March 23, 2017
A Case for Master Data Management in Upstream Oil and Gas
Oil & Gas professionals, how many times have you seen an angry royalty owner call you due to a “bad address” or an incorrect payment? How many times have you cursed the PPA that makes you look into historic division orders with multiple ownership updates? For oil and gas companies, data is coming in constantly from numerous sources into a plethora of different systems. In the midst of all this activity, revenue and accounting departments need to be able to send out timely disbursements and avoid prior period adjustments. So even in periods of high chaos, such as a merger or an acquisition, they still need to link division order data and make sense of what took place, right? They still need to know if a royalty owner was present in more than one property and retain the ability to provide superior service for their customers. However, most of the time, for upstream professionals, data often remains a tangled mess. One of the key reasons is due to the lack of a solid MDM strategy.
data often remains a tangled mess
Master Data Management (MDM) is one of the most prolific and efficient software tools out there today. The benefits of MDM are vast, and it’s become a staple for a wide variety of industries, including banking, utilities, and even downstream Oil & Gas companies. Yet the upstream sector has been largely reluctant to adopt it as a means to organize the huge amounts of data that informs and results from their daily operations. With the recent downturn continuing to take its toll on revenues for E&P companies, it’s a perfect time for companies to take a closer look at how they manage their data-driven business and invest in a better strategy, one that an energy MDM similar to their downstream counterparts.
perfect time for companies to take a closer look at how they manage their data-driven business
This would result in:
- Easier data integration between various systems during mergers and acquisitions
- Enhanced ability to tie together all the hub and spoke systems, thereby streamlining processes and ensuring accuracy
- Easier to build applications against repository
- Happier royalty owners
- Reduced write-offs due to incorrect payments to the wrong royalty owners
If an Upstream department comes up with a good MDM plan, it can lead to a lot of advantages. Let’s imagine you are setting up John Smith from Arkansas. The first thing you’d need to know is if John Smith is already in our system. To find out, you could do a percentage-based search to determine that information- you’ll know right away whether or not you need to create a setup. The issue today is that most ERPs do not have such a good search mechanism, where we can pinpoint if John Smith is in our system. Hence, we set up John Smith again and again in our system. This leads to multiple linkages to the same person in most cases, as well as numerous issues during ownership updates.
What if John Smith passes away and his inheritance goes to his kids? How many division orders should we be updating? Did we get all of them right? Without proper linkage, there’s no way of knowing until a mistake has already been made.
Additionally, there’s the unique issue of an incorrect postal address. Seems like a small, innocent mistake right? But, if the ERP cannot validate up-to-date zip codes in the USPS web-site, a single bad address can create a suspense account that ultimately will need to be escrowed and escheated.
These small, seemingly insignificant errors in accounts can lead to expensive, lengthy correction processes, such as prior period adjustments. To handle their current influx of data and prepare for a future of ever-increasing data needs, upstream companies must seriously consider an overarching MDM and then create interfaces to all other systems such as the Upstream ERP, financials ERP, reserves systems, marketing systems and platforms. That way, all the master data would be accurate and in one place. All the spokes would receive validated information from the master and then be able to efficiently carry out their function. No more angry royalty owners or pesky PPAs. Just clean, timely data that makes upstream life easy…well, easier.
About Shree Sannabhadti
Shree Sannabhadti is an experienced consultant who has been optimizing processes for upstream Oil and Gas professionals for over 15 years. As a Managing Partner for Value Global, LLC, he delivered projects in Production, Revenue, JVA, and Accounting departments for industry leaders such as BP, BHP Billiton, and Southwestern Energy. In addition to deep business knowledge, Shree has extensive knowledge of technologies such as ERP, mobile platforms, web-based product deployments and interface design.
Shree received a degree in Computer Engineering from the University of Mumbai, and now lives in Houston with his family where he enjoys reading, playing tennis, and solving math problems in his spare time. He can be reached via email at email@example.com.
image credit: @fineas_anton