El Paso Corporation is the nation’s leading interstate natural gas pipeline system. More than a quarter of the natural gas consumed in the country each day is transported through our 42,000 mile natural gas pipeline system.
El Paso Exploration and Production Company is a leading domestic natural gas producer with a substantial footprint in the emerging shale plays across the United States and international developments in Brazil and Egypt.
El Paso’s Investment Recovery Program Our main commodities for investment recovery within the company are: pipe, valves, fittings and equipment. Although we have centralized management of the IR function (reporting through Supply Chain), we are decentralized with a regional focus in the actual day-to-day practice of the surplus asset management/disposition functions.
In the 7+ years that our Investment Recovery Program has been in place, we have developed integrated policies and processes as well as strategic collaboration with Purchasing and Project Management. Procedures are regularly reviewed and updated as needed.
Surplus Materials Management
Our main approach for utilizing surplus materials is through internal redeployment for commonly used items, as this is the most cost efficient means to recover value. Returns to Vendor focuses on less commonly used items, while pursuing minimization of restocking fees. Outside Sales are employed for long standing surplus and obsolete inventory that is no longer functional for our operations.
Salvage Material & Equipment
Our main avenues for recouping costs for salvage materials are as follows:
Bid Sales: For take up pipe, used/retired equipment which is readily marketable and has an established customer base
Direct Sales: Employed when there is direct buyer inquiry or site visits; requires an existing relationship with the buyer
Online Auctions (via 3rd Party Services): We’ve found this to be a very efficient way of accessing a broad buyer base when a market is not readily apparent.
Scrap Materials Management
To efficiently manage and control the highest recovery of value for scrap materials, El Paso takes the following approach:
- Use of AMM Price Index for appropriate market, less buyer differential as a dollar amount (not %)
- Standard bill of sale used for all scrap deals
- Records management, i.e., timely reconciliation of weigh tickets against sales settlements Key Points/Best Practices
Over the years, we have found the following to be necessary components for success of our IR program:
- Continuous promotion of services to internal customers
- Internal visibility of surplus (through whatever means possible)
- Use of intra/internet capabilities
- Return clauses in alliance contracts
- Continuous improvement of processes
- Environmental/legal—managing the risks & liabilities inherent in IR activities
- Membership in the Investment Recovery Association and attendance at the seminars and trade shows for networking opportunities and education
And in Conclusion: “THE BUCK $TOP$ HERE!”
That statement (which hangs over my desk), encapsulates the primary thrust of Investment Recovery activities—the fruits of which directly impact the bottom line. With solid procedures, continuous improvement of processes and utilization of industry recognized best practices, our IR efforts help to mitigate the impact of surplus/salvage materials that arise from the normal course of business, over-purchasing, project scope changes, design errors and obsolescence.