Cairn study to benchmark upstream personnel costs

Vol 7, PW 8 (02 Jul 03) Exploration & Production

GOOD NEWS for private upstream companies in India.

All that time wasted in never-ending and tiresome haggling with the DGH and sometime ONGC over general and administrative (G&A) costs in their annual budgets could soon be history, if a Cairn Energy-led initiative is successful. Cairn itself is the victim of disputes with partner ONGC over Ravva G&A costs.

But instead of sulking and complaining Cairn has decided to take the lead in benchmarking these costs across India and has linked up with energy consultancy Ziff Energy, which has 20 years experience in the upstream benchmarking business. Cairn began the process in mid May by inviting ONGC, British Gas, Gujarat Petroleum, Oil India, Premier Oil, Hardy Exploration, Niko Resources and Reliance Industries to a meeting with Ziff at its office in Chennai.

"We are trying to interest companies in India in this concept," a source tells this report. Why were only these companies chosen "We've had prior talks with these companies about benchmarking." The response to the Cairn proposal has been good.

"There is positive interest from a number of companies." Cairn wants a commitment from at least six of the eight companies before it decides to go ahead. "Only then will the study be effective as sixis a fairly large representative sample," he adds.

"This will also ensure that the study is 'blind' and will generate an adequate cross-section of data." Cairn expects to have the study completed by the end of this year. We learn Ziff is now in discussions with the target companies.

When it begins the study Ziff will aim to "benchmark key general and administrative costs and manpower metrics and identify related best practices." We are told that, "it makes a lot of sense to have this kind of data with you when you argue in favour of your costs. This kind of data will also set a benchmark across India." Cairn's two-year-old dispute with ONGC over Ravva G&A costs is still unresolved.

In the 2003-04 Ravva budget, Cairn set aside $8.7m - a figure undisputed by partners Petrocon and Marubeni but too high for ONGC which says $5.6m is enough.

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