250406394-sap-pra.pdf 2i1x47

SAP Functions in Detail SAP for Oil & Gas

SAP® PRODUCTION SHARING ING

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CONTENTS INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 SITUATION ANALYSIS AND BUSINESS DRIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 SAP PSA BUSINESS BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 MAJOR DESIGN CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 FUNCTION DESCRIPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 MASTER DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Unit-of-Measure Conversion in a Combined Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 SAP PSA CALCULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Calculation Categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Calculation Types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Calculation Schemes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Sliding Scale Frequencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 DATA TRANSFER FROM AN SAP JVA SOURCE LEDGER TO AN SAP PSA LEDGER . . . 9 SAP PSA Ledgers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Planning Functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 DEFINING RULES FOR PSC COST DERIVATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 PERIOD MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Authorizations for Data Entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 DAILY VOLUME DATA ENTRY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Actual Production for Data Entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Daily Production Data Entry Transactions and Interfaces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 SPECIFYING THE FREQUENCY OF PRODUCTION VOLUME ENTRIES . . . . . . . . . . . . 12 REPORTING FREQUENCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SAP PSA Calculation Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SAP PSA Calculation Processing with Multiple Venture and Equity Groups . . . . . . . . . . . . . . . 13 SAP PSA Calculation Processing with Combined Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Executing Actual Entitlement Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 TRANSFER FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 ENTITLEMENT ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 COST AND STOCK ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ADDITIONAL SAP PSA CALCULATION FEATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SAP PSA REPORTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 INTERPRETING RESULTS OF SAP PSA CALCULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 18 SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3

INTRODUCTION As oil and gas exploration and development continues to expand globally, international oil and gas companies are constantly seeking out new reserves. Many untapped reserves are under government ownership in various countries. In order to explore and develop their reserves, governments enter into production-sharing contracts (PSCs) with international oil and gas companies, allowing them to maintain control and ownership of their resources and ensure a fair return on the production and sale of the products.

• Calculating profit shares and entitlements • Reporting results Royality

Government Take

Contractor Take

To comply with the of the PSC, the contractor must maintain relevant ing information, provide regular reports to the government, pay royalties, and distribute the appropriate share of costs and revenues. SAP® Production Sharing ing (SAP PSA) s these requirements for all parties that work under PCSs. In SAP PSA, the fiscal relationship between a government and a contractor is formalized in a PSC. The contractor operates the project and pays royalties to the government, while the government provides capital reimbursements. Both parties then share the profits. The PSC usually specifies incentives for the contractor, along with an acceptable return for both the contractor and the government. SAP developed SAP PSA in the late 1990s to meet the requirements of upstream oil and gas companies involved in PSCs. It enables the contractor to effectively manage PSCs, plan budgets, and project expected financial results. You can use SAP PSA in conjunction with SAP t Venture ing (SAP JVA). By using these key capabilities together, the cost data (maintained in SAP JVA ing ledgers) can be used as the source cost data in SAP PSA, providing consistent ing. SAP PSA automates the following processes: • Recording and classifying costs • Allocating production to government royalty and contractor costs

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TOTAL PROFIT

Rent

Operating OPEX

Total Production

Total Available for Production Sharing

Development

Entitlement

COST RECOVERY

Exploration CAPEX

Figure 1: Production Sharing Contracts (PSCs)

Figure 1 illustrates the basic fiscal concepts of a typical PSC. The government’s royalty must first be deducted from total production, making the remainder available for production sharing between the government and contractor. However, the contractor can use a portion of this production volume to recover costs, such as capital expenses and operating expenses. The unused volume is available for profit sharing, with the contractor keeping a portion (called the contractor take). The remaining profit belongs to the government.

SITUATION ANALYSIS AND BUSINESS DRIVERS Differences in local government regulations affect the ability and profitability of exploration and development activities. Tighter government regulations mean that contractors must be able to provide accurate and timely reports to government authorities. Furthermore, a contractor must have tools to forecast expected incomes, based on production estimates, prices, and costs. The contractor can then, for example, use this information to determine whether or not a project is worthwhile or to specify optimum production levels. SAP PSA ensures continuity in business processes, by providing best business practices throughout all business processes. It also reduces ing istration, facilitates calculations of financial information, and provides timely and accurate financial and operational data.

SAP PSA BUSINESS BENEFITS SAP PSA delivers the following business benefits: • Eliminates duplicate data entry and keying errors, by automating roll-up of all cost data for all PSCs from SAP JVA • Provides efficient, accurate, and rapid processing of complex calculations for multiple contracts and multiple products within each contract • Eliminates manual tracking of costs for recovery, by automatically carrying costs forward over multiple periods, when necessary • Produces consistent reporting results, by synchronizing all cost and production volume data, regardless of the time it is entered • Promotes efficient summarizing, by reporting aggregate results for all products in a contract • Provides a planning, reporting, and decision-making tool to forecast future costs, revenues, and profits

SAP PSA enables you to do the following: • Gather detailed operational data and convert it into powerful, timely business information • Reduce time and overhead required to manage PSCs • Simplify the business processes required to for PSCs • Make informed decisions through the use of planning tools

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MAJOR DESIGN CONSIDERATIONS Based on industry requirements, the following are key design features of SAP PSA: • Simple, intuitive, consistent, and common interfaces to reduce training time and increase proficiency • Flexibility to customize and personalize screens to suit specific business needs • Maximum automation of business processes and data capture to minimize manual input • Integration with SAP JVA and mySAP Financials to help eliminate redundancy and data integrity issues • Flexible, sophisticated reporting capabilities

FUNCTION DESCRIPTIONS Figure 2 shows the flow of data through the various functions of SAP PSA.

Process

JVA Special Ledgers

Master Data Input

Summary Balances JVT01 Actual Items JVS01

Application Data In-/Output Reports

Plan Items JVP01

Ledger 4A Ledger 4C

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Cumputation Rules

4 Production & Prices (Plan & Actual)

Direct Cost Adjustment

Computation (Plan & Actual)

3 Cost Roll Up (Plan & Actual)

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PSA REPORTING CYCLE

Roll Up Rules

Revenues, Royalties, Entitlement (Plan & Actual)

Reporting

1

Master Data

Figure 2: Functional Process Flow of SAP PSA

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MASTER DATA

SAP PSA CALCULATIONS

Master data records in SAP PSA represent PSCs and the petroleum products specified within a PSC. SAP PSA uses a PSC and product master records by asg cost data to the records within the ledger. The PSC and product are linked through master data maintenance. All cost, volume, and revenue data stored in SAP PSA is assigned to a combination of a PSC and a product. SAP PSA master data maintenance and assignment are handled by functions that the following tasks: • Creating and linking SAP PSA master data • Mapping SAP PSA master data to source system master data

You can enter the production volumes and prices for each unit in SAP PSA at appropriate intervals, ranging from daily to yearly. SAP PSA calculates revenue by multiplying the volume by the price of each unit. It also automatically synchronizes production volume with monthly cost data. Once the cost and production volume data is in place for all PSCs, SAP PSA starts the automatic calculations. It automatically apportions production volumes to cover government royalties and all other cost and profit categories.

Other master data records include terminal codes, ship codes, PSC groups, PSA oil types, and PSA equity groups (as opposed to JVA equity groups). SAP PSA includes a lifting partner group, to which you can assign lifting partners, as required. SAP PSA uses the lifting partner group to facilitate the splitting of lifting partner shares. UNIT-OF-MEASURE CONVERSION IN A COMBINED PRODUCT

To combine calculations for various products within a PSC, you need a unit of measure for hypothetical, combined product records. Because hypothetical or combined product records include multiple products (which can have different units of measure), the production volumes (entered for the multiple products) are automatically converted into the unit of measure assigned for the hypothetical or combined product record. All units of measure involved must be based on the same dimension – either volume or length.

Each PSC requires an SAP PSA calculation. If the recoverable costs exceed the specified cost recovery cap, you can carry over the excess costs to a subsequent ing period. Alternatively, you can transfer the excess costs to another PSC in the same period. However, you can also accumulate excess profits when the recoverable costs are less than the cost recovery cap. This excess profit must be shared by the contracting company and the government. You can also make unscheduled credit transfers between PSCs to reduce excess profit and costs after performing an initial calculation. In addition, SAP PSA generates a comprehensive summary report that fulfills the contracting company’s reporting requirements allocating production volumes to costs according to a PSC. Contractors can use various calculation methods to determine entitlements, profits, costs, gains and losses, and recoveries. CALCULATION CATEGORIES

Each calculation category represents a standard class or group of data that results from a typical production sharing calculation. SAP PSA calculates the amount for the data class (including production, cost, and profit), based on a formula that is part of the calculation category. SAP PSA performs calculations based on the order in which the calculation categories are defined.

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Because some of the calculation categories depend on the results of other calculation categories, it is best to define the calculations in the same order as the corresponding keys (for example, 1 = Production, 2 = Royalties, and so on). Production is calculated even though it is not assigned. CALCULATION TYPES

If a category needs to be subdivided for cost purposes, you can assign calculation types to a category that specifies rules for rolling up cost data from the source system to the SAP PSA ledger. Calculation types also contain percentages that the system applies to the base amount for volume, revenue, or cost. CALCULATION SCHEMES

SAP PSA calculation schemes contain percentages that are used to determine various production sharing calculations. Depending on the type of calculation involved, calculation schemes are based either on production volumes and prices or on costs stored in the SAP PSA ledger. The formulas in the calculation categories involve the following types of functions: • Production volumes and revenues calculates gross revenue by multiplying the volume for the period by the price per unit. • Government royalty calculates a percentage of the results of the production volumes and revenues formula and deducts that percentage from the results. • The cap or limit of the contractor’s recovery of costs calculates a percentage of the production volumes and revenues formula as the maximum cost to be recovered with revenues. • Actual costs selects data from the ledger and applies recovery rates for different types of costs. • Profit including excess profit adds excess profit to regular profit, resulting in one number for profit. The system then splits the profit between the contractor and the government, based on the percentage specified for each. This may apply in certain instances, but it is not always enforced, because excess profit could go to the contractor.

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• Profit excluding excess profit excludes excess profit from profit calculations, if the excess profits (above the actual costs and less than the cost recovery cap) are going entirely to the government. • Excess profit or excess cost carryforward is the gap between the cost cap and the assigned costs. An excess profit results if the costs are lower than the cost cap. If the costs are higher than the cost cap, then the excess cost carryforward function carries forward excess costs to the next ing period. • Other costs determines additional costs outside the normal sequence of calculating profit. This calculation category is not included when calculating gross profit. It can be used, for example, if the government advances a loan to a contractor. • Adjustments or transfers calculates funds that are manually transferred, either from one PSC to another or within the same PSC, between different ventures or equity types. • Net excess profits deducts the amount resulting from the other costs formula and the adjustments or transfers formula, from the amount calculated by the excess profit or excess cost carryforward formula. • Production adjustments allows you to for gains or losses in production. • Gross entitlement provides a summation of calculation categories. The split between the contractor and the government is summed up (rather than calculated as a ratio). • Entitlement adjustments facilitates funds transfers between the contractor and the government, between the government and partners, or between partners identified within the PSC. • Net entitlement provides a summation for each party’s share, to show an adjusted net entitlement line with percentage share.

DATA TRANSFER FROM AN SAP JVA SOURCE LEDGER TO AN SAP PSA LEDGER Details of the formulas are specified within calculation schemes, which define the percentages that the system uses for various calculations. Percentages are specified on a sliding scale basis. You must assign calculation types and schemes for specific combinations of PSCs and products. This assignment links the percentages in the schemes to the formulas within the calculation categories.

When SAP JVA is the source ledger for an SAP PSA ledger, t ventures are assigned to the PSC. You can control data transfer to the SAP PSA ledger by using validation rules that specify the data that the system will roll up for specific combinations of PSCs and products. Beginning with SAP R/3® 4.6B, SAP PSA only works together with SAP JVA. Activating SAP PSA involves activating SAP PSA roll up and creating an SAP PSA document number range.

SLIDING SCALE FREQUENCIES

You can specify percentages for PSC calculation schemes in detail with the calculation scheme transaction. You can also specify a sliding scale (range) of percentages. Each percentage is applied to a production volume or value (threshold), based on the amount of the production volume or value. Sliding scale frequency is independent of volume frequency, so there is complete flexibility of frequencies and units of measure. Also, a revenue-to-cost index factor can be used as a threshold.

SAP PSA LEDGERS

There are two sets of ledgers defined for SAP PSA: cost ledgers 4P and 4Q, and partner ledgers 4R and 4S. Each set can have one or two physical ledgers capable of storing up to four currencies besides the transaction currency. PLANNING FUNCTIONS

To fulfill government requirements, a variety of planning functions are available in SAP PSA. These functions allow you to: • Set up multiple versions of a cost plan • Enter production, pricing, and partner entitlement data in a cost plan • Copy cost plans and actuals as new plan versions • Execute and reverse calculations of planned entitlement as required The first step in a periodic production sharing process involves rolling up recoverable costs. PSC costs are rolled up from SAP JVA to the SAP PSA ledger. The roll up can be done for both actual costs and planned costs, which are originally planned in SAP Controlling and then transferred to SAP JVA. You can selectively roll up costs by using SAP JVA to map PSCs to t ventures and equity types. SAP JVA simultaneously assigns calculation schemes to the costs, based on -defined criteria, such as product type or cost category. You can also differentiate between capital expenses and operating expenses.

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DEFINING RULES FOR PSC COST DERIVATION The rules for PSC cost derivation allow you to derive transactional cost data from the source ledger for roll up to SAP PSA.

JVA Special Ledgers

Roll Up Rules

PSA Roll Up Ledgers

Summary Balances JVT01

PSA Roll Up

Summary Costs JVPSC01T

Actual Items JVS01

Plan Items JVP01

Ledger 4A Ledger 4C

Actual Items JVPSC01A

Ledger 4P Ledger 4Q

Figure 3: PSA Roll Up from SAP t Venture ing

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Plan Costs JVPSC01P

SAP PSA features sets that specify individual entries or ranges of entries to be used as selection criteria in the rules used for SAP PSA. These sets also select cost data for specific types of cost calculation. Also, in addition to or instead of sets, rules can be defined to transfer costs from SAP JVA to SAP PSA. You can assign sets to the rules and create sets for cost data selection in the SAP PSA rules transaction area. Usually, you assign multiple sets (consisting of lists of basic sets) to a rule.

PERIOD MANAGEMENT

DAILY VOLUME DATA ENTRY

The open PSC periods transaction is available to specify the periods of time that should be opened for a particular company code, to allow PSC transactions.

You can enter SAP PSA volumes and populate the volume data record table (T8PSA_INPUT), by using the following transactions: • Actual production data entry • Daily production data entry transactions and interfaces

AUTHORIZATIONS FOR DATA ENTRY

SAP PSA includes authorization features that allow system s to limit s’ access to SAP PSA transactions, according to a particular set of fields, including the company code field. With the use of company code and other relevant fields in setting up SAP PSA authorizations, s from different companies can use the same SAP PSA transactions, but will be allowed to access only to their company’s data within the transactions.

ACTUAL PRODUCTION DATA ENTRY

You can use this transaction to enter volumes and prices directly into the T8PSA_INPUT table. You can also enter adjustments, as required, in this transaction. The SAP PSA calculation retrieves the volumes and prices in the T8PSA_INPUT table. The volumes are stored by: • Company code • Version • Year • Month • PSC • Product • Venture • Equity type • Volume type, including production, production adjustment, take or pay, and free gas DAILY PRODUCTION DATA ENTRY TRANSACTIONS AND INTERFACES

You can enter volumes, prices, and adjustments, by using the following daily data entry transactions: • Maintaining prices defines pricing data. • Maintaining lifting data by PSC captures cargo information classified by property, which is assigned directly to a company code and a PSC. • Maintaining production volumes defines production volumes and any gains or losses attributable to storage or transportation. • Maintaining adjustments defines adjustments to production data and any gains or losses attributable to storage or transportation. • Maintaining pricing by terminal s the entry of pricing for a particular terminal.

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SPECIFYING THE FREQUENCY OF PRODUCTION VOLUME ENTRIES • Maintaining lifting data by terminal captures cargo information classified by a terminal that is either associated with a company code or independent of a company code. • Maintaining weighted average price establishes the frequency with which the system calculates the selling price for a particular company code, PSC, and product combination. • Maintaining weighted average price for arm’s-length sales allows s to maintain a monthly average price for arm’s-length sales. • Arm’s-length/non-arm’s-length definition specifies industries that are physically close to the production (arm’slength) and industries that are further away (non-arm’slength). • COEP% for production interface is used to split the lifting defined by the terminal for all involved PSCs and partners. • Split lifting by PSC is used to update the company code and PSC of lifting data entered for a company codeindependent terminal. After daily data is entered, you use an interface transaction to update monthly data with the daily data that was entered. The interface carries out calculations for volumes, prices, sales splits, and lifting data.

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A frequency specifies how often production volumes must be entered into the system. The following frequencies are available: • Daily average by month • Daily average by quarter • Monthly • Quarterly • Semiannually • Annually The production volume entry function specifies how often production volumes must be entered in SAP PSA. This interval must be equal to or less than the reporting frequency specified for the PSC.

REPORTING FREQUENCY You use the reporting frequency function to specify the frequency of SAP PSA calculations – monthly, quarterly, biannually, or annually. The system can execute the SAP PSA calculation process only for the frequency specified in the PSC master data. If the reporting frequency for the PSC is specified as monthly, then the system can execute the SAP PSA calculation process for any single ing period.

SAP PSA CALCULATION PROCESSING The SAP PSA calculation processing with PSC groups function allows a PSC to stipulate the following: When the costs of a particular PSC that is within a group of PSCs exceed the cost recovery cap, the excessive costs are transferred in the current period to a producing PSC in the same group. Only one PSC in a group of PSCs can be designated as “producing.” In contrast, for PSCs that are not in a group and that have costs that exceed the cost recovery cap, the excessive costs are transferred from the current period to the following period. SAP PSA CALCULATION PROCESSING WITH MULTIPLE VENTURE AND EQUITY GROUPS

In SAP PSA, a PSC can contain multiple venture and equity groups, because multiple venture and equity groups can be assigned to a single PSC in a single period. Depending on the parameters, the calculation is performed either by PSC or by equity group. By default, the calculation and reporting is performed based on equity group level. If you choose to perform the calculation by PSC level, the report is broken down by equity group. However, since all sliding scale definitions are on a PSC level, the calculation uses the threshold based on the PSC level, but applied to the equity group level. Figure 4 shows an example of an SAP PSA calculation for one PSC and one equity group.

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Further, within the same PSC, you can assign single products (that is, products not assigned to a combined product), in addition to combined products (including the assigned products). EXECUTING ACTUAL ENTITLEMENT CALCULATIONS

You use this transaction to execute calculation processing of actual entitlement and to review the resulting SAP PSA entitlement report. This report includes the production volumes, organized by calculation categories, and the corresponding breakout by government and contractor shares.

Figure 4: SAP PSA Calculation by Equity Group and PSC

To process multiple venture and equity groups, the system evaluates volumes or revenues for a PSC while considering the rates that should be applied for certain costs. When multiple venture and equity groups for a PSC are involved in calculation processing, the total volume or revenue for that PSC is adjusted to the volume or revenue for each t venture and equity group. The system uses the adjusted volume or revenue of the PSC to determine the rates to be applied to the adjusted volume for each t venture and equity group involved in processing. SAP PSA CALCULATION PROCESSING WITH COMBINED PRODUCTS

In SAP PSA, combined products aggregate calculation results for all the products assigned to a combined product. You can enter combined products in the system by using the “Create SAP PSA Products” transaction, just as you do for real products. When you assign a combined product to a PSC, the configuration settings of the calculation schemes and types ensure that costs are rolled up to the combined product.

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TRANSFER FUNDS

ENTITLEMENT ADJUSTMENTS

The transfer funds feature in SAP PSA allows you to transfer funds from one PSC to another. It also enables you to transfer between different ventures and equity groups or products within the same PSC, as required. This feature is distinct from the automated roll up of costs from the source ledger. The transfer involves forwarding a credit amount from one PSC to another.

The entitlement adjustment feature in SAP PSA allows you to transfer funds within one PSC from: • Contractor to government • Government to contractor • Partner to government • Partner to partner

You would ordinarily use the transfer funds feature after initial calculations reveal excess profit in one PSC and a cost carryforward condition in another PSC. Further, reversing a transfer is possible if required. Reversing a transfer involves executing two transfer reversals, one for the receiver record and one for the sender transfer record. This reversal must take place before the calculation has been posted.

An entitlement adjustment involves forwarding a credit amount from one participant in the PSC to another. Entitlement adjustments are used to change the regularly calculated split between the contractors (partners) and the government. You can also reverse an entitlement adjustment, if required. Reversing an adjustment involves executing two transfer reversals, one for the receiver record and one for the sender transfer record.

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COST AND STOCK ADJUSTMENTS

ADDITIONAL SAP PSA CALCULATION FEATURES

SAP PSA also features cost adjustment functions that the processing of contractor entitlements, as well as stock adjustment functions that facilitate stock transfers between PSCs and stock swaps across PSCs and a crude stream. Furthermore, stock adjustment functions include restatements of prior-year PSC s and reason codes that identify why an adjustment is made.

In addition to the basic functions required to the minimum reporting requirements of PSCs, SAP PSA offers the following enhanced features that streamline and further automate the reporting process: • Multiple products are possible for each SAP PSA contract. • Multiple source ledger master data objects can be mapped to a single PSC and product combination, with cost roll up, following this mapping. • Aggregate calculation results can be produced for all products in a PSC. • Multiple calculation and reporting frequencies are ed, including reporting monthly, quarterly, semiannually, and annually. • Expenses that exceed the amount of recovery allowed for a period can be automatically carried forward to the next period in the same PSC or can be carried over to another PSC in the same period. • Production that exceeds actual costs for the period, but that falls short of the maximum amount of recovery allowed for the period, can be apportioned in various ways, depending on customization. • Additional line items (other than rolled-up costs) can be accommodated. • Manual transfers of credits between PSCs can be posted directly.

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SAP PSA REPORTING Various SAP PSA reports are available to review the results of PSA processing and to meet your reporting needs, including: • PSA print entitlement report displays the actual entitlement calculation that was previously executed (see Figure 5a). • Document displaying by period displays results, according to the documents that were created and posted. • JV partner entitlement displays the entitlement of each partner that is a contractor for a PSC or a group of PSCs (see Figure 5b). • Statement of storage entitlement displays total stock entitlement for the government and each of the partners, as well as stock adjustments and stock swap or transfer amounts (see Figure 5c). • PSC master data displays an overview of PSC master data. • Production data with adjustments displays an overview of production data with corresponding adjustment amounts. • Lifting data displays lifting data, including products and partners involved, the volume, and the lifting date. • Flat prices report provides details about prices per unit and corresponding periods. • Adjustments provides an overview of adjustments to production volumes. • Partner list report provides an overview of actual or planned quantities or amounts calculated for a particular partner, PSC, and product combination. • Displaying ledger summary displays ledger cost data.

Figures 5a, 5b, and 5c show sample reports you can create in SAP PSA:

Figure 5a: Example of an SAP PSA Entitlement Report for One PSC

Figure 5b: Example of an SAP PSA t Venture Partner Entitlement Report for One PSC, Venture, and Product

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INTERPRETING RESULTS OF SAP PSA CALCULATIONS You can interpret the results of SAP PSA calculations by using the following transactions:

• Production data entry transaction The production data entry transaction allows you to review production volumes and revenues, which are critical for executing SAP PSA calculations. With this transaction, you can review volumes and prices per unit for specific PSC and product combinations for particular ing periods and fiscal years.

• Display ledger summary transaction

Figure 5c: Example of an SAP PSA Storage Entitlement Report for One PSC, by Product Breakdown

A ledger summary (ledger 4P) is available to provide details about cost and cost recovery records in a venture. The ledger summary stores cost data that was rolled up from the source ledger to the SAP PSA ledger. A second ledger summary (ledger 4R) is available to provide details about the figures stored within the calculation process on the calculation type and partner level.

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The display ledger summary transaction allows you to review cost data, which is also critical for executing SAP PSA calculations. With this transaction, you can review the PSC standard ledger, which stores cost data that was rolled up from the source ledger to the SAP PSA ledger. If there is an amount by which actual costs exceed the cost recovery cap for the current period, the ledger reflects a credit for that amount to the PSC and product for the current period. The ledger also reflects a debit for the same amount for the next period, enabling the system to apply that amount against the cap during calculation processing in the next period.

• Data browser transaction After the system executes the SAP PSA calculations, the PSCHD, PSCIT, and PSCCR tables are updated with different aspects of the results. To fully interpret the results of calculation processing, you can review these tables using the standard Data Browser available in the ABAP Workbench Tools.

SUMMARY SAP PSA is a key capability of the SAP for Oil & Gas industry portfolio. By reporting on government royalties, contractor costs and recovery tracking, and profit allocation, SAP PSA delivers a single, integrated solution for upstream companies involved in production sharing. For more information please us at: SAP AG Neurottstrasse 16 69190 Walldorf Mailing address: 69189 Walldorf SAP information service: Tel. +49-180-5343424 Fax +49-180-5343420 http://www.sap.com

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