In the current low product price and high production cost environment, the Oil and Gas Industry is facing increasing pressure on profitability and investor expectations. To minimize the impact of these challenges, Management needs to take appropriate decisions on maximizing and controlling projects and operating costs given limits on financing. The JV Budget is the primary tool used for this purpose.
WellGlobe Budgeting and Controls class provides Participants with practical knowledge and relevant skills not only to plan and implement a process that will facilitate selection of the strategically aligned investments with controlled costs for the Joint Venture projects but also ensure proper accountability and transparency. Highlights of the course include:
External and internal risk factors that affect and influence budgeting and control processes.
Legal and agreement structure impacts on budgeting requirements.
Differences between International Oil Company and National Oil Company perspectives
How budgeting fits into overall strategic planning, management and controls processes.
Roles and responsibilities and effective participation.
Broader impacts on the country and the government.
This course is aimed at providing the Participants with the necessary knowledge and skills to:
Understand the broader perspectives but at the same obtain an in-depth knowledge of the detailed processes.
Participate effectively in budget development, discussions, reviews and approvals
Negotiate and achieve timely budget approvals that reflect government and organizational priorities.
Interpret and utilize the accounting and management reports for their decision making process and that assist in achieving desirable results. Take responsibility for their costs and track performance to minimize disruptions and delays.
The training is also aimed at providing the required knowledge and relevant skills to participants to address the above challenges. It also provides a forum for Operators and Partners representatives to sit together, gain understanding review the process, brainstorm on issues and reach frank agreements on how to meet their Corporate and Partners ' expectations.
Our methodology will include analytical presentations, case studies, exercises, group discussions and exchange of knowledge, ideas and experiences. We will encourage full participation as much as possible to enable participants have fun and build business relationships in addition to knowledge acquisition.
We expect that the training will impact the participants and their organizations and result in:
Enhanced personal knowledge of the budgeting and related planning and control processes
Full and effective participation of all stakeholders in the Budget decisions and conflict resolution
Transparency and confidence between stake holders
Reduced unnecessary time wasted on Joint Venture budget disputes and conflicts.
Who should attend:
This training will benefit the following categories of professionals and employees involved in joint interest project implementation, funding, reviews and approval.
Project, PPL and Block oversight Managers
Engineers and Engineering Supervisors e- Earth Scientists
Accountants and Finance Supervisors
Planning Managers and Supervisors
Members of review Committees (CASHCOM, TECOM, OPCOM)
Cost verifiers and auditors
Introductions and establishing Expected Outcomes. General background on factors affecting budgeting and controls
a. Upstream industry external risks - geology, completion, market, political
b. Industry value chain and costs overview - exploration, appraisal, development, operating costs and abandonment.
c. Internal organization risks - stakeholder confidence, insufficient due diligence and consultation, cost inefficiencies, lack of control of decisions, fraud and corruption,
d. Understanding the legal and contractual framework that affects budgeting and controls, e.g. joint venture agreements, role of operator, concessions, fiscal terms, production sharing agreements, tax laws, MOUs, MinFin and MinPet regulations, currency regime, US Dollar accounting.
Control Processes, Cycles and Linkages -
e. Overview of Planning and Control cycle - from strategic plan, business plan, budget, AFE, and updated forecast to controls and authorities, contracting plan, approved contractor list, contract award, cost accounting systems, management reporting and auditing.
f. International Oil Company Accounting and Financial Practices - What external factors drive accounting and financial practices, e.g. anti corruption, corporate governance laws, currency and tax regulations, government budget, public disclosures and shareholder accountability,
g. What are a company's accounting records used for, e.g. company's act, tax compliance, PSA compliance, internal controls, Government accounts, borrowing, management oversight, joint venture oversight, input into budgets, currency and cash management, cost controls,
h. Internal factors that drive accounting, e.g. departmental and government policies, strategic objectives,
i. Critical concepts in oil and gas accounting, e.g. successful efforts, expense vs capital, accruals
j. The ERP system - importance in selecting, implementing, and utilizing.
Day 3 - National Oil Company JV Budget Processes and Issues
k. Role of NOC - independence in funding vs central government control
I. What is covered, e.g. revenues? Payments to government? Costs only?
m. Budget and Business Plan development based on strategies for an IOC and for an NOC.
n. Linkage to work plan, drilling schedule, project schedules and project economics
o. AFE's use as a control and a cost management tool
p. Revised forecasts - difference from a budget and use within an IOC
q. PSA cost recovery and Tax reporting requirement
r. Non-financial budgets and targets, e.g. pro duct ion, reserves, employment, safety targets, training, environmental impacts, community and CSR.
Day 4 - Merging Accounting and Budgeting via Management Reports -
s. Use as an analytical tool
t. Use as an internal control tool
u. Types of financial reports, e.g. departmental costs, accounts payable listings, capital project/AFE report s, profit and loss or cash flow reporting,
v. Usage in monitoring performance and evaluating new projects
w. Comparison between different operators and blocks and projects
Day 5 - Issues and Challenges faced by the National Oil Company
x. National Oil Company accounting and government accounting - Different uses (e.g. investment decisions, borrowing, foreign currency management, national treasury, government spending, and Issues arising in other countries. Examples of Issues arising in other countries
y. Differences between how a private company (IOC) and how a government entity (NOC) views budgets, e.g. flexibility, approval authority, emphasis on other controls
z. Reporting currency
aa. Cost allocations - between blocks, from parent company, between expense and capital
bb. Parent company costs -time-writing and allocations
cc. Degree of financing alternatives - impacts on budget approvals and flexibility
cc. Budget disputes - examples and resolution options
ee. Impact of budgeting on Boom or bust cycle
ff. Impact of NGO's and Civil Society on budget transparency and disclosure
gg. Use of budget and controls to influence other factors - level of exploration, pace of development, contract awards, local content, employment, training and currency strategies