First of all some (SAP and Oil business) basic vocabulary:

**PSC**: Production Sharing Contract. As written in the first part of this blog, this is the contract formalizing the fiscal relationship between oil companies and governments. The agreement specifies the rights and obligations of each party. It also provides the calculation formulas used to compute the shares.

**CALCULATION TYPE**: Allows to identify a specific calculation when validation rules are assigned for the rolling up cost data (from the source – e.g. JVA – to the PSA ledger).

The calculation types are assigned to calculation schemes which are assigned to calculation categories containing formulas (scales, percentage, etc.).

**CALCULATION**** ****CATEGORY**: Production, Profit Oil, Cost Cap, Actual Costs, Government Royalty, Excess Profits, …

**PSA**** ****CALCULATION**** ****SCHEME**: A calculation scheme is defined for a specific currency or unit of measure. It is used by the system to compute different production sharing calculations.

**R-FACTOR (“~ based Cost Oil”)**: R-Factor refers to Ratio of Cumulative Receipts to Cumulative Expenditure

R-Factor = Cumulative Receipts / Cumulative Expenditure

**NOC/FOC**: National Oil Company/Foreign Oil Company

**LEDGERS** (source and destination):

Sender (JVA) | Receiver (PSA) | Reporting |

4A (JVA Standard Ledger) | 4P (PSC Standard Ledger) | 4R |

4C (JVA Additional Standard Ledger) | 4Q (PSC Additional Currencies) | 4S |

Note: the ledgers 4C and 4Q are only needed if more than two local currencies are involved.

The next part of this paper will be focused on the key features of SAP PSA.