The cost of unreliable data in oil and gas
The importance of data
In a recent survey we carried out, (download the report here), we asked professionals involved in Hydrocarbon Accounting (HCA) about unreliable data in oil and gas. Around 65% said that they were “not at all” or only “somewhat” confident in the data at their disposal.
This issue of unreliable data in oil and gas is problematic. Allocation is all about determining the division of ownership of hydrocarbon products.
Mistakes can have a real and substantial financial impact. Inadequate systems and processes can make it difficult to manage routine issues like mismeasurements. Small problems can give rise to a cascade effect with consequences that are difficult to unravel. A failure of compliance is not the least of the potential problems.
Failure to meet obligations
In this context, the news this week that the US Department of the Interior’s Office of Natural Resources Revenue (ONRR) had assessed Lyon Oil Company as liable for a $113,200 civil penalty for failure to file production reports is interesting. The company was cited for “failure to report production on two wells and for not filing Oil and Gas Operations Reports dating back to 2004”.
Another example is the failure of Energy Resources Technology Inc. (ERT) to permit an audit following a US Office of Natural Resources Revenue (ONRR) request as part of a royalty audit of several offshore leases. The fine was $136,000.
We can only speculate on the reasons why these two companies failed to meet their regulatory obligations. It seems that poor data management is a likely candidate as a root cause. It’s also not hard to envision those companies attempting to manage their data on spreadsheets.
Solving the problem
Solving this problem requires something better than a “big system” approach. The costs and inflexibility of traditional solutions don’t reflect the agile nature of the business that these companies do. They need access to reliable enterprise technology. Technology that is delivered in a way that allows them to build solutions incrementally and be responsive to change.
Small companies need to be agile. Traditional technology solutions, whether it’s Excel or “big systems”, are failing them.
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