4th National Data Repository Meeting

1

• 4th National Data Repository Meeting
• NPD, Stavanger 5. 7. March 2002
• Resource Accounts, National and International
  standardization

by Sigurd Heiberg (Statoil), Per Blystad (NPD)
and Erik Søndenå (NPD)
2

• Petroleum reserves and resources classification
  are used for different purposes

• Government
• Manage the countrys petroleum resources
• Industry
• Manage exploration and production processes
• Financial management
• Compare investment opportunities

3

• SPE, WPC and AAPG

4
SPE/WPC/AAPG Resource Classification
5
The New NPD/FUN Resource Classification
Reference www.npd.no, www.fun-oil.org
6

• Probabilistic methods

• produce more accurate deterministic estimates.
• permit quantified assessment of uncertainty for
  aggregated quantities
• facilitate quantification of the value of
  opportunities and risks.

7
Proved reserves of the Security and Exchange
Commission of the USA
8
Unifying the Russian and International
Classifications
9
UN-ECE, Committee on Sustainable Energy

• Decided to establish formally an Ad Hoc Group on
  the Harmonization of Energy Reserves/Resources
  terms, to apply the Codification System of the
  UNFC with the existing commodities definitions
• Proposes that the Ad Hoc Group should include
  equally experts from petroleum, coal and uranium
  communities and institutions.
• The Organisation of Petroleum Exporting Countries
  (OPEC), World Petroleum Congress (WPC), World
  Energy Council (WEC), Nuclear Energy Agency
  (OECD/NEA), International Atomic Energy Agency
  (IAEA), Council of Mining and Metallurgical
  Institutions (CMMI) and World Energy Council
  (WEC) have been invited as members of the Ad Hoc
  Group.
• Plan to organise the first Workshop in UN-ECE in
  Geneva in June 2002

10
(No Transcript)
11
Conclusions and possible future developments

• Probabilistic forecasting better reflects our
  understanding and therefore facilitates better
  management.
• Needs for resource management/business management
  and financial management are likely to require
  different classifications also in the future.
• Differences may be reduced by
• Reporting mean values of reserves as a basis for
  change explanations.
• Reporting proved reserves as a supplement.
• Using forward prices for forecasts instead of
  historical prices.
• The internationalisation of finance requires
  international standards.
• Classifications must evolve in a continuous way
  and not change abruptly. Conversion matrices may
  facilitate transitions.

12
Maintaining International Standards

• SPE/WPC/AAPG are monitoring needs and maintaining
  the definitions.
• UN Economic Commission for Europe are developing
  standards for the extractive industries using the
  results of SPE/WPC/AAPG.
• The International Accounting Standards Board
  (IASB) are considering the development of
  international accounting standards for the
  extractive industries, making strong reference to
  the results of SPE/WPC/AAPG.
• SECs new chairman has expressed awareness of the
  need to maintain up to date securities and
  exchange regulations in the USA.

13
Backup
14
Classification System

• Categories can be-
• Technical - proved / probable / possible
• Business driven by project maturity
• Business driven by time to production
• Majority use proved / probable / possible
• Few link classification to business process
• Few identified categories for Improved recovery
  reserve growth
• Some reluctant to change due to US tax rules
• NPD unique as authority being business driven

15
Project status categories allow improved
consistency
16
Use of NPDs classification system

• Resource account for the Norwegian Continental
  Shelf
• Resources in separate fields and discoveries
• Resources in sub areas
• Basis for statistics, analyses and prognoses
• Basis for planning of activities, e.g. new
  concession rounds
• Basis for estimation of future production
  profiles

17
History of NPDs classification system

• 1965 - 1991 Simple tables to More advanced
  spreadsheets
• 6 resource classes
• Only Reserves used (even for undiscovered
  prospects), later (1984) distinguished between
  Reserves and Resources, Discovered and
  Undiscovered.
• Defines Maturity of petroleum resources
• Few fields, easy overview/control
• 1991-1994 Introduces probabilistic data of
  resources
• 6 resource classes, including improved recovery
• Register Minimum (P95), Expected and Maximum
  (P05)
• 1994-1997 Further development..
• 7 resource classes, including fields that are
  closed down and discoveries that are
  relinquished.
• The maturity of the resources with respect to
  production are focused
• 2001 New classification system based on
  SPE/WPC/AAPG.

18
EP forecasts gt It is the sales volumes that
count

• Fuel and flare

Royalty in kind
Other agreements that affect the volumes
Reservoir
Production share
Sales point
Proved Reserves to be
booked
19

• Proved reserves are

• Evaluated at a fixed reference price and
  operating condition Today's
• Reasonably certain
• Mature

20

• Booking of reserves (SEC) - certainty

Proved Reserves are the estimated quantities of
crude oil, natural gas, and natural gas liquids
which geological and engineering data demonstrate
with reasonable certainty to be recoverable in
future years from known reservoirs under existing
operating conditions. i. Reservoirs are
considered proved if economic producibility is
supported by either actual production or
conclusive formation test. The area of a
reservoir considered proved includes (A) that
portion delineated by drilling and defined by
gas-oil and/or oil-water contacts, if any and
(B) the immediately adjoining portions not yet
drilled, but which can be reasonably judged as
economically productive on the basis of available
geological and engineering data. In the absence
of information on fluid contacts, the lowest
known structural occurrence of hydrocarbons
controls the lower proved limit of the
reservoir. ii. In certain instances, Proved
Reserves may be assigned to reservoirs on the
basis of a combination of electrical and other
type logs and core analysis which indicate the
reservoirs are analogous to similar reservoirs
in the same field which are producing or have
demonstrated the ability to produce on a
formation test. iii. Reserves which can be
produced economically through application of
improved recovery techniques (such as fluid
injection) are included in the "proved"
classification when successful testing by a
pilot project, or the operation of an installed
recovery programme in the reservoir, provides
support for the engineering analysis on which the
project or programme was based. In a few
limited circumstances, such as in the case of
certain fields in the North Sea, the Office of
Engineering of SEC will review estimates of
Proved Reserves attributable to fluid
injection, in light of the strength of the
evidence presented by the registrant in support
of a contention that enhanced recovery will be
achieved.
21

• Booking of reserves - certainty cont'd

• Proved Developed Reserves. Proved developed oil
  and gas reserves are reserves that can be
  recovered through existing wells with existing
  equipment and operating methods.

22

• Booking of reserves - certainty cont'd

• Proved Undeveloped Reserves. Proved undeveloped
  oil and gas reserves that are expected to be
  recovered from new wells on undrilled acreage, or
  from existing wells where a relatively major
  expenditure is required for recompletion.
  Reserves on undrilled acreage shall be limited to
  those drilling units offsetting productive units
  that are reasonably certain of production when
  drilled. Proved reserves for other undrilled
  units can be claimed only where it can be
  demonstrated with certainty that there is
  continuity of production from the existing
  productive formation.

23

• Entitlement to book reserves

• Reserves conveyed free of cost are booked by the
  receiver and not by the party giving the reserves
  away.
• Bartered reserves
• Royalty
• Carried interest
• Volumes handled under negotiated fiscal regimes
• Reserves produced under negotiated fiscal regimes
  are booked when
• STATOIL holds exclusive rights to produce
• Production is at STATOIL's cost and risk
  including oil market exposure
• Remuneration is in terms of a price pr. volume
  delivered

24

• Technical and administrative requirements

• Reserve reference point Sales point
• Inter field transfers If paid for it is a sales
  transaction to inventory, if not it is a
  conveyance of mineral rights.

25
Business processes require consistency between
financial and petroleum resource accounting

• Financial accounting
• Exploration cost
• Development costs
• Amortisation/Depreciation costs

• Petroleum resource accounting
• Contingent resources/reserves
• Proved/Proved developed reserves
• Proved developed reserves

26
United Nations International Framework
Classification for Reserves/Resources

• United Nations Economic Commission for Europe
  (UN/ECE) has upon intiative from the German
  Government established a system for
  classification of Solid Fuels and Mineral
  Commodities (UN Framework Classification)
• This system allows national classification terms
  to be maintained and at the same time make them
  comparable.
• The UN Framework Classification may also be used
  for energy commodities (petroleum, coal and
  uranium) when reporting to the World Energy
  Council.

27
UN-ECE, Committee on Sustainable Energy

• Decided to establish formally an Ad Hoc Group on
  the Harmonization of Energy Reserves/Resources
  terms, to apply the Codification System of the
  UNFC with the existing commodities definitions
• Proposes that the Ad Hoc Group should include
  equally experts from petroleum, coal and uranium
  communities and institutions.
• The Organisation of Petroleum Exporting Countries
  (OPEC), World Petroleum Congress (WPC), World
  Energy Council (WEC), Nuclear Energy Agency
  (OECD/NEA), International Atomic Energy Agency
  (IAEA), Council of Mining and Metallurgical
  Institutions (CMMI) and World Energy Council
  (WEC) have been invited as members of the Ad Hoc
  Group.
• Plan to organise the first Workshop in UN-ECE in
  Geneva in June 2002

28
(No Transcript)