PDM 001 Project Development Manual (Rev 0)

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PROJECT

DEVELOPMENT

MANUAL

Document No: PDM-001

Revision 0 (uncontrolled when printed)

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The fuel that drives this Corporation is the amount and quality of its investments.

ital Over the next several decades, no single activity will have a greater impact on our employees or our shareholders than the performance of our investments in our project pipeline. To support that activity, this Project Development Manual was established to be used in concert with our Major Cap Projects GLD and the project Hub concept within our Corporate Operating Model.

FOREWORD

The combination of these tools in the hands of our employees is meant to do one thing – establish BHP Billiton as the industry leader in Project Management.

Over time, we expect to invest greater and greater amounts of annual capital expenditure and we will continue to execute some of the largest and most complex projects in the world.

Both our Minerals projects and our Petroleum projects will be enhanced by the use of these Project Management tools that we intend to keep at a leading edge of industry expertise.

So, to those of you that work for this Corporation in a Project Management role, we thank you for helping us build these modern project tools, and we know you will use them daily.

Our colleagues and shareholders are counting on us.

Mike Yeager

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1.0 INTRODUCTION

1.1 BACKGROUND 1.2 PURPOSE 1.3 STRUCTURE 1.4 CHANGE CONTROL 1.5 PROJECT CLASSIFICATION

2.0 THE BHP BILLITON APPROACH TO PROJECTS

2.1 OVERVIEW

2.2 PROJECT DEVELOPMENT PROCESS

2.3 PORTFOLIO MANAGEMENT

2.4 PROGRAM MANAGEMENT HUBS

2.5 PROJECT MANAGEMENT

2.6 MAXIMISING VALUE

3.0 GROUP LEVEL DOCUMENTS

3.1 GLD OVERVIEW

3.2 MAJOR CAPITAL PROJECTS GLDS

3.3 MANDATORY DELIVERABLES

4.0 STRATEGIC PROCESSES

4.1 BUSINESS OBJECTIVES AND STRATEGIC FIT

4.2 RISK MANAGEMENT

4.3 HSEC MANAGEMENT

4.4 PEOPLE AND TEAMS

4.5 STAKEHOLDER MANAGEMENT

4.6 OPPORTUNITY REALISATION

4.7 VALUE IMPROVEMENT

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5.0 CORE WORK PROCESSES

5.1 ENGINEERING MANAGEMENT

5.2 CONTRACTS AND PROCUREMENT MANAGEMENT

5.3 CONSTRUCTION MANAGEMENT 5.4 COMMISSIONING MANAGEMENT 5.5 TRANSITION TO OPERATIONS 5.6 PROJECT CLOSE-OUT

6.0 CONTROL PROCESSES

6.1 STUDY MANAGEMENT 6.2 PROJECT MANAGEMENT 6.3 SCOPE DEFINITION 6.4 SCHEDULE DEVELOPMENT 6.5 COST ESTIMATING 6.6 PROJECT CONTROLS 6.7 QUALITY MANAGEMENT

6.8 AUDIT AND REVIEW

7.0 GLOSSARY & ABBREVIATIONS

7.1 ABBREVIATIONS

7.2 GLOSSARY

7.3 REFERENCES

7.4 SUBJECT INDEX

8.0 INVESTMENT PHASE CHECKLISTS

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This document has been prepared for use by project practitioners in support of the development and delivery of projects in which the BHP Billiton group has an interest (BHP Billiton Projects).

Use of this document is restricted to BHP Billiton personnel, consultants and contractors engaged in the development and delivery of BHP Billiton Projects.

By reading this document you undertake not to disclose this document to any other person (other than a person supporting the development and delivery of a BHP Billiton Project) and not to use it for any other purpose.

Refer to Project Management eRoom to obtain the latest version of this document: https://eroom.bhpbilliton.com/eRoom/Facility53/ProjectManagement

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PROJECT DEVELOPMENT MANUAL

CHAPTER 1.0

INTRODUCTION

Document No: PDM-001

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Tables

Table 1.3.1 PDM contents - summary...5

Figures

Figure 1.1 Project Development Manual context...2

PROJECT DEVELOPMENT MANUAL CHAPTER 1.0 INTRODUCTION Page i

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PROJECT DEVELOPMENT MANUAL CHAPTER 1.0 INTRODUCTION Page 1 Revision 0 (uncontrolled when printed)

1.0 INTRODUCTION

Over the past decade, BHP Billiton has been spending ever increasing amounts of annual capital expenditure and will continue to execute some of the largest and most complex projects in the world.

Safe, predictable and competitive projects are fundamental to BHP Billiton’s continued growth and there is an overall program within the corporation aimed at improving our performance in this area.

The key elements of this improvement program are:

 An excellent project management process, including:

 The new Major Capital Projects (Petroleum) and Major Capital Projects (Minerals) Group Level Documents (GLDs)1 which clearly outline the performance requirements

and accountability for our major projects.

 The new Project Development Manual (PDM) which consolidates all the project development and delivery knowledge across BHP Billiton and provides guidance to support achievement of the GLD requirements.

 Improving BHP Billiton’s project capability to ensure that the corporation continues to have the people and teams required to lead and deliver on the project pipeline. This includes a program aimed at enhancing the skills and experience within the project community across the whole of BHP Billiton.

 The establishment of global program management hubs, where BHP Billiton has centralised project delivery in several geographic locations in order to create excellence in project delivery in conjunction with Tier 1 implementation contractors.

This PDM has been developed for use by all BHP Billiton personnel, consultants and contractors engaged in project development and delivery activities.

It represents a consolidation of all of BHP Billiton’s project development knowledge and lessons learnt. The PDM is not mandated, it is designed to assist project teams in accessing and using best practice in the development and delivery of BHP Billiton projects.

Figure 1.1 shows the context of the PDM in relation to the Major Capital Projects GLDs and the hub or CSG project delivery processes.

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PROJECT DEVELOPMENT MANUAL CHAPTER 1.0 INTRODUCTION Page 2

Figure 1.1 Project Development Manual context

The GLDs outline key minimum requirements for project development and delivery. They provide the high level project management process elements required for effective project development and delivery. The PDM enhances the GLDs by expanding on the content required for the key deliverables described and mandated in the GLDs. The PDM also describes the overall project development process in BHP Billiton and in particular the application of the strategic, core work and control processes.

The hub or CSG processes are developed to describe how the minimum GLD requirements are met. These include standards and procedures and draw on the content and overall delivery methodology described in the PDM.

HUB or CSG PROCESSES (Standards and procedures)

PROJECT DEVELOPMENT MANUAL MAJOR CAPITAL PROJECTS GLDs

Major Capital Projects GLDs

 Minimum requirements by phase  Defines project management process  Defines “What”, not “How”

Project Development Manual

 Overview of project development process  Expands on key GLD requirements  Best practice ToC, guidelines, examples  Not mandated

 Continuously improved

Hub or CSG Processes

 Must achieve GLD minimum requirements  Mandated by the CSG or hub

 How minimum requirements are achieved  Detailed standards and procedures  Can build on PDM

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1.1 BACKGROUND

During the late 1990s BHP experienced a number of project failures while pursuing an aggressive growth strategy. Initiatives to prevent a recurrence were instigated following the merger of BHP and Billiton in the early 2000s. These initiatives were:

 development of a set of minimum standards for the study and project execution phases  development of investment process, including phases, independent review and benchmarking  creation of governance and approval structures such as the Investment Committee (IC)  creation of a functional project group (formerly Project Development Services (PDS) and

now Project Management Services (PMS)) to provide governance and support to the projects and the project community.

In the latter part of the 2000s significant pressures arose from shortages of project delivery resources of all kinds (both within BHP Billiton and in the industry in general) and there was an associated:

 escalation of costs

 delay to scheduled completion

 decline in the predictability and quality of project development.

As a result of these constraints and an increased recognition of the importance of the project pipeline to BHP Billiton’s continued success as a corporation a series of further project improvement programs were implemented in 2009/2010 as outlined in Chapter1, including this PDM.

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1.2 PURPOSE

The overall purpose of this PDM is to support BHP Billiton in improving its project effectiveness and achieve its growth objectives in a safe, predictable and competitive manner.

The specific objective of the PDM is to support the Major Capital Projects GLDs and it contains important checklists and examples which are not in the GLDs but which are considered essential to successful project delivery.

The PDM:

 describes key core work processes such as engineering, procurement, construction, commissioning and handover to operations

 describes control processes associated with study management, project management, estimating, scheduling, project control, quality and assurance.

 describes frameworks for implementing key strategic processes such as HSEC, risk, people & teams, investment evaluation and value maximisation

 includes guidelines, checklists, templates and examples

 provides a fully integrated “one stop shop” for all BHP Billiton major capital project teams in the support of the GLD minimum requirements and the CSG/hub processes

 is aimed at stimulating continuous improvement from lessons learnt.

The PDM currently excludes the following work processes which are covered by other corporate, CSG or hub specific processes:

 geological and mineral resource investigation and analysis  metallurgical processing

 mine design.

An outline of the processes outside the PDM is provided in the project management processes roadmap in Section 2.5 Project Management.

The PDM is intended for use primarily by the BHP Billiton Owner’s team and by all BHP Billiton personnel associated with the development and delivery of a major capital project. The PDM may also be used for background information and briefing of consultants and major implementation contractors including the hub program delivery teams.

Through the implementation of the PDM, the opportunity exists to:

 take account of the factors that contribute to business success  realise a project’s full potential value

 efficiently and effectively manage a project through all phases of study and execution

 stimulate Owner’s teams to continually look for and document better ways of achieving best practice

 promote ongoing development of project management skills of BHP Billiton’s project personnel through mentoring and by the experience of participating in successful projects  enhance the capability of BHP Billiton to meet the growing pipeline of capital project

investment.

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1.3 STRUCTURE

The structure and content of the PDM is set up in an easy-to-use format of nine chapters.

Chapters 1, 2 and 3 provide an overview of the context, background and review and approvals processes of how BHP Billiton develops its capital projects.

The body of the PDM is based around Chapters 4, 5 and 6 which cover the key strategic, core work and control processes. These are the essential components for development of a major capital project.

Chapter 7 contains abbreviations, glossary, references, and a subject index.

The content of the PDM is supported by investment phase checklists in Chapter 8 and tools (examples, guidelines, templates etc) summarised in Chapter 9.

The summarised contents of the chapters are shown in Table 1.3.1.

Table 1.3.1 PDM contents - summary

Chapter Title Content

Chapter 1 Introduction Outlines the purpose and structure of the PDM.

Chapter 2 The BHP Billiton Approach to Projects

Explains the corporate management processes and methodologies to achieve excellence in delivery of major capital projects.

Chapter 3 Group Level Documents

Outlines the mandated performance requirements of project development and delivery and quality of work needed to meet gating criteria.

Chapter 4 Strategic Processes

Describes the processes used to ensure capital projects are rightly chosen, clearly defined, appropriately resourced, optimised and safely developed to add maximum value.

Chapter 5 Core Work Processes Describes those processes used to progress the core project work, e.g. engineering, procurement, construction, commissioning, etc. Chapter 6 Control Processes Describes the study and project management processes used to

plan, define scope, and control the outcome of the work processes. Chapter 7 Glossary and Abbreviations Contains the references, acknowledgements and a detailed subject

index.

Chapter 8 Investment Phase Checklists Contains checklists by investment phase.

Chapter 9 Toolbox Contains the examples, guidelines, templates and the like.

The different chapters and sections of the PDM are based on functions e.g. Engineering Management. They include the key elements across all the investment phases, though the emphasis is placed on the dominant phase. As an example, Section 5.1 Engineering Management focuses heavily on the requirements for developing an Engineering Management Plan prior to gating into execution, as this is a critical component of successful project delivery and the bulk of the engineering is conducted in the execution phase.

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1.4 CHANGE CONTROL

The PDM is a dynamic document, continuously updated to capture project lessons learnt and best practice. In order to maximise its usefulness, it is highly desirable that feedback is provided by project teams and all suggestions for improvement of the chapters and contributions to the tools and lessons learnt are very welcome and can be sent to [email protected], using the following feedback form: Toolbox 9.1.4B PDM Feedback Form.

PMS is the owner of the document on behalf of the CSGs and the latest electronic copy of the PDM (along with the associated checklists, examples and toolboxes) is located in the Project Management eRoom (refer

https://eroom.bhpbilliton.com/eRoom/Facility53/ProjectManagement).

For further details on the PDM section champions, refer also to Toolbox 9.1.4C PMS PDM Contacts. A log which outlines (at a high level) the changes incorporated in the various revisions of the PDM is included in Toolbox 9.1.4D PDM Change Log. The log does not detail any changes to the referenced examples, toolboxes or checklists.

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1.5 PROJECT CLASSIFICATION

BHP Billiton currently classifies its operated and non operated capital projects as follows:  Major (>US$250 million)

 Medium (US$5 to US$250 million)  Small (<US$5 million)

Where the US$ amount in ( ) is the expected total project capex cost (including any pre-commitments). The Major Capital Projects GLDs are mandated for major capital projects, which is a defined term in the Investment Process GLD. Typically this is where the BHP Billiton share of the project capex (including any pre-commitments) exceeds the group approval threshold (currently US$250 million) but teams must check the detailed wording in Appendix 2 of the Investment Process GLD for the assessment criteria.

The Major Capital Projects GLDs are also recommended to be used in a fit for purpose manner for Major and Medium BHP Billiton operated projects below the group approval threshold.

The PDM is recommended to be used in a fit for purpose manner for all Major and Medium BHP Billiton operated projects.

Small projects typically follow the BHP Billiton Small Project Management Framework (SPMF), which is also included in the Project Management eRoom at:

 https://eroom.bhpbilliton.com/eRoom/Facility53/ProjectManagement/0_9f28.

The use of the GLDs/PDM or SPMF for non BHP Billiton operated projects is dependant on the requirements of the relevant joint venture and/or shareholders agreement. Where possible, business development teams need to seek to include the requirement to use BHP Billiton’s project standards for non operated projects, unless the project operator has a higher standard.

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PROJECT DEVELOPMENT MANUAL

CHAPTER 2.0

THE BHP BILLITON APPROACH TO

PROJECTS

Document No: PDM-001

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Tables

Table 2.1 Chapter contents...1

Table 2.5.1 The fundamentals of project management in BHP Billiton... 22

Table 2.6.1 IPA front end loading index... 27

Figures

Figure 2.1.1 Simplified overview of Group investment process ...3

Figure 2.2.1 Idea generation and project initiation within BHP Billiton ...6

Figure 2.2.2 Project development and delivery roadmap...7

Figure 2.3.1 Portfolio management strategy and levels ...8

Figure 2.3.2 Example of prioritisation of BHP Billiton’s major project pipeline...9

Figure 2.3.3 Example of ITS pipeline (study phase) report ... 10

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PROJECT DEVELOPMENT MANUAL CHAPTER 2.0 THE BHP BILLITON APPROACH TO PROJECTS Page ii Revision 0 (uncontrolled when printed)

Figure 2.4.1 BHP Billiton program management hubs ... 15

Figure 2.4.2 Hub objectives statement... 17

Figure 2.4.3 Typical hub structure ... 20

Figure 2.6.1 The value of front end loading... 25

Figure 2.6.2 Maximum influence on project value ... 27

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2.0 THE BHP BILLITON APPROACH TO PROJECTS

The contents of the chapter are summarised in Table 2.1.

Table 2.1 Chapter contents

# Title Details

2.1 Overview

 Provides an overview on guiding principles to project development and delivery within BHP Billiton.

 Provides an overview of the BHP Billiton investment process and in particular the various development phases a project progresses through.

2.2 Project development process

 Identifies key objectives, activities and deliverables of each project phase.  Introduces the project development and delivery roadmap.

2.3 Portfolio management  Outlines how BHP Billiton and the respective CSGs manage their portfolio of projects.

2.4 Program management hubs

 Provides an overview of the BHP Billiton program management hub strategy.  Explains what a hub is.

 Provides some information on the established and planned hubs.

2.5 Project management

 Provides a high level overview of the BHP Billiton project management fundamentals.

 Includes a project management processes roadmap to support PDM users in navigating this manual.

2.6 Maximising value  Provides an overview of project front end loading (FEL).

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PROJECT DEVELOPMENT MANUAL CHAPTER 2.0 THE BHP BILLITON APPROACH TO PROJECTS Page 2 Revision 0 (uncontrolled when printed) Section 2.1 - Overview

2.1 OVERVIEW

BHP Billiton’s experience, supported by research and benchmarking with other operators, is that excellent project performance follows from having the right project development and delivery process, people and delivery mechanisms.

An excellent project development and delivery process has the following characteristics:  A formal project management process is applied consistently across all projects.  The process is business focussed and addresses the full life cycle of the opportunity.

 Opportunities are moved through the process in a series of controlled steps (project phases).  Control is assured by the need to meet defined objectives agreed with all major stakeholders

and by detailed scrutiny of recommendations and risks and a formal decision point at the end of each project phase.

 Performance is benchmarked against industry and lessons learnt are captured and built into future projects.

2.1.1 Guiding principles

The BHP Billiton project development and investment processes are designed to ensure that the corporation makes and then delivers on good investment decisions. It is important that these investments:

 are aligned with BHP Billiton values, ethics, priorities, strategies and policies  achieve optimal shareholder value with an acceptable degree of risk  have an acceptable probability of success

 are based on a consistent decision framework.

BHP Billiton’s goal is to consistently invest and deliver on opportunities that achieve returns in excess of an investment’s cost of capital, thereby increasing shareholder wealth and reputation.

All BHP Billiton projects are developed by ensuring each phase builds on the sound decision making and delivery processes from the preceding phase and as such:

 are built to a frozen and clearly defined scope and completed safely, on time and within budget

 work as expected, particularly in terms of capacity, operating cost and product quality  are operable, reliable and maintainable

 are delivered against the corporate principles in respect of health, safety, community relations and environmental performance

 aim to maintain or improve the value of the business case throughout each project phase.

2.1.2 Introduction to the investment phases

The BHP Billiton investment process is described in the Investment Process GLD. The GLD describes the ‘performance requirements for the advancement of investments1 through a phased process for conducting studies,

undertaking independent reviews, and executing projects to promote robust investment decisions’. It is recommended that all key project personnel familiarise themselves with this GLD before or soon after they join the Owner’s team for a capital project.

An overview of the investment process is included in Figure 2.1.1, with further details provided in Section 4.8 Investment Process.

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Figure 2.1.1 Simplified overview of Group investment process

There is a mandated review process, known as a ‘gate’, at the end of each study phase and a further gate, ‘Gate 2A’ when the optimal investment alternative is selected (refer Appendix 3, Section 1.2 of the Major Capital Projects GLDs). At each designated gate the mandated study deliverables are subject to review and, if approved, the project then proceeds to the next phase. Endorsement and approval authorities are listed in Appendix 1.0 of Investment Process GLD.

The Owner’s team takes a complete approach to the project management process including the ownership and management of each project phase and the gating activities between completing one phase and commencing the next.

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2.2 PROJECT DEVELOPMENT PROCESS

2.2.1 Phase objectives

The objectives of the four project development phases, as identified in the Major Capital Projects GLDs, are as follows:

 Identification phase

Identify a value-creating investment, assess the material risk issues, identify the potential strategic investment alternatives to be assessed further during the selection phase and ensure alignment of the investment with the business strategy.

 Selection phase

Assess all reasonable value-creating alternatives and select the optimal investment alternative taking into account net present value (NPV), risk, uncertainty and embedded option value. Ensure the technical and commercial viability of the selected investment prior to further study and optimisation in the definition phase.

 Definition phase

Define the investment by optimising the selected configuration for life cycle costs (LCC) and NPV and finalising the scope, cost, schedule, commercial terms and statutory and regulatory approvals/agreements prior to project execution.

 Execution phase

Deliver the investment to meet the agreed project objectives, scope of work (SoW) and approved execution phase key performance indicators (KPIs).

Planning for the next phase is a critical element to be considered during each of the project phases, whether it be a study work plan (SWP) for the selection or definition phases or a project execution plan (PEP) for the execution phase. This is discussed further in Section 2.2.3.

The activities to be undertaken in each phase are based on the requirements described in the Major Capital Projects GLDs.

2.2.2 Phase activities and key deliverables

In each study phase there are 14 key areas of activity commencing with 2.0 – Geology and Resources (for Minerals projects) or 2.0 - Subsurface (for Petroleum projects) and finishing with 15.0 – Transition to Operations, as set out in the Major Capital Projects GLDs, appendices 2, 3 and 4. These 14 sections encapsulate all detail areas of work and study. The results are then recorded in the study report using the same structure as the GLDs with the addition of the executive summary (of the findings of the other 14 sections) as Section 1.0.

The basic structures for study reports are included in Section 6.1 Study Management. It is best practice for each study report section to be a summary of the subject by describing the key points with all details included as appendices. Thus each section of the study report with its appendices will present a comprehensive record of all activities, conclusions and recommendations relating to the subject matter. The study report is a very valuable document with several important uses. Firstly it provides a well structured and easy to read document for the independent peer review (IPR). Secondly, the study report is used as a reference document for both the preparation of the investment approval request (IAR) and for the next phase. Also, it is an historical record which is archived in the Investment Tracking System (ITS) and used as a reference for future developments.

A different approach is required to the execution phase because it is the implementation of the results of the foregoing study phases. The execution phase work is based on the approved PEP and budget.

The time required to complete the study report at the end of each phase is not overlooked. Whilst individual sections are drafted progressively, the whole report is only finalised and compiled when all other PROJECT DEVELOPMENT MANUAL CHAPTER 2.0 THE BHP BILLITON APPROACH TO PROJECTS Page 4 Revision 0 (uncontrolled when printed) Section 2.2 - Project Development Process

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work is complete. For the execution phase, the equivalent report is the project close-out report (PCOR). Is it good practice to include time for these activities in the overall schedule for each phase.

2.2.3 Phase planning

It is important to recognise that information becomes available in a logical sequence in any study. This is well recognised in the execution phase. For example, tender enquiries cannot be sent out before engineering documents have been prepared. However, the dependencies are sometimes not so well recognised or articulated in a study schedule.

One of the key issues for minerals projects is the sequence and flow of information from geology and mineral resources through mining into processing and infrastructure. Careful planning is required to ensure that activities such as drilling and sampling, various types of test work, environmental baseline surveys, etc are done in a timely manner with adequate allowance for the lead times. Similar planning and schedule constraints apply to the flow of information from subsurface, wells and facilities work in the study of petroleum projects.

Each SWP then identifies and plans the activities and makes provision for the time and cost to complete each of them.

No study phase is considered complete until the review and approval processes have been carried out and a decision has been made to proceed (or not to proceed) to the next phase. On making the decision to proceed to the next phase the following are confirmed as having been accounted for by the project team:

 Enough time is included in the project schedule for the approval/tollgating process. Between the start of IPR and IC/Board approval it can typically be 3 to 4 months depending on alignment with the corporate calendar for IC and Board meetings.

 The cost of keeping people on board during this time is included, to ensure continuity of key personnel and where necessary to progress further engineering, prepare for next phase and cover pre-commitments where applicable. This budgeting is included in the request for funds made at the end of the previous phase.

2.2.4 Idea generation and project initiation

Within BHP Billiton, ideas are generated and projects initiated via a number of different means.

Idea generation and project initiation generally occurs at the Asset or CSG level so reference is made by project teams to CSG specific ideas capture processes like the Benefits Capture System (BCS).

Once a project has been initiated and proceeds into the identification phase, the processes within this PDM apply, except for Group Level Acquisitions and Divestments.

Figure 2.2.1 provides a high level overview of the idea generation and project initiation process within BHP Billiton.

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PROJECT DEVELOPMENT MANUAL CHAPTER 2.0 THE BHP BILLITON APPROACH TO PROJECTS Page 6

Figure 2.2.1 Idea generation and project initiation within BHP Billiton

CSG Level Group Level

Organic growth options New growth options

Existing Assets1 Brownfields Exploration2 Business Development3 Greenfields Exploration4 Acquisitions & Divestments5

Revision 0 (uncontrolled when printed) Section 2.2 - Project Development Process

At the CSG level, all ideas, whether they are expansions, acquisitions or modifications to existing assets are entered into the Resource Development Potential (RDP) process and model. As part of this process, potential projects are analysed for the value that they add to the Asset or CSG at a “high” level. Depending on the outcome of the RDP process, one or more projects may be put forward for further investigation. Where a decision is made to initiate a project and thus proceed into the project development process, an identification phase SWP, budget and schedule are prepared for approval.

2.2.5 Project development and delivery roadmap

The project development and delivery roadmap (refer Figure 2.2.2) provides a one-page graphical representation of the whole life of a project and in particular depicts:

 the critical activities and deliverables of the project by investment phase

 the key approvals required in order for the project to proceed through the relevant gates from one phase to the next

 the interface between the major project development and delivery and investment processes  the influence of and input from external stakeholders during the life of the project

 the relevant project development and delivery processes that apply to the project during the project life cycle and the intensity of those activities over the various investment phases.

Production 5 Year Plan

(5YP) Project Life Cycle

IPS SPS STOP DPS Exec Di recti o na l Pl anni ng Initiate Project? No Resource Development Potential (RDP) Yes Single point accountability. Life of Asset

(LoA) Business objectives.

Project in ITS.

NB: This PDM only applies to development of major capital projects Notes:

1) Includes expansions to existing mines/wells and/or process plants

4) Excludes CSG level “greenfields” developments 2) Exploration as agreed between CSG and Minerals Exploration

5) Large scale A&D e.g. new CSG or new country 3) CSG level acquisition of similar assets and divestment

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Figure 2.2.2 Project development and delivery roadmap

LEGEND Project Process

(as outlined in this PDM) 4.0 Strategic Processes 5.0 Core Work

Processes 6.0 Control Processes

Key process steps and deliverables External govt. &

other stakeholder requirements

Major Projects Process Investment Process

4.1 Bus ines s Objec tiv es & St rat egic F it 4.2 R is k Management

4.3 HSEC Management 4.4 Peo

ple and T eams 4.5 St akeho lder Management 4.6 Oppo rt unit y R ealis at io n 4.7 V alue I m pro vement 4.8 I nv es tment Pro ces s 5.1 Engineering Management 5.2 Co nt rac ts & Pro curement Mgt 5.3 Co ns truc tio n Management 5.4 Co mmis si on ing Management 5.5 T rans iti on t o Operat io ns 5.6 Pro jec t Clo se -o ut 6.1 St udy Management 6.2 Pro jec t Management 6.3 Sc op e Def init io n 6.4 Sc hedule Dev elo pment 6.5 Co st Es timat ing 6.6 Pro jec t Co nt ro ls 6.7 Qualit y Management 6.8 Audit and R ev iew Idea Gen eration / Project Initiation IDE N TIF ICATIO N (IPS ) SELECTION (SPS) DEFINITION (DPS) EXEC U T ION OPERAT ION Project kickoff, appoint Owner’s team

Prepare prelim SoR Identify investment opportunities Yes Initiate Project? Approve? High intensity Low intensity

Work or activity intensity Key task or activity Key deliverable(s) Decision “Input from” or “Approval by” Flowchart Process Approval by CSG President (Input from IPR) Finalise analysis &

study report. Plan for next phase SPS SWP, IAR, evaluation model. study report. Yes Approve? Approval by CEO (Input from IPR) Finalise analysis &

study report. Plan for next phase DPS SWP, IAR, evaluation model, study report. Yes Approve? Approval by Board (Input from IPR) Finalise analysis &

study report. IAR, evaluation

model, study report STOP No Develop IPS SWP Yes Approve? Initial risk register

and business objectives Gate 1 Gate 2 Gate 3 Assess risk, strategic fit, markets etc

Produce short list of investment opportunities Preliminary scope

definition & review of geology/mining Identify stakeholders, preliminary OL&C* & HSEC requirements HSEC plan, stakeholder register Carry out preliminary evaluation Outline SoW(s)

Finalise SoR. Opp. framing - define

alternatives Optimise resource

& mining, choose process & config. Class 4/5

estimate & schedule

Rank & present for approval preferred alternative (engage IPR) Assess risks,

HSEC, fit etc. Prelim eval of alternatives,

Class 3 estimate & sched. SoW. prelim BoD, BoE, BoS, PEP. risk register. Precommitments

Approval by CSG President

Carry out VIPs, benchmarking, Definition, design, estimates, schedule, contract planning Finalise OL&C, HSEC & stakeholder requirements. Prelim E&SIA, EMP

Develop prelim scope Input from relevant

govt. & other statutory bodies Gate 2A Input from environmental and community bodies Transition to Operations Project controlling, monitoring and reporting processes Project procedures, detail design, contracts, POs, definitive estimate. Finalise definition of selected alternative

Optimise total life cycle costing for

the investment

Prepare estimate, schedule and PEP. Final evaluation Carry out additional analysis as required Carry out additional VIPs as required IPA benchmarking exercise Class 2 estimate &

schedule, finalised SoW, BoD, BoE, BoS, PEP, risk

register.

Finalise permitting, secure tenure,

leases etc Input from relevant

govt. & other statutory bodies

Input from environmental and community bodies

Operations strategy, plan and

procedures, operations phase cost estimate, operational readiness & handover plan, O&M manuals. Strategic project processes eg risk, HR and HSEC management Carry out execution phase reviews EPR reports Input from relevant

govt. & other statutory bodies *OLC = ownership, legal and contractual Carry out IPR Carry out IPR Yes Carry out IPR IPR report & Board presentation. Draft media release & Q&As

IPR report IPR report IPS SWP Yes Close-out project PCOR, IPA close-out report Operate assets Carry out post investment review PIR report Consider IPA pacesetter review Upload project monthly report into ITS ITS monthly reports Prepare a recovery plan if project moves

to Observation

Recovery plan Implement PEP

and associated core work processes, e.g. - Engineer - Procure - Construct - Commission Prepare a SAR if project moves to Critical Supplementary approval request Appoint study manager Develop business objectives Register project in ITS

Input from relevant govt. & other statutory bodies

Input from environmental and

community bodies _Prelim

SoR

Definition, design, capex/ opex & project schedule Prelim SoW(s) Issue media documents Media press release and Q&As IPA prospective evaluation

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2.3 PORTFOLIO MANAGEMENT

BHP Billiton initiates, prioritises, develops, optimises and delivers on its major capital investment growth pipeline at four levels:

 Group

 CSG

 Asset  Operation.

Figure 2.3.1 shows the overall strategy and levels of portfolio management in the business.

Figure 2.3.1 Portfolio management strategy and levels

2.3.1 Group level

Overview

At a Group level, the senior management are collectively focused on “portfolio management”.

On an annual basis as part of the Corporate Alignment Planning (CAP) process a capital prioritisation and capital allocation process takes place where the Group Management Committee (GMC) review the submissions from the CSGs for their respective project requirements for the next two years (in detail) and five years (in outline).

One of the GMC meetings is set aside for a session where the overall priorities for the growth pipeline are set in line with the corporate strategy and annual Group letter of intent and subsequently feed back to the business.

The annual criteria for prioritisation of the overall BHP Billiton pipeline varies dependant on the prevailing market conditions but the overall growth strategy normally remains consistent from year to year.

PROJECT DEVELOPMENT MANUAL CHAPTER 2.0 THE BHP BILLITON APPROACH TO PROJECTS Page 8 Revision 0 (uncontrolled when printed) Section 2.3 - Portfolio Management

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Group prioritisation

At the Group level, the prioritisation of the overall growth portfolio is carried out in accordance with Investments and Value Management (I&VM) criteria. This includes four high level steps as follows:

 Step 1: Rank projects (sourced from ITS) - criteria are NPV and corporate fit (see Figure

2.3.2).

 Step 2: First prioritisation of projects.

 Step 3: Second prioritisation - remove non-elective and deferred/terminated.

 Step 4: Third prioritisation, strategic overlay.

Corporate fit is a combination of competitive capability and major risks where:

 Competitive capability reflects the synergy resulting from the fit of an investment with BHP Billiton’s existing assets and capabilities that will enable BHP Billiton to earn returns exceeding the cost of capital for the relevant investment. It is not intended to reflect the direction in which BHP Billiton should head.

 Major risk issues are those risks not captured in the economic analysis. Risks not captured in the valuation are generally those that are "substantially uncontrollable" and/or difficult to quantify e.g. political, regulatory, natural disasters, community environment, JV partner actions/reputation, etc. Major risks result in significant uncertainty in the valuation.

Figure 2.3.2 Example of prioritisation of BHP Billiton’s major project pipeline2

Slide 4

Example of BHP Billiton Growth Pipeline Prioritisation

Axis contracted for clarity Axis contracted for clarit

Very High High Medium High Medium Very Low Cor p or a te F it

Capital Efficiency Ratio

0.20 0.40 0.60 0.80 1.00 >1.20

All Phases - NPV Feasibility Only - NPV Pre-Feasibility Only - NPV

All Phases - CER Feasibility Only - CER PreFeasibility Only

-CER

All Phases – CER v NPV Feas. Only – CER v NPV PreFeasibility Only

-CERvNPV

The competitive capability classification depends on asset attractiveness, where the asset attractiveness ratings are as follows:

 Low (related business):

 related business opportunity (including vertical integration) which does not have an obvious fit with BHP Billiton’s existing capabilities

2

Note for confidentiality reasons the names of the actual investments have been removed from the diagram. NB: size and colour of spheres represents CSG and

project size. For purpose of the PDM, colours have been masked and project names removed.

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 Moderate:

 investment in an existing non-core business, or

 horizontal acquisition with synergies arising from increased revenues (market share)  High:

 greenfields project which expands a core business, or  horizontal acquisition with synergies arising from cost savings  Very High:

 non-greenfields project (e.g. to sustain production, small brownfields, cost reduction initiative) in a core business (e.g. iron ore, aluminium, oil & gas), or

 horizontal acquisition which significantly improves industry dynamics. Additional details on the prioritisation process used at the Group level are available from I&VM.

Group reporting

At the Group level, various standard reports are available from ITS, including both execution phase projects and investments in the study phase. An example study phase pipeline report is shown in Figure 2.3.3. There is also a similar report for projects in the execution phase.

Figure 2.3.3 Example of ITS pipeline (study phase) report

These reports are issued monthly to the GMC by I&VM.

2.3.2 CSG level

At a CSG level, the respective CSG senior management (executive committee or ExCo) normally focus on ‘program management’.

Again as part of the CAP process, each CSG prepares a set of priorities for their capital growth pipeline which is discussed at the annual strategy appraisal.

Most CSGs have a regular monthly capital projects meeting (known variously as project review committee, capital committee, or steering committee).

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The objectives of these meetings are essentially the same, to discuss the priorities, approval, status and governance of the CSG’s projects.

CSG prioritisation

At a CSG level, the prioritisation of the overall pipeline program is left to the respective CSGs.

Each CSG uses slightly different prioritisation criteria, although the overall principles (balancing benefit against cost, risk and complexity) are the same. CSGs may elect to prioritise their projects based on some or all of the following:

 capex  gross  net  complexity

 project location e.g. new country entry  project capability

 technology complexity (existing/new)  environmental impact  regulatory environment  operations  additional product to CSG  throughput  operating cost

 product issues (new, quality etc)  operability

 HR requirements (industrial relations)  Joint venture partners

 who is project operator?  what is their experience level?  relationship

 special risks

 business risks  reputation risks

 NPV

 total life cycle cost (TLCC).

CSG reporting

At a CSG Level the reporting of the program is again left to the individual CSGs.

The majority of CSGs have an overall set of structured project reports including single page project dash boards. Refer to Section 2.4 Program Management Hubs for details on program reporting.

2.3.3 Asset and operation level

At an Asset or operation level there is the same focus on ‘program management’ as at the CSG level but obviously on a smaller population of projects.

Within each Asset there is normally a ‘project prioritisation process’ which enables the Asset management team to rank the respective value of the project to the business in terms of benefit, risk, complexity etc. This methodology is used to decide which projects require to be delivered when and why. At an Asset level, one of the key constraints is often the resources to develop and execute the project.

Where possible, the same prioritisation method or criteria is used across a CSG’s Assets and operations. PROJECT DEVELOPMENT MANUAL CHAPTER 2.0 THE BHP BILLITON APPROACH TO PROJECTS Page 11 Revision 0 (uncontrolled when printed) Section 2.3 - Portfolio Management

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Where possible, a standard portfolio management software program (like Mariner or similar) is used on all Assets and operations within a particular CSG so that it is possible to roll up the overall project program at a CSG level.

2.3.4 Program management hubs

Recently BHP Billiton introduced the ‘hub’ concept of grouping the corporation’s major capital projects together into a global network of program management hubs.

Several of these are multi CSG hubs where a pipeline of pan-CSG projects are grouped together to optimise the benefits and leverage available from developing and executing multiple projects at one location.

The program management hub concept is explained in more detail in Section 2.4 Program Management Hubs.

2.3.5 Compliance with GLDs

The Major Capital Projects GLDs have four sections where the minimum performance requirements for portfolio and program management are mandated, as follows:

 Section 1.0 Project Initiation.

 Major capital projects must be initiated and prioritised in accordance with the corporate objective, CSG strategy and CSG approved 5 year plan.

What this means is that the individual projects need to be initiated and prioritised in accordance with both the overall BHP Billiton corporate growth strategy (portfolio management) and the CSG growth strategy and 5 year plan (program management).  Appendix 2.0 Section 1.1 Business Objectives and Strategic Fit.

 Ensure the investment is consistent with the corporate objective, CSG strategy and CSG approved 5 year plan.

 Provide a concise overview of the strategic rationale, strategic fit and any required exit strategy. Reference existing material from the CSG approved 5 year plan and CSG strategy appraisal.

This is an identical requirement to that highlighted above but specific to the identification phase. Note that there is not a requirement to repeat the full CSG approved 5 year plan and CSG strategy appraisal text in either the study report or the IAR but to reference the relevant documents and include a strategic summary and highlight/confirm that there is a good strategic fit between the current project and both the BHP Billiton and CSG growth strategies.

 Appendix 3.0 Section 1.1 Business Objectives and Strategic Fit.

 Provide a concise description of the strategic fit and any required exit strategy for the preferred investment alternative. Reference existing material from the approved CSG 5 year plan and CSG strategy appraisal.

This is a similar requirement to Appendix 2.0 but specific to the selection phase. Again there is not a requirement to repeat the full CSG approved 5 year plan and CSG strategy appraisal text in either the study report or the IAR but to reference the relevant documents and include a strategic summary and highlight/confirm that there is a good strategic fit between the current project and both the BHP Billiton and CSG Growth strategies. It is important to also include details of any exit strategy in the study report and IAR.

 Appendix 4.0 Section 1.1 Business Objectives and Strategic Fit.

 Provide a concise description of the strategic rationale, strategic fit and any required exit strategy for the preferred investment alternative. Reference existing material from the approved CSG 5 year plan and CSG strategy appraisal.

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This is a similar requirement to Appendix 2.0 but specific to the definition phase. Reference the relevant documents and include a strategic summary, confirm that there continues to be a good strategic fit between the current project and both the BHP Billiton and CSG Growth strategies. Include details of any required exit strategy in the Study Report and IAR.

2.3.6 Current portfolio status

The current status of BHP Billiton’s portfolio of projects can be found in Toolbox 9.2.3B Current Portfolio Status.

Examples of Group Level reporting can be found in Toolbox 9.2.3A ITS Reports, while examples of CSG Level reporting can be found in Toolbox 9.2.4C Program Reporting Guideline.

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PROJECT DEVELOPMENT MANUAL CHAPTER 2.0 THE BHP BILLITON APPROACH TO PROJECTS Page 14 Revision 0 (uncontrolled when printed) Section 2.4 - Program Management Hubs

2.4 PROGRAM MANAGEMENT HUBS

In the past, BHP Billiton carried out studies and projects on an individual project by project basis. However, due to the very high levels of global demand for most of BHP Billiton’s commodities and therefore the associated increase in BHP Billiton’s project growth pipeline, in 2008 the GMC endorsed the proposal that the corporation move towards a model where all BHP Billiton major capital projects were grouped and resourced from a global network of program management hubs.

Initially these were identified as Perth, Brisbane, Houston and Santiago with others to follow on an as required basis. This section of the PDM provides:

 information on the overall program management hubs strategy

 detail on how to comply with the hub requirements in the Major Capital Projects GLDs  relevant statistics and information on the individual hubs.

Context

The hub concept, where BHP Billiton gains increased effectiveness through the leverage of multiple projects in a single location, was introduced before the global financial crisis (GFC), when there was a severe shortage of experienced project resources from both the Owner’s team and the implementation contractor3. While labour shortages subsequently abated, the longer term increase in BHP Billiton’s capital

spending and the start-up of new businesses, such as uranium and potash, are indications that the resourcing of major projects will continue to remain a challenge for the foreseeable future. As a result, the hub strategy is seen as a key mitigation in addressing this issue.

The other benefits of the hub strategy include:

 locking in access to Tier 1 implementation contractors  realising significant supply chain leverage

 achieving simplicity through common systems, processes, standards and procedures  developing a scalable major project delivery model to facilitate future growth.

Hub definition

A program management hub is a centre of excellence for the study and execution of a portfolio of projects. Each hub uses a program management approach, provides continuity of work for key Owner’s team and implementation contractor’s project resources, enables the consistent application of best project practices, normally has a long-term commitment to a Tier 1 engineering, procurement and construction management (EPCM) contractor and facilitates driving continuous improvement in the corporation’s project performance.

Key features of a hub must include:

 a central location where BHP Billiton co-locates its major capital projects in order to realise the benefits and synergies (standardisation, replication, continuity and leverage)

 a sufficient pipeline of continuous projects that is treated as a program

 continuity of key owner and implementation contractor resources and to enable the development of project team capabilities

 typically includes a long-term relationship with one or several aligned Tier 1 implementation contractors who provide program management support

 individual projects in the hub are afforded sufficient flexibility in order to maximise value (e.g. use of different engineering support contractors) without eroding the benefits of the hub model

 consistently employs excellent project management standards and processes.

3

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Hub locations

The current program management hubs are:  Perth – Iron Ore

 Brisbane – multi commodity, managed by Metallurgical Coal  Santiago – multi commodity, managed by Base Metals  Houston – Petroleum

 Vancouver – multi commodity, managed by Diamonds and Speciality Products. Figure 2.4.1 identifies the locations of these program management hubs.

Other hubs may follow on the basis of portfolio demand.

Figure 2.4.1 BHP Billiton program management hubs

The individual status of each hub is detailed in Section 2.4.5 Current status and details on individual program management hubs.

2.4.1 Compliance with the GLDs

What is required?

The Major Capital Projects GLDs have three sections where the minimum performance requirements for the program management hub strategy are mandated, as follows:

 Appendix 3.0 Section 14.7 Program Management

 Major capital projects, where BHP Billiton is the project manager, must be developed where possible via a program management hub in the selection phase.

The individual major projects need to be developed via one of the established program management hubs from the start of the selection phase onwards.

 Appendix 4.0 Section 14.7 Program Management

 Major capital projects, where BHP Billiton is the project manager, must be developed where possible via a program management hub in the definition phase.

This is an identical requirement to above, however specific to the definition phase.  Appendix 5.0 Section 2.3 Project Execution

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 Major capital projects, where BHP Billiton is project manager must be executed where possible via a program management hub

This is an identical requirement to above, however specific to the execution phase.

When is it required?

As highlighted above, the requirement is that the individual major projects need to be developed via one of the established program management hubs from the start of the selection phase onwards. The appropriate time therefore to be considering which hub to use is during the latter part of the identification phase.

How do I find a suitable hub?

Contact PMS for the latest information on, the current workload in each hub and the optimum hub to use for a particular project.

Toolbox 9.2.4A Hub Procedure 001 Project Entry provides details on the process for entering a project into a hub.

How do I get approval for my program management hub strategy?

To obtain approval for a particular program management hub strategy, apply the following steps:

 The project leader, sponsoring CSG and landlord CSG (hub) all need to decide on the optimum hub strategy and then following due process, recommend this for formal approval.  The Head of PMS will endorse the recommendation as defined in the Major Capital Projects

GLDs. Note that the default is to put major projects in a hub unless a specific reason exists.  The CSG president then approves the recommendation as defined in the Major Capital

Projects GLDs.

Exemptions from development of major capital projects via a program management hub requires endorsement by Head of PMS and approval by the CSG president sponsoring the project.

2.4.2 The program management hub strategy

Objectives

The market drivers for BHP Billiton’s project pipeline delivery are the same as those for the rest of the minerals and petroleum industries i.e. meeting developing market demand for natural resources which has continuously shown strength and resilience over an extended period of time.

In periods of high global demand, the international market for experienced project management, engineering, fabrication and construction resources is highly stretched. This limited market for skilled human resources has lead BHP Billiton to approach its projects in a new and innovative way via program management hubs.

For BHP Billiton to meet its overall project delivery objectives, it is essential for the program management hubs strategy to:

 achieve zero harm to people, the community and the environment

 enable the BHP Billiton project pipeline to be delivered according to the respective project business cases and investment processes

 use an innovative approach to consistently capture and improve value  deliver predictable capital cost, schedule, and operating performance.

The hub objectives statement (Figure 2.4.2) presents the business objectives of the program management hubs.

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Figure 2.4.2 Hub objectives statement

BHP Billiton will view the hub as being successful when  The hub program management contractor (PMC) delivers a program with zero harm.  Projects are resourced and delivered to a schedule consistent with CSG objectives.  There are no significant deviations from the authorised cost of any project.  There are no significant quality deviations.

 The CSGs want to place their sub $250 million projects into the hub.

 The hub provides certainty of access to key resources that are scarce in the market but are essential to the development of the CSGs assets through major projects.

 Reliable business outcomes are delivered for the specific needs of each project.

 The value delivered by each project is greater than if treated as separate projects competing in the market.  Each project in the hub receives appropriate levels of management attention and support.

 Each project is resourced with high quality, experienced project professionals.

 The planned program of projects is studied and executed in a controlled and predictable manner.

 The hub structure is able to flex and accommodate the planned program and occasional incremental projects.  The hub seamlessly integrates key specialist contractors where they are best able to support projects.

 High quality studies are produced that routinely apply best team development, front end loading, value improving practices and project control practices.

 The hub PMC is an extension of the Owner’s team.

 Additional project resources are made available to the projects including: o engineering value centre capability and established offices

o international resource base o international procurement o China procurement

o modular design, fabrication and construction o highly experienced functional leadership.

 There is a reduction in engineering and management man hours and overhead cost.

 Allows for relationship building and trust development over time between Owner and hub PMC.

 The structure and longevity of the hub allows for career development and talent management of both the Owner’s and hub PMC’s staff.

The hub PMC will view the hub as successful when  The program provides certainty of work over an extended period of time (5-10 years).

 The commercial arrangement suitably rewards the hub PMC for the provision of their best project management resources with additional upside for successful business/project outcomes.

 The program provides a critical mass of project volume to support: o attraction and retention of highly experienced resources o the personal and career development of project resources o the application of standard processes, standards and systems

o resource levelling of key project management and engineering resources.  The program uses additional services offered by the hub PMC including:

o engineering value centres o international resource base o international procurement o China procurement o central procurement o modularisation centres.

 The hub PMC is an extension of the Owner’s team.

 The hub PMC delivers successful projects to a major corporate client that enhances their reputation and business value.

 The CSGs want to place their sub $250 million projects into the hub.

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2.4.3 Hub scope of work and services

Hub scope of work

The scope of work for any individual hub is determined by the specific projects that need to be studied and executed through the hub at that time, which in turn is driven by the CSG’s individual growth pipelines. Typically, each hub has around US$10-20 billion worth of capital projects in development or execution. BHP Billiton major projects typically include the following types of scopes:

 mining or hydrocarbon drilling (typically Owner’s scope)

 materials handling systems e.g. crushing, screening, transport, transfers

 mineral processing plants e.g. hydrometallurgical or pyrometallurgical processes  upstream oil and gas systems e.g. SPJ, TLP, FPSO, associated topsides

 supporting infrastructure e.g. power generation, water supply, road, rail, ports.

Services provided by hub PMC

A typical hub PMC provides the following services:

 development of a program level plan for project coordination and program wide resource levelling and planning

 monitoring of the overall program and individual project progress

 provision of high-level expertise to support BHP Billiton with conceptual and identification studies

 provision of expertise for the completion of detail definition and project execution planning for selection and definition phase studies

 provision of a functional centre of excellence for shared services across all projects within the program including:

 estimating

 planning and scheduling  project controls

 engineering management  engineering

 procurement and contracts  health and safety management

 environment and community management  project human resource management  information management

 construction management  quality management  commissioning management

 provision of common program and project systems, procedures and standards for all studies and projects managed through the hub

 development and retention of project information including estimates, procurement outcomes, contracts, engineering deliverables, correspondence, vendor data, engineering and construction labour productivities, escalation, lessons captured and learnt

 development of a human resourcing program to support projects within the hub, including training, career development and talent management

 selection, allocation, mentoring and monitoring of performance of key project personnel including project managers/directors

 provision of engineering value centre capability to support hub projects

 identification of and development of long term relationships with key suppliers, consultants and construction contractors

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 assisting BHP Billiton to develop strategic supply agreements for key process equipment where appropriate

 development of standard scope elements to support replication within and across projects  development of standard commercial terms for suppliers and contractors for across individual

studies and projects

 leadership of innovation programs to support the hub projects

 capture and application of lessons learnt to improve project performance across the program  capture of project data to allow the measurement and benchmarking of program value

delivery

 development of alignment programs with Owner representatives.

For project implementation, the hub carries out the work using the full range of contracting models from self perform to engineer, procure and construct (EPC), traditional EPCM, through to modified forms of third party EPC, dependant upon the project scope, risk profile, business objectives and the contracting strategy developed during the front-end loading phases of the project.

Subject to BHP Billiton’s approval (required on a case by case basis), contracting services provided by the hub PMC could include the bidding, assessment and the recommendation of lower tier EPCM and/or engineering services contractors. This is expected to be performed under the procedural guidance and governance of BHP Billiton because of commercial sensitivities. The contract with the lower tier contractors may be with BHP Billiton however, the management, coordination and functional leadership of lower tier EPCM and/or engineering services contractors are specifically included in the hub PMC’s project scope.

Services not provided by the hub PMC

The scope of services by the hub PMC typically excludes the primary responsibility for the following (but does include supporting BHP Billiton in these activities):

 government relations  regulatory approvals  land tenure

 native title

 community relations

 geology and mineral resource investigation  mine design

 market analysis  investment evaluation  operating philosophies

 development of the Owner’s specific scope e.g.  pre-strip

 start-up.

Implementation contractor

Regardless of who is executing the specific project work, whether the hub PMC or a third party EPCM, for the purposes of this document, herein after they are referred to as the implementation contractor.

2.4.4 Hub structure

A typical hub structure is shown in Figure 2.4.3.

PDM 001 Project Development Manual (Rev 0)

PROJECT

DEVELOPMENT

MANUAL

Document No: PDM-001

FOREWORD

1.0 INTRODUCTION

2.0 THE BHP BILLITON APPROACH TO PROJECTS

3.0 GROUP LEVEL DOCUMENTS

4.0 STRATEGIC PROCESSES

5.0 CORE WORK PROCESSES

6.0 CONTROL PROCESSES

7.0 GLOSSARY & ABBREVIATIONS

8.0 INVESTMENT PHASE CHECKLISTS

PROJECT DEVELOPMENT MANUAL

CHAPTER 1.0

INTRODUCTION

Document No: PDM-001

Table of Contents

Tables

Figures

1.0 INTRODUCTION

1.1 BACKGROUND

1.2 PURPOSE

1.3 STRUCTURE

1.4 CHANGE CONTROL

1.5 PROJECT CLASSIFICATION

PROJECT DEVELOPMENT MANUAL

CHAPTER 2.0

THE BHP BILLITON APPROACH TO

PROJECTS

Document No: PDM-001

Table of Contents

Tables

Figures

2.0 THE BHP BILLITON APPROACH TO PROJECTS

2.1 OVERVIEW

2.1.1 Guiding principles

2.1.2 Introduction to the investment phases

2.2 PROJECT DEVELOPMENT PROCESS

2.2.1 Phase objectives

2.2.2 Phase activities and key deliverables

2.2.3 Phase planning

2.2.4 Idea generation and project initiation

2.2.5 Project development and delivery roadmap

2.3 PORTFOLIO MANAGEMENT

2.3.1 Group level

Example of BHP Billiton Growth Pipeline Prioritisation

2.3.2 CSG level

2.3.3 Asset and operation level

2.3.4 Program management hubs

2.3.5 Compliance with GLDs

2.3.6 Current portfolio status

2.4 PROGRAM MANAGEMENT HUBS

2.4.1 Compliance with the GLDs

2.4.2 The program management hub strategy

2.4.3 Hub scope of work and services

2.4.4 Hub structure