BP-Mobil: Year 2000 programs enhanced by downstream JV

The formation of joint ventures and mergers between former competitors is common in the oil industry. But does working with a partner complicate a company's Year 2000 program?

The answer, according to British Petroleum Co. plc and Mobil Corp., who have united their European downstream operations, is: No.

The early stages

BP and Mobil agreed to form a European refining JV in 1996 (OGJ, Mar. 4, 1996, p. 40). The two men now in charge of their respective Year 2000 preparedness programs told OGJ, in a joint interview, that the so-called millennium bug was not a substantive factor in the JV discussions.

"When we were originally going through the joint venture discussions, systems aspects were obviously important," said Stephen Ind, millennium IT project manager for BP. "What they did was to go through the Mobil systems and the BP systems on the ground and discuss which was better on its merits."

More important, said Ind, was that BP was running its downstream business with a recent version of Oracle Corp. software. Mobil's downstream business, on the other hand, was running an earlier version of SAP that was not "millennium-compliant" said Colin Bull, Mobil's regional executive champion for the millennium.

Had it not been for the formation of the JV, Mobil would have had to update its SAP version.

Bull said "I think we both, coincidentally, pursued the strategy of looking for an integrated set of business applicationsellipseI think most companies in the industry are pursuing that strategy.

"Weellipseboth had integrated business systems-Mobil's around SAP and BP's around ISP (BP's own refining and distribution software) and Oracle. They are similar systems strategies but use different platforms."

Meshing Y2K programs

"We started off by effectively treating the entire joint venture as if it were part of the BP project," said Ind, "and then worried about picking up the pieces afterward, because that was the safer route to cover. Therefore, I included in my round of tours anything that took my fancy, because of its size and importance to the joint venture as a whole."

Bull said, "The driving principle, probably in the back of everyone's mind, is that, when the joint venture was set up, IT support and other staff support for the joint venture would come from BP services."

Ind said he had had discussions on the Year 2000 issue with Mobil's office in Fairfax, Va., after the JV was formed, but it wasn't until Bull was appointed to his current position at the beginning of 1998 that the two firms began to formulate and document a joint strategy.

"Our view of the scope and the relative priorities-in terms of how we deal with systems, customers, suppliers, and that kind of thing-are very similar," said Bull. "I think it's fairly easy for Stephen to reassure Mobil management that BP would basically approach the millennium issue the same way that Mobil would. But what we've subsequently done is formalize how that process works."

The companies' relationship differs slightly in the area of lubricants. While Year 2000 staff support for the overall joint venture comes from BP, the lubes side of the JV's business is operated by Mobil, which has made things interesting, says Bull.

"It's made easier by the fact that Mobil and BP are essentially approaching the issue on a similar timeline, with similar management prioritization and near-identical scopes. So there's not really a lot of potential for disagreements to happen," he added.

Cooperation

Ind says the JV has facilitated, rather than hindered, his Year 2000 program: "It's very helpful, because it means that anybody who does take their eye off the ball has got two sets of people down their necks. It's quite constructive in that sense."

Bull sees the situation the same way: "Because of the very open relationship that we have with BP, we are able to sort of test ideas on how we might approach something-be it the strategy we have with customers or suppliers. And we've got very open lines of communication.

"I think we're both learning from each other. I would say it's probably helped us move more quickly, if anything."

"Absolutely," said Ind. "It works in other types of joint ventures in the same way. We have joint-venture refineries, for example, where it's very useful to have that cross-fertilization of ideas. And also it means that, if you have a joint-venture audit team, for example, looking at a facility, you've then got two sets of escalation routines if the auditors come across things they're not content with.

"It means the motivation is there, to some extent, more readily than if it is just one company," Ind added.

"Yeah, I would say it's even more applicable in a situation like this, because none of us have actually worked a project like this one before, whatever we may pretend," said Bull.

"There's a real advantage to cooperating, not only with people that you've formed the joint ventures with, but across the industry generally," he added. "There are other forums that are proving very useful for being sure that we're approaching some of this in the right way."

In addition to the business operations aspect of the Year 2000 problem, it also presents an engineering challenge that has never before been faced, says Ind.

"How to look at process control technology only really grew from early 1997 onwards. We were really making that science up as we went along," he said.

"It made a lot of difference to be able to hold hands across the industry and say, 'Well, we think this. What do you think?'

"And we didn't have time to slow down. So we got a tremendous boost of speed by being able to look over the fence.

"And nobody's really drawn a competitive barrier on that, trying to pretend that there's any kind of edge to be gained from not sharing information. It has been very good. Particularly, with having this joint venture, there has been a very broad level of cooperation.

"I think," said Ind, "having spread the thinking process across so many world-class engineers, and bringing in our suppliers-a lot of whom were suppliers to both Mobil and BP, as well as other oil companies-we've been able to draw in every grain of information very rapidly. That has been necessary and extremely useful."

Progress

Both companies are well into the testing stage of their Year 2000 programs by now (see story, p. 23). And they expect essentially to finish their programs by yearend 1998.

"That's generally the approach that is taken by blue-chip companies in our industry," said Bull.

Ind says BP will finish its business-critical systems by yearend, leaving other, less important items to be handled in 1999.

"On the whole, we'll get there (by yearend)," said Ind, "although there will be one or two pieces hanging over because of things like delivery dates of software."

Bull agreed: "Essentially, we're both aiming to get everything finished that is business critical and to focus our energies in the first half of '99 on contingency planning and getting a good fix on where our suppliers and customers are going to be."

Potential liabilities

Asked if the joint venture posed any complications in terms of legal liability, Bull said, "It's like anything else in life. It depends which lawyer you talk to."

The first thing one does, when approached with an enterprise-wide project like Year 2000, says Bull, is examine one's legal options: "And that doesn't really lend itself to getting the kind of dialogue that you need with critical suppliers that are essential to making yourself as well prepared as you might be.

"Collaboration, opening up the lines of communications, and things like that-I don't think we'd have been able to do that without formal cooperation with joint venture partners.

"There's an awful lot of spurious information out there about what will and won't go wrong," said Bull, "and collaboration, I think, is essential to dividing one's way through that.

"Certainly, the process of trying to collaborate and share information across such bodies as the API (American Petroleum Institute) and Ukooa (U.K. Offshore Operators Assocation) did falter for a little while," said Bull, "while lawyers got concerned about what the industry could meaningfully share (see Part 1 of this series, OGJ, Sept. 28, 1998, p. 29). But I think, generally, there has been a way found through that.

"The industry is characterized by so many cross-ownerships and percentages that it would be very hard to start withholding information. What we're all very careful to do is not to represent anything without very clear information.

"So, by and large," said Bull, "as we try and find out whether a piece of kit is prone to problems or not, our initial route is via the vendor and whatever factory test they've done, whatever testing regime they've been through. And it only makes sense that the industry, in general, should share that information and put it in the public domain.

"I won't say that every vendor has sorted his way through that maze," said Bull. "We've certainly got the odd company that is being very reticent about sharing information. And, in some cases, the information that is in the public domain has been misleading.

"But, certainly as regards Mobil and BP, it's clear that we're in a joint venture, and it's clear that we have to get information from the vendors. And it's clear that we're going to have to go through a thorough program to satisfy regulators and everybody else.

"We've been through that program, and it really shows us that we can't presume to withhold information. What we have to be careful to do is not to be inflammatory when we express our opinions about whether one piece of kit or one business partner is ready."

"At the end of the day," said Bull, "honesty is your best policy in these sort of things. But one must be circumspect about what specific information one puts in the public domain."

Copyright 1998 Oil & Gas Journal. All Rights Reserved.