Integrating Reserves Management: Providing Regulatory Compliance and Improving Decision Making

Abstract

This article, written by Senior Technology Editor Dennis Denney, contains highlights of paper SPE 124168, "Methodology for Integrated Reserves Management: Providing Regulatory Compliance and Im proving Decision Making," by Lev Virine, SPE, Project Decisions, and Doug MacDonald, SPE, Schlumberger Information Solutions, prepared for the 2009 SPE Annual Technical Conference and Exhibition, New Orleans, 4-7 October. The paper has not been peer reviewed. Effective corporate reserves-management systems enable tracking reserves to provide input for reporting to regulators and to serve as a decision-support system. Implementation of such reserves-management systems has challenges. Regulatory bodies, including the US Securities and Exchange Commission (SEC), require proper categorization of reserves on the basis of evaluating whether the volumes can be recovered economically in a timely manner. The reserves-management system should provide technical and economic volumes on the basis of up-to-date prices, capture and analyze uncertainties in the reserves volumes, provide secure data access and data archiving, and implement an approval and audit process. Introduction A method to integrate reserves management was developed that comprises three processes—data management, which ensures fast and secure access to reservoir data; economic and technical volume calculation; and a flexible reporting process. Reservoirs, as well as prospects, are organized within a corporate hierarchy. In accordance with SEC regulations and SPE/World Petroleum Council/American Association of Petroleum Geologists/Society of Petroleum Evaluation Engineers Petroleum Resources Management System (SPE-PRMS) guidelines, the data-management process captures proven, probable, and possible reserves, as well as discovered and undiscovered resources, for different petroleum products and companies with different working interests. Each category of each reservoir is associated with an economic case that contains information about costs, prices, and the fiscal regime. Economic volumes can be calculated on the basis of the results of economic evaluations of the reserves. Uncertainties in reservoir data are captured by use of multiple scenarios for each reservoir and category. A regional-pricing mechanism allows updating prices for all economic cases at a particular level of the corporate hierarchy. All changes to the economic-results data would be recorded and require approval. Challenges. Disclosure of oil and gas reserves is different from disclosure of company financial performance or production. While the financial performance of the company, at least in theory, can be calculated precisely, oil and gas reserves are uncertain by definition. Different proven methods of estimating reserves may yield different results. Moreover, different estimators that use similar methods may determine different numbers. New SEC regulations aim to improve transparency by providing investors with more information about the reserves. In particular, the new regulations permit disclosure of probable and possible reserves. It should be noted that information about probable and possible reserves also includes more uncertainties, compared with proven reserves.