Upstream Petroleum Contracts, Accounting, Auditing Policies and Procedures

Objectives

• Gain a full understanding of the different types of the Upstream Petroleum Contracts
• Understand the main contractual terms and their differences between the various types of contracts from PSA, Service contracts and others
• Be aware of the approaches to negotiation of these contracts
• Incorporate the best terms into these Upstream Petroleum Contracts
• Develop an understanding of the accounting and auditing standards, policies and practices used by Upstream Petroleum companies
• Improve relevance and reliability of financial reports to better meet the needs of users
• Review and use publicly available information for benchmarking the business performance
• Understand the role and function of an Internal Audit Department
• Understand audit risk and efficiently plan, control and record an audit assignment

Outline

 Introduction and Overview of Upstream Petroleum Contracts
• Brief overview of the O&G industry
• Oil and gas terminology
• The legal framework to Upstream Contracts
• Introduction to contract formation
• Key oil and gas terminology
• Oil and gas industry structure
• Relationship between different players in the oil and gas industry
• Phases of the oil and gas industry
• Oil and gas contract fundamentals and legal principles
• Territorial water, continental shelf and United Nations Convention on the Law of the Sea (UNCLOS)

 Contracting in the Upstream Sector: Ownership and Licensing
 Ownership and exploitation of reserves
• The ABCs of Petroleum Contracts: License-Concession Agreements, Joint Ventures, and Production-sharing Agreements
• Characteristics of upstream contracts
• Commercial realities of the oil and gas business
• Agreement with resource holders
• Ownership of oil and gas
• Risk Service Contracts (RSCs)
• Grant of rights by resource holder

 Host country’s legal and regulatory framework and fiscal regime; stabilization
• Role of host government
• Key Issues in international oil and gas contracts
• Negotiation framework and strategy; objectives of host countries/NOCs and IOCs

 Host Government’s Role in Upstream (Exploration & Production (E&P)) Agreements
• Overview of upstream operations and E&P agreements (types and trends by region)
• Key differences between Production Sharing Contracts (PSCs), concessions, service contracts and JV contracts
• Role of Host Government in Upstream Contracts

 Production sharing contracts (PSC) & Joint Operating Agreements (JOA)
• Different approaches and levels of complexity
• New PSC’s in key jurisdictions
• The role of calculation
• Understanding the formulas
• The non-fiscal legal and contractual terms
• Contractual terms and conditions
• Royalties and taxes

 Commercial terms in licensing and concession agreements
• Fiscal arrangements, license fees
• Four key financial aspects to a PSC:
• Royalty, The R factor
• Cost oil
• Profit oil
• Taxation
• Bonuses, Penalties
• PSC – Cash Flow Distribution
• PSC – CF Distribution Example – Year N+1
• Comparison of Fiscal Systems

 Joint Operating Agreements (JOAs)
• What is a Joint Operating Agreement (JOA)?
• Nature, aim and functions of a joint venture
• Government approval
• Key areas of the JOA
• Purpose and scope: participating interests

 Service Contracts, Farm-In and Farm-Out and Unitization – Risk bearing and Non- Risk Bearing Service contracts
• Service Contracts
• Risk Service Contracts
• Different model forms – sources
• Risk allocation and insurance
• Master service contracts

 Participation Agreements (Farm-in and Farm-out)
• Agreements for farm-ins and farm-outs
• Nature of the farm-out
• Subject matter of the farm-out
• Interest assigned and reserved
• Assignment of interest

 Unitization and Unit Operating Agreements (UUOAs)
• What is unitization?
• Unitization in practice
• Government approval
• Transboundary unitization

 Negotiating Production Sharing Contracts
• Government take
• Production share and cost recovery
• Local content
• Force majeure
• Dispute resolution
• Stabilization and renegotiation provisions

 Upstream Petroleum Accounting & Auditing Policies and Procedures
 Major Accounting & Auditing Issues in the Upstream Petroleum Sector
• The latest Accounting & Auditing Issues facing the sector
• The impact of commodity prices, currency & interest rate fluctuations and political and environmental developments.
• The impact of financial and accounting issues on Strategic Development and Growth within the sector
• The Annual Reports & Financial Statements of leading international Petroleum companies
• An Overview of IFRS in relation to Upstream Oil & Gas Accounting
• The Role of Auditing

 Accounting for Revenue & Costs in the Upstream Petroleum Sector
• Revenue Recognition & IFRS 15: Revenue from Contracts with Customers
• Costs in Acquisition, Exploration, Development and Production
• IFRS 6: Exploration for and Evaluation of Mineral Assets
• Accounting Approaches – The “Successful Efforts” (SE) Method or the “Full Cost” (FC) Method
• Break Even Oil, Cost Oil & Profit Oil
• Evaluating Profitability of leading international Oil & Gas companies

 Accounting for Assets in the Upstream Petroleum Sector
• Reserves & Resources
• IAS 16: Property, Plant and Equipment
• Depletion, Depreciation & Amortisation (“DD&A”)
• IAS 36: Impairment of Assets
• IAS 37 – 39 : Provisions, Contingent Liabilities and Contingent Assets; Intangible Assets and Financial Instruments
• Evaluating the Assets & Reserves of leading international Petroleum companies

 Creative Accounting, Corporate Governance & Auditing
• Creative Accounting
• Corporate Governance
• Published Financial Statements
• The Role of the Board & Audit Committee
• External Auditing – reporting to investors in the Oil & Gas industry
• Internal Auditing – Defining and Developing the Internal Audit Process

 The Internal Audit Function
• Establishing the Roles & Staff within the Internal Audit Dept.
• The Various Types of Audits
• Planning & Commencing Internal Audit Examinations
• Controls & Substantive Tests
• Communicating Audit Findings
• The Audit Exit Conference Meeting & Post-Audit Reviews

Who Should Attend ?

Senior contract negotiators and managers
Legal managers, legal counsel
Commercial and business managers
Contracts administrators, and managers
Commercial, financial and insurance professionals
Project and General Management personnel
Corporate Accountants, Financial Controllers, Treasury Officers, Management Accountants
Finance Staff in General Accounting, Payables, Receivables, Inventory, Fixed Assets, etc.