By Kiana Wilburg
One of the most tedious jobs for oil producing countries is cost recovery audits. These are done to ensure that the costs a company said it incurred in the search of the petroleum are necessary and economical.
But not all countries are equipped and experienced enough to audit such costs in that fashion. As such, they can be easily duped by sly oil firms.
Understanding this reality, the International Organization of Supreme Audit Institutions (INTOSAI) has compiled and shared for the benefit of newcomers to the sector, such as Guyana, the experience of Uganda. This African state, it said, has been successful in ensuring cost control in the oil sector.
The Organization reminded that cost recovery audits are undertaken after an activity has been done or after the close of the year.
But to ensure efficiency, the international body pointed out that Uganda mandates that all oil companies submit real time data to the regulator for any drilling campaign.
The transparency body said that this keeps the Regulator informed of all activities as they occur. It said, too, that the daily drilling and operations report which is submitted is required to have at least a 24-hour forecast.
The global body said that this gives an estimation of the costs expected to be incurred in the next 24 hours.
The INTOSAI said that this is an important step for cost control by the Regulator. It explained that this data, once submitted, can be reviewed early enough before the final cost recovery audit. It also helps to save time when the final cost recovery audit has to be done.
But this is not the only cost control mechanism that Uganda has in place. The International Organization of Supreme Audit Institutions pointed out that Uganda has monitoring officials assigned to each of the licensed companies.
It explained that a monitor employed by the Regulator stays in the field and sends his/her own reports about each activity on a daily basis to the Regulator. The monitors are rotated regularly too.
The International Organization of Supreme Audit Institutions said that the monitoring role is undertaken by staff of the Petroleum Authority and all other institutions involved such as the National Environment Management Authority, and the Uganda Wildlife Authority for activities in national parks.
It said that the monitoring reports are important for the audit as they give firsthand accounts of what happened in the field in addition to the reports from the companies.
The Organization stressed that real time monitoring is important for both the company and the Government. To provide an example to support its case, it said, “If a well is drilled and it was expected to use 100 casings but it uses only 80 casings, both the Government and the drilling team will immediately be aware of the number of casings used rather than wait for a stocktaking exercise.”
The transparency body said that this improves inventory movement on the company’s part.
It said, too, that it ensures that by the time the final cost audit is undertaken, most of the costs have been reviewed through this mechanism.
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