Oil and Gas Exploration in the Arctic Ocean: The Accounting and Reporting Challenges

Abstract

Oil and Gas exploration and production in the Arctic requires unique
attention because of the special features in the field. Dealing with the exclusive issues in the Arctic, poses some accounting and reporting challenges. In this study, Shell Company exploration activities and reporting were studied. Two methods of accounting for exploration are considered; the Successful Effort method and the Full Cost method. It is however revealed that due to the unique challenges in the region, the accounting method to be adopted will have implication to both shareholders and the other stakeholders. Consequently, shareholders may prefer the use of full cost based on its impact on their earnings, while the regulators prefer the successful effort due to its fairness in reporting.