I MANAGEMENT REPORT OF THE BOARD OF DIRECTORS

Transcription

1 2007 Annual Report

2

3 Contents 2007 Annual Report 1 CONTENTS Foreword I MANAGEMENT REPORT OF THE BOARD OF DIRECTORS financial year activities and highlights a. Overview of Technip s business b. Technip s business in 2007 c. Business segments d. Investments e. Change in project strategy f. Technip s business environment g. Human resources 2. Business results a. Group consolidated results b. Company s financial results Corporate governance a. Composition of the Board of Directors at February 20, 2008, terms and responsibilities of directors b. Role and operation of the Board of Directors and agenda for Board of Directors meetings in 2007 c. Composition, role and operating policies of specialized committees d. Compensation and other benefits granted to corporate officers Outlook and risk management a. Post year-end events b. Outlook c. Risk factors and insurance d. Exceptional events and litigation 5. Technip and its shareholders a. Information relating to the share capital b. Company shareholding structure c. Dividends paid over the past three years d. Share repurchase programs Sustainable development a. Employee-related information b. Environmental information

4 Annual Report Contents II APPENDICES TO THE REPORT PREPARED BY THE BOARD OF DIRECTORS 1. Report by the Chairman of the Board of Directors on internal control 2. Report by the Statutory Auditors on internal control 3. Shareholders Meeting of April 25, 2008: agenda and proposed resolutions 4. Summary of authorizations currently in effect approved by the Extraordinary Shareholders Meeting III CONSOLIDATED FINANCIAL STATEMENTS IV STATUTORY ACCOUNTS V AUDITORS' REPORTS VI OTHER GENERAL INFORMATION 1. Persons responsible for the Reference Document and for auditing the financial statements a. Statement by the person responsible for the Reference Document b. Person responsible for auditing the financial Statements 2. Documents available to the public 3. Other legal information a. General information relating to the Company b. Other information relating to the share capital and shareholding structure 4. Other corporate governance information a. Extracts from the articles of association relating to corporate governance b. Other information relating to members of management and supervisory bodies c. Related party transactions 5. Other information on the Group s business and structure a. Organization chart b. Market environment c. Procurement d. Cycles and seasonality e. Property, plant and equipment f. Major contracts g. Technology h. History of the Group i. Third-party information, expert opinions and ownership statements 6. Contracts and calendar for financial information releases a. Person responsible for financial information b. Calendar for financial information releases VII RECONCILIATION TABLE

5 I - Management Report of the Board of Directors 2007 Annual Report 3 I MANAGEMENT REPORT OF THE BOARD OF DIRECTORS Foreword When used in this Reference Document, the terms "Technip" and "Group" refer collectively to Technip S.A. and to all of its directly and indirectly consolidated subsidiaries located in France and outside France. In this Reference Document, the terms "Company" and "issuer" refer exclusively to Technip S.A., the Group's parent company. In accordance with Article 28 of European Commission ruling no. 809/2004 of April 29, 2004, the following information is incorporated by reference in this document: the 2006 consolidated financial statements and company financial statements, as well as the Statutory Auditors reports for the financial year ended December 31, 2006, found on pages 99 to 199 of the 2006 Reference Document filed with the French Financial Markets Authority (hereinafter, the "AMF") dated April 6, 2007, registered under no. D , the 2005 consolidated financial statements and company financial statement, as well as the Statutory Auditors reports for the financial year ended December 31, 2005, found on pages 82 to 191 of the 2005 Reference Document dated April 18, 2006 filed with the AMF under no. D The sections of these documents that are not included either are not relevant to investors or are covered in another part of the Reference Document financial year activities and highlights a. Overview of Technip s business With consolidated revenues of approximately 7.89 billion in 2007, Technip ranked among the world s top operators in gas and oil industry engineering, technologies and projects. Technip is also one of the most integrated groups in this sector as a result of its numerous industrial assets. In 2007, 88.7% of Technip s consolidated revenues were generated in non-european Union markets. Technip s main locations outside France are in Italy, Malaysia, Germany, the United Kingdom, Norway, Finland, the United States, the Netherlands, Brazil,Abu Dhabi, China, India and Australia. Its production facilities (flexible pipes, umbilicals), manufacturing yards and spoolbases are located in France, Brazil, the United Kingdom, Norway, the United States, Finland and Angola. At February 29, 2008, Technip employed more than 23,000 people in nearly 50 countries. As of this date, it boasted a fleet of 16 vessels specialized in subsea pipelay, subsea construction, diving support and exploration. Technip designs and builds high-technology industrial installations: subsea equipment and platforms and onshore mega-complexes for the oil, gas and petrochemicals sectors.

6 Annual Report I - Management Report of the Board of Directors Technip works on all phases of a project, from the preliminary study phases to unit delivery, including equipment procurement and flexible pipe manufacture and construction. Over its 50 years of operations, Technip has designed and supervised the construction of more than 2,000 facilities in over 115 countries. Its roster of clients includes international oil companies such as Exxon Mobil, Total, Shell, Chevron Texaco, BP and a large number of national companies like Petrobras, Saudi Aramco, Qatar Petroleum, Petronas,ADNOC and PDVSA. Its five main clients represented 40.4% of consolidated revenues in Technip, whose shares have been listed on the Paris stock exchange (Euronext Paris) since 1994, has set itself the twofold objective of providing innovative solutions in the oil and gas industry and creating value for its shareholders. b. Technip s business in 2007 The information presented below is taken from Technip s press releases. These press releases are available in their entirety on the Company s website ( The following is a summary to be read in relation to the tables of numbers as may be included in these press releases. JANUARY 2007 Poland Technip was awarded a contract by PKN Orlen for the construction of a hydrogen production unit in PKN Orlen s refinery in Plock, Poland. It is a lump-sum management contract. Group At its meeting on January 15, 2007, Technip's Board of Directors, upon the Nominations and Remunerations Committee s proposal, appointed Thierry Pilenko to succeed Daniel Valot as Chairman and Chief Executive Officer following the April 27, 2007 Shareholders Meeting in which he was appointed to Technip s Board of Directors. United Arab Emirates Technip won a lump-sum turnkey contract worth approximately U.S.$610 million with Abu Dhabi Gas Liquefaction Limited ( ADGAS ) for gas compression installations and related equipment on the Das Island, in the United Arab Emirates. FEBRUARY 2007 Group On February 2, 2007, Technip sold 100% of the share capital of Perry Slingsby Systems Ltd. and Perry Slingsby Systems Inc., two companies that manufacture ROVs, to Triton Group Holdings, a subsidiary of private hedge fund, SCF Partners. These companies, located respectively in Kirkbymoorside (United Kingdom) and Jupiter, Florida (United States), employ a workforce of approximately 300 staff, and, in 2006, had total revenues of approximately 70 million, mainly with non-technip customers. After amortization of goodwill, this U.S.$82 million disposal generated approximately U.S.$10 million, a pre-tax capital gain of approximately U.S.$23 million. New Zealand The Technip-Subsea 7 Joint Venture won a contract with New Zealand Overseas Petroleum for the development of the Tui field located approximately 50 kilometers off the coast of Taranaki (New Zealand), 125 meters below sea level. Thailand Technip won a contract with the exploration-production subsidiary of Petroleum Authority of Thailand for the basic and detailed engineering of four tree platforms, their subsea pipes and connections. The platforms will be installed in the Arthit gas field at 80 meters below sea level in the Gulf of Thailand, and will be connected to the existing tree platforms. Malaysia Technip successfully completed the first offshore installation of topsides using the "catamaran" floatover technique for the Kikeh SPAR. This platform, which was built for Murphy Sabah Oil and its partner, Petronas Carigali, will be used to develop the Kikeh deep sea field off the coast of Malaysia.

7 I - Management Report of the Board of Directors 2007 Annual Report 5 France Technip won a contract with Silicium de Provence (Silpro) for preliminary studies on a solar polycrystalline silicium production plant. This plant will be located in Saint-Auban (Alpes-de-Haute- Provence) and will initially produce 2,500 tons per year of ultrapure silicium to be used to manufacture solar panels. Gulf of Mexico Technip won a contract with BHP Billiton for the installation of flowlines, risers and subsea structures to be used in developing the Shenzi field in the Gulf of Mexico, 1,310 meters below sea level. MARCH 2007 Brazil Technip won a contract worth approximately 115 million with Petrobras for the development of the Roncador field off the coast of Brazil.The Roncador P-54 project involves 11 subsea production wells and six subsea water injection wells located up to 1,740 meters below sea level and connected directly to the P-54 FPSO which will be anchored at 1,400 meters below sea level. Technip won a four-year charter contract with Petrobras worth approximately 150 million for its flexible pipelay vessel, the Sunrise 2000, which operates off the coast of Brazil. This contract can be renewed for an additional four years. Gulf of Mexico Technip won a contract with Shell for the installation of water injection flowlines and risers used to develop the Ursa and Princess fields located in the Gulf of Mexico, 230 kilometers southeast of New Orleans (Louisiana). APRIL 2007 China Technip won an engineering, procurement and construction management ( EPCM ) contract with BYACO, the joint venture formed by BP and Sinopec/YPC, for the construction of an acetic acid unit in Nanjing, in China's Jiangsu province. Group Technip's Combined Shareholders' Meeting was held on April 27. The following resolutions were adopted: approval of the 2006 financial statements; the payment of an ordinary dividend of 1.05 per share for the 2006 financial year; the payment of an exceptional dividend of 2.10 per share; the payment of an ordinary dividend and an exceptional dividend on May 3, 2007; the appointment of Ms. Germaine Gibara, Mr. Pascal Colombani, Mr. John O Leary and Mr.Thierry Pilenko to the Board of Directors and the renewal of the terms of Mr. Olivier Appert, Mr. Jacques Deyirmendjian, Mr. Jean-Pierre Lamoure, Mr. Daniel Lebègue, Mr. Roger M. Milgrim, Mr. Rolf-Erik Rolfsen and Mr. Bruno Weymuller; and the renewal of the Board of Directors' authorization to repurchase shares, within the limit of 10% of share capital. Technip's Board of Directors, in their meeting held after the Shareholders' Meeting, appointed Thierry Pilenko as Technip s Chairman and Chief Executive Officer. He will succeed Daniel Valot who is retiring. Thierry Pilenko joined Technip on January 15, 2007 as Executive Vice President to ensure an efficient transition. MAY 2007 India Technip won a project management assistance contract with the joint venture formed by Renault, Nissan and Mahindra, for the construction of a shared automobile plant in Chennai, India. First Quarter 2007 Results Operational Highlights Order Intake Over the first quarter of 2007, Technip s order intake reached 1,481.3 million compared to 1,824.7 million over the first quarter of At March 31, 2007, the Group s backlog amounted to 9,878.5 million, compared to 10,272.8 million at the end of Projects In the SURF business segment, ongoing projects progressed in a satisfactory manner. In the Offshore Facilities business segment, the first quarter of 2007 was characterized by a high level of activity related to our SPAR technology. In the Onshore-Downstream business segment, several projects are under construction. In the Industries business segment, projects progressed satisfactorily. Asset Disposals In the SURF business segment, the Group sold its Remotely Operated Vehicle ( ROV ) manufacturing business, which was managed by two Technip affiliates, Perry Slingsby Systems Inc. ( PSSI ) and Perry Slingsby Systems Ltd. ( PSSL ).

8 Annual Report I - Management Report of the Board of Directors First Quarter 2007 Financial Results At 1,774.7 million, first quarter 2007 Group revenues increased by 12.7% compared to the first quarter of Group operating income from recurring activities reached million, an increase of 237.2% compared to the first quarter of Over the first quarter of 2007, income from the sale of activities (sale of PSSL and PSSI) amounted to 14.6 million after goodwill amortization of 8.0 million. Net income amounted to 68.1 million, an increase of 169.2% compared to net income for the first quarter of Norwegian North Sea Technip won a 90 million EPC contract with BP for the engineering, equipment procurement and construction of flexible pipes for the Skarv FPSO located in the Norwegian North Sea. The contract includes flexible risers, flexible jumpers and related equipment. JUNE 2007 Norway Technip won a turnkey contract worth approximately 110 million with Talisman Energy for the redevelopment of the YME field 100 kilometers off the coast of Norway. Spain Technip won a 60 million lump-sum EPC contract with CEPSA for the engineering, equipment procurement and construction of flexible pipes for a hydrogen unit to be built in the Huelva refinery in Spain. Group On June 20, 2007, Technip filed its 2006 annual report on Form 20-F with the United States Securities and Exchange Commission (the SEC ). JULY 2007 Canada Technip won a contract with Fort Hills Energy for the processing of heavy crude extracted from bitumen sands as part of the Fort Hills Oil Sands project. This service contract involves detailed preproject engineering, detailed engineering, equipment procurement, construction and project management for the main upgrader, which will be located near Edmonton in the province of Alberta (Canada). China Technip, in partnership with license holder INEOS, won a contract with Liaoning Huajin Chemicals for a high-density polyethylene unit in Panjin (China). Poland Technip was awarded a contract worth approximately 160 million by PKN Orlen for the construction of a new paraxylene complex in the Plock refinery in Poland. Technip won a lump-sum turnkey contract worth approximately 472 million with Lotos for the Gdansk refinery in Poland. The contract includes the engineering, equipment procurement and construction of a new medium-pressure hydrocracking unit with a 45,000 bpd production capacity. Gulf of Mexico Technip was awarded a contract by Mariner Energy for an electro-hydraulic inspection umbilical designed for the Bass Lite field in the Gulf of Mexico. This project is a follow-up to the contract awarded to Technip in 2006 for pipes in the same field. Group Technip's Board of Directors, at its July 25 meeting, approved the recommendation of the Group s management to proceed with the voluntary delisting of its American Depositary Shares ( ADS ) from the New York Stock Exchange ( NYSE ) and to deregister from the United States Securities and Exchange Commission ( SEC ). Second Quarter 2007 Results Operational Highlights Order Intake Over the first half of 2007,Technip s order intake reached 3,165.9 million compared to 3,126.7 million over the first half of At June 30, 2007, the Group s backlog amounted to 9,669.7 million, compared to 11,382.8 million at June 30, 2006 and 9,878.5 million at March 31, Projects In the SURF business segment, ongoing projects progressed in a satisfactory manner in all areas. In the Offshore Facilities business segment, Technip identified metallurgical problems with certain mooring shackles on the Tahiti project. New shackles are being manufactured, which will replace those shackles identified as defective. In-depth investigations are ongoing to identify the causes of the metallurgical problems. In the Onshore-Downstream

9 I - Management Report of the Board of Directors 2007 Annual Report 7 business segment, a large number of projects are currently in the construction phase. In the Industries business segment, projects progressed satisfactorily. Resources Projects to increase the Group s flexible pipe production plant capacity by 50% and 20% respectively in Vitoria, Brazil, and Le Trait, France, were completed. Financial Results Second Quarter 2007 At 1,844.6 million, second quarter 2007 Group revenues increased by 16.1% compared to the second quarter of Group operating income from recurring activities reached million, an increase of 61.9% compared to the second quarter of Net income amounted to 79.6 million, an increase of 54.6% compared to net income for the second quarter of First Half 2007 At 3,619.3 million, Group revenues for the first half of 2007 increased by 14.4% compared to the first half of Group operating income from recurring activities reached million, an increase of 111.5% compared to the first half of Net income amounted to million, a significant increase of 92.3% compared to net income for the first half of Fully diluted EPS amounted to 1.41, an increase of 99.8%. Abu Dhabi Technip and National Petroleum Construction Company won an EPC contract with Abu Dhabi Marine Operating Company for the engineering, equipment procurement and construction of gas compression and processing installations in Zakum, off the coast of Abu Dhabi. Technip's share of this contract, worth approximately U.S.$370 million, is 35%. Algeria Technip won a detailed pre-project contract with Sonatrach for the ethane extraction project in Arzew, Algeria. This contract relates to two LNG ethane extraction units for Arzew's GL1Z and GL2Z lines. AUGUST 2007 Saudi Arabia Technip, in consortium with Bechtel, entered into a contract with Saudi Aramco to convert the Khursaniyah (Saudi Arabia) gas unit project from a turnkey contract to a lump-sum contract. In March 2005, the contract was granted to this consortium as a cost plus fee contract. Nigeria Technip won a turnkey contract with Elf Petroleum Nigeria Ltd. for the loading, transport and installation of topsides on the fixed OFP2 platform in the Ofon field. Located 50 kilometers off the coast of Nigeria and 40 meters below sea level, this field is operated by Elf Petroleum Nigeria Ltd. for the joint venture between Nigerian National Petroleum Corp. and Elf Petroleum Nigeria Ltd. China Technip won a basic engineering contract with Sinopec Yangzi Petrochemical Co. Ltd. ( YPC ) for a synthetic gas unit located in Nanjing, China. Norway Technip and Subsea 7 won a contract worth approximately 37 million with Statoil for the development of the Alve field off the coast of Norway. Technip won a contract worth approximately 24 million with Statoil for the development of the Gjøa field. This field is located in blocks 35/9 and 36/7 of the Norwegian continental plateau, 360 to 380 meters below sea level. Gulf of Mexico Technip won a contract with Bluewater Industries, Inc. for the flowlines, risers, jumpers and subsea structures designed for the Mirage field in the Gulf of Mexico. This field is located in Block 941 of Mississippi Canyon, 1,230 meters below sea level. United States Technip won a detailed pre-project engineering contract with Biomass Investment Group ( BIG ) for its biomass, closed-circuit electrical power station project. This Florida-based plant will use e-grass as fuel to produce energy. The contract also includes the design and supply of a 1:10-scale demonstration unit. Malaysia Technip won a contract for the development of the Cili Padi gas field with Shell Oil and Gas Malaysia LLC. Shell, under the terms of a shared production contract for Petronas, operates this field s development in partnership with Petronas Carigali Sdn Bhd and Nippon Oil. Qatar Technip won a lump-sum detailed pre-project contract worth approximately 44 million with Qatar Petroleum, for the Al Shaheen refinery to be built in Messaieed, Qatar.

10 Annual Report I - Management Report of the Board of Directors SEPTEMBER 2007 Brazil Technip won three major contracts worth a total of approximately 200 million with Petrobras for subsea pipes designed for Brazil's Canapu, Mexilhão and Roncador fields. Indonesia Technip won a contract with Eramet for the study and, if a final decision to invest is made, management of a laterite processing project on Halmahera Island in Indonesia. NOVEMBER 2007 Australia Technip was awarded a contract by Woodside Energy Limited for the development of the Enfield field, located off the coast of Australia, 550 meters below sea level. Republic of the Congo Technip won a contract worth approximately 80 million with Murphy West Africa, Ltd. for the development of the Azurite field, located 150 kilometers off the coast of the Republic of the Congo, in the Deep South Sea block, 1,400 meters below sea level. OCTOBER 2007 Group Technip has been selected as a member of the Dow Jones Sustainability Index for This marks Technip's sixth consecutive selection for the DJSI since In the industrial oil equipment and services sector, Technip reaffirmed its leadership in sustainability performance out of a panel of 47 companies. Bernard di Tullio was appointed Chief Operating Officer on October 1, Under this newly created position, Mr. di Tullio is responsible for all Group operations in all business segments. In October,Thierry Pilenko,Technip s Chairman and Chief Executive Officer, presented the strategic framework and the 2010 objectives in terms of the Group's profitable development: Focusing on core business: the oil and gas markets Developing technologies and expertise Investment program of approximately 1 billion to develop industrial and naval capacities Continuing geographic expansion in key regions worldwide Reinforcing operational performance. Technip granted STX Heavy Industries (Korea) a contract for the construction of a new rigid and flexible pipelay vessel, which is expected to be delivered at the end of Third Quarter 2007 Results Operational Highlights Order Intake Over the first nine months of 2007, Technip s order intake reached 5,096.2 million compared to 4,487.1 million over the first nine months of At September 30, 2007, the Group s backlog amounted to 9,411.3 million, compared to 9,669.7 million at June 30, Projects In the SURF business segment, ongoing projects progressed in a satisfactory manner in all areas. In the Offshore Facilities business segment, Technip identified metallurgical problems with certain mooring shackles on the Tahiti project. Detailed investigations found that the shackles had not undergone the same manufacturing process and heat treatment as the samples on which the acceptance tests were performed. As a result, with the client s agreement, a decision was made to replace all the mooring system shackles with shackles supplied from an alternative source. Some of the new shackles have already been delivered to the client, with the remaining shackles to be delivered in January Technip s Tahiti contract is for the supply of elements of the mooring system as well as the SPAR hull. Replacement costs are covered by insurance. On the other SPAR project affected by this issue, Technip provided the client with the solution of providing new shackles, the cost of which is also covered by our insurance. In the Onshore-Downstream business segment, a large number of projects are currently in the construction phase. In Saudi Arabia, due to construction difficulties experienced on a petrochemical project, Technip decided to record a charge of 50 million related to this contract during the third quarter of In the Industries business segment, projects progressed satisfactorily. Resources Studies related to the development of a new flexible pipe manufacturing plant in South East Asia by 2010 progressed satisfactorily. Two additional vessels joined the fleet: the Seamec Princess and the Skandi Achiever. Technip s fleet includes 16 vessels.

11 I - Management Report of the Board of Directors 2007 Annual Report 9 Financial Results Third Quarter 2007 At 2,166.0 million, the Group s revenues for the third quarter of 2007 increased by 21.6% compared to the third quarter of Group operating income from recurring activities reached million, an increase of 10.4% compared to the third quarter of Net income amounted to 76.1 million, an increase of 26.2% compared to net income for the third quarter of Fully diluted EPS amounted to 0.72, an increase of 27.6%. First Nine Months 2007 At 5,785.3 million, the Group s revenues for the first nine months of 2007 increased by 17.0% compared to the first nine months of Group operating income from recurring activities reached million, an increase of 61.8% compared to the first nine months of Over the first nine months of 2007, income from asset disposals amounted to 20.7 million, attributable to capital gains from the sale of PSSL and PSSI ( 17.6 million including a price supplement of 3.2 million, and after an 8.0 million goodwill reversal), and the sale of GIFI securities ( 3.1 million). Net income amounted to million, a significant increase of 63.2% compared to net income for the first nine months of Fully diluted EPS amounted to 2.13, an increase of 68.6%. Group As announced on July 25, 2007, Technip proceeded with the formalities required for the voluntary delisting of its American Depositary Shares ( ADS ) from the NYSE and for deregistration from the United States Securities and Exchange Commission ( SEC ). The delisting of its ADSs from the NYSE became effective on August 16, 2007 and it deregistration from the SEC became effective on November 14, Technip and Wieland announced the signature of an agreement to market innovative, high-performance heat exchange solutions for liquefied natural gas ( LNG ) and ethylene units. DECEMBER 2007 Group John Harrison was appointed as General Counsel and a member of the Company's Executive Committee. He is responsible for managing all the Group's corporate and legal activities and reports directly to the Company's Chairman and Chief Executive Officer, Thierry Pilenko. India Technip won two contracts worth approximately 270 million with Aker-Kvaerner for flexible pipes for an oil field located east of India, 1,400 meters below sea level. Germany Technip won an engineering, procurement and construction management ( EPCM ) contract worth approximately 90 million with Total for a kerosene hydrodesulfuration unit, which will be built in the Leuna refinery near Leipzig, Germany. Poland Technip won a project management service contract with Grupa Lotos for the refinery in Gdansk, Poland. Caribbean Technip won a service contract with National Gas Company of Trinidad and Tobago Limited ( NGC ) for two gas pipelines to be installed off the coast of Trinidad and Tobago, in the Caribbean. Brazil The FSTP consortium, which is composed of Technip and Keppel FELS, won an EPC contract worth approximately U.S.$1.2 billion with Petrobras for the engineering, equipment procurement, construction and project management for the semi-submersible P- 56 platform, which will be connected to the Marlim Sul oil field in the Campos Basin, 1,700 meters below sea level. RECENT MAJOR ACQUISITIONS AND DISPOSITIONS Technip's external growth policy is part of the strategy presented by the Chief Executive Officer in October This policy aims to consolidate the Group's leadership in the oil and gas markets through the acquisition of technologies and complementary technological expertise, of geographical positions enabling an extension of its global market coverage, or by strengthening its construction and manufacturing activities.

12 Annual Report I - Management Report of the Board of Directors In the 2005 financial year,technip disposed of the following assets: In March 2005, Technip UK Limited concluded a memorandum of understanding with Mermaid Offshore Services Limited, for the sale of the diving support vessel, Marianos, which Technip delivered to Mermaid in August The sale of Marianos is part of Technip s strategy to continuously adapt its asset base to changes in its markets. In December 2005, Technip USA Holdings, Inc. and Gulf Island Fabrication, Inc. (NASDAQ: GIFI) signed an agreement pursuant to which Technip sold the assets and share capital of Gulf Marine Fabricators, a Technip subsidiary located near Corpus Christi,Texas (United States), to a subsidiary of Gulf Island Fabrication. Technip received approximately U.S.$85 million, including U.S.$40 million in cash, and a minority stake in Gulf Island Fabrication worth approximately U.S.$45 million. They also signed a cooperation agreement for the completion of engineering, procurement and construction ( EPC ) projects, which will give Technip the continued benefit of access to manufacturing capacities in the Gulf of Mexico. Continuing its policy of selling assets that are not at the core of its business, Technip sold its 83.75% stake in Technip Portugal to the branch s management on December 22, This Lisbonbased company carries out engineering contracts on the Portuguese market and employs a staff of 150. It had revenues of 12.4 million in Technip Portugal changed its name to Technoedif Engenharia and will continue its work with Technip on the Portuguese market on a case-by-case basis. In the 2006 financial year, Technip completed the following transactions: Sale: In March 2006,Technip sold its 8% share in TECI, a Tunisian engineering company, to another TECI shareholder. Creation of a joint company: On May 12, 2006, Technip and Subsea 7 signed an agreement for the creation of a joint company for their subsea activities in the Asia-Pacific region (excluding India and the Middle East). This joint company, Technip Subsea 7 Asia Pacific Pty Ltd, began operations on July 1, In February 2007,Technip sold 100% of the share capital of Perry Slingsby Systems Ltd. and Perry Slingsby Systems Inc., two companies that manufacture ROVs and other subsea equipment, to Triton Group Holdings, a subsidiary of private hedge fund, SCF Partners. These companies, located respectively in Kirkbymoorside (United Kingdom) and Jupiter, Florida (United States), employ a workforce of approximately 300, and, in 2006, had total revenues of approximately 70 million, mainly with non-technip customers. Prior to Technip's sale of its stake in Guigues, a company specialized in water treatment and the environment, Guigues's laboratory business was integrated into a Guigues subsidiary and then sold by Guigues in January 2007 to a subsidiary of the Institut Pasteur. At the end of the 2007 financial year, Technip sold its 36.56% stake to the Guigues majority shareholder for an amount of 314,000 on December 21, It still continues to work with this company. Acquisitions or acquired interests: On July 2, 2007, Setudi, an engineering company with a staff of approximately 40 employees, located in Rouen, was acquired by Citex, a wholly-owned subsidiary of Technip that is specialized in chemical engineering. On July 3, 2007, Technip Offshore (Nigeria) Limited, a whollyowned subsidiary of Technip, acquired a 39% stake in a Nigerian engineering company, Crestech Engineering Limited, which was newly formed in partnership with a Nigerian company, giving Technip a significantly stronger presence in this company and helping it meet local demand. The new company employed approximately 100 staff at December 31, On July 10, 2007, Asiaflex Products was created to build a new flexible pipe manufacturing plant in Malaysia. This company is 100% owned by Technip Offshore International, which is 100% owned by Technip. On September 9, 2007,Technip Norge AS and Dofcon AS created a joint venture for the ownership of the Skandi Arctic vessel, which is in the process of being built for the Norwegian market. In the 2007 financial year, Technip completed the following transactions: Disposal of companies or shares: In January 2007,Technip sold its 20% stake in Nargan, an Iranian engineering company, to another Nargan shareholder. On January 18, 2007, Technip sold its 51% shareholding in Deepwater Charters Inc. in AGR Deepwaters Development Systems Inc.

13 I - Management Report of the Board of Directors 2007 Annual Report 11 c. Business segments From January 1, 2008,Technip s financial statements will be reported based on the following three business segments, in addition to the Corporate segment: SUBSEA: previously known as SURF, OFFSHORE: previously known as Offshore Facilities, ONSHORE: includes two business segments previously known as Onshore-Downstream and Industries. The activities below are described according to the previous organization. 1. SURF and Offshore Facilities In 2007, the SURF and Offshore Facilities business segments generated net revenues of 3,217.0 million, representing 40.8% of the Group s consolidated revenues. Technip provides integrated design, engineering, manufacture and infrastructure installation services for offshore production and oil and gas transportation, including platforms and subsea pipes. Technip mainly carries out its business through integrated contracts covering every stage of the process, from design to turnkey delivery of surface (platforms, floaters) and subsea (pipe systems, subsea equipment) oil installations. Technip is considered to be a forerunner in the area of offshore construction.technip s engineers and technicians give the company internationally recognized technological expertise. Its major technological development allowed the Group to offer its own technologies as products, such as SPAR, TPG 500, flexible pipes, umbilicals and installation processes. Upstream of field operation project management and completion, Technip is active in field development option evaluation. Its engineering services cover economic assessment, risk management and technical studies. a. Services for subsea oil fields (SURF: renamed Subsea starting on January 1, 2008) Subsea services have traditionally represented the core of Technip s business. One alternative to using platforms with surface wells for offshore hydrocarbon production is placing trees on the sea floor by connecting them to processing and removal platforms with rigid and/or flexible pipes. These trees and the subsea collection systems are managed remotely by umbilicals that send data, steer the subsea trees and send service fluids from a platform or a production vessel. Technip s services include the turnkey delivery of these subsea systems, in particular, offshore work (pipelay and subsea construction) and the manufacture of critical equipment such as umbilicals and flexible pipes. Technip can also handle the procurement of other subsea equipment and the procurement of rigid pipes that the Group acquires from third parties through international bids. As markets move towards greater sea depths, there is a growing need to implement new resources and approaches. Due to these technological innovations, Technip can service customers in the opening of new ultra-deep sea fields, as demonstrated with contracts won in 2007 for the installation of pipes in the Gulf of Mexico, Angola, Brazil, and India, at record depths. In addition to these activities, Technip can carry out other work such as pipe trenching on the sea floor. In general, this subsea work is done by divers and/or Remotely Operated Vehicles ( ROV ) from diving or construction support vessels. In addition to the engineering and installation of new systems, SURF activities also cover the maintenance and repair of existing subsea infrastructures and the replacement or removal of subsea equipment. Technip has one of the world s top-performing fleets of subsea pipelay and construction vessels, which provide essential support to its SURF activities. b. Offshore Facilities Technip designs and builds fixed or floating drilling, production, processing or living quarter platforms for the development of offshore shallow and deep sea gas and oil fields. In its platform operations, the Group has set itself apart through its skills in the following areas: large project management, innovative platform design and related technologies (processing unit installation and raising methodology and processing unit modularization). Technip offers a range of first-rate technological solutions such as SPAR or floating Extendable Draft Platforms ( EDP ) and self-installing platforms (Unideck and TPG), dispensing with the need for expen-

14 Annual Report I - Management Report of the Board of Directors sive, floating raising systems. Technip also offers innovative solutions such as floatover. Fixed platforms The TPG 500 is a self-installing high-capacity fixed platform that is built, equipped and tested onshore and then towed onsite. Once on site, the platform s legs are jacked down to the seabed up to 150 meters below sea level (appropriate for many North Sea fields). The fixed platform is then raised to its final position. Floating and semi-submersible platforms The SPAR is a floating deep sea drilling and production platform based on technology co-developed by Technip and J. Ray McDermott. This structure includes a cylindrical hull vertically anchored in the water. The platform allows the trees to remain at the surface instead of installing them on the sea floor, and offers the benefit of direct and permanent access to the wells, which facilitates maintenance work. d. Strategy In the SURF market,technip s strategy aims to consolidate its leadership position on a global level and focuses on the following four main points: Continually increasing its expertise and improving methods in executing projects, Modernizing and expanding its naval fleet as well as its production capacities in flexible pipelines and umbilicals, Ensuring that the necessary technology is in place for developing deep sea fields in increasingly deeper waters and difficult environments, Strengthening its local presence in its main regional markets (Africa, the United States, Brazil, Asia-Pacific). In the Offshore Facilities market, Technip s strategy is based on developing and enhancing its innovative technologies and expertise: floatover systems, concepts of fixed and floating platforms, and expertise in topside project management and engineering. The SPAR platforms constitute an important component of Technip s strategy for floating production platforms. In addition to SPAR platforms, Technip has also developed a new Extendable Draft Platform ( EDP ), a self-installing high-capacity semi-submersible platform, suitable for use in West Africa, the Gulf of Mexico, Brazil and in deep sea fields in the North Sea. This new technology dispenses with the need for sea raising resources and is currently being evaluated as a technical solution for development projects off the coasts of West Africa and Newfoundland, Canada. c. Developments in the sector The Offshore markets should remain healthy over the next few years as the number of subsea fields starting production increases. This growth should be particularly strong for deep sea fields, in particular, in Brazil, the Asia-Pacific zone,west Africa and the Gulf of Mexico. The North Sea markets should maintain record levels of business, close to those recorded in These market developments are favorable to Technip, which boasts top naval and industrial resources and first-rate expertise and geographical coverage. 2. Onshore-Downstream and Industries In 2007, the Onshore-Downstream and Industries business segments generated net revenues of 4,669.5 million, representing 59.2% of the Group s consolidated revenues. Onshore-Downstream activities (renamed Onshore as from January 1, 2008) include both upstream activities, such as the production and transport of oil and gas on land, gas treatment and liquefaction plants, and downstream activities including oil refineries, gas processing units, and petrochemical and fertilizer plants. Technip also designs and builds the infrastructures related to these activities, in particular, hydrogen production units, sulfur recovery units and storage units. a. Activity Development of onshore fields Technip designs and builds all types of development facilities for onshore oil and gas fields, from wellheads to process facilities and export systems. In addition to new onshore field development projects, Technip also revamps existing facilities by modernizing production equipment and control systems, and brings them into line with current environmental standards. Land pipelines Since 1960,Technip has engineered or engineered and implemented more than 160 pipeline projects in over 40 countries, amounting to an aggregate length of 34,000 kilometers of pipelines. Technip mainly builds pipeline systems for natural gas, crude oil and oil products, water, and liquid sulfur. Through its subsidiary,

15 I - Management Report of the Board of Directors 2007 Annual Report 13 Technip Germany, Technip is one of the world s most experienced pipeline builders and has completed projects in the most severe environments including deserts, tundra, mountains and swamps. Natural gas treatment and liquefaction Technip s accumulated long experience and the importance of its ongoing projects in the natural gas and liquefied natural gas industries positions the Group among the world leaders in these industries. With over 40 years of experience in this area, Technip is a pioneer in the field of natural gas liquefaction ( LNG ) with the construction of the first high-capacity liquefaction facility in Arzew, Algeria in the early 1960s. In connection with the joint venture with Chiyoda, Technip was awarded three major LNG projects in Qatar: QatarGas II, Rasgas 3 and QatarGas III/IV, in 2004, 2005 and 2006, respectively. With its joint venture with KBR and JGC, Technip is very well positioned in the emerging Gas-to-Liquids ( GTL ) market, with the engineering and construction of the firstever large-scale GTL plant in Qatar (Oryx) in 2003, which commenced operations in Technip benefits from solid experience in natural gas processing and has access to corresponding licensed technologies. Technip is specialized in extracting sulfur from natural gas and, according to its knowledge of the market, is the leader in terms of installed capacity. Since 2000, Technip has built 10 gas treatment plants, each with a capacity of over 400 million cubic meters, and the world s largest sulfur recovery installation. In addition, through its Cryomax technology,technip is specialized in the highly efficient recovery of C2 and C3 hydrocarbons from natural gas and the refining of gases. Refining Technip s activities in this sector include the preparation of integrated refining concepts and the design and construction of oil refineries. Since it was created in 1958, Technip has designed and built more than 31 full refineries, including eight since 1995, and has completed major expansion or modernization work on over 175 existing plants. These projects represent more than 800 individual oil and natural gas processing units in over 70 countries, for national and international oil companies. Technip s technical inspection capacities and its patented technologies, in particular, its progressive crude oil distillation patent held jointly with Total, give it a strategic edge for winning refinery contracts. in a global alliance with Air Products & Chemicals for the supply of high-purity hydrogen to the refining industry. High-purity hydrogen is critical for the low-sulfur transformation of heavy crude into diesel and gasoline, required to meet the most stringent environmental standards. Since it was founded, Technip has participated in the design or the design and construction of more than 240 units of this type worldwide for the refining and other related industries. In general, natural gas has a high level of undesirable sulfur that must be recovered during processing. Technip has built approximately 40% of the world s installed sulfur recovery capacities. Petrochemicals In the field of petrochemicals, Technip has designed and built a large number of individual petrochemical units, including more than 130 aromatic units, over 110 intermediate product units and 130 polymer units, including 85 polyolefin units and most of the major steam-cracking units awarded lately. Technip has also completed 10 turnkey contracts for completely integrated petrochemical complexes since Ethylene Technip combines technology and expertise with the large number of projects it is currently working on, for a global installed capacity of ethylene exceeding seven million tons per year, including the construction of two of the world s largest steam-cracking units in the Middle East. These projects (such as Ras Laffan in Qatar and the Olefin II Kuwait Project in Kuwait) are at various stages of progress and reaffirm Technip's competitive edge in this field. Polyethylene/Polypropylene Technip is active in the construction of polyethylene and polypropylene units in terms of the number of units designed or designed and built (a total of 109 units). Biofuels and renewable energies In 2007, Technip strengthened its presence on the biofuels and renewable energies market by signing several contracts for projects such as an alcohol dehydration unit in Dunkirk, a polycrystalline silicium plant used to manufacture solar panels in Saint-Auban (France), and a biomass electrical plant in California. Technip is a leader in the design and construction of hydrogen and synthetic gas production units and sulfur recovery units. Hydrogen and synthetic gas are used to treat and/or process refinery products and petrochemicals. Since 1992,Technip has participated

16 Annual Report I - Management Report of the Board of Directors Industries Technip offers its engineering and construction services to industries other than the oil and gas industries, mainly to companies working in life sciences, chemicals, mines and metals, and construction. In 2007, the Group won a contract with Eramet for the study of a laterite processing project on Halmahera Island in Indonesia. Technip also won a contract with the Renault-Nissan- Mahindra joint venture for the construction of an automobile plant in Chennai, India. b. Developments in the sector The Onshore-Downstream markets have entered a growth phase, resulting, in particular, from a marked increase in global energy consumption and in gas and oil prices, saturation in this industry s existing production capacities, and the lagging renewal of major producers oil and gas reserves. In this context, Technip believes that the LNG and ethylene markets should remain healthy, in line with the trends observed since the middle of 2004, with investments over the next few years largely exceeding those made in previous years. This trend in investments should also impact the refining industry, and several new refinery projects have been identified in the Middle East, Asia and Latin America. a diving and construction vessel, held equally with Dofcon, which was designed for a framework agreement signed with Statoil in 2005 for the Norwegian market, a flexible pipelay vessel for Brazil to meet the recent increase in the Group's plant capacity in this country, an umbilical pipelay system designed for the deep seas of the Gulf of Mexico, a total increase of 30% in the production capacities of the Le Trait (France) and Vitoria (Brazil) plants, and the construction of a new 200 km/year flexible pipe plant in Malaysia, with production starting in The total amount of these investments in 2007 amounted to million in tangible assets. The breakdown by segment is as follows: SURF: million, Platforms: 7.7 million, and Onshore-Downstream and Industries: 19.9 million. In 2007, this program led to the increase in the flexible pipe production capacity of the Le Trait plant (France) by 20% and the Vitoria plant (Brazil) by 50%. Technip also added two new vessels to its fleet in 2007: the Seamec Princess was converted into a diving support vessel, and the Skandi Achiever was chartered by Technip for an eight-year period. c. Strategy Technip is basing its strategy for this segment on the Group s expertise (large-scale project management, engineering, purchasing and supervision of construction sites), its first-rate reputation among its main customers, and its financial solidity. Its main objectives are to strengthen its leadership position in the LNG, ethylene, gas processing and refining sectors. It also aims to reduce the portion of lump-sum turnkey contracts pursuant to which Technip is responsible for construction, and to increase the share of contracts that provide for construction to be handled outside a package contract structure. In 2008, investments should amount to approximately 470 million, of which approximately 300 million will be allocated to the fleet and the development of a new flexible manufacturing plant in South East Asia. The installation of a new crane is planned in Le Trait, France in 2008 for approximately 14 million. The Group s principal ongoing investments are self-financed. d. Investments To meet sustained demand in this sector,technip launched a major 1 billion investment program in 2006 for the period to expand its fleet and to increase its flexible pipeline production capacity. This program includes: a rigid pipelay vessel, with top speeds of 20 knots, designed to be used in the North Sea and in the deep sea of the golden triangle (Gulf of Mexico, Brazil, West Africa),