Cost oil audit

Niger has a long history of petroleum exploration dating back to the 1970's. In 2011, the petroleum industry of Niger was officially recognized with the opening of the country's first refinery in Zinder. Since 2012, exploration has intensified with production-sharing contracts signed with international firms. The Government of the Republic of Niger mandated Mazars to perform a cost oil audit in order to verify compliance with the Petroleum Code of the Republic of Niger, the Joint Operating Agreement and the Production Sharing Agreements defined with one of its private operator.


Within the framework of their production-sharing agreement, the Government of Niger has granted a private company exclusive oil exploration and exploitation licenses.

The contract was based on the following general principles:

  • The government, either directly or via its national company, remains the unique owner of mining shares and rights and consequently of the production. The private oil company can only operate as provider within the framework of a specific contract.
  • The government or its national company, using technical skills or financial resources from the private oil company, remains the owner of a substantial proportion of the production. In this case, the private operator will be reimbursed for the expenses incurred, and will also receive a portion of production as compensation, in addition to its share of the profit, as stipulated in the Joint Operating Agreement.

Within the upstream sector, the accounting function and the monitoring of expenditures are usually managed by the private oil company. The government retains the rights to verify all cost oil accounting, either via performing audit itself or via the appointment of an independent audit firm in accordance with the Production Sharing Agreement.


To perform this assignment, Mazars’ team developed a specific methodology in accordance with international standards related to cost oil auditing, Oil & Gas legislation, relevant tax legislation and regulations.

Our intervention was based on the following eight steps:

  • Scope analysis: contracts analysis, operator’s IT system analysis, prior audit reports review, cost oil statements review, preliminary analytical review, etc.
  • Assessment of IT system and procedures: accounting framework and operating manual review, audit of preparation procedures, approval and monitoring of budget, IT review, contracts management procedures review, invoicing system review, stock management system review, etc.
  • Analysis and validation of Cost oil and Profit Oil : audit of analytical procedures, general and analytical accounting reconciliation, implementation of validation test, audit of development and exploration drilling cost, audit of oil production and transportation system, audit of profit oil split calculation, etc.
  • Ensuring the correct application of tax and petroleum legislation
  • Benchmarking Cost oil practices: gap analysis with other practices used in Senegal, Chad and Mauritania
  • Monitoring specific points raised during previous audits
  • Producing reports and deliverables 
  • Setting an action plan for the national oil company and accompaniment for the monitoring and the implementation of recommendations.


Thanks to this engagement, the Government of Niger now has a deeper understanding of their current Cost oil practices as defined within its private operator.

By combining an international and multidisciplinary team of experts with a deep knowledge of the Oil & Gas industry, our client also has greater visibility on their current Cost Oil practices by having them benchmarked against practices from other countries.

This engagement has specifically helped the Government of Niger to:

  • Among the Cost Oil declared by the operator, identify the potential non-recoverable expenses under the Production Sharing Agreement;
  • Define a formalised framework to monitor the petroleum operations of each license granted to the operator;
  • Identify weaknesses which require improvement relating to petroleum legislation, particularly the Petroleum Code and Production Sharing Agreements signed with operators.

Further to this assignment, our client, the Ministry of Energy and Oil in Niger, expressed their great satisfaction regarding the work performed.

The Mazars team was mandated to conduct further cost oil audit assignments.