In a recent survey we carried out, (download the report here), we asked professionals involved in Hydrocarbon Accounting (HCA) how confident they were in their data. Around 65% said that they were “not at all” or only “somewhat” confident in the data they were using as input to the hydrocarbon allocation process. This situation is problematic, given that allocation is all about determining the division of ownership of hydrocarbon products, and that mistakes can have a real and substantial financial impact. Inadequate systems and processes can make it difficult to manage routine issues like mismeasurements, and initially 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.
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.
While it’s only possible to speculate on the reasons why these two companies failed to meet their regulatory obligations, it does seem 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, with all of the issues of control and version management that result. Solving this problem requires something better than a “big system” approach, as the costs and inflexibility of traditional solutions don’t reflect the agile nature of the business that these companies do. They need access to secure, reliable, enterprise technology delivered in a way that allows them to build solutions incrementally and be responsive to change.
Small companies need to be agile, and traditional technology solutions, whether it’s Excel or “big systems”, are failing them.
Traditional production accounting systems are frequently a source of business inefficiencies. Find out how switching to a modern production accounting can reduce these inefficiencies and increase business performance.