Lifting Partner Groups for PSC Allocation
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Solution Overview
Problem
In the context of production sharing contracts, existing methods fail to efficiently allocate profits, costs, and entitlements among entities involved in joint ventures and production sharing agreements, particularly when products are commingled and sold, leading to complexities in accounting and pricing across different entities.
Innovation Solution
The use of Lifting Partner Groups (LPGs) and Crude Oil Entitlement Percentages (COEPs) allows for the allocation of lifted product volumes and costs to specific Production Sharing Contracts (PSCs) and entities without requiring specific identification of each entity for each terminal lift, enabling accurate accounting, tracking of arm's length and non-arm's length sales, and adjustment of sales prices.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Adaptability or versatility
If products from multiple PSCs are commingled in shared storage facilities, then storage efficiency and operational flexibility are improved, but accurate tracking and allocation of product volumes to specific PSCs becomes complex and difficult
Solution Approach 1:
The patent introduces Lifting Partner Groups (LPGs) as intermediary structures that mediate between the commingled storage system and the allocation requirements. LPGs aggregate entities with identical or proportional entitlements, creating a manageable intermediate layer that simplifies tracking while maintaining the benefits of commingled storage. The system uses LPG identifiers and entitlement percentages as mediators to allocate volumes without requiring direct tracking of each individual entity's specific product.
2Measurement precision
If detailed identification of each entity for every terminal lift is required, then allocation accuracy is improved, but system complexity and operational burden increase significantly
Solution Approach 1:
The patent merges multiple entities with identical or proportional entitlements into single Lifting Partner Groups. Instead of tracking each entity separately, the system combines them into LPGs that are allocated together using a unified entitlement percentage. This merging reduces the number of separate tracking requirements while maintaining allocation accuracy, as all members of an LPG receive proportional shares based on their combined entitlement.
Solution Approach 2:
The LPG structure serves multiple functions simultaneously: it identifies which entities are involved in a lift, determines their proportional entitlements, calculates allocation percentages, and tracks volumes all through a single unified mechanism. The LPG acts as a universal accounting unit that handles complex multi-entity allocation scenarios without requiring separate tracking mechanisms for each entity.
3Adaptability or versatility
If production sharing contracts have varying terms and allocation percentages, then contractual flexibility is improved, but standardization of accounting processes and comparability across contracts deteriorates
Solution Approach 1:
The patent segments the allocation process into standardized components that can be universally applied across different PSCs. By using LPGs with standardized entitlement percentage calculations and allocation formulas, the system creates modular accounting processes that can be consistently applied regardless of specific contract terms. The segmentation allows different contracts to maintain their flexibility while using the same standardized accounting framework.
Data Source
AI summary
An embodiment of the invention regards allocating lifted product volumes to specific entities of a Production Sharing Contract (PSC) through the use of Lifting Partner Groups (LPG) and an Entitlement Percentage (EP), which is itself calculated, consistent with the terms of the PSC. Through this system, specific PSC members no longer need to be identified for each specific terminal lift to allocate the lift back to the PSC entity. Rather, the EP is used in conjunction with the Lifting Product Groups to split up the portion of each lift attributable to each entity for actual accounting purposes, and further to determine the average sales price(s) to be used in calculating total production revenue.