The Construction And Innovation Of The Chinese Oil Company’s Global Cost Allocation Mechanism

The geographical dispersion of oil and gas exploration and development requires dual lines of management between headquarter and overseas operating companies of multinational oil companies, leading to the necessity of the head quarter centrally providing services to the overseas companies. As such, global cost allocation has become a common practice in the industry among the world-class multinational oil companies, matched with their level of globalization. The cost allocation mechanism of a multinational oil company has various effects and considerations from cost effectiveness, management and business perspectives.Through research about evolution and development trend of corporate management and global cost-allocation management strategies of multinational oil and gas companies, we selected two comparable multinational oil companies and performed comparison and analysis with Chinese Oil Company’s status from the aspects of organizational structure, cost classification and cost-allocation method. On this basis, combining the theories and the practices, we make a demonstration on Chinese Oil Company’s cost-allocation model construction from the views of the fundamentals, the choice of methodologies, the work procedure, the construction of supportive system and etc.Chinese Oil Company’s global cost allocation mechanism should be guided by a global strategic thinking and globalization mindset. The purpose is not only to reinforce the compliance of the operations in both China and overseas, but also to further improve the level of tax and management efficiency of SIPC. Establishing a global cost allocation mechanism, legitimately, effectively and in full compliance, can help to improve our economic efficiency, to enhance our corporate image and to better protect our rights and interests of a non-operator in overseas.Our main innovative point is the adherence to the concept of internationalization mindset and localization from development and implementation during the construction of the cost allocation mechanism. The largest shining point of this project is that to make a workable and tailor-made cost allocation system, instead of working from simple theories in isolation, we paid more attentions to the company’s actual situations, to the foundation of our work, to the establishment of a working procedure and also to the construction of supportive systems.