For First Part you can refer the link: Functional Area Reporting Scenarios in Oil & Gas Industry – Part 1

In this Part, I will throw some light about the business scenario of Day to day LOE from the perspective of Functional Area Reporting.

In Oil & Gas Industry, LOE is a common term or terminology used to mean Lease Operating Expenses. Generally the costs of maintaining and operating property and equipment on a producing oil and gas lease is called Lease Operating Expenses.

 

Generally Operating expenses are deductible in accordance with the taxpayer’s method of accounting.Therefore, it is important to be able to distinguish and categorize the various expenditures that will be encountered in an oil and gas producer’s return.Expenses wise Operating expenses of oil and gas leases will include direct and indirect expenses and depreciation.

 

Now lets look at the points how to achieve this business scenario in SAP:

  • First: Purchase operating supplies for direct consumption at field office or Route via Purchase order – In this case we can Debit to Operating supplies G/L Account based on material group account assignment, and with Field Office Cost Center assigned to purchase order, with offset to GR/IR at time of Goods Receipt.
  • Second: Issue operating supplies to field office from Route or yard – In this case we can Debit to Operating supplies G/L Account based on material group account assignment, and with Field Office Cost Center assigned to Goods Issue with offset to Spare Parts inventory.
  • Third: Month end Accrual of LOE Cost – The accrual of the LOE Cost can be accounted to Accrual Cost Center / and relevant G/L Account and offset to the Balance Sheet Accrual Account. The important point to be noted here is  the unique accrual document type to be used so that it is easily identifiable.
  • We need to run the allocation to the wells.
  • Also the JV Cutback process need to be executed.

In case you are reading this blog and not aware about the JV Cutback process :

A joint venture operating partner carries all operating costs throughout the accounting period. At the end of the accounting period, the operator‘s expenditures are shared by the non-operating partners and the operator, according to their equity shares. This process is called cutback.

Now lets know what are the SAP Modules involved to address the above scenario:

  • Material Management
  • Finance & Controlling
  • Joint Venture


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

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