Accounting, disposal and transfer of property values ​​under production sharing agreements

Production sharing agreements usually bypass the topic of accounting for material assets during the extraction of mineral resources.

Investors, by equipping mining sites and wells on the plots, construct material objects that eventually become independent objects of property rights.

Production sharing agreements are concluded for more than a dozen years, and therefore, during the industrial development of the production site, a property pool of investors is formed in the form of stations, blocks, roads, bridges, etc. 

When conserving wells, the objects described above must either be destroyed by investors or transferred to the state, because the share of hydrocarbon raw materials reimbursed by the state has already covered the cost of preparatory construction and engineering works at the site.

The question remains: whose property is it: the investors or the state?

That is why the parties to a production sharing agreement must agree on the procedure for accounting, disposal and transfer of property values ​​to the state as a party to the agreement.

The procedure for accounting, disposal and transfer of property values ​​should include:

- determination by the parties of the production sharing agreement of the balance sheet holder of the property;

- decommissioning plan (liquidation, tamping, cessation of operation, curtailment of work and dismantling, disposal);

- maintenance of fixed assets and intangible assets;

- accounting of capital investments;

- inventory of property and work of the inventory commission.

From the point of view of careful attitude to the moment of transfer and acceptance of property, it is advisable that, starting from the year in which the first distribution of commodity products will be carried out in the measurement point, investors should generate reports on property values.