How to Record Natural Gas Liquids Extraction and Revenue from Individual NGL Products
Recording revenue from ethane, propane, and butane extracted from raw gas at a gas processing plant.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Trade Receivable (NGL Products) | Asset (+) | 2,800,000.00 | - |
| NGL Revenue | Revenue (+) | - | 2,800,000.00 |
💡 Accountant's Note
NGLs are separated at a gas processing plant and sold as individual components. NGL extraction improves gas production economics. Revenue is allocated to each product based on its market price.
Practitioner & Systems Framework
💻 ERP Architecture
NGLs (ethane, propane, butane, pentane/natural gasoline) are extracted at cryogenic gas plants. Revenue should be recorded per product — each has a distinct market (ethane for petrochemicals, propane for LPG heating and cooking, butane for LPG and gasoline blending). Allocate the gas processing costs to each NGL product using the relative sales value method. Compare the NGL extraction economics to the alternative of leaving NGLs in the gas stream (which increases gas calorific value and tariff, but misses NGL premiums).
⚠️ Audit Flags
NGL volumes must be measured at the plant outlet per product — not estimated from inlet gas composition. The allocation of shared processing costs between NGLs and residue gas affects both product margins and royalty/tax calculations. Auditors check that NGL revenue is included in the gross production value for royalty and cost recovery calculations — under-reporting NGL volumes reduces fiscal obligations.
📄 Required Documentation
Gas plant inlet and outlet measurement records, NGL product measurement by component (barrels or tonnes), NGL product quality certificate, sale agreement per product and per buyer, product invoice, processing cost allocation methodology (relative sales value), royalty calculation including NGL products, and PSC NGL treatment documentation.
Automate this entry with the JEH Accounting Suite
Stop doing manual entry. Our VBA-powered ERP automatically generates your ledgers, Trial Balance, and Financial Statements.
No Subscriptions. Own your data.
Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.
Related Journal Entries
Oil & Gas
How to Capitalize the Cost of a 3D Seismic Survey as an Exploration and Evaluation Asset Under IFRS 6
Oil & Gas
How to Capitalize Exploratory Drilling Costs as an E&E Asset Pending Reserve Determination
Oil & Gas