Doing Business in China 2014 - Edinburgh

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Information about Doing Business in China 2014 - Edinburgh

Published on March 6, 2014

Author: DigitalContent



Slides of presentations of 'Doing Business in China 2014' event in Edinburgh on 6 March 2014.

Doing Business in China 2014 China/India Market Awareness Opposites & Equals Glasgow 22nd March 2013 Crowne Plaza - The Roxburghe Hotel Edinburgh WELCOME

Doing Business in China 2014 Long Baijin General Manager – Mainland China SDI China Welcome & introduction China – Market overview & Routes to market

Doing Business in China 2014 Agenda Time 09.00 Item Registration and Refreshments Speaker/notes 09.30 Welcome and Introduction China Market overview and business context Sector opportunities Routes to market Exhibitions and missions SDI support / market support Protecting your intellectual assets Long Baijin, SDI China 09.40 10:00 Long Baijin, SDI China John Gray, Murgitroyd Panel members: Panel Discussion 10:20 Market research Financial considerations Cultural considerations James Brodie, CBBC Colin More, HSBC David Moore, Eastmoore (GlobalScot) Jacqueline You, Cicada Corporation Scott Brown, Redfern Associates Jordi Martin Navarro, Klako Group

Doing Business in China 2014 Time Item Speaker/notes 11:20 Networking Break 11.40 Case studies panel session Intro – Who we are and what we do How we started doing business in China Do’s and don’ts Assistance & support received Advice, tips and considerations from experiences Q&A Case study participants: Alan Meldrum, Percepta David Branch, Cochran Neil McArthur, LFH Engineering Richard Selwa, Unmanned Production Buoy Ltd. 12.50 Smart Exporter services Steven Turner, Smart Exporter Adviser 13.00 Networking Lunch 13.30 One to one sessions with specialist advisers All speakers

China March 2014 China Market Awareness Workshop Inverness and Edinburgh March 2014 Long Baijin General Manager – Mainland China Scottish Development International

China Key Facts 2013 • • • • • • • • • Population: 1.37 b (est. Oct 2013) Area: 9.6 m. sq km GDP value: US$ 9.0386 tn – World’s 2nd largest economy GDP Growth: 7.7% Per Capita GDP: $6091 (2012), World’s No. 122 Inflation: 2.6% Unemployment: 4.1% Foreign Trade: $4.16 tn - world’s largest goods trader Exports: $2.21 tn +7.9% Imports: $1.95 tn +7.3% Language: Standard Chinese =Mandarin (Note: According to CIA, China’s GDP by PPP is $12.26 tn and per capita GDP is $9100)

China Political & Economic Update Reform Version 2.0 by Xi Jinping and the new leadership Continue the theme of political conservatism and economic reform. Key themes: • China Dream • Deeper pro-market economic reform • market-based resource allocation • freeing interest rates, exchanges rates, capital accounts • Rebalancing investment and consumption • rural land reform /property rights of farmers • Urbanization – to be detailed and demonstrated • Anti-corruption by catching both tigers and flies –implications! Key issues to address for the new leadership: • Sustainable growth; food safety; pollution; property prices; income distribution; anti-corruption; health reform; social security; population policy; the hukou system; rural issues; employment, etc • Territory disputes

Why China • A market of significant Size • A market of significant Growth • A market of significant Resiliency • A market which has increasing impact on businesses and families across the world - negative or positive (A Year Without Made-in-China… by Sara Bongiorni) • A market which will “invades” your territory if you do not “invade” it • Still a global manufacturing base, despite of increasing salary pressure • A source of fund and FDI • A global market with virtually all major MNCs present • A market that the Scottish Government attaches great importance to …A market that you should not ignore and can’t afford to ignore!

Scottish Government New China Plan – T&I Priority One: Trade & Investment To increase trade opportunities for Scottish business in China and encourage more Chinese investment in Scottish industry and infrastructure Targets • Target 1.1: Double the number of Scottish companies (based on 2010 levels) supported to access Chinese markets by 2017. • Target 1.2: Increase direct exports to China above the Scottish Government‟s export target of 50% by 2017 and to exceed this for China based on 2010 export levels. • Target 1.3: Double the number of major Chinese investors with a presence in Scotland by 2017 based on 2012 levels. Levers 1. Utilise Ministerial visits to China to include trade delegations and encourage highlevel reciprocal visits to Scotland. 2. Increase the visibility of Scotland as a brand associated with high quality, innovation, creativity and world leading capability across our key sectors. 3. Increase Scottish Development International‟s (SDI) trade support expertise, staff and geographic footprint in China. 4. Support our enterprise bodies to promote the investment opportunities that are available in Scotland and China in the energy and low carbon sector.

SDI Key Sectors Focus in Mainland China Sectoral targets Financial Services Energy TAE&CI Life Sciences Education Food & Drink Textiles Tourism

China Opportunities – Demographic/Behavoural…Approach • • • Over 1.2 b. mobile phone users Home to over 618 million Internet users, 80 percent of it access the Web via their smartphones 55% of Chinese netizens are under 30 E-commerce/online shopping: dramatic growth in the past years Social media – important part of life now, e.g. Wechat, QQ and Sina Microblog • • • • • • • Rise of middle class - target of world luxury goods suppliers The young consumers – trend catching (brand buyers) Change of perception/taste (e.g. whisky) One child policy, though changing and loosening Food safety concern Trust imports: brands, products and overseas education Gift market – relations building culture • •

China E-Commerce (online shopping) With Chinese internet users quickly approaching 600 million, and e-commerce revenue growth (from 2009-2013) growing at 70 percent annually on average, China is on pace to pass the US and become the largest e-commerce market in the world.

China Opportunities – Sector Approach (1) Food & Drink: • one of the fastest growth sectors • Imports grow at 15% in the past five years • China estimated to be the biggest importer of F&D by 2018 at £48 b. • Whisky and Seafood inc. salmon are top exports from Scotland Textiles: • The world's biggest apparel manufacturer with 20 million employees and $1,064 b. turnover. Export at $292 b. in 2013 • Top target market of world top brands Tourism: • Outbound tourists reach 83 m. in 2012 (against 10 m. in 2000). World’s biggest consumer of luxurious goods - 25% of the world total, with 2/3 purchased overseas Education: • Chinese students going to study abroad amount to over 410,000 in 2013, +3.58% - a market continues to grow year on year

China Opportunities – Sector Approach (2) Life Sciences: • 5.6% of the world market, expected the 2nd biggest market by 2015. Aging population, and universal coverage of medical care to be introduced • China healthcare regarded as High Value Opportunity by UKTI, estimated at £250-350m worth of business potentially accessible to UK firms in next few years. Financial Services: • No. 1 foreign reserve country - $3.66 tn by Sept 2013 • Around $1304 b. under SWF management – asset management and overseas investment • Business services such as legal and accounting required by Chinese companies for overseas investment Energy: • World largest energy consumer and 2nd largest oil consumer • Proactively acquiring O&G assets overseas and exploring discoveries domestically • Cleantech and energy efficiency opportunities TAE/Creative Industry • 1.2 b. mobile phone users & 618 million Internet users –great potentials for online games, music, videos • China tries to obtain technologies and knowhow for all its key sectors

China – Not All is Rosy – Challenges and Risks Political and Economic Uncertainties (e.g. Norweigian salmon/Japanese car) Laws and Regulations/Changing regulatory framework Bureaucracy (officials vs civil servants. Do not expect them to serve you as the Scotland/UK government agencies do. It is the other way round!) • Language barrier • Business culture • Guanxi based business culture • Hierarchical corporate culture (e.g. in decision making) • Yes may not mean Yes or Success of business • JV management conflicts • Cross the river by feeling the stones of the riverbed - Chinese way • Corruption • Nationalism/local protection (national treatment is not yet completely there) • Competitive market • IP Protection (inc. trade mark, design) • Swindling/Scamming (no free lunch!) • Local Partners/staff/HR issues • Resources & commitment demanding • Quality of life – air polution/food safety/traffic jam… • And more… China is not a market for everyone! • • •

Access to China Market • • • • • • • Do you have the resources (financial and human) for the market? It could be medium to long term before you see results Do you have unique selling point(s) Right time for your business and products? Market research Due diligence Visits/trade missions/exhibitions • Business meetings/workshops Local partner/agent/distributor identification • Export • Representative office • WOFE (wholly owne foreign enterprise: more popular than JVs now) • Joint Venture (equity or Cooperative) • M&As • Licensing • Oursourcing Implications of different entry modes

Scottish Companies’ Physical Presence in China Bridge of Weir David Ritchie Implements Fresh Catch Glasgow Caledonian University • Aggreko •Rosti Technical Plastics Howden Hua Engineering Co. Ltd • Safehouse Habitats • Atkins • Score Group • Azimuth • Caledonian Alloys Ltd • Worldmark • Clyde Blowers (various operations) • Hengan Standard Life Insurance • Dundee University •Simclar (Tianjin) Ltd. • • Edinburgh University • Aberdeen Asset Management • Glasgow School of Art • Angus Dundee • Glasgow University • Aggreko • Hengan Standard Life Beijing •Cochran • Howden Hua Engineering Beijing • Shanghai Clyde Bergemann Tianjin • Heriot Watt University • The Edrington Group Shandong • Ian Macleod Ltd • Frank Sammeroff • KAL • Fountain Bridge Jiangsu • Logitech • JD Wilkie • Napier University • Kinloch Anderson Shanghai • Neogen Europe • Marine Harvest • NCR (Beijing) Financial Equipment System • Martin Currie • RBS • Michael Bradley Architecture • SgurrEnergy Shenzhen • William Grant & Sons • Skyscanner • Wolfson Microelectronics • SQA • Peak Scientific • Standard Life Investments • Power Jacks • Wilson & Garden •TEFL Scotland • RBS • Verdex Ltd. • Weir Group •Teknek • Wolfson Microelectronics • Wood Mackinzie • Trespass • Elmwood College •Twig World • Weir Group And more through export…

SDI’s Approach to China Market Outward Opportunities Support Scottish companies to internalize Collaborative Promote partnership opportunities in key sectors Inward Opportunities Attract Chinese companies to invest in Scotland for the benefits of Scottish economy

SDI Mainland China/Field Support • • • SDI China (Beijing) set up in 1994 SDI Shanghai set up in 2003 Work in partnership with UKTI, CBBC, Scottish Government (Scottish Affairs Office Beijing), etc • Smart Exporter ertneC a cnan F ertneC llaiicnaniiF lanoitanretnI :iahgnahS • Field Support: Conduct market research Identify business partners & suppliers Advice on market entry strategies Development market visit programme Introductions to business networks, e.g. GlobalScots Followup supports rewoT efiL anihC :gnijieB • • • • • •

China Market SDI Plans (TBC) & Some Key Events Creative Industry & TAE 06-07/14 China Gaming Mission to Scotland 07/08/14 SDI Scottish Gaming Mission to China Joy Shanghai Time TBC Scottish Sensor Mission to China Energy Time TBC 08/14 03/15 Food & Drink 05/14 11/14 10/14 11/14 Scottish Oil & Gas Mission to China CIPPE Shanghai CIPPE Beijing Chinese Buyers mission to Scotland/European Seafood Show (ESE) in Brussels Qingdao Seafood Show with a pavilion sponsored by SDI Great British Brands Festival (CBBC) FHC Shanghai

China Market SDI Plans (TBC) & Some Key Events Financial Services 04/14 Chinese AMC Mission to London/ Edinburgh 10/14 TBC Lord Mayor of City of London’s visit to China Life Sciences 04/14 CMEF Shenzhen -Top medical equipment fare in China Textiles 07/14 10/14 UKTI’s China Luxury Buyers’ Mission to Scotland Intertextile Fabrics Show in Shanghai Tourism 11/14 TBC 04/14 06/14 Scottish golf tourism delegation visit to China China Outbound Travel & Tourism Market (Beijing) International Luxury Travel Market, Asia (Shanghai) Others 03/15 TBC Scottish Cross Sector Mission to China

China – Food and Drink Dalian Seafood Show in 2013

China – Food and Drink Dalian Seafood Show in 2013

China - Oil and Gas FM with Oil and Gas group visit Sinopec - 2013 Beijing

China - Education FM visit Tsinghua University - 2013 Beijing

China – Textile CHIC 2013 Beijing

China - Textile Fashion show at CHIC 2013 Beijing

China - Creative China Joy 2013 Shanghai

China Premier - Li Keqiang visit Scotland

Contact Us Beijing Office Initial Contact: Long Baijin Address: SDI Beijing Office, Rm 1006A, China Life Tower, 16 Chao Yang Men Wai Da Jie, Chaoyang District, Beijing 100020, China Telephone: +86 108525 3070 Fax: +86 10 8525 3086 E-mail: Shanghai Office Initial Contact: Mingyu Ge Address: Scottish Development International, 8F, Tower 2, International Finance Center 8 Century Boulevard, Pudong, Shanghai China, 2000120 Telephone: +86 21 6062 7117 Fax: +86 21 6062 7102 E-mail: Hong Kong Office: Taipei Office: Initial Contact: Fiona Squair Address: British Consulate-General 1 Supreme Court Road Admiralty, Hong Kong Initial Contact: Reggie Wu Address: Scottish Development International, 4Flr., No.200 KeeLung Road Sec. 1Taipei City, 110, Taiwan Telephone: +852 2901 3086 Fax: +852 2901 3007 E-mail: Telephone: +886 2 8723 9975 Fax: +886 2 8723 9976 E-mail:

Doing Business in China 2014 John Gray Director Patents Murgitroyd & Company Protecting your intellectual assets

Doing Business in China: Intellectual Property Considerations John Gray European and UK Patent Attorney 6 March 2014, Edinburgh © Murgitroyd & Company 2014

What This Talk Covers … © Basic introduction to intellectual property (IP) © Concerns of UK business © Dispelling some myths © The Dragon plays catch-up © Adapting your IP strategy © China – available patent types © Murgitroyd & Company 2014

What this talk covers – pt 2 © Trade Marks – and Chinese transliterations © Domain name issues © IP Insurance © Murgitroyd & Company 2014

Basic introduction to IP © What exactly is IP? © Why are IP rights important? © How do I know if I have IP? © Unregistered and registered IP rights © Murgitroyd & Company 2014

China: Principal concern of UK business © Murgitroyd & Company 2014

Dispelling Some Myths “My technology will be stolen, copied and sold cheaply, possibly by my Chinese partner”. © Many companies in China are skilled and prolific counterfeiters – Correct © There is nothing you can do about it – Wrong “Chinese IP laws are unsophisticated, so protecting IP in China is a waste of time and money” © China’s IP laws remodelled on the German/European system and are very comprehensive “IP rights in China are of poor quality” © Patents issued to foreigners are handled by most experienced Examiners and quality is improving. © Murgitroyd & Company 2014

Dispelling Some Myths (cont’d) “Laws and enforcement mechanisms favour domestic interests” © Supreme Courts in larger cities are handing down sophisticated judgments EU judges providing training © German bus manufacturer was awarded $3M damages and an injunction against Chinese infringer in 2009 © Consistency of judgments outside major cities is a recognised problem. 60% of judges have no IP training. This is being addressed “Foreign businesses cannot succeed in litigation in China” © 90% foreign companies litigating in China win their case compared to, e.g. 3040% for foreign companies litigating in US; and at much lower cost © Murgitroyd & Company 2014

The Dragon plays catch-up © First UK patent granted in 1449 and UK-IPO set up in 1852 © Concept of IP entirely alien to China as recently as the 1970’s © First Chinese patent granted in 1985 © Chinese Patent Office acceded to all major IP Agreements and Treaties between 1985 and 2001 © China’s emergence as economic superpower reflected in patent filing statistics © Murgitroyd & Company 2014

Statistics – Patent Filings compared to other countries © Murgitroyd & Company 2014

Adapting your IP strategy © Manufacturing © Sourcing of parts and components © Selling your technology in China © R&D © Partnering with Chinese companies – either in China or at home © All demand knowledge of local IP environment and a suitably tailored IP strategy. © Murgitroyd & Company 2014

China – patent types available © Invention Patent © New and inventive technical solutions relating to a product or a method of producing or doing something. Includes improvements to existing solutions © Detailed examination – high “inventive step” threshold © 20 year term (3-5 years to grant) – appropriate for longer life cycle products © Utility Model Patent © New technical solutions relating to the shape and/or structure of a product which are functional rather than aesthetic. Methods and chemical compounds are excluded © Granted without substantive examination – lower “inventive step” threshold © 10 year term (1 year to grant) - appropriate for shorter life cycle products © Design Patent © New designs relating to shape of a product which distinguishes its overall appearance © Granted without substantive examination © 10 year term (1 year to grant) © Murgitroyd & Company 2014

China - Trade Marks © ‘First-to-file’ system – Applying to register is very important as China grants vast majority of trade mark rights on first to register – not use © Plan ahead - get rights on file as soon as possible © Register yourselves – don’t leave it to local agent © Transliteration of Trade Mark – Trade mark should be registered in English and in Chinese. Check meaning of transliteration and ensure it sounds similar to trade mark. © Murgitroyd & Company 2014

Transliteration of Trade Mark © Murgitroyd & Company 2014

Transliteration of Trade Mark - 2 © Coca Cola = “Ke Ku Ke Le” which means “allowing the mouth to rejoice.” © Pepsi Cola = “Bai Shi Ke Le” which means “everything makes you happy.” © Murgitroyd & Company 2014

Domain Names © Yes, it is possible to register domain names – “” © Register through reputable domain name registrant © Be aware of scams - example © Murgitroyd & Company 2014

Domain Names – Scam example © Dear CEO, We are the domain name registration organization in China. © Last week we received an application from someone wishing to register © After initial examination, we noted it is same as your company name/trade mark. © Would you like to pay us handsomely to register it for you? © Murgitroyd & Company 2014

IP Insurance © Insurance policy can cover the costs of enforcing/defending IP litigation © Provides a more level playing field for small/medium sized company vs large company © Like any insurance policy, devil is in the detail! © Watch out for a policy which requires an opinion from a barrister of “100% prospect of success” © Murgitroyd & Company 2014

Summary © Chinese IP laws are well established and comprehensive © Enforcement problems are recognised and will improve over time © Remember: an Invention Patent has a 20 year term and IP environment is sure to improve markedly within that period – and Trade Marks can last indefinitely © File your Trade Marks early © Give careful consideration to Transliterations © Murgitroyd & Company 2014

Doing Business in China 2014 James Brodie Manager, Scotland and China Business Adviser China-Britain Business Council

China-Britain Business Council - Partnering with SDI/UKTI - Edinburgh, 6th March 2014 @ChinaBritain

• Background to CBBC • Supporting SDI/UKTI • Market Research & Development • Cultural Considerations @ChinaBritain

Shenyang Beijing Qingdao Xi’an Nanjing Chengdu Wuhan Shanghai Chongqing Hangzhou Changsha Guangzhou Shenzhen @ChinaBritain

Support through regional offices

Construction Scotland Learning Journey

Bespoke Market Research (through OMIS) Manufacturing in China for long time Building good relationships Long-term approach & patience Working with local staff / team Regionally targeted in North China

Chinese Cultural Titbit Relationships = Order

No relationships = no order

Doing Business in China 2014 Panel Discussion: Topics covered Panel members Market research James Brodie – CBBC Financial considerations Colin More – HSBC Cultural considerations David Moore – Eastmoore (GlobalScot) Expert tips & recommendations Jacqueline You – Cicada Corporation Jordi Martin Navarro – Klako Group Scott Brown – RedFern Associates

Doing Business in China 2014 Networking Break Sign up for one to one meetings (13.30 onwards) at the registration desk Bookings taken on a first come first served basis

Doing Business in China 2014 Case studies panel session: Topics covered Panel members Who we are and what we do Neil McArthur – LFH Engineering How we started doing business in China David Branch – Cochran Do’s and don’ts Richard Selwa – Unmanned Production Buoy Assistance & support received Alan Meldrum – Percepta Advice, tips and considerations from experiences Q&A

Energy Solutions Worldwide Cochran Ltd Newbie Works, Annan, Dumfries & Galloway, UK DG12 5QU. +44(0) 1461 202 111

Chinese Boiler Currently in Production 64 Energy Solutions Worldwide

Manufacturing Facilities Cochran head office and manufacturing facilities were established in 1898, covering an total area of 59,000 m2 Manufacturing partnership in Shanghai established in 2011 65 Energy Solutions Worldwide

Delivery of London Olympic boilers to site 66 Energy Solutions Worldwide

One big one, One little one… 67 Energy Solutions Worldwide

Cochran Timeline 1878 Cochran Founded in Birkenhead 1898 Relocate to current location in Annan 1930’s First Export to PRC 1980/90’s Dedicated Cochran team in PR Regional office, Business grows in PRC to become largest export market 1995 First overseas company to obtain Quality License from Chinese government 2000 Sold by Rolls Royce to MechMar (Malaysia), Establish Cochran HK 2003 Establish JV/ licence agreement with SHBV 2010 Sold by MechMar to SBHV, JV wound up, OEM agreement established 2012 Establish Cochran Shanghai Ltd as a WOFE 68 Energy Solutions Worldwide

China is a large country 69 Energy Solutions Worldwide

It requires investment 70 Energy Solutions Worldwide

It is Bureaucratic 71 Energy Solutions Worldwide

考克兰考克兰-品质保证 • 考克兰具有国际公认的品质保证。其品牌本身 代表了考克兰产品无与伦比的可靠性,长期的 稳定性,独特的技术特性 在热力系统中的展现 高效性能 • 从对设备及系统设计,设备制造及供应,维护保 养,再到备品备件的供应,考克兰服务是基于一 百多年以来在燃烧&控制系统技术设计&制造上 取得的成绩这些设计和创新始终领导着该产业 的走向。 • 我们向全球客户提供经过验证的能源解决方案。 我们凭借成熟的工程技能和知识储备一直占据 着技术革新的前沿。 72 Energy Solutions Worldwide

Contract is just the start of the negotiation 73 Energy Solutions Worldwide

What have we learned from doing business in China?? 1. 2. 3. 4. 5. 6. 7. 8. 9. 74 It’s a BIG country It requires Investment You have to eat Funny food You might have to Drink too much Its Bureaucratic They Speak Chinese The Contract is the Start of the Negotiation You are Never really in Control Talk to People – Take Advice Energy Solutions Worldwide

Thank you for your time, we would be happy to take any questions Cochran Ltd Newbie Works, Annan, Dumfries & Galloway, UK DG12 5QU. +44(0) 1461 202 111 75 Energy Solutions Worldwide

Doing Business in China 2014 Unmanned Production Buoy Richard Selwa Chairman & Founder March 2014 Confidential © UPB Ltd 2014 76

Agenda Why did UPB go to China? UPB Product Markets & Drivers Size of Prize Global Supply Chain UK Project – FFFA Government Support Tips and Lessons Learned Confidential © UPB Ltd 2014 77

Why did we Go to China? Niche Oil & Gas Company Developer & Producer Mass Manufacturer Capture and Develop series of Marginal or Stranded Fields Why China? Chinese Oil companies China (£2.5 billion) International (£1.8 billion +) Mass Manufacture Key Parts (£2.5 billion) CNOOC Signature with First Minister-Beijing November 2013 Confidential © UPB Ltd 2014 78

UPB Product – What is it? Economic range 600-15,000 bopd 200,000 bbls oil storage Gas used for fuel Re-usable, low environmental footprint CAPEX and OPEX 1/3 of next available solution Confidential © UPB Ltd 2014 79

UPB Product - Applications Marginal Fields Where existing technologies do not allow economic production Economic >3 million bbls recoverable Tail-end Assets Where an existing production system is no longer economic e.g. post FPSO CoP Typically <5,000bopd Proven Undeveloped Discoveries Where a UPB can be used as an early production facility to prove reserves Convert 2C to 2P Stranded Fields No adjacent infrastructure Host facility to be decommissioned Confidential © UPB Ltd 2014 80

UPB Product – Value Proposition Simple Process – Utilizes temperaturebased stabilization Intrinsic Safety –normally unmanned Mass Manufacture – Wide operating envelope allows standardized design. Enables economies of scale Redeployable – One unit can produce from several fields through its useful life Lower Costs – Simplicity achieves low CAPEX and OPEX Confidential © UPB Ltd 2014 81

Markets & Drivers - Markets UK Production and Demand China’s Oil Production and Consumption 3.5 Production 3.0 Demand 2.5 14 Production Consumption 12 2.0 million boe/day 10 million bopd 1.5 1.0 8 6 4 0.5 2 0 0.0 1998 2002 2006 2010 2014 2018 2022 2026 1994 2030 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Year Source: DECC, Oil and Gas Field Data 2012 Confidential © UPB Ltd 2013 82

Markets& Drivers - Drivers UK China Large decline in production Moderate increase in production Moderate increase demand Large increase in demand Increase in imports Increase in imports Need to maximise local production Need to maximise local production Marginal field opportunity Marginal field opportunity Problem faced in UK is the same as that in China Need new technology Confidential © UPB Ltd 2013 83

Size of Prize – UK & China UKCS - Prize Further recovery of 15-24 billion boe over life of UKCS Over 160 UK Field opportunities identified for UPB Equates to 2 billion UK barrels Requires new technology to be viable China Prize Chinese indigenous production set to increase to around 4.7 million barrels per day by 2035 Further Recovery of which UPB Opportunity Further Recovery Significant reliance on imports Opportunity to increase indigenous production by marginal field technology Recover 100 UPBs could deliver 500,000 bbls/day Confidential © UPB Ltd 2014 84

Size of the Prize – Global 100’s of small offshore fields Europe 1000’s of field development opportunities worldwide Mass manufacture UPB System, 100 units in 10 years Result: Increase in jobs Increase in exports Increase in sustainability of the oil and gas supply chain Confidential © UPB Ltd 2014 85

Supply Chain - Partners UPB relationships with key equipment Engineering Partner: vendors Collaborative test programs Mass manufacturing strategy Confidential © UPB Ltd 2014 86

Supply Chain – Eng. Manufacture & Assembly Engineering Partner Manufacture Partner Engineering & HQ Assembly UK UPB Assembly Site UK Confidential Material Onshore Supply Material On Yard Supply from Warehouse to Sits Structure Fabrication Flow Material Offshore Supply Assembly & Integration Sit Outfitting Flow Delivery Zuhai Manufacture Plant Assembly Asia Candidates • Malaysia • China • Singapore Confidential © UPB Ltd 2014 87

Supply Chain - Global Confidential © UPB Ltd 2013 88

UK Project - FFFA Fife, Flora, Fergus & Angus 2/7-29 2/7-22 VALH 2/7-2 21 ANGUS 56 FLORA 27 FIFE 26 39 1a 2a UPB holds licence to an area containing 4 former producing fields Area has produced 101.6 million barrels of oil to date Opportunity to extract further reserves using low cost production system FERGUS Angus and Fife identified as best candidates to be developed Engineer and Build UPB-1 Deploy and operate on Angus Redeploy and operate on Fife Confidential © UPB Ltd 2014 89

Government Support UK Government 2009 – ITF & DECC Scottish Government High Growth 2009, Irish Government 2010 Scottish Enterprise Grant 2011 UK Government design approved 2011 EIB Finance 2012 UK 27 Round License Award 2013 China – signature with CNOOC November 2013 • UKEF 2013 Confidential © UPB Ltd 2014 90

Tips & Lessons Learned Do homework before you first go Work with SDI and Government Prepare a plan and test it in your visits Identify and select local mechanism or partner Tools: Product & Market IP strategy Patience Build relationships Your word is the contract Commit Confidential © UPB Ltd 2014 91

Doing Business in China 2014 Steven Turner Smart Exporter Adviser SDI Smart Exporter services

Doing Business in China 2014 Friday 31st January 2014

Doing Business in China 2014 Scottish Government Target of 10,000 additional Scottish Exporting businesses by 2017.

Doing Business in China 2014

Doing Business in China 2014 • Scottish Development International (SDI) is the specialist inward investment and trade arm of the Scottish Government • Single point of contact for international business development needs •SDI operate a network of international offices

Doing Business in China 2014

Doing Business in China 2014 What is Smart Exporter? • International trade skills programme designed to increase exporting skills and knowledge. • Available on a free or subsided basis to businesses and individuals across Scotland

Doing Business in China 2014

Doing Business in China 2014 FREE to Scottish Businesses and Entrepreneurs: • Training to get ready to Export • Access to an experienced trade adviser • Information of Trade Missions and activities • Market research and credit checks • Technical Assistance with problems

Doing Business in China 2014 • Neil Fraser • Steve Turner One to one review

Thank you Sign up for one to one meetings (13.30 onwards) at the registration desk Bookings taken on a first come first served basis

Networking Lunch Followed by 1:2:1 sessions (see registration desk for further information)

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