Downstream refining — mini-refineries, condensate splitters, lubricant blenders and full integrated refining-petrochemical complexes — combines manufacturing accounting with commodity accounting. Few finance teams are comfortable with both.
A refinery is a giant arbitrage on the molecule. The accounting must measure that arbitrage accurately — from crude-cost allocation across co-products to hedge accounting on crack-spread derivatives.
A refinery converts one barrel of crude into a slate of products — LPG, naphtha, gasoline, jet, gasoil, fuel oil, bitumen — with very different prices and margins. Allocating the joint cost of crude across co-products under IAS 2 using relative sales value or physical-quantity methods is a policy choice that materially changes which products look profitable.
The crack-spread economics — the difference between the value of refined products and the cost of crude — moves daily and is often hedged using futures and swaps. Under IFRS 9, derivatives must be marked-to-market through P&L unless designated as hedging instruments with documented effectiveness. Most operators fail to do this properly.
Capital expenditure on units, catalysts, turnaround maintenance and major shutdowns requires careful componentisation under IAS 16. Turnaround costs are typically capitalised as a separate component and amortised to the next turnaround — but many operators expense everything to P&L, distorting earnings in turnaround years.
Environmental and decommissioning provisions for tankage and process units under IAS 37 are routinely under-estimated. This understates liabilities and overstates net assets — a problem that surfaces at the worst possible time, typically during a sale process or refinancing.
A refinery is a giant arbitrage on the molecule. Map My Books ensures the accounting measures that arbitrage accurately — from yield-based cost allocation and crack-spread hedge documentation to turnaround componentisation and environmental provisions.
Five accounting bottlenecks that distort performance measurement in UAE and GCC refining businesses.
A refinery converts one barrel of crude into a slate of products with very different prices and margins. Allocating joint cost across co-products under IAS 2 is a policy choice that materially changes which products look profitable. FIFO or weighted-average must be applied consistently — LIFO is not permitted under IFRS.
Crack-spread derivatives must be marked-to-market through P&L under IFRS 9 unless designated as hedging instruments with documented effectiveness. Most operators have the economic hedges in place but lack the accounting designation, creating P&L volatility that obscures operating performance and frustrates lenders.
Capital expenditure on turnaround maintenance and major shutdowns requires careful componentisation under IAS 16. Turnaround costs capitalised with a useful life to the next turnaround smooth earnings correctly; turnaround costs expensed to P&L in the turnaround year create dramatic and misleading earnings swings.
Catalyst replacement is typically capitalised with a useful life equal to the catalyst cycle. Many operators expense catalyst cost to P&L on replacement, understating assets and overstating expenses in catalyst-change years — distorting the cost structure and producing misleading unit-margin analysis.
Environmental and decommissioning provisions for tankage and process units are routinely under-estimated, particularly for older facilities. This understates liabilities, overstates net assets, and produces a balance-sheet surprise at the worst possible time — during a sale process, refinancing or regulatory review.
A complete accounting, tax and advisory function built around the way refineries businesses actually work.
We implement a refinery cost-accounting model that runs a yield-based allocation from crude through processing units to finished products, integrates with the production planning system, and produces unit-level gross margin regularly. Catalyst, turnaround and major-overhaul costs are componentised with documented useful lives.
We design VAT for petroleum products, structure Corporate Tax to leverage free-zone qualifying income for exports, apply excise tax where relevant, and file customs and duty refunds correctly. Transfer pricing for crude-supply and product-offtake inter-company agreements is documented to FTA standards.
We document the joint-cost allocation policy, hedge-accounting designations with effectiveness testing, decommissioning provisions with sensitivity analyses, and capex componentisation — producing IFRS-compliant financials that survive Big Four review.
We give the operator a refinery margin dashboard against published benchmarks (Singapore complex, Med complex), turnaround budgeting and post-turnaround variance analysis, working-capital optimisation, and scenario modelling on crude-product spreads.
Tell us about your business — the size of your contract book, your current challenges, what keeps the finance team up at night — and we'll come back to you within one working day.
Our refineries accounting specialists are ready to review your situation and show you exactly where your books can be improved.
Get a Free Consultation