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Introduction to the Enhanced Production Audit Program. ISA January 25, 2010. Outline. EPAP Goals Overview of EPAP Implementing EPAP Question Period. New Directive 076. Title: “Operator Declaration Regarding Measurement and Reporting Requirements” Effective January 4, 2010
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Introduction to theEnhanced Production Audit Program ISA January 25, 2010
Outline • EPAP Goals • Overview of EPAP • Implementing EPAP • Question Period
New Directive 076 • Title: “Operator Declaration Regarding Measurement and Reporting Requirements” • Effective January 4, 2010 • Directive available for download at:www.ercb.ca • Operator’s Handbook
Two Main Goals • Raise level of assurance over compliance with ERCB measurement and reporting requirements • Raise level of compliance with ERCB measurement and reporting requirements
5 Major Components • Declarations • Controls & Evaluation of Controls • Compliance Assessment • Action Items • Escalation
Declarations • State key operator assertions • Involve senior executives • Report evaluations at a summary level • Create through EPAP system Declaration does not require perfection
Controls & Evaluation of Controls • Every well-managed business operates controls • EPAP is based on operators evaluating their measurement & reporting controls
Overview of Relationship Evaluation of Control Assesses Control Monitors Business Process
Oil & Gas Example For sample of Well Tests, examine review of the log Assesses Review Well Test log Monitors Conduct Well Tests
Compliance Assessment • Based on Compliance Assessment Report • Contains Registry and FIS data • Available monthly • Basis for regular contact Indicators are not noncompliance events
Action Items • Some contacts become action items • EPAP system provides support • Documents discussion and actions • Communicates to operator • Provides basis for follow-up Action items are enforceable
Escalation • More information requested on: • Controls • Evaluation procedures • Evaluation results • Controls-based audit • Substantive audit
Connection to D-019 • Lack of progress • Assistance • Education • Lack of co-operation • No or inadequate response • Failure to submit a declaration Directive 019 Enforcement is avoidable
EPAP Philosophy “Trust, but verify” - Ronald Reagan
EPAP Approach • Use of judgment • Focus on collaboration • Continuous improvement takes time • Operators will need support
Implementation Activities - 1 • Select your declaration month • Meet with senior executives • Build understanding of the controls-based audit approach • Build understanding of current work • Deliver a communication presentation about EPAP
Implementation Activities - 2 • Create an evaluation plan • Strengthen business processes and controls • Perform trial evaluations of controls • Act on the Compliance Assessment Report
Implementation Resources • Questions: • www.ercb.ca • epap@ercb.ca • Assigned PAT member • IMG – Industry Measurement Group • CAPPA – Canadian Association of Petroleum Production Accounting • IIA – Institute of Internal Auditors
Future EPAP Related Events • CSHM Conference – April 2010 • IMG EPAP Course – later in 2010 • EPAP Industry briefing – later in 2010 • CAPPA Conference – October 2010
Common Misconception Low ComplianceAssessment scores = ≠ High Compliance
Indicators of Deficienciesin Controls • Amendments • Compliance assessment report • Voluntary self-disclosures • Field inspections • Audit findings • ERCB Volumetric Noncompliance Report • Provisional assessments
Suggestions for Continuous Improvement • Recent production audit findings • Recent field inspection findings • PAT Top 10 or 20 list of audit findings • ERCB Noncompliance Report • Integration • Schematics and drawings
Suggestions for Continuous Improvement • Data quality enhancement initiatives • Review current practices • Perform self-inspections • Review the findings of internal audits • Review the findings of recent joint venture audits
Suggestions for Continuous Improvement • Review noncompliance event list • Review items on the current ERCB risk matrix • Review the Registry warning report • Review Provisional Assessments • Synchronize property setup among: • Production accounting system • Field data gathering system • Financial accounting system
Suggestion for Industry Cooperation • Participate on IMG subcommittee • Participate on CAPPA subcommittee • Work with Registry to implement enhancements • Work with PA and Field Data Gathering software vendors
Eventually, all operators will • be aware of their state of compliance with ERCB requirements • have the infrastructure in place to mitigate risk of noncompliance • raise their level of compliance