Treasury Practice

Problem SolvedXiaofeng Huang, CNOOC Limited

Published: Jul 2010

CNOOC Limited is China’s largest producer of offshore crude oil and natural gas and one of the largest independent oil and gas exploration and production companies in the world. CNOOC Limited has four major production areas in offshore China, which are Bohai Bay, Western South China Sea, Eastern South China Sea and East China Sea. In addition, it is one of the largest offshore crude oil producers in Indonesia. The group also has upstream assets in Nigeria, Australia and some other countries.

Xiaofeng Huang

General Manager, Treasury Department

Problem…

CNOOC Limited was keen to implement a treasury management system, however the company was facing a number of key issues that needed to be addressed before any implementation could take place.

Some of the inefficiencies and challenges that the company was facing included:

  • Manual processing of account reconciliations was laborious. Real-time monitoring of bank account closing balances and bank transaction processing were not possible with the existing systems.
  • Daily operations involved numerous manual processing tasks, were inefficient, and operational risks were high.
  • A lack of appropriate online internal risk control.
  • While the main aspects of the centralisation of cash had already been realised, there was still room to improve cash centralisation.
  • There was no single integrated platform to file, record and manage the data and files of the company’s treasury departments.

As Xiaofeng Huang, General Manager, Treasury Department, CNOOC Limited, explains, “Treasury operations clearly needed to be more integrated. After some consideration, we selected SunGard’s AvantGard Treasury system to help us to address these inefficiencies.”

…Solved

In order to ensure a successful project implementation, CNOOC Limited’s treasury department deployed key members of the business and IT team to set up a strong joint-project team with system provider SunGard. There were however numerous challenges that CNOOC Limited had to deal with during the implementation period. These included the fact that the system structure was rather complex and business modules were numerous. Additionally, the implementation involved CNOOC Limited’s ERP, budgeting system (Hyperion) and direct connections with more than ten banks. However, “Through a comprehensive planning of the project and working closely with the internal ERP project team, budget planning project team and seamlessly co-operating with external banking partners, the project went live successfully after one year and has realised its pre-set objectives,” says Huang.

The TMS implementation has allowed CNOOC Limited to raise its treasury management operations in China to a new level. A single front, middle and back-office treasury operation platform with comprehensive treasury functionality has been built. Host-to-host connections with CNOOC Limited’s partner banks, connectivity with SAP, Bloomberg and Hyperion have also been realised, thereby improving STP rates.

Through the connection with banking systems, the company can realise real-time (or interval) monitoring of cash; automation of bank reconciliations also improved responsiveness, the accuracy of daily transactions and the reliability of short-term cash flow forecasting. Treasury operations have also become increasingly automated, improving efficiency and reducing the error and fraud risks of manual processing. The cash pool management tool has also allowed CNOOC Limited to further enhance treasury management centralisation, leverage on the scale of its cash position and improve the efficiency of its cash.

On the back of this, CNOOC Limited has built a strong risk management and control system, which has meant that the company can now meet company internal compliance and SOX 404 regulatory requirements. At the same time, CNOOC Limited can also meet the requirements of international accounting standards and automation of accounting for daily treasury activities. In summary, the TMS implementation has provided CNOOC Limited with a powerful IT tool to enhance and improve treasury management. As Huang concludes, “The success of this project is one of the milestones in promoting and advancing China corporate treasury management as a whole.”

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