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By definition, Functional Area is an Account assignment characteristic that sorts operating expenses according to functions. Each industry will have its own operating expenses for example: A major Oil & Gas Upstream company might have the functional area in the form of  – Production Expense, Gas Plant, Exploration, Seismic, Dry Hole, Terminals & Rail, Abandonment, Drilling, Corrective Maintenance, Preventive Maintenance, Refurbishment, Pipeline, Marketing etc.

There might be different business scenarios in Oil & Gas Industry that use the Functional Area i.e.

  • Exploration and/or Development of a New Well (Assuming Authorization for Expenditure (AFE) is already approved).

Exploration and/or Development of a New Well (Assuming AFE is already approved): This scenario speaks about how to handle the exploration and
of a new well. Also this scenario is With respect to Authorization for Expenditure it is assumed that WBS is already approved.

Let’s look at what are the activities required to achieve this scenario:

  • Procurement of Well Material
  • Books of Accounts for respective internal and external transactions.
  • Billing to the partners through JV Cutback Process
  • Settlement of Capex to AUC and
  • Settlement of AUC to Final Asset.

What are the Master Data required:

  • WBS, Cost Center
  • Purchase Order
  • Material Master
  • Vendor Master
  • GL Account
  • Cost Element
  • Work Order
  • Employee Master
  • JOA
  • Joint Venture etc.

What are the Transaction Data required:

  • GR/IR
  • Non PO Invoice Posting
  • Labor Cost charged to WBS Element based on
    Time Entry
  • Accrual of Capital Cost to WBS Element
  • Joint Interest Billing Cut-Back process
  • WBS Settlement

What are the SAP Modules involved

  • Material Management
  • Finance & Controlling
  • Joint Venture Accounting
  • Project System

In case you want to refer other business scenarios for the Functional Area in Oil & Gas Industry, you can refer them by navigating the following links:

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  1. Cecil D'Souza

    Would you be kind enough to create a link to Part 2 of this blog so that one can know that it had many parts to read through. Similarly for Part 2 leading into part 3 and so forth. Thank you for sharing your knowledge.


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