OBLIGATIONS
Contents |
Introduction
The control and management of ongoing business functions within an organization necessitates the storage of vital information. Information is an asset; a data model is essential for managing this asset. The PPDM Version 3.5 Obligations Module is a database module designed to allow the capture of business objects as they pertain to obligations. The data structure of the obligations is broken down into sub-modules that cover:
- Obligation Components
- The components of obligations may be associated with any or all of the following:
- land rights, notifications, terminations, wells, land offering bids, land
- right acquisitions, Business Associate service, land requests, contracts, and
- contract provisions.
- Obligation General Information
- General Information includes valid obligation types, substances, crossreferencing,
- calculations, and parties.
- Obligation Deductions
- Deductions stores relevant information about deductions, allowable deductions, and
- calculations regarding the deduction.
- Obligation Payments
- This sub-module is specific to obligation payments, the payment details, payment rates, and
- payment instructions that provide for the direction of how the payment is to be made and who
- the payment is to be made to.
In summary, the various sub-modules address the pertinent data that is required
to capture all the necessary requirements to provide for the administration of
obligations. The source of obligations come from the compliance of the terms
and conditions of mineral land rights, contracts, wells or other high level
Business Modules that will be using this part of the database for the storage of
this information.
Purpose
Obligations may be contractual, regulatory, statutory, or documented responsibilities. They are defined in the terms and conditions of negotiated contracts, any other legally binding agreements applicable to the maintenance of land rights, wells, or facilities or are set by regulatory agencies. Obligations require a Business Associate to perform certain duties to fulfill these responsibilities.
Description
When complying with negotiated, documented, legislated, or regulated terms and
conditions, a Business Associate must manage many types of financial and nonfinancial
obligations. Financial obligations are the payments made for the
maintenance of, operations on, and production from the land right in the manner
that is stipulated in the lease agreement or any other contractual arrangements
that require fulfillment.
Performances of duties are the actual actions or tasks taken or directed by a
Business Associate in order to comply with the maintenance and operational
commitments specified in an agreement.
Obligations are usually time sensitive and require tasks or actions to be
performed to fulfill these actions before a critical date. Failure to comply with an
obligation may violate the provisions of the contract or lease agreement and
result in a penalty, litigation, or default condition.
Business Processes
Obligations can be classified as either financial or non-financial (duties).
- Financial: These are the payments made for the maintenance of, operations on, and
- productions from the land in the manner that is identified in the contract.
- Maintenance Payments: These are payments that preserve the title to the land right or
- contractual arrangement. Payments, such as rental or maintenance costs, do not add or
- subtract any value from the land right.
- Operational Payments: These are the payments required to conduct the actual operations upon
- or within the land right. Payments include all the operations necessary to exploit the land
- rights, including the costs of exploration for and the removal, processing, and
- transportation of petroleum substances.
- Production Payments: These are the payments that surround the actual substance that is
- removed and the division of the revenues associated with that substance. These payments
- usually include taxes, production royalties, shut-in royalties, and compensatory royalties.
- Non-Financial (Duties): Performing duties is the actual action undertaken by or directed by
- the Business Associate in order to comply with the maintenance specified in the agreement.
- Operational: These duties deal with the compliance, with terms or conditions that deal with
- the exploitation of the land rights. They include the actions associated with the
- exploration for and the removal, processing, and transportation of petroleum substances.
- Maintenance: These duties involve the performance or direction of action that are necessary to comply
- with the terms or conditions that preserve the land rights in its current state. They include actions
- that are required for notifications, applications, regulations, or legislative requirements.
Several actions or key business tasks are applicable to most obligations. All
obligations need to be identified through the review and analysis of the terms
and conditions of the governing contract(s) or lease agreement. Once the review
has occurred, a user records the pertinent information about that obligation in
order to support its administration. Dates, descriptions, responsibility for, and
necessary duties required to fulfill the obligation are types of information
necessary.
More than one duty that may be applicable to the same obligation. Some
obligations are one-time obligations, and others are reoccurring. For reoccurring
obligations, it is important to capture the frequency that it occurs so it can be
monitored. The fulfillment of one obligation may trigger the requirement to
fulfill a new obligation. For example, it may be the responsibility of a Business
Associate to send out termination notifications to the applicable Business
Associates in a case where a land right has come to the end of its natural expiry
and applications for continuation are unsuccessful.
Tracking and reporting of unfulfilled obligations are a large part of daily
maintenance. Monthly rental and/or royalty payments are required to ensure that
the term of the land rights does not become void.
If the land right or contractual arrangement has been relinquished then
obligations to ensure you have fulfilled the appropriate release conditions are
necessary.
Failure to meet an obligation can have serious ramifications and could result in
the loss of land rights or production revenue. If this occurs, a Business Associate
may suffer loss of the initial investment and any operational costs that were
expended. Additional costs may also be incurred if the failure to meet
obligations results in litigation by another Business Associate affected by the
error.
Integration
Integration is an integral part of the model. Special considerations must be made in order to ensure that the components of the model work together correctly. For example, the OBLIGATION COMPONENT table integrates the required obligations within other PPDM Business Modules with the Obligations Module. Although the Obligations Module can be used by all of the other PPDM Business Modules, currently the Obligations Module must be integrated with the following modules in the Version 3.5 PPDM data model:
- Land Mineral Rights Module
- Contracts Module
- Well Module
- Seismic Module
