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International Accounting Financial Standards Of The Oil And Gas Industry

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Introduction
The upstream sector of the oil and gas industry is majorly capital intensive and characterised by numerous uncertainties likely to affect exploration and exploitation of natural resources. The complexity of projects, stringent regulatory framework and operating circumstances contribute to its functionality and outcomes. Host countries have the benefit of negotiating the arrangement in which multinationals firms will operate.
Formation of a Joint Operating Agreement (JOA) between an International Oil Company (IOC) and the host governments by way of National Oil Companies (NOC) drafts a contract for interested parties to sign. It is through such an agreement that co-operations explore, develop and produce oil and gas
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Finally, the third part will raise arguments about the roles played by IFRS 6 guidelines in upstream sector accounting and reporting.
Operating Arrangement by IOC’s
Prior to exploring and exploiting hydrocarbons, multinationals and host governments engage in contractual agreements to ensure process is facilitated smoothly. All relevant information are captured in the agreement such as length and parties to the agreement, party’s interest, the works scope, control cost and liabilities, transfer interest, allocation of hydrocarbon, accounting procedures just to mention a few. According to Al-Attar A. and Alomair O. (2005), the upstream petroleum arrangements have undergone three evolutions namely the concessionary agreements (CAs), economic nationalism and the current participation agreements (PAs)
At first, global vertically integrated companies “seven sisters” held concessions in several countries especially in low cost E &P areas (Al-Attar A. and Alomair O. 2005). The PAs were majorly controlled by IOC’s due to oil-rich nation’s naivety about resources in the less developed countries and extraction skills. Due to their biasness; politics and the continued acceptance of oil and gas, countries holding the reserves re-negotiated and sort options to CA (Waqas M. 2014).
The improvements led to the economic nationalism contract which saw NOC’s come into the industry with new agreements. With inability to negotiate concession terms by host nations,
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