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Oil India speeds up exploration

Oil India Limited has been able to achieve enterprise-wide transparency through mySAP ERP. The implementation has helped the company improve its overall efficiency thanks to tighter inventory control, faster closure of accounts and insights into project costing says Abhinav Singh

For a large enterprise such as Oil India Limited (OIL), which has a number of offices including those at remote locations, information integration is of the utmost importance for enabling transparency and speedy decision making. OIL wanted to have a system, that would integrate its processes and systems to streamline oil exploration, production as well as the transportation of crude oil and natural gas and it wanted to get a quick overview of information pertaining to its operations. The company has over 1,00,000 sq. km of concession area (onshore) for carrying out hydrocarbon exploration and production activities. It also transports crude oil produced in the northeast region through its 1,200 km integrated cross-country pipeline to five refineries in the region. The company also produces LPG at its LPG recovery plant in Assam.

Lack of a reliable information system

Due to its large scale operations and widespread offices, OIL found that operations management had become inefficient. AN Saikia, General Manager (ERP), Oil India Limited, explained, “Although there were islands of computerization, most of the processes were being done manually and were paper-based. There was complete disintegration of information that was affecting the decision-making process. The business processes of different departments did not talk to each other.” Additionally although OIL had invested in software solutions in the past to handle its operations, they were not well integrated, and data interchange across the organization was inadequate. To add to the existing problems, the data transfers were one way and maintained in disparate systems.

Even the business transactions were not fully automated. There was a delay in processing and capturing business information, which, in turn, led to delay and inaccurate decision making for the organization. There was also inaccurate budgeting and costing and there was a ton of unclean data whose existence hampered analytical studies. The lack of a project management system and burgeoning inventory contributed to the company’s woes.

There was a direct impact on account closure as well. Account information was unavailable on a real time basis and in case of any expenditure for a particular task/project there was no transparency with regard to data. For instance, for LPG production from a particular plant it could not be properly ascertained as to what was the costing of the plant—in terms of turnover, capacity and consumables as all the relevant data had to be manually compiled. Additionally project costing of drilling an oil well was based on ‘gut feelings’–relying on experience and were nowhere close to the actuals. Saikia added, “The manual systems cannot be updated immediately. Each department had a set of disparate legacy systems which could meet the requirement of that particular department leading to creation of islands of information.” There was also no proper inventory control as the materials department lacked real time information about the materials in stock, in transit at any given location. It was also challenging to raise a quotation in real time due to the lack of an integrated information system.

Stringent parameters for vendor selection

OIL drew up stringent parameters to evaluate an ERP system for its set-up, as it wanted to address multiple issues by implementing the system. During the process three major ERP vendors—SAP, Oracle and JD Edwards—were evaluated. Different departments of OIL had made Business Script Demonstrations in front of these vendors. The demonstrations involved a script of different issues that each department hoped to resolve by implementing an ERP system. There were about 50 such business scripts. OIL looked for an ERP solution provider with vertical capability in oil & gas exploration, a partner with referenceable customers was desired. A comprehensive set of evaluation criteria was laid down and the shortlisted products were meticulously evaluated and rated.

“Primarily, we needed a product that had the best credentials for oil & gas upstream. Nearly 3,000 functional needs were identified, covering all the business requirements of OIL,” said Saikia. Most importantly, various vendors were evaluated in terms of number of sites (worldwide) that they had successfully implemented and their total oil and gas industry implementation experience, product features and the R&D efforts and lastly, the product road map was also evaluated.

Based on this stringent evaluation, SAP (mySAP ERP 4.7 version) was selected as the best-fit package for the company’s needs. SAP scored high mainly in the areas of vendor credentials and also its R&D effort and road map to support the oil & gas industry vertical. Saikia added, “SAP had proven expertise in the oil & gas industry and had implementations in companies such as ONGC and BPCL which helped us in getting quick customer references. The evaluation exercise was done in mid 2004 and we finalized SAP by year-end [2004].”

‘Project Aarohan’

The implementation project was dubbed ‘Project Aarohan’ and it kicked off in April 2005. A lot of customization was done with the challenge being to manage a large-scale implementation. SAP had to be implemented across 11 scattered locations and all modules including Finance and Inventory, Material Management, HRMS, Sales, Production, BI, SRM, CFM were implemented. A total of 80 people were involved in the implementation—a 50 member internal team and a 30-member team from SAP India Consulting were involved. In addition to the above, oil & gas industry specific processes including production and sale of oil, gas, LPG; oil transportation from wells at various locations and delivery from the central tank farm to refineries through pipelines were covered. The team underwent SAP Partner Academy Certificate courses on various modules before the actual implementation began. SAP India Consulting was selected as the implementation partner due to its experience in implementing upstream oil & gas specifics and its large pool of quality consultants. The standard Accelerated SAP (ASAP) methodology was adopted with clearly defined milestones such as project preparation, business blueprint, final preparation, go-live and support.

An oil & gas industry-specific ‘Production and Revenue Accounting’ module was successfully implemented for the first time ever in Asia, making it an unique implementation for SAP services in this industry. As part of the implementation OIL started a new chapter in the material management functions by introducing e-procurement through the SRM module of the SAP solution. Customization pertaining to the HR processes whereby a lot of details regarding allowances had to be entered into the system and also regarding the procurement process was carried out on the SAP system.

Enterprise-wide visibility

Post implementation, OIL has derived significant benefits, as there has been centralization of information resulting in corporate visibility. The end-to-end process of production, sales, delivery and invoicing both product and area-wise details are now available online and in real-time. All processes, from contract requisition to payment, have been automated and the asset data is available on SAP. Budgetary control has been established.

Faster account closure

Additionally account closure has been expedited. Prior to the SAP implementation, account ledgers were available either monthly or quarterly as they were processed in batches—resulting in delaying of the reconciliation process. However, post the mySAP ERP implementation, all ledgers are available online and at any given time it is possible to get all the integrated account information. This facilitates reconciliation and accounts closure. The Joint Venture Accounting (JVA) process has been standardized. Moreover ‘Inception to Date’ reporting is now easy as all the required data is available in the system. Use of Automatic Payment Program (APP) has not only helped in faster release of payment but has also reduced efforts required earlier for vendor account clearing and reconciliation.

Online payroll processing

The ERP system has also streamlined the HR processes and post implementation, all employee payrolls are processed through the system. In addition, there are automated system checks for various allowances and claims; leave applications can now be validated based on predefined rules. Reports such as reconciled lease-wise production and disposal, production loss details, well test data, well status are also available online. “With SAP, the information flow is faster and all details are documented. Project costing has also been streamlined. Now in case of any estimation required for project cost of any drilling exercise it is easy to get that through the SAP system as everything is automated. This reduces time, cost and more importantly, optimizes resource utilization in oil & gas exploration,” said Saikia.

Next focus

OIL has overseas operations in Libya, Gabon and Nigeria and it plans to gradually extend the ERP system to these locations in the future. It also plans to go in for a document management system, fund management and strategic enterprise management.

abhinav.singh@expressindia.com