Oil and Gas Industry Upstream Solution – Joint Venture Accounting

V.Muthukumaran GPU Oil & Gas APJ SAP Consulting

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SAP AG 2007

SAP for Oil & Gas Upstream
In the capital-intensive Upstream Oil and Gas Industry, operators need the tools which enable them to make informed decisions in the effective management of their operations. SAP for Oil & Gas offers a comprehensive solution to meet these demanding challenges, providing a premier enterprise solution that has been enhanced and refined for upstream businesses. The SAP for Oil & Gas Upstream solution components are specifically designed to meet the demanding needs of upstream businesses, providing integrated processes and tools so you can manage your business better.

SAP AG 2007

Upstream Solution Portfolio Upstream Midstream Refining Primary Distribution Secondary Distribution Service Station & Convenience Retailing xApp Integrated E&P Joint Venture Accounting Production & Revenue Accounting Production Sharing Accounting Remote Logistics Management SAP AG 2007 .

SAP AG 2007 .Why SAP JVA? SAP JVA is the only SAP solution that allows you to track venture expenditures on a venture by venture and partner by partner basis. SAP JVA is fully integrated with: Financial Accounting (SAP FI) Controlling (SAP CO) Asset Management (SAP AM) Materials Management (SAP MM) Production Planning (SAP PP) Plant Maintenance (SAP PM) Project System (SAP PS) allowing you to capture all joint venture transactions by using standard SAP functions. The result is a streamlined workflow and reductions in errors.

SAP JVA ensures accurate calculations and reporting of venture activities on a venture-by-venture basis. and expense. SAP AG 2007 . and billing. reducing audit headcount. SAP JVA supports joint audit data exchange (JADE) reports.Why SAP JVA? Using proven SAP FI-Special Ledger functionality as its basis. SAP JVA ensures full compliance with all standard overhead methods and calculations (US and international). overhead analysis. all authorization for expenditures (AFEs) tied to JOA's. cutback. time. online and in real time. SAP JVA provides complete drill down capabilities for reporting all ventures.

based on the Joint Operating Agreement Allocations of billable and non-billable costs Multi-currency processing Farm-in/farm-out and equity changes Real-time gross/net venture reporting SAP AG 2007 .SAP JVA Features and Benefits Detailed joint venture data capture in real time Cash calls to/from partners Partner billing for venture expenses and revenues Overhead calculation.

JVA Business Objects: Venture Venture A EQTYPE 1 Engineering Design A EQTYPE 2 Construction EQTYPE 3 Production 2002 33 1/3 B C 33 1/333 1/3 33 1/3 EG1 A 50 % B 25% D 25 % A 50 % C 25 % B 25% Ventures associate Equity Types and Equity Groups to define a specific joint operation or purpose 2003 EG2 EG4 A A 25 % D 25 % C 25 % B 25% A 75 % C 25% 2004 EG3 33 1/3 B C 33 1/3 33 1/3 EG5 EG6 SAP AG 2007 .

EG5 EG6 Venture A EQTYPE 2 EQTYPE 3 Production Construction Project A 33 1/3 B C 33 1/333 1/3 33 1/3 EG1 Valid A 50 % D B 25% A 50 % B 25% 3 C 25 % 25 % EG2 A A 75 % C 25% EG4 A 33 1/3 B C 33 1/ 33 1/3 A 25 % D 25 % C 25 % B 25% EG3 EG5 EG6 SAP AG 2007 .Joint Venture Integration with Cost Objects Venture A EQTYPE 1 EQTYPE 2 Construction EQTYPE 3 Production New Processing Plant Design Cost centre A 33 1/3 B C 33 1/333 1/3 33 1/3 EG1 Valid A 50 % D B 25% 25 % A 33 1/3 B 50 % 25% 3 D 25 % EG2 A A 75 % C 25% C EG4 A B 33 1/3 33 1/ D 25 % C 25 % A 25 % B 25% Construction Project EQTYPE 1 Engineering Design EG3 .

Joint Venture Integration with Cost Objects Cost Center Internal Order Asset Venture 1 Plant 2 Project Prod Order PM Order SAP AG 2007 .

Joint Venture Coding for Cost Object Cost Object Cost Object Project Cost centre Internal Order Joint Venture Equity Type Recovery Indicator JV Object Type Plant Maintenance Order Production Order Network Order JIB/JIBE Class JIB/JIBE Subclass A SAP AG 2007 .

Recovery Indicator Identifies category of a joint venture transaction Indicates whether a particular revenue or expense is shared by venture partners Used to select data for reporting to venture partners Used to distinguish between joint and own revenues and expenditures Recovery indicator assignment & determination: FI User Entry Document Type G/L Account & Cost Element Cost Object Default (Corporate) SAP AG 2007 CO MM .

00 17.00 60.47.70.Joint Venture Integration and Interface Joint Venture Document Joint Venture Document FI CO PS HR AM MM SD PM Itm Account Cost Obj.00 40.00 40.50 JV Interface Special Ledger Interface FI DATA GLT0 JV DATA JVT01 BILLING JVT02 CUSTOM DATABASE SAP AG 2007 .50 7.00 Accounting Interface PP Accounting Document Itm Account Cost Obj.50 . Venture EqG RI 1 1 2 3 4 4 Vendor Vendor Cost 1 Cost 2 Tax Tax CC-1 CC-2 CC-1 CC-2 CC-1 CC-2 JVI001 JVI002 JVI001 JVI002 JVI001 JVI002 A01 A01 A01 A01 A01 A01 BI BI BI BI BI BI Amount .50 60. Amount 1 2 3 4 Vendor Cost 1 Cost 2 Tax CC-1 CC-2 -117.00 10.

Joint Venture Asset Posting .Example JVA derives venture coding for an asset using the cost centre entered on the asset master record Vendor Invoice Asset Master JV Document Asset Document SAP AG 2007 .

Joint Venture Material Posting . Goods Receipt MM Assignments Material Document JV Document Accounting Doc JV Document SAP AG 2007 .Example JVA derives venture coding for material movements from a special stock cost object that is assigned to a plant and a valuation type (which is optional) associated with the plant.

Example The expenses are assigned to the JV partners via the cost centre assigned to the expense line items Post Vendor Invoice Cost Centre Assignment JV Document Accounting Doc SAP AG 2007 .Joint Venture Vendor Invoice Posting .

Periodic Processes Foreign Currency Valuation Cost Transfers Cost Allocation & Settlement Overhead Calculations (PCO) Equity Adjustments Cutback Joint Venture Close Partner Netting Final Settlement Corporate Close Billing SAP AG 2007 .

350 0 20 30 100 200 Cost Object B Materials Internal Labour External Labour Staff Salaries Rent & Rates Light & Heating Vehicles Repairs & Servicing Travelling Hotels Entertaining Telecoms Mail & Carriage 40% 40% Assessment A Total 140 140 Total 140 Total SAP AG 2007 .Assessments & Distributions Cost allocations are based on R/3 CO functions with JVA required enhancements. including: Substitution of the recovery indicator (recovery indicator manipulation) Allocation of secondary costs Re-run of settlement Distribution (through original cost element) Internal CO only Unallocated Costs Allocation (via secondary cost element) Internal CO only Cost Object B Materials Internal Labour External Labour Staff Salaries Rent & Rates Light & Heating Vehicles Repairs & Servicing Travelling Hotels Entertaining Telecoms Mail & Carriage 8 12 40 80 Cost Object A Materials Internal Labour External Labour Staff Salaries Rent & Rates Light & Heating Vehicles Repairs & Servicing Travelling Hotels Entertaining Telecoms Mail & Carriage Assessment A .

Equity Changes & Adjustments Farm-In / Farm-Out A partner joins or leaves a venture Redetermination Partner shares are adjusted to reflect changes in business conditions. such as reserves Funding Currency Change A funding currency is added or removed from a venture Current and prior period equity adjustments handled SAP AG 2007 .

Venture EqG RI Amount 1 O'Head Admin C00001 A01 NB .00 O'Head O'Head CC-1 CC-1 JVI001 JVI001 A01 A01 BI BS 50.00 CC-1 50.12. Amount Admin .50.00 JVA Project Suspense Joint Venture Document Joint Venture Document Itm Account Cost Obj.00 Posting Fiscal Year Period Posting Date 2002 12 31. Venture EqG RI Amount 1 O'Head Admin C00001 A01 NB .00 2 O'Head CC-1 JVI001 A01 BI 50.50.50.Suspense Processing Suspense functionality supported for: Partner Suspense Equity Group Suspense Project/WBS Element Suspense Specific costs are not charged to a venture but instead posted to suspense accounts for the duration (year & period) a project remains in suspense Set project in suspense Project Suspense Selection Company Code Venture GBU1 JV0001 to JV9999 Post Costs Accounting Document Accounting Document Itm Account 1 O'head 2 O'head Cost Obj.00 0 Options Test run SAP AG 2007 .2002 2 3 Joint Venture Document Joint Venture Document Itm Account Cost Obj.

Overheads International – Parent company overhead US/Canada – Well related allocations Cost Stepped Rate Rule GBP 140 000 GBP 250 000 Overhead 1% GBP 2 800 2% GBP 10 000 GBP 10 000 GBP 0 5% GBP 500 SAP AG 2007 .

Venture A Cutback ET1 Company Code 50 % Partner B EG2 25 % Partner D 25 % Net Operating Exp / Rev 50 AR / AP Partner B 25 AR / AP Partner D 25 SAP AG 2007 .Cutback Processing Gross Operating Exp / Rev 100 Cost Object RI = Bill Venture A The cutback process allocates JV partners' expenses or revenues according to their working interest ownership.

00 Lcurr Amt 46.Cash Calls Cash Call Partner C Partner A 100 600 Accounts Rec.Cash Call Processing Equivalent to down payments or pre payments Can be issued for future months (Reclassification) Request and cash receipts carried forward to billing process Integrated with Accounts Receivable and Accounts Payable Cash Call Request: Gross to venture/project Net to venture/project/partner Partner Shares FI Document Venture JV0001 EqG A01 FCurr NOK Partner JVGBU1 JV5001 JV5101 FCurr Amt 600..74 23...37 7.Cash Calls Partner B 300 SAP AG 2007 .79 Accounts Rec.Cash Calls Accounts Rec.00 100.00 300.

Suppl Detail Invoice JV Summary Ledger Cutback JV Billing Ledger … JV Integration Mgr.Joint Venture Billing Payroll Vendor Invoices Internal Allocations Accounts Receivable JV Integration Mgr. JV Integration Mgr. Suppl Expenditure Detail Inv. … Orders Costs JV Billing creates various customized billing documents to send to your JV partners Billing Statement Exp. Cash Calls Paid Cash Calls Partner Payments Cutback Invoice Partner Adjustments SAP AG 2007 .

as defined in configuring SAP JVA and SAP FI SAP AG 2007 .Inter-Company Ventures Affiliated Inter-Company Setup FI Document Cutback CO To Affiliate: INVOICE Cutback creates A/P entries to operator on the books of the affiliated partner as configured in SAP JVA and SAP FI Intercompany Processing FI A/P Cash Call Cash Calls Gross cash calls create A/P entries on the books of the affiliated partner.

Suppl Detail Invoice Ledger 4B and 4D JVA Billing Balances Ledger 4A and 4C JVA Balances SAP AG 2007 . Suppl Expenditure Detail Inv.JV Partner Auditing Standard JVA Reports: Gross billable/all by venture/account Gross billable/all by cost object Gross billable/partner net by cost object Gross billable/all by cost object foreign currency Gross billable/partner net for JIB Remaining cutback by cost object Posted suspense overview Gross non-operated by cost object Venture/equity group/billing indicator Partner/billing indicator Billing Reconciliation Extract: Reconciliation Statement Exp.

cost object.Non-Operating Ventures Online transaction for incoming invoices for non-operated ventures Input forms. defined in JVA configuration. asset) Incoming cash calls are handled with the cash call functions Non-operated venture processing is fully integrated with SAP accounts payable functions Invoice Da Tra ta En nsa try ctio n R/3 Accounts Payable Nonoperating net share Cash Call all h C ction s Ca nsa Tra SAP AG 2007 . control the layout of the input screens Input form includes the SAP coding block information (account.

central disbursement account Funding currency defined for each venture Bank reconciliation and switching Exchange differences for each venture SAP AG 2007 .Cash and Banking Main Features Balanced books by venture Venture specific bank accounts v.

flexible master data and customizing Full integration with SAP core processes provides: highly automated JVA processing ease of use for users full document drill-down & tracking.shortening the cash flow cycle faster month end closing and financial reporting at lower cost SAP AG 2007 . with realtime information on any partner or venture Flexibility to handle business changes – retroactive equity change handling.SAP JVA Business Benefits Provides an accurate accounting and reporting tool. historical data and audit trail End-to-end integrated business process coverage ensures: streamlined cash call and joint interest billing processes greater efficiency in billing partners.

SAP JVA Business Benefits And the bottom line result is: increased customer/partner satisfaction with fewer incorrect billings lower administration costs – time savings with greater automation timeliness of information – faster period end reporting. greater ability to meet reporting deadlines auditability – SAP standards for storage and retrieval of historical data with full tracking of documents SAP AG 2007 .

Thank You SAP AG 2007 .

Where previously it could take two days to produce a monthly statement of accounts. this means considerable cost savings for Statoil. Statoil has been a publicly listed company since 2001. Obviously. The company plays a leading role on the Norwegian continental shelf. “Our routines are undoubtedly more efficient and the accuracy of our accounting has increased since we started using SAP Joint Venture Accounting (JVA). it now takes half that time and the data is of a much higher quality. Norway Statoil saves time and money with SAP’s Joint Venture Accounting www. and is one of the world’s largest net sellers of crude oil. Statoil has a presence in 28 countries.” Kjell-Petter Gilje Statoil ASA SAP AG 2007 . and has substantial international operations.Success Story: Statoil. totalling 150 licences. As either producer or operator it is involved in 20 oil and gas fields.statoil.com SAP for Oil & Gas Statoil ASA is one of the world’s largest offshore oil and gas companies.

Some of our JVA Customers SAP AG 2007 .