Mergers, acquisitions, and joint ventures are routinely finalized in the oil and gas business. Specific to an oil and gas acquisition, the concern for the acquiring company is creating a comprehensive measurement policy following the acquisition.
Perhaps your company already has a set of Standard Operating Procedures (SOPs) that reflect your policies and procedures, are aligned with industry standards, and outline the processes that should be followed by your measurement team.
Now, your company has acquired a new company and their assets. How do you incorporate these assets into your existing SOPs?
The Challenge for Many Companies is a Legacy Approach
In a recent episode of the Pipeliners Podcast, measurement expert and GCI representative Ardis Bartle presented this scenario for companies that have acquired another company:
Your company acquired a legacy company, and that legacy company has legacy measurement policies and legacy contracts. Now you need to create a cohesive measurement policy across the entire company, including the newly-acquired assets.
You cannot use the legacy company’s pre-existing contracts, but you can base the measurement policy on the contracts. So, what do you do?
The answer is: you build a set of measurement SOPs based on the Sarbanes-Oxley (SOX) requirements for accurate and reliable measurement. This way, everyone in the company has universal understanding of measurement procedures and is speaking the same language about measurement.
It comes down to integrating assets, people, and processes to ensure that everything that happens post-acquisition is aligned with the measurement SOPs and that everyone involved is performing measurement the same way.
Why is a Comprehensive Measurement Policy Vital?
A comprehensive measurement policy outlines the beginning-to-end process of producing accurate and reliable measurements of product. There are critical points throughout the process that could materially alter or affect the accuracy of the measurement.
There’s a lot of small but important things in measurement that are covered in the SOPs that make sure that the proper actions are taken and ensures that everyone involved in the measurement process follows those procedures.
What are the key elements of a measurement SOP manual that dictates the actions?
- Guidelines & Requirements
- QA Inspection Procedures
- Control Evidence
- Applicable Forms
- Latest Federal Regulations
Guidelines & Requirements
Following an acquisition, everyone involved in measurement needs to understand the best practices for the installation of equipment, the documentation, how to test the equipment, and how to calibrate equipment.
Measurement professionals from the previous company may have followed a legacy approach to performing these tasks. Following an acquisition, everyone needs to be on the same page to ensure that measurements are accurate and consistent. Otherwise, a measurement will be skewed from the beginning all the way to the end.
The guidelines and requirements for measurement help ensure that all measurement professionals start from a common ground of measurement.
Measurement SOPs serve another important role of outlining how often to perform the measurement. Measurement supervisors need to ensure that measurement data is received in the same way and at the same frequency to prevent gaps.
Measurement technicians from the previous company may have followed one schedule, while your company follows another. Measurement SOPs ensure that all involved parties are following the same schedule and performing the correct measurements so that you’re receiving complete measurement data when needed.
From a contract perspective, this is important for compliance purposes of holding parties accountable according to the terms of the contract. Without correct or complete measurement data, there could be contract issues. This is avoidable through adherence to the procedures.
QA Inspection Procedures
Inspecting the quality of the product — whether gas, liquid, crude, NGL, or another form of hydrocarbon — requires a universally-stood approach to ensure a consistent evaluation.
- Electronic Gas Measurement (EGM) measures the quality of gas using a flow computer.
- Crude Sampling takes samples in the field to inspect the quality of NGL.
- Lease Automatic Custody Transfer (LACT) measures the net volume and quality of liquid hydrocarbons.
Measurement SOPs provide guidance on how to perform each of these inspection procedures in alignment with the industry standards.
This requires understanding what equipment will be used to perform the measurement, the correct approach to perform the measurement, and what standards provide the guidance for that approach. Then, measurement supervisors need to outline the procedures that all measurement technicians can follow in the field to perform the measurement.
Near the end of the measurement process, control evidence is the proof of an accurate and reliable measurement.
The challenge following an acquisition is arriving at one approach to provide this evidence. If you acquired a company that uses paper records and your company uses electronic records, you need to create alignment around one, universally-accepted approach. Most preferably, it would be digital for increased accuracy and reliability.
The bottom line is to ensure that the measurement SOPs clearly outline the approach for producing control evidence. This will help measurement personnel understand exactly what they need to do in their role and will hold them accountable if they do not follow procedures.
Measurement data, quality checks, and control evidence lead to the completion of applicable forms that validate measurement.
The forms should be completed in alignment with SOX requirements for reporting measurements that reflect: installation, quality assurance, field inspection or verification, calibration, and witnessing.
Measurement SOPs outline how to complete the forms to satisfy SOX requirements.
Latest Federal Regulations
New federal regulations may be introduced from time to time. For example, the Bureau of Land Management (BLM) introduced the Onshore Oil and Orders for conducting oil and gas operations on federal and Indian lands.
The BLM Onshore Orders continue to be updated with new requirements or minimum standards for the accurate measurement of hydrocarbons. As the requirements are updated, measurement SOPs should also be updated to reflect the latest regulations.
If you acquired a company that does not have an SOP manual that reflects the BLM Onshore Orders, then this will be a critical step in developing a comprehensive measurement policy.
Find Support Updating SOPs Post-Acquisition
A comprehensive measurement policy should include SOP manuals for gas measurement, liquid measurement, and the BLM Onshore Orders. After acquiring another company, evaluate whether you need to update SOPs.
The goal is to ensure that all measurement personnel have complete understanding of how to perform tasks in their role that support accurate and reliable measurement.
- Do your current SOPs need to be updated to reflect the newly-acquired assets?
- Do you need to build new SOP manuals that follow the tenets of SOX?
- Do you need to provide training to new measurement personnel on measurement SOPs?
Gas Certification Institute (GCI) is available to support your company following an acquisition. We can review your current SOPs, make recommendations on whether to update SOPs, and create an SOP management plan to continually update SOPs according to the latest federal regulations.
Contact GCI today to inquire about updating your SOPs that reflect your current operating state following an acquisition.