Accounting principles for prospecting, exploration costs for oil and gas operators in Vietnam

Accounting principles for prospecting, exploration costs for oil and gas operators in Vietnam (Internet image) 

Clause 2, Article 6 of Circular 107/2014/TT-BTC, the accounting principles for prospecting, exploration costs for oil and gas operators in Vietnam are stipulated as follows:

- Prospecting, exploration and resource volume estimate costs are the costs incurred to serve the purpose of prospecting for and evaluating oil and gas potentiality, determining existence of resources and likelihood of commercial extraction of oil and gas within a sedimentary bed, formation, cluster, block or basin, including preparation, geological, geophysical, geochemical and other survey; analysis, research, well drilling and sealing; well testing; well completion; well repair; well abandonment; resource volume estimate plans and other activities.

- Where the oil and gas agreement prescribes the following earnings recorded as decreases in prospecting, exploration and reserve estimate costs, the O&G Operator is entitled to do so (after entirely discharging obligations to the State Bank in accordance with laws and regulations where applicable):

+ Earnings derived from the produced oil and gas which can be used for offsetting gas and oil prospecting, exploration and resource volume estimate costs

+ Earnings derived from insurance or indemnity directly related to prospecting, exploration and reserve estimate activities;

+ Earnings derived from sublease of assets directly related to prospecting, exploration and reserve estimate activities;

+ Earnings derived from liquidation of assets directly related to prospecting, exploration and reserve estimate activities;

+ Other earnings directly related to prospecting, exploration and reserve estimate activities.

- When the validity term of the oil and gas agreement ends, the O&G Operator must keep final accounts of prospecting, exploration and reserve estimate costs and those which have already been recovered. Positive difference between the amount of search, exploration and reserve estimate costs in one side and the amount of costs actually recovered in the other side shall be recorded as a decrease in portions of capital contribution made by contracting parties.

- The O&G Operator shall consolidate and keep track of details of recoverable costs of prospecting, exploration and resource volume estimate and costs which are not recovered under specific terms and conditions of oil and gas agreement. The O&G Operator can divide the Account 246 - Prospecting, exploration and resource volume estimate costs – into secondary or tertiary accounts where appropriate for its managerial requirements.

More details can be found in Circular 107/2014/TT-BTC, which comes into force from January 1, 2015.

Thuy Tram

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