Oil And Gas Accounting: Practice, Challenges And Solutions In Nigeria (A Case Study Of Shell Nigeria Plc)

Project and Seminar Material for Accountancy / Accounting

Oil And Gas Accounting: Practice, Challenges And Solutions In Nigeria (A Case Study Of Shell Nigeria Plc)


Abstract


This study examines the impact of oil and gas accounting and reporting on the organisation and to the Nigerian accounting practice using Shell Development Petroleum Company as a case study. The study was conducted using the Chi-square. The elements were selected by means of random and stratified sampling technique. Data were gathered from primary and secondary sources. Data collected were presented using tables and analyzed using the Chi-square analysis. It was found from the study that Oil and gas accounting practice in Nigeria is standardized in line with International Financial Reporting Standard; the challenges facing oil and gas accounting in Nigeria is low while the prospect of oil and gas accounting is high

The study recommended that the International Financial Reporting Standard be adopted by countries that are yet to standardized their oil and gas accounting information. It also recommended that oil and gas accounting software be developed in line with the IFRS requirements and standards to ease the complexities involved in the nature of oil and gas accounting.


Table of Contents


Preliminary Page(s)

  • Title Page
  • Approval Page
  • Declaration
  • Dedication
  • Acknowledgement
  • Abstract
  • Table of Contents
  • List of Tables

Chapter One:

Introduction

  • 1.0 Introduction
  • 1.1 Background of the Study
  • 1.2 Statement of Problem
  • 1.3 Objectives of Study
  • 1.4 Research Questions
  • 1.5 Research Hypothesis
  • 1.6 Significance of the Study
  • 1.7 Scope of the Study
  • 1.8 Definition of Terms

Chapter Two:

Literature Review

  • 2.0 Introduction
  • 2.1 Theoretical Framework
  • 2.2 Conceptual Framework
  • 2.3 Empirical Framework
  • 2.4 Challenges of Oil and Gas Accounting Practice in Nigeria and Solutions
  • 2.5 Concept of Best Practices in Accounting
  • 2.6 Shell Petroleum Development Company, SPDC: An Overview
  • References

Chapter Three:

Methodology

  • 3.0 Introduction
  • 3.1 Area of Study
  • 3.2 Research Design
  • 3.3 Population of Study
  • 3.4 Sample Procedure and Sampling Size
  • 3.5 Research Instrument
  • 3.6 Method of Data Collection
  • 3.7 Method of Data Analysis
  • 3.8 Validation of Instrument

Chapter Four:

Data Presentation and Analysis

  • 4.1 Data Presentation and Analysis
  • 4.2 Test of Hypotheses
  • 4.3 Discussion of Findings

Chapter Five:

Summary, Conclusion and Recommendations

  • 5.1 Summary of Findings
  • 5.2 Conclusion
  • 5.3 Recommendations
  • References

Chapter One


1.0 Introduction

Accounting regulatory bodies usually formulate industry specific standards when an industry has peculiar characteristic of accounting for banks and non-bank financial institutions. The oil and gas industry is one of such industries that have specific accounting standards. This can be attributed to its peculiarity in terms of high capital requirement, earning volatility, regulation, type of business ownership, taxation, non-correlation between the amount of investment made and returns obtained (Wright and Hallun et al, 2008) and high sensitive to risk price risk and foreign exchange risk.

Up and 2012 when the International Financial Reporting Standard (IFRS) was adopted by exploration companies in Nigeria, Nigerian companies in the upstream sector prepared their financial statement in line with the statement accounting standard 14 (accounting in the petroleum industry; upstream activities and SAS 17 (accounting in the petroleum industry) formulated by the Nigerian Accounting Standard Board.

By its adoption of IFRS, Nigeria joined over 100 countries who either use or have adopted t he accounting guidelines as stipulated by the International Accounting Standard Board (IASB). This will ensure harmony and easy comparison of financial statements. This is particularly useful in the oil and gas industry considering that it is one of the most global industries. The adoption of a common accounting framework also widens access to investment opportunities.

IFRS 6 applies to expenditure incurred by an entity in connection with the search for mineral resources. The standard divides upstream activities into two groups namely: exploration and evaluation activities and development activities. The standard under paragraph 9 discusses exploration and evaluation activities. Examples of expenditure that can be categorized as exploration and evaluation according to paragraph 9 are acquisition of right to explore, topographical, geological, geochemical and geophysical studies, exploratory drilling, trenching, sampling cost, costs incurred in trying to evaluate the technical feasibility and commercial violability of extracting resources. These cost are capitalized and classified as tangible or intangible (IFRS 2011). Developing activities involves developing the results from extractive activities. This usually requires huge amount and paragraph 10 of (IFRS) 6 states that these expenditures should be categorized as intangible assets and treated as per the guideline provided in IAS 38 (intangible assets).

Accounting for the upstream sector is quite controversial and companies may choose from either the successful efforts method or full cost method.

Successful effort is a method of accounting for petroleum exploration and development expenditures that permits capitalization of expenditures only a successful projects while expenditures in unsuccessful wells are expensed. A drilling effort is classified as successful if it results in the extraction of economically recoverable oil and gas and classified as unsuccessful if it results I a dry hole.

On the other hand, the full cost method allows for the capitalization and amortization of all exploration and development expenditures i.e. both successful and unsuccessful efforts.

The main difference between the two accounting method is that only cost in proven wells are capitalized in the successful effort method while every cost is capitalized under the full cost method.

The research, therefore, seeks to investigate the nature of oil and gas accounting practice, its challenges and solutions excerpts Ejiroghene E. (2013) Accounting for oil and gas Reserve; implication for investors.


1.1 Background Of The Study

The oil and gas industry is one of such industries that have specific accounting standards. This is as a result of its peculiarity in-terms of high capital requirement, earnings violability, regulation, type of business ownership, taxation, non-correlation between the account of investment made and returns obtained (Wright and Gullen et al, 2008) and high sensitivity to risk like price risk and foreign exchange risk etc. Therefore, when the international Financial Reporting Standards (IFRS) was adopted by exploration companies in Nigeria, it became imperatives for oil and gas companies in the sector to prepare financial statements in line with the statement of accounting standards.

Upstream oil and gas organizations must meticulously record, track, distribute and report sales of oil and gas and other products. Accurate and timely oil and gas revenues accounting require tracking complex contracts and owner lease agreements. It must also reflect joint venture and capital expenditure accounts among others.

The nature of the complexity of the oil and gas operations makes the nature of its accounting reporting even more complex by new challenges such as horizontal drilling etc.

The research, therefore, intends to explore the nature of oil and gas accounting in Nigeria, challenges and solutions.


1.2 Statement Of The Problem

The complex nature of the operations of the upstream oil and gas industry makes the oil and gas accounting more complex in nature. However, the International Financial Reporting Standards (IFRS) requires that oil and gas companies in the upstream sector prepare their financial statement in-line with the statement of accounting standards 14 (accounting in the petroleum industry; upstream activities) and SAS 17 (accounting in petroleum) formulated by the Nigerian Accounting Standard Board.

This is as a result of the guidelines stipulated by the International Accounting Standard Board (IASB

However, oil and gas accounting is made increasingly difficult by new challenges and risks such as horizontal drilling, price risk, foreign exchange risk etc.

Therefore, this research seeks to investigate oil and gas accounting in Nigeria, practice, challenges and solution.


1.3 Research Questions

  1. What is the nature of oil and gas accounting?
  2. What constitute the challenges of oil and gas accounting?
  3. What possible solution are necessary in oil and gas accounting?
  4. What is the nature of oil and gas accounting in Nigeria?

1.4 Objective Of The Study

  1. To determine the nature of oil and gas accounting
  2. To determine the discharges and solutions in oil and gas accounting
  3. To determine the nature of oil and gas accounting in Nigeria.

1.5 Significance Of The Study

  1. It shall provide a detail analysis of the nature of oil and gas accounting as a framework for further studies.
  2. It shall provide a framework to evaluate the challenges in oil and gas accounting and proper solution.
  3. It shall serve a reference part of information for accounting professionals etc.
  4. It shall elucidate the nature of oil and gas practice in Nigeria.

1.6 Statement Of Hypothesis

  1. H0 oil and gas accounting practice is not standardized in Nigeria
    H1 oil and gas accounting practice is standardized in Nigeria
  2. H0 Challenges in oil and gas accounting in Nigeria is high
    H1 Challenges in oil and gas accounting in Nigeria is low
  3. H0 The prospect of oil and gas accounting in Nigeria is low
    H1 The prospect of oil and gas accounting in Nigeria is high

1.7 Scope Of The Study

The scope of the study is centered on the oil and gas accounting practice in Nigeria, its challenges and solutions IN Shell Nigeria Plc


1.8 Definition Of Terms

Accounting:

Accounting is the systematic and comprehensive recording of financial transactions pertaining to a business, and it also refers to the process of summarizing, analyzing and reporting these transactions to relevant regulating agencies and tax collection entities.

Oil and Gas:

Oil and natural gas are naturally occurring chemicals that are made up of just two elements — carbon and hydrogen.

Accounting Practice:

This is the system of procedures and controls that an accounting department uses to create and record business transactions. Accounting practice should ideally be extremely consistent, since there are a large number of business transactions that must be dealt with in exactly the same manner in order to produce consistently reliable financial statements.

IFRS:

International Financial Reporting Standards (IFRS) are a set of accounting standards developed by the International Accounting Standards Board (IASB) that is becoming the global standard for the preparation of public company financial statements.

IASB:

The International Accounting Standards Board (IASB) is an independent, private-sector body that develops and approves International Financial Reporting Standards (IFRSs). The IASB operates under the oversight of the IFRS Foundation.

SAS:

SAS (Statistical Analysis System) is a software suite developed by SAS Institute for advanced analytics, multivariate analyses, business intelligence, data management, and predictive analytics. SAS was developed at North Carolina State University from 1966 until 1976, when SAS Institute was incorporated.


Oil And Gas Accounting: Practice, Challenges And Solutions In Nigeria (A Case Study Of Shell Nigeria Plc)


Project Material Download

3,000 Naira


The complete material will be sent to you in just 2 steps.

Quick & Simple…


Step One Purchase

Make payment of ₦3,000: through USSD Transfer, Bank Mobile App, ATM Transfer, or POS Transfer to:

Access Bank PlcAccount No.: 0811003731
Name: Samphina Academy
Account Type: Current

Or Click Here to pay with Debit Card

FOR CLIENTS OUTSIDE NIGERIA:
Click Here to pay with Debit Card ($15)
GHANA – Make Payment of 60 GHS to MTN MoMo, 0553978005, Douglas Osabutey 

  PAY WITH CRYPTOCURRENCY


Step Two Purchase

Send the following details through Text Message or WhatsApp Messenger | +234-8143831497

  • Payment Details 
  • Email Address 
  • Oil And Gas Accounting: Practice, Challenges And Solutions In Nigeria (A Case Study Of Shell Nigeria Plc)

The complete material will be sent to your email address after receiving your payment information | T & C Apply


  Contact Our Help Desk


You may also like:

⚠️ Need a different topic? Perform a quick search



Get A Complete Business Plan For Any Business In Nigeria

Business Plan for Businesses in Nigeria

  Business Plans in Nigeria


Disclaimer


This research material “Oil And Gas Accounting: Practice, Challenges And Solutions In Nigeria (A Case Study Of Shell Nigeria Plc)” is for research purposes and should be used as a guide in developing your research project / seminar work. For no reason should you copy word for word (verbatim) as samphina.com.ng will not be liable for any who copied the material.

The aim of providing this material is to reduce the stress of moving from one school library to another all in the name of searching for research materials. This service is legal because, all institutions permit their students to read previous projects, books, articles or papers while developing their own works. According to Austin Kleon “All creative work builds on what came before”.

samphina.com.ng is only providing this material “Oil And Gas Accounting: Practice, Challenges And Solutions In Nigeria (A Case Study Of Shell Nigeria Plc)” as a reference for your research. The paper should be used as a guide or framework for your own paper. The contents of this paper should be able to help you in generating new ideas and thoughts for your own research. Use it as a guidance purpose only.

Samphina Academy

Samphina Academy is an Online Educational Resource Center that is aimed at providing students with quality information and materials to aid them in succeeding in their academic pursuit.