IMPACT OF OIL AND GAS ACCOUNTING ON ACCOUNTING PRACTICE IN NIGERIA: (A STUDY OF SHELL NIGERIA PLC)
ABSTRACT The research project uses Shell Development Petroleum Company as a case study to investigate the effects of oil and gas accounting and reporting on the organisation's and Nigerian accounting practices. We conducted the study using the Chi-square method. Random and stratified sampling methods helped determine the elements. We sought out primary and secondary sources of data. We examined the collected data using the Chi-square technique and presented the results in tables. The study revealed that Nigerian oil and gas accounting practices follow the International Financial Reporting Standard. Hence, the issues confronting oil and gas accounting in Nigeria are minimal, while the possibility of oil and gas accounting is great. The report advised that countries that are still standardising their oil and gas accounting data should embrace the International Financial Reporting Standard (IFRS). To help simplify the complexity of oil and gas accounting, it is also advised that oil and gas accounting software be built in conformity with the IFRS criteria and standards.
TABLE OF CONTENTS Title Page Approval Page …………………….. I Declaration…………………………… II Dedication………………………………… III Acknowledgement…………………… IV Abstract………………………………… V Table of Contents ……………………VI List of Tables…………………………… IX
CHAPTER ONE: INTRODUCTION 1.0 Introduction ……………………… 1 1.1 Background of the Study………………… 1 1.2 Statement of Problem …………….. 3 1.3 Objectives of Study……………………… 3 1.4 Research Questions ……………………… 4 1.5 Research Hypothesis…………………… 4 1.6 Significance of the Study……………… 5 1.7 Scope of the Study…………………6 1.8 Definition of Terms………………… 6
CHAPTER TWO: LITERATURE REVIEW 2.0 Introduction……………….…………………… 7 2.1 Theoretical Framework…………………… 10 2.2 Conceptual Framework ………………… 14 2.3 Empirical Framework……………… 21 2.4 Challenges of Oil and Gas Accounting Practice in Nigeria and Solutions… 41 2.5 Concept of Best Practices in Accounting // ……………… 42 2.6 Shell Petroleum Development Company, SPDC: An Overview ................. 45 References ………………… 49
CHAPTER THREE: METHODOLOGY 3.0 Introduction……………………………………… 54 3.1 Area of Study ………………………. 54 3.2 Research Design………………………………… 5 4 3.3 The population of Study ………………… 54 3.4 Sample Procedure and Sampling Size ………… .55 3.5 Research Instrument …………………………… 55 3.6 Method of Data Collection ………………………. 55 3.7 Method of Data Analysis ………………………. 55 3.8 Validation of Instrument ………………………56 CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS 4.1 Data Presentation and Analysis ……………..…… 57 4.2 Test of Hypotheses …………………………. 59 4.3 Discussion of Findings …………………… 64 CHAPTER FIVE: SUMMARY, CONCLUSION, AND RECOMMENDATIONS 5.1 Summary of Findings………………. 68 5.2 Conclusion……………………………. 68 5.3 Recommendations…………………… 68 References …….……………… 70
CHAPTER ONE 1. INTRODUCTION Usually, when a sector has the unique feature of accounting for banks and non-bank financial firms, accounting regulatory agencies create industry-specific standards. Among such sectors with particular accounting guidelines is the oil and gas sector. Its unique characteristics, such as needing a lot of money, fluctuating earnings, different types of ownership, tax issues, the mismatch between investments and returns, and high sensitivity to risks like price and foreign exchange risks, help explain this. Prior to 2012, when exploration companies in Nigeria adopted the International Financial Reporting Standard (IFRS), upstream Nigerian companies prepared their financial statements in line with Statement of Accounting Standard 14 (Accounting in the Petroleum Industry; upstream activities) and SAS 17 (Accounting in the Petroleum Industry), developed by the Nigerian Accounting Standards Board.
By adopting IFRS, Nigeria became one of over 100 nations that either use or have adopted the accounting rules established by the International Accounting Standards Board (IASB), thereby ensuring consistency and ease of comparison in financial statements—a crucial aspect for the global oil and gas sector (Kolawole et al., 2025).
1.1 BACKGROUND OF THE STUDY One of such sectors with accounting rules is the oil and gas sector. Its unique features include needing a lot of money to operate, unpredictable earnings, strict regulations, different types of ownership, taxes, a mismatch between how much is invested and the returns received, and a high Consequently, it became important for oil and gas firms in Nigeria to create financial statements in conformity with the statement of accounting standards when exploration businesses there embraced the International Financial Reporting Standards (IFRs). Upstream oil and gas companies must carefully document, track, distribute, and document sales of oil and gas as well as other products. Accurate and timely accounting for oil and gas revenue requires careful tracking of complex contracts and lease agreements, including joint ventures and capital expenditure accounts. New issues such as horizontal drilling, variable pricing mechanisms, and long-term contracts (Gridlex, 2024; EY, 2020), combined with the inherent complexity of oil and gas operations, make accounting and reporting even more challenging. Thus, the study aims to investigate the nature of oil and gas accounting in Nigeria, its difficulties, and their remedies.
1.2 STATEMENT OF THE PROBLEM Oil and gas accounting is more complicated because of the complex character of operations in the upstream sector. While providing flexibility, IFRS demands that oil and gas businesses in the upstream industry publish their financial statements in compliance with IFRS 6, which has been attacked for discrepancies, including different applications of capitalisation methods (Kolawole et al., 2025). New challenges and risks such as horizontal drilling, changes in commodity prices, foreign exchange risk, losses from price drops, and cleanup responsibilities all make oil and gas accounting more difficult. Studies on needed accounting rules in this sector have not been sufficiently comprehensive and rigorous.
This research aims to clarify oil and gas accounting policies in Nigeria, grasp their operation, and ascertain the degree of standardisation that matches the sector with global criteria.
1.3 OBJECTIVES OF THE STUDY
The study seeks the following objectives:
1. To determine if oil and gas accounting is standardised in Nigeria
2. To examine the challenges of oil and gas accounting in Nigeria and proffer solutions
3. To evaluate the prospects of oil and gas accounting in Nigeria.
1.4 RESEARCH QUESTIONS
We formulated the following research questions: 1.
1. Is oil-and-gas accounting standardised in Nigeria?
2. Are there challenges in oil and gas accounting in Nigeria?
3. Does Nigeria offer opportunities for oil and gas accounting?
1.5 RESEARCH HYPOTHESIS
Research questions and problems typically generate hypotheses, which serve as tentative solutions to research questions. Therefore, the researcher will test the following hypotheses:
H1: Oil and gas accounting practice is standardised in Nigeria.
H2: There are no challenges in oil and gas accounting in Nigeria.
H3: Oil and gas accounting has huge prospects in Nigeria
1.6 SIGNIFICANCE OF THE STUDY
1. It will help oil and gas companies understand the relevant accounting standards required to comply with the Nigerian reporting environment.
2. it will help relevant agencies know what is expected from oil and gas companies in terms of accounting reporting.
3. It shall serve as reference material for accounting professionals and practitioners seeking more knowledge.
4. It shall serve as a basis for further study.
1.7 SCOPE OF THE STUDY
The study seeks to evaluate the impact of oil and gas accounting practice in Nigeria and Shell. Nigeria was used as the case study for this research.
1.8 DEFINITION OF TERMS
Accounting: Accounting is the systematic and comprehensive recording of financial transactions pertaining to a business; it also refers to the process of summarising, analysing, and reporting these transactions to relevant regulatory agencies and tax collection entities. Oil and Gas: Consisting solely of carbon and hydrogen, oil and natural gas are naturally occurring chemicals. Accounting Practice: This is the system of procedures and controls that an accounting department uses to create and record business transactions. Accounting practice should ideally be extremely consistent, since there are a large number of business transactions that must be dealt with in the same manner to produce consistently reliable financial statements. IFRS: International Financial Reporting Standards (IFRS) are a set of accounting standards developed by the International Accounting Standards Board (IASB) that is becoming the global standard for the preparation of public company financial statements. IASB: The International Accounting Standards Board (IASB) is an independent, private-sector body that develops and approves International Financial Reporting Standards (IFRSs). The IASB operates under the oversight of the IFRS Foundation. SAS: SAS (Statistical Analysis System) is a software suite developed by SAS Institute for advanced analytics, multivariate analyses, business intelligence, data management, and predictive analytics. SAS was developed at North Carolina State University from 1966 until 1976, when SAS Institute was incorporated.
References (APA 7th) EY. (2020, April 17). Recent declines in oil and gas prices have prompted accounting considerations. EY. https//www.ey.com/en_gl/technical/ifrs-technical-resources/accounting-considerations-related-to-recent-declines-in-oil-and-gas-prices Gridlex. (2024). IFRS 15 and the oil and gas industry: Revenue recognition implications. Gridlex Finance. https//www.gridlex.com/a/ifrs-15-and-the-oil-and-gas-ind-oil-and-gas-industry-st6293/ Kolawole, J. S., Alabi, A. W., & Awotomilusi, N. S. (2025). The value relevance of oil and gas firms in Nigeria is influenced by IFRS 6. Journal of Management World, 2025(2), 78–91. https//doi.org/10.53935/jomw.v2024i4.870
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