Selecting the right solution for international E&P operations

An Ask the Expert feature with Wellpoint Systems

National Oil Companies, at the centre of emerging O&G markets around the world, are encouraging foreign investment and seeking assistance in developing their resources. If you are considering investment in international E&P opportunities, you need systems to manage these investments and provide insight to effective decisions. Peter Beasley, Vice President at WellPoint Systems offers an experienced perspective on selecting a venture management system to support your growth into new markets.

Cost Recovery
You will incur substantial costs in your operations over the next several years; costs that may be recovered during the production phase of the operation. To ensure that your investment is recovered, identify costs as to purpose, type, AFE, date, currency, conversion rate and other elements that may be required during audit.

There are numerous accounts of disallowed recoverable costs in the industry, and may represent up to 5% of your investment. Investments in industry-specific systems and processes will pay dividends during cost recovery reviews, supported by controls and audit trails throughout the project.

Operational Effectiveness
As operator, you act in the best interest of the venture and are granted a higher standard of trust than is normally found in business operations. Accordingly, you have a responsibility to effectively operate the business. And to do so, you require the proper tools.

You need an industry-specific solution, implemented and supported by expert staff. Identifying a provider with a history of success in international O&G deployments is critical to fulfilling your obligation to effectively manage operations.

The oil and gas expertise in the right software provides a solid platform for venture management. Specific capabilities should include AFE management, Joint Interest Billing, and an industry-specific procurement and logistics solution.

Total Cost of Ownership
Total cost of ownership is a financial estimate of the direct and indirect costs related to a capital investment, including the purchase cost and expense incurred in the training, use and maintenance of the system.

Based on a TCO analysis you will find the right solution to be a significantly better investment than the alternatives. When evaluating the alternatives, consider that custom development and/or error-prone manual workarounds are expensive and may result in delays and issues otherwise avoided by commercial solution selection.

Compliance
The selected solution must be capable of managing in-country, statutory and reporting requirements while addressing corporate (IFRS, GAAP, country specific) needs. While many systems claim to be ‘multi-currency,’ few truly address the requirement for multiple books denominated in the appropriate currencies. A multiple book solution, providing full transaction details in all currencies, will enhance your ability to comply with applicable reporting requirements as your transaction volumes grow. Be cautious of performing after the fact currency conversions that may result in non-compliance with IFRS/GAAP, statutory or mandated requirements, ultimately eroding partner, NOC and corporate confidence.

Risk Minimization
The E&P business is risky enough without the additional risk of non-specific financial solutions and inexperienced solution providers. Your provider must understand the issues of international O&G financial management and deliver proven results in the region where you plan to operate. A non industry-specific team will incur unexpected costs as they learn the business at your expense. A proven system coupled with region and industry specific expertise, will deliver an effective system implemented in the time frame and cost originally proposed.

Peter Beasley is a VP at WellPoint Systems with a focus on the international oil and gas solution, WellPoint IDEAS. He is a Certified Public Accountant with more than 25 years of experience in software development and international implementations. Previously, Mr. Beasley was the Director of Price Waterhouse Software, Financial Management Systems Group.