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TOPIC 4: oil and gas industry - Coggle Diagram
TOPIC 4: oil and gas industry
Nature and activity
high risk involved (the project must be failure or successful in extracting)
Greater time lag (more than 1 year)
long operating cycle (acquire to sell)
High capital expenditure (high cost to build oil platform, specialized equipment and machinery)
Current Acc. standard and regulations
no specific standard
influenced by term stipulated in
production sharing contract (PSC)
- contract between PETRONAS and other companies where the companies will act as a contractors only.
Gas Supply Act, 1993
MFRS 6Exploration and Evaluation Mineral Resources
Petroleum Development Act, 1974
Operation of the industry (5 phase)
Appraisal @ Evaluation phase
Development phase
(construction of production facilities needed)
Exploration phase
Production phase
(Lifting the Oil & gas to surface, gathering, treating, field processing and storage
Acquisition phase
(acquire right to explore the are and collect seismic data)
Main accounting issues
4)
Amortization / depreciation
of capitalized costs
5) Determination of
post-production costs
3) Determining
basis of the center
SE method
Cost center:
smaller than whole firm
FC method*
Cost center:
firm/entity
Expense method
Cost center:
smallest possible (wells)
2) Determination and treatment of the
pre-production costs
Meaning:
- costs incurred in
upstream activities
(acquisition, exploration, evaluation & development) : have very
high degree of uncertainty
(success/failure)
Methods
Expenses method
:
All treated as expenses
when they are incurred regardless of the outcome
Successful effort method
(SE)
Successful
locating new oil and natural gas reserve :
Capitalized
(SoFP)
Unsuccessful:
expenses
(SoP&L)
Full cost method
:
All treated as capitalized
regardless of the outcome
Note
: Only production costs (stage 5) is
expenses
6)
Disclosure
information in Financial Statements
1) Determination of
success / failure
of operation / project
The successful is based on the
well (telaga) that finds oil reserves.
Factors influenece
Product prices and marketability
Timing of production
Acreage (keluasan) and drilling costs
Anticipated success of drilling
Type of costs incurred
Evaluation costs
- evaluate the technical feasibility and commercial viability
Development costs :
- to gain access to proved reserve
cost of drilling and installing equipment
exploration costs
- associated related to identify areas
cost of exploratory drilling
Production costs
- costs of bringing the O&G to surface
Acquisition costs
- include all costs relating to either purchase / lease the right to extract the O&G from a property not owned by the company
the right
the gov. give license