities and costs 2
E&P best practices and cost-out levers are a key source

of value identification in a ZBD program
Example from E&P project experience: 1,000+ potential upstream efficiency improvement levers
Capital 1 2
efficiency Wells/Assets Engineering and Projects
Common levers Common levers
• Rig portfolio optimization • Project portfolio optimization (e.g., value,
• Well operational, drilling program, and utilization and/or stability)
design standards • Operational and design standards
• Well abandonment standards • Access/utilization of delivery assets
3 Contracting and 4 5 Real estate and

Logistics
Supply Chain other facilities

Common levers Common levers Common levers
• Reduce number of contractor firms • Capacity management (aviation, • Capacity management (offices,
• Renegotiate current agreements marine, roads) warehouses, dock space)
• Bundle services • Central optimization of routes and • Rental spaces optimization
utilization of vessels • Office sales and leasebacks
• Shared transportation models
6 Production Operations and 7 Technical & support

Maintenance functions
Common levers Common levers
• Maintenance strategy and policy including • Rationalize IT infrastructure
preventative maintenance • Training and certifications (e.g.,
Operational • Reduce/eliminate manning levels cancellation fees)
expense (automation, remote monitoring) • Optimize third party vendor spend
efficiency • Crew rotation, insourcing/outsourcing 61
Challenge definition and assess 3
cost outcomes
Challenge sessions are held to assess outcomes and review

decisions on activities and resources
Illustrative
Challengers Working team
Leaders/experts who can challenge Asset workstream Leads/PMs
complexity of the process and the being challenged on their design
new way of working recommendations
Workshop
ZBD Program Leader preparation
• Provide cross-functional
perspective is critical
Workstream Lead
• Have top down leadership view
on path to First quartile cost
Accurate and

Additional asset experts transparent
• Provide additional insight and Workshop Workstream PM information to
perspective on asset realities
• Have understanding of activities
enable participants
and resource requirements to make the
Workstream Support key decisions
BCG experts
• Have detailed understanding of
best-in-class design
62
Embed the change and enable execution 4
Robust organization and governance key for successful ZBD implementation

Example from BCG E&P ZBD client
Execution Structure Overview of roles

• Overall accountability for program delivery
Executive Lead Executive Lead • Challenge/endorse recommendations
• Ultimate decision-making for escalated alternatives
• Owns delivery of program-level impact

• Requires ad-hoc support from other Leadership Team
ZBD Program Lead ZBD Program Lead members to discuss specific topics
• Guides org changes during design phase
• Make recommendations on escalated choices to EL

Project Mgmt Project Mgmt • Runs tracking & reporting, program assurance, change
Office mgmt., & ad-hoc initiative support to work stream leaders
Office • Integrates and escalates design choices to Program Lead
• Manages initiative team through detailed design, ensuring

Work stream/Org Work stream/Org
milestones and impacts are reached
design leads design leads • Makes decisions within their workstream
Cross-functional
teams Cross-functional • Supports work stream day-to-day activities
(resources from • Provides ad-hoc input
across areas) teams
63
Acting also on ways of working to integrate ZBD with cost
culture: Meetings reduction
Situation: Too much time wasted in Outcome: Scheduled meeting hours
poorly integrated meetings/reporting reduced ~25% Key areas of reduction
Proportion of Time Spend (%)
25% of meeting hours • Faster operational
currently identified as STOP catch-ups (e.g., using
38% 100%
100% a phone call)
Annual Manhours (K) • Shorter team
62% 58
meetings
50% 15 • Condensed contractor
43
performance reviews
12 • Fewer Finance

meetings
0%
All other Meetings, Total 43 • Reduced attendance
activities Reports 31 at central meetings
6 5
2 3 1
5 5 2 1 1 1
Multiple other issues owing to limited Assets Technical HSSE/ Business Operate Total
visibility and a lack of clear interfaces Assurance Performance
• No clear visibility on important meetings Terms of

• Unclear decision makers 71 28 14 16 5 117
reference
• Few, poorly written Terms of Reference
• Focus on tactical decision making, not
strategic thinking Stop Keep New
• Limited visibility on reports, which were often too long
64
Innovation in Capital Productivity
65
Project delivery issues can be addressed by operation science application in
project management  Project Production Management
Global megaprojects are facing severe cost overrun Several IOC have moved to ERA-3 with efficient
and schedule delays and Asia is below average PPM system
Out of 365 evaluated global megaprojects 1900 1950 2000 2019
64% are facing cost overrun
73% are reporting schedule delays
North America Europe ERA-1 ERA-2 ERA-3

58% 53% Productivity Productivity Productivity
55% Asia-pacific
74%
68%

80%
Scientific Project Project Production
Management management Management (PPM)
How to get more How to How to deliver
Latin America Middle East
out of workers? product project business objectives
57% 89% outcomes through with minimal use
71% Africa
87% measurement of resource
67% and compliance?
82% PM practices based on
critical path management
Source: Project Production Institute (PPI), BCG experience 66

Project Production Management(PPM) focuses on 'How to deliver
business objectives with minimal use of resource'
Project Management1
considers projects to be a Cost, time
time/cost trade-off using and cash
time and capacity
Scope and Process Resource use
Quality design
Project Production
Management2 considers Cost, time

projects as a variability, and cash
capacity, inventory and
time trade-off
Scope and Process Capacity Inventory Variability
Quality design
Inventory (WIP) and variability are the leading factors of project cost and schedule overruns, however, they are not
considered in conventional Project Management
Source: Project Production Institute (PPI) 67

Cost of Inventory
Time to amass
Handling (equipment and labor)
Holding (laydown, warehousing, etc.)
Preservation

Obsolescence due to design change
Degradation
Theft
Unnecessary cash tied-up
68
There is an implicit amount of variability in our time-
cost trade-off curve that we take for granted
Inventory (finished Inventory (finished
drawings/specs) to goods) to decouple Inventory and or time
decouple engineering fabrication from site buffer to decouple
from fabrication installation enabling Inventory to optimize operations between
enabling optimization optimization of raw use of capacity onsite trades or crews
of technical resources– materials and capacity enabling optimization
may also be required use including of capacity onsite
by outside stakeholders transportation
Engineer Fabricate Deliver Install

Engineer Fabricate Deliver Install
69
Unnecessary use of inventory
increases cost, time and risk
of QHSE incidents and results in
operability issues due to the time
and capacity it takes to amass,

handle and hold the inventory, not
to mention potential obsolescence
70
IOCs have started to unlock significant value in upstream
projects with implementation of PPM practices
Example Issue Client Unlocked value

Commitment reliability 50%80%
Excessive delays, poor onsite
$54B Gorgon project in Australia Schedule predictability 14%82%
productivity
Reduction in cycle time 13%52%
Large onshore development Large buffer in planning and >35 % Reduction in drilling cycle time

project in North America execution >40% reduction in D&C and development costs
Monthly planned progress 86%100%

Large upstream facility Cost and schedule overruns due
151% Increase in welding production
construction project to variability
20% reduction in labor capacity with same throughput
Historical success in similar

Delivery of large LNG project
projects is <10% to deliver on >50% reduction in Durations—last module to RFSU1
with 3 trains
both cost and schduele
Note: 1. Ready for Start Up

Source: BCG case experience 71
technology and digital
Enable change through
72

Oil companies investing significantly in industry 4.0
Industry 4.0 investment is growing with 25% CAGR until 2025 in O&G
2018 Data Benchmark Digital Investment (M$)

Current key focus is
already to industrialize
1,000
M$ 1,000
Digital initiatives and replicate digital tools
in Downstream was 400
400
just getting started
across business quickly
370
200
160 162

142
100 Expects 300 FTEs to
work on digital in the
future
0
1 2 4
3
FTEs5 20 N/A 30 N/A N/A 150 30

1. Downstream investment 2. Repsol 2018 digital investment 3. Engie to invest 500 M€/yr. in Digital and new ventures, assumed 300€/yr. in Digital 4. Upstream investment 5. Full time employees
73
Source: Annualized companies' financial reports, vertical and company size survey – IDC, Gartner industry reports, companies website, news report, Mordor Intelligence
Industry 4.0 is creating significant impact across the
O&G value chain
Upstream E&P Refining Gas & LNG Marketing & Retail
Production 1%-3%
Operations 0.3-0.5 Small scale Advanced
Uplift Optimization $/bbl LNG Pricing

Exploration >40% Supply Chain 0.2-0.4 Digital workforce Demand
UFC1 sav. $/bbl
success Optimization management forecasting
0.1-0.3
$/bbl
Digital >50% Maintenance 0.05-0.1 Churn Personali-
NPT2 sav. $/bbl
Drilling optimization retention zation
Digital supply >20% Digital 0.1-0.2 Intelligent system New retail

Time sav. $/bbl
chain procurement dispatch formats
74
1. Unit finding cost, 2. Non productive time
Upstream: Digital unlocks value across the value chain
Enhanced barrier Single platform
mgmt. for MOC
Deviation information for SCE
MOC
Asset health, information
work order
Predictive
Maintenance cockpit
Maintenance Maintenance Change
Amazon-style E2E last-mile Online
Subsurface plans (stock items) SCE request Integrated
analogue
procurement delivery inventory
equipment platform for
identification status portal provider clearing house
OGIP, Maintenance Safety
NLP to identify reserve estimation, data & Maintenance Change
analogues digital well Trigger auto Logistic & Surplus
plant status data, work order PR-PO inventory plans inventory request
target attributes approval
Digital Well Asset Performance process
Subsurface Targeting Management
Well
input for well Digital well Integrated ops. Forecasted
design
potential
maintenance Blockchain-
Subsurface target box and & completion center & Process Material management
Well planning activity enabled control & order tracking info
analogue designed well information auto. intelligence MPP
identification & design deviation data Drilling & WS tower
Structured data for demand quantity Forecasted Inventory
subsurface multi-domain & schedule drilling activity availability
characterization Well status, well Auto invoicing
visualization configuration & data
data Forecasted
Engineering
well testing data Automated
AI-powered Subsurface Automated well offshore ops Engineering Data Center
E2E invc. Engineering
subsurface collaboration design & well file Field Development activity Market intel. & data & docs data & docs
model.& inter. center system Plant (offshore) demand forecasting
Subsurface for proc. strategy Forecasted
reservoir
Invisible loss project activity, Project plan
Subsurface characterization time Offshore brownfield
actual BOM vs. progress Integrated plan. &
Well design calculator Virtual
analogue NPT
& event work request & schedules pj progress mon.
identification prediction collaboration room
Subsurface data from tools

reservoir Forecasted onshore
offset wells Actual
characterization ops activities
cost data Designs for Engineering
NPT Advisor feedback Budget vs. approval data & docs
Field Development actual cost
Machine Plant (onshore) Onshore
learning to rank Drilling brownfield
Offset well data Tailored cost Cost based on
reservoir & well work request project progress
Reservoir prediction estimation tools
potential prospect completion & schedules Price Approved
design Detailed
ranking Data-driven benchmarks designs Engineering
Real-time Gas for costing
NPT design
Well completion Lift Mon.
prediction design Historical Integrated
drilling data
AI/ML based Costing engineering
BHA Optimizer Production production data & docs Cost per WBS environment
Drilling & well forecast forecast
completion design & reserve scenarios
data
Sub-surface targets AI-assisted Historical lead times
and production forecast decline curve
analysis process
Sub-surface targets
Talent Workforce
and production forecast People Analytics
Cluster legend: Games Analytics
Applicant Personnel
data analysis
Operations Operations
Exploration Drilling
(Offshore) (Onshore)
Maintenance Supply Chain HR Safety Engineering Finance
Note: This chart does not include initiatives without direct data linkage to other initiatives 75
1. For two way arrows, description closer to initiative indicates inbound data flow 2. MPP = Master Procurement Plan 3. BOM = Bill of Materials 4. WS = Well Services 5. WBS = Work breakdown structure
Exploration: Priority solutions can deliver USD ~28 million p.a. in net steady-
state benefits and 50%-60% time savings in prospect maturation time
Subsurface collaboration Natural language AI-powered Machine learning to

software processing to modelling & rank reservoir

Cross-functional solution
identify analogues interpretation potential
76
Technology driven E2E
transformation
Example: Digital drilling has high potential Drill Better

Improved well design and
well trajectory to
maximize returns
Advanced Analytics
Drill Faster
Virtual reality Reduce Drilling &
Completion costs by:
• reducing invisible lost
time and non
productive time (NPT)

Connectivity for • Optimizing performance
Big data acquisition Safety technologies parameters
Digitally enabled
remote operations
Drill Safer
Avoid personnel incidents
Avoid well instability
(blow out risk)
Process automation Robotics
77
Source: BCG project experience
Digital Procurement
0.1-0.2 • Spend cube analysis
A $/bbl1 • Procurement Centralization & Shared Services
• Optimization of Operational & Strategic procurement & Material
management
• ……
Operations Optimization
0.3-0.5 • EKONS Operations
B
Refining $/bbl1 •
•
Energy Management
Yield Optimization using AA
• Utility optimization
• ……
$/bbl 0.8-1.5 0.2-0.4

Supply Chain Optimization
• Crude selection and re-optimization
C
bottom line $/bbl1 •
•
EKONS Scheduling
Crude assay management & Predictive analytics
impact through
• ……

rapid digital D
0.05-0.1
$/bbl1
Maintenance process optimization
• Predictive maintenance to avoid unplanned s/d
transformation •
•
•
Turn around management
Advance material management
…….
Sales, Marketing & Retail

0.1-0.3 • End to end CRM
E $/bbl1 • Advanced Pricing & Demand forecasting
• PERSONA AI
• ……
78
1. For typical integrated refinery with ~250-300 KBD crude processing facility,
Source: BCG
Marketing and Retail: Personalization system that generate results
in the short term by using multiple use cases
OPTIMIZE FUEL PROFITABILITY
(i.e. increase volumes, reduce discounts)
1 1.1 Increase customers' share of
wallet (i.e. incremental volumes)
1.2 Activate low frequency customers
1.3 Optimize price, discounts &
loyalty costs
NETWORK OPTIMIZATION

3.1 Redirect traffic to more
attractive stations
2 UP SELL / CROSS SELL
3.2 Optimize network and workforce 2.1 Non-fuel consumption in station
utilization (i.e. reduce CapEx and
(C-store, services, lubricants)
OpEx)
3 2.2 Premium fuels
2.3 Cross selling other retail products
(e.g. LPG, retail power)
2.4 Cross selling partners' products
(e,g, car dealers, insurance, etc.)79
Source: BCG
Data Governance
Data Governance: Critical component of any successful

digital transformation journey
Vision
Vision • Data governance vision, objectives and strategy
Organization, roles and responsibilities

Organization, roles and responsibilities
• Positioning and structure of the data governance organization, roles and responsibilities
Governance structure
Governance structure • Formal governance structures that enforce standards and policies, make decisions, and are points of
escalation for resolving issues related to data governance
Data Data quality Data security Content Core data governance Standards
management management management management • Data mgt.: Maintaining single source of truth & integrity of critical data, data entities and relationships, data
dictionary, and data lineage.

• Data quality mgt.: Management of data consistency, accuracy, completeness, availability etc.
• Data security mgt.: Appropriate access controls, data privacy and protection
• Content mgt. : Classification, naming, tagging standards for documents
Policies and processes
• Policy documents describe the activities that need to be executed and set standards to be observed and
guidelines for the organization on a specific data governance topic (e.g., data quality policy, data
management policy, data security policy etc.)
Standards, Policies and Processes
• Data governance processes define structure to daily work and include RACI matrices defining the involvement
of key data governance roles within these processes.
• Policies and processes may also include the definition of metrics, monitoring activities and operational
reporting
Data architecture Data architecture, tooling, IT infrastructure and operations

• Data architecture: Standards for data modelling, data integration, data stores and platforms
• Specific tooling implemented to support the core data governance competencies
Tooling, IT infrastructure and operations 80
• Underlying IT infrastructure and operational support processes
Digital Center of
Excellence
Digital Center of Excellence is the focal point to

develop and deploy necessity digital capability
Key questions for the establishment of DCoE
Digital Center of Excellence
2 What is the governance

structure of DCoE?
1 How to source needed

capability?

What should be the org.
3
Develop structure of DCoE?
Deploy
4 How to develop and
retain talent for DCoE?
5 What should be DCoE way

81
of working?
Business digital roadmap
BOT is a Network of
comprehensive digital champions
Consistent
set-up to build- Digital
methodologies
up capabilities Center of
digital
to own one's specialists

Agile decision
digital making
transformation New roles for

Managers
IT digital readiness
82
Fundamental changes in people and processes are
required for a successful digital project
10% 20% 70%
Technology Processes People

• Design technology to help users make • Regulate diverse processes across • Build tech capabilities
decisions and solve high-impact subsidiaries • Ensure organizational alignment
business problems • Manage complexity arising from minority across the whole group
• Engage stakeholders early to ensure interests of flagships • Run stakeholder analysis to determine
all pain points and scenarios are • Set up product borrowing ledger each flagship's needs
covered • Structure arm’s length transactions • Design win-win collaborative system
• Set up separate company & P&L • Involve real users to co-develop
• Leverage notional accounting MVP definition
• Translate business requirements to • Ingrain agile way of working and focus
operating model prior to building on speed to value
the CT
Source: BCG 83
Way forward and priorities
84

Response Cash
HSSE and
Petrovietnam continuity of
Supply chain preservation
(How to fight resilience and cost
strategic priorities the crisis?)
operations
cutting
Strategic
positioning, Optimal
Corporate
M&A, optimal size and
Rebound restructuring
portfolio mix in governance

$30/bbl world
(How to
transform
the company New ways of
post crisis?) New business Alternative working & new
models for energies and operating
growth renewables model, enabled
by technology
85
Source: BCG experience, BCG analysis
• Initiate rapid portfolio optimization exercise
• Identify and screen potential M&A
Evaluate Strategic
opportunities
options
• Launch supply chain response to mange risk

and create resilience
Suggested next • Initiate Zero Based Design on core operational
processes
steps Build resilience
through operational • Apply PPM in project delivery
and organizational

transformation
• Apply technology and digital to accelerate

into organizational and operational
transformation
Digital and
Technology
86
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BCG does not provide fairness opinions or valuations of market transactions, and these materials should not be relied on
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Navigating through

COVID-19 and oil

Jamie Webster Jaime Ruiz-Cabrero Asheesh Sastry

Rebecca Fitz Dave Sivaprasad Yan Li

Copyright © 2020 by Boston Consulting Group. All rights reserved.

Sachin Sharma Marcin Miller Van Dang

[2016] PVN Board Workshop

[2017] BSR 1 week on-site diagnostic – Multiple engagement and

Copyright © 2020 by Boston Consulting Group. All rights reserved.

[2017-2019] Extensive public sector engagement on energy

[2016-2020] Extensive engagement with PVN Executive Team on

Deep Dive: Strategic responses by industry players (15 min)

Deep dive on key transformation topics (45 min)

Copyright © 2020 by Boston Consulting Group. All rights reserved.

Deep dive: Enabling through Digital & Technology (10 min)

Discussion on way forward and priorities (15 min)

Copyright © 2020 by Boston Consulting Group. All rights reserved.

Copyright © 2020 by Boston Consulting Group. All rights reserved.

Daily number of new cases detected

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1. Calculated from first day when cumulative # of cases surpassed 100

Markets looked past COVID- Inflection with virus' spread

Declines can be seen in gold, crude

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Copyright © 2020 by Boston Consulting Group. All rights reserved.

Testing (virus) - levels Testing (virus) - scaled Testing (antibodies)

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V – at least this U – the main risk L – still unlikely

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Strategic macro call Tactical call

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Last 3 US recession in terms of geometry vs. intensity

1991 GDP drawdown over 2Q, with a hint of

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Geometry of shock (V-U-L)

What can tip the scenario U-

(~2.5%) V U L Two paths to a U-shape

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Copyright © 2020 by Boston Consulting Group. All rights reserved.

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Demand: long term shift?

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Global uneconomic1 production at low oil prices

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Brent oil price (US$/bbl)

1. Not covering production costs and government share

Demand Supply OPEC+ deal Implied storage

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Source: IEA monthly oil data service, BCG CEI analysis 19

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Note: Index maximum is 1000, country response is weighted by oil demand

Shipping Transportation Aviation Broader economy

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Storage rate (Mbpd)

20 Locally, storage maximum

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Source: IEA monthly oil data service, BCG CEI analysis 22

100 100 100

Oil Demand Growth