Regulation of oil and gas reserves reporting in Saudi Arabia: Review and recommendations

Abstract

The regulatory framework and guidelines for reserves reporting in Saudi Arabia are reviewed – the ongoing privatization process of the national oil company (Saudi Aramco) will benefit from the establishment of transparent asset appraisal rules. Previously, Saudi oil reserves were exclusively reported to the Organization of Petroleum Exporting Countries (OPEC) as mandated by confidential considerations and internal policies of the Saudi government. Truly independent appraisal of oil and gas reserves as commonly performed by oil and gas investment analysts becomes increasingly relevant when national oil and gas companies are seeking to privatize and must gain the trust of the international investment community. Under such scenarios the regulation of – and compliance with – the governing reserves reporting guidelines need to be conducted with the utmost transparency. Successful monetization of the corporate asset value via bond issues and initial public offerings (IPO) to potential new shareholders critically depends on independent reserves appraisals. Some of the complexities of reserves estimations for a national oil company, such as Saudi Aramco, making the transition – from a formerly wholly state-owned enterprise to a public-private-partnership company – are highlighted. Recommendations are given for improved reserves reporting governance.