PRMS – Status & Plans
by: John Ritter, Occidental Petroleum John Etherington, PRA International Ltd
Ryder Scott 11th Annual Reserves Conference Houston, Texas - September 2, 2015
1 Agenda
Background - Resource Classification History - PRMS Development/Implementation
PRMS 2015 Status
PRMS Update Project
Future View
2 Petroleum Resources Classification
1907 London Mines Institute
1937 API 1955 World Geological Congress 1961 AGA
1965 SPE (OGRC) 1972 USGS 1985 SPEE McKelvey 1978 SEC 1987 SPE
1997 SPE/WPC
2000 SPE/WPC/AAPG 2004
2009 SEC 2007 SPE/WPC/AAPG/SPEE/SEG ‐ PRMS
2011 PRMS Application Guidelines
3 “Vision” for Reserves/Resources (developed by OGRC – Sept 2004) Part 1
SPE/WPC/AAPG/SPEE definitions and classification system (and associated estimating guidelines) will continue to be maintained evergreen and enhanced to incorporate new best practices, and unconventional resources, and will be recognized as the premier classification standard.
Part 2
Actively promote and facilitate in-depth understanding of the definitions and their adoption by the oil, gas, and related industries; international financial organizations; governments; regulatory agencies; and reporting bodies.
4 Petroleum Resources Management System
Published in April 2007; maintained by SPE OGRC; co- sponsored by:
Society of Petroleum Engineers (SPE)
World Petroleum Council (WPC)
American Association of Petroleum Geologists (AAPG)
Society of Petroleum Evaluation Engineers (SPEE)
Endorsed by Society of Exploration Geophysicists (SEG)
5 2007 Petroleum Resources Management System
PRODUCTION RESERVES P90 P50 P10
1P 2P 3P COMMERCIAL Proved Probable Possible PLACE (PIIP) - IN
- CONTINGENT DISCOVERED PIIP RESOURCES
1C 2C 3C SUB-COMMERCIAL UNRECOVERABLE
PROSPECTIVE RESOURCES Increasing Chance of Commerciality TOTAL PETROLEUM INITIALLY TOTAL PETROLEUM Low Best High Estimate Estimate Estimate UNDISCOVERED PIIP UNDISCOVERED UNRECOVERABLE
Range of Uncertainty Not to scale
6 PRMS Official Reference (www.spe.org)
(all documents in pdf – free downloads)
Also See: Mapping of Reserves Definitions & Estimating and Auditing Standards for Reserves 7 The PRMS Document “Consolidated Format”
Section 1. Basic Principles & Definitions Discussion of Principles Section 2. Classification and Categorization Guidelines
Section 3. Evaluation and Reporting Guidelines.
Section 4. Estimating Recoverable Quantities
23 pages Resource Table I: Classes & Sub-classes Definitions & Table II: Resource Status Modifiers Guidelines Table III: Category Definitions & Guidelines 6 pages
Auxiliary Appendix A: Glossary Cross-referenced to Text Definitions 20 pages
8 Guidelines for Application of PRMS
PUBLISHED November 2011 (221 pages) Updates and replaces 2001 SPE “ Guidelines for the Evaluation of Petroleum Reserves and Resources” Contents Chapter 1 Introduction Chapter 2 Petroleum Resources Definitions, Classification, and Categorization Guidelines Chapter 3 Seismic Applications Chapter 4 Assessment of Petroleum Reserves using Deterministic Procedures Chapter 5 Probabilistic Reserves Estimation Chapter 6 Aggregation of Reserves Chapter 7 Evaluation of Petroleum Reserves and Resources Chapter 8 Unconventional Reserves Estimation Chapter 9 Production Measurement and Operational Issues Chapter 10 Reserves Entitlement and Recognition
9 Fulfilling the Vision
Part 1: Publish the Standard Create and maintain an international standard petroleum reserves and resources classification system.
Part 2: Implement the Standard Actively promote and facilitate in-depth understanding of the definitions and their adoption by the oil, gas, and related industries; international financial organizations; governments; regulatory agencies; and reporting bodies.
Technical Presentations Training Sessions Mapping Projects Applied Technology Workshops
10 PRMS – Sharing the Vision Globally
SPE Reserves ATW’s To Feb 2015 PRMS Training Sites PRMS Presentations
11 PRMS “Mapping” Projects
(updates to 2005 Mapping Study)
PRMS to CRIRSCO* (Minerals Classification) 2006 for International Accounting Standards Board
PRMS to COGEH** (Canada guidelines) (completed 2008)
PRMS to New SEC Rules – Completed 2009
PRMS to United Nations Framework Classification (UNFC) (UNFC_PRMS Bridging Document completed 2013)
PRMS to Russian Federation Classification 2013 (Update ongoing 2015)
PRMS to Chinese Classification (work in progress - 2015)
*Committee for Mineral Reserves International Reporting Standards **Canadian Oil and Gas Evaluation Handbook 1212 • PRMS Status
• PRMS Future Plans
13 PRMS Adoption Status - 2015
PRMS is implicitly or explicitly referenced by:
Securities Oil & Gas Regulators Companies Government USA (SEC) Reporting Canada (CSA) Hong Kong (HKEX) BOEM Australia (ASX) PRMS ANP UK (LSE-AIM) EBN Singapore CNH Argentina Netherlands UNFC Brazil Italy Financial OPEC France IASB (ESMA) ESMA = European Securities and Markets Authority BOEM = Bureau of Ocean Energy Management ANP = Brazil Agencia National do Petroleo EBN = European Business Network CNH = Mexican Comision Nacional de Hidrocarburos 14 IASB Extractive Activities Project 2011 Discussion paper
(accounting interface)
15 Applying PRMS Unconventional Resources Conventional Resources PRMS
Fundamental to a standard is that the classification and categorization of the estimated marketable quantities derived from an evaluation does not depend on the method of evaluation or on the type of resource being evaluated. PRMS is being applied to the full range of unconventional resource projects: Heavy & Extra-Heavy Oil Bitumen Tight Oil & Gas Shale Gas Coal Bed Methane
16 PRMS Update Project
February 2013 – Establish OGRC Update Committee Terms of Reference:
1. Improve clarity and, potentially, granularity
2. Align with COGEH and other systems
3. Potential revision of definitions (e.g. discovered)
4. Maintain core principles
5. Expand for other stakeholders (e.g. national inventories)
This is an update – not a “rewrite” – part of “system maintenance” Target a draft report in late 2015
17 Main Issues to be Addressed in “PRMS Update”
Incremental vs Scenario Methods Integrating Deterministic and Probabilistic Methods
Clarify project definition Clarify the “5 year rule”
Accommodating unconventional resources (statistical analyses?)
Merge COGEH and PRMS
Standardized Risking (discovery .. development)
Incorporating national inventory requirements (UERR, reserves growth…)
18 Unconventional Resources
What’s Different?
Different trapping mechanisms & production processes affect evaluation procedures:
Relatively limited production history and relatively few analogs on which to base evaluations.
Traditional petrophysical analysis may not be relevant - log analysis models are still evolving.
Porosity and water saturation may be of little relevance in some unconventional reservoirs - parameters such as total organic carbon or mechanical rock properties may be critical.
Production mechanisms are not the same. Stimulation is generally required.
Unconventional reservoirs may be very thick and laterally extensive, with ill-defined boundaries and variable mineralogy and mechanical properties.
Expect significant variability of productivity & recovery efficiency
19 Classification - Does PRMS Still Apply? Do we need to modify the basic matrix?
PRODUCTION
RESERVES
1P 2P 3P COMMERCIAL Proved Probable Possible PLACE (PIIP) PLACE -
IN CONTINGENT - RESOURCES DISCOVERED PIIP DISCOVERED (DPIIP) classify by 1C 2C 3C Chance of Commerciality SUB-COMMERCIAL UNRECOVERABLE (1- Risk) of project applied PROSPECTIVE RESOURCES Increasing ChanceCommerciality of TOTAL PETROLEUM INITIALLY PETROLEUM TOTAL
Low Best High
(UPIIP) Estimate Estimate Estimate
UNDISCOVERED PIIP UNRECOVERABLE
Range of Uncertainty Not to scale categorize estimates based on uncertainty of sales quantities associated with a project
20 Relook at Basic Definitions
Net Pay is not defined in PRMS but is one of the most important parameters in the estimation of PIIP : the net portion of a reservoir from which petroleum can be produced or extracted, given a specific recovery technology.
Cutoff is not defined in PRMS and is now defined as:
A limiting value of a reservoir parameter that removes non- contributing intervals from resource calculations.
(from COGEH ROTR study)
21 Relook at Basic Definitions
Reservoir: A subsurface rock formation containing an individual and separate natural accumulation of moveable petroleum that is confined by impermeable rocks/formations and is characterized by a single-pressure system. A subsurface rock unit that contains an accumulation of petroleum.
Discovered: A discovery is one petroleum accumulation, or several petroleum accumulations collectively, for which one or several exploratory wells have established through testing, sampling, and/or logging the existence of a significant quantity of potentially moveable hydrocarbons.
(from COGEH ROTR study)
22 “Known Accumulations”
What’s the Issue?
The oil sands and most shale gas reservoirs were penetrated by 100’s of wells before the technology was available to recover petroleum.
We knew it was there but we could not justify technical recovery. Thus is cannot be Contingent Resources. It was in effect “known” but was “unrecoverable” with current technology.
This is common in early stages of unconventional resource exploration/exploitation.
The PRMS bucket is Discovered Unrecoverable (or does it just remain as “Discovered PIIP”?) (from COGEH ROTR study) 23 Use of Analogs
Analogy is the process of transferring information on a subject accumulation or reservoir to another accumulation or reservoir
Two intimately related components:
Reservoir analog: A reservoir with similar rock properties, fluid properties, reservoir conditions and drive mechanisms, that can be used as a model for the subject reservoir that is being evaluated.
Process analog: A recovery process that is an Established Technology or is Technology under Development in the analogue reservoir that can be applied to the subject reservoir that is being evaluated.
These analogues cannot be considered separately. It cannot be assumed that a recovery process that is applicable in one reservoir will be applicable in a different one.
(from COGEH ROTR study)
24 Clearly Define the Project(s)
A Recovery Project is an activity or set of activities which provides the basis for the assessment and classification of recoverable resources to support decision-making related to capital investments.
Assess the PIIP
Alternatives ? Select a Technology Project Phases
Define a Project Scenario [Expected production, capital, operating costs and product prices ..and timing..]
Estimate Recoverable Quantities & Value
25 Focus on Petroleum Initially-in-Place
Data TPIIP Gas content A Sorption isotherm DPII UPIIP Gas composition P Well penetration? Geological and seismic mapping Rock‐eval pyrolysis A Well Tests (Frac?) Analogs – cutoffs – net pay Mineralogical Local stress field/fractures Basin analysis – regional tectonics analyses Analogs – cutoffs – net pay Vitrinite A reflectance Deterministic & Core description V Probabilistic Assessments Probabilistic Assessments 3D seismic Kerogen types Routine core Sufficient info to analysis declare a “discovery”? Conventional logs
Key information varies with Special logs Unconventional resource type
(from COGEH ROTR study)
26 Focus on Petroleum Initially-in-Place
TPIIP
DPIIP UPIIP
those regions that are distant from tested wells should be classified as undiscovered, pending more proximate evidence of both the existence of petroleum and of its productivity
there is a tendency for evaluators to consider reservoirs – or, more particularly, productivity - to be continuous over large areas and to extrapolate limited data over those areas, in spite of evidence of heterogeneity from the existence of “sweet spots”
(from COGEH ROTR study)
27 Discovered but not Recoverable?
UNRECOVERABLE is that portion of Discovered (DPIIP) which is estimated, as of a given date, not to be recoverable by future development projects.
A portion of these quantities may become recoverable in the future as commercial circumstances change or technological developments occur; the remaining portion may never be recovered due to physical/chemical constraints represented by subsurface interaction of fluids and reservoir rocks.
Production
Commercially Recoverable Reserves
Technically Recoverable C. Resources
No technically viable* * Residual of PIIP using recovery plan Discovered Total Discovered Total Unrecoverable Established Technology Physically or Technology Under Unrecoverable Petroleum Initially-in-Place Development
28 Sub-classify as Specific as Possible
PRODUCTION Economic On Production
Approved for Economic Undetermined RESERVES Development Sub-economic
COMMERCIAL Justified for Development
Development Pending Development DISCOVERED PIIP DISCOVERED CONTINGENT Development On Hold RESOURCES Pre-Development Development Unclarified Development not Viable Conceptual Plan SUB-COMMERCIAL UNRECOVERABLE
Prospect Established Technology TOTAL PETROLEUM INITIALLY-IN-PLACE (PIIP) INITIALLY-IN-PLACE PETROLEUM TOTAL PROSPECTIVE Lead RESOURCES Increasing Chance of Commerciality Technology Under Development Play Experimental Technology UNRECOVERABLE UNDISCOVERED PIIP UNDISCOVERED Not to scale Range of Uncertainty
29 Pulling it all Together
Qualitative to Quantitative Risk for Discovered Resources
Established Technology Reserves Not addressed in PRMS Repeated Commercial Success
CR Development Pending Economic Technology CR Development On Hold Under Economics COC% Development Undetermined CR Development Unclarified
Not Economic CR Development Not Viable
[CR = Contingent Resources] Technically Viable Experimental technology Not technically Viable Discovered Unrecoverable
30 Risking Volume and Value
Chance of Commerciality (COC) = Chance of Discovery * Chance of Development
Success Case(s) * COC % Best Est
EV/EMV You estimate the risk! Failure Case * (1- COC%)
“Because an evaluator with access to all available data for a prospect (or project) should have an informed opinion of the chance of discovery (and development), it can be potentially misleading to disclose unrisked estimates without quantifying the risk.”
Not addressed in PRMS
31 Assessment Methods
Deterministic Methods Probabilistic Methods
incremental scenario 100% 1P 2P P90 Cum Prod 3P
Proved ProbablePossible reasonably certain Proved P50 1P scenario – high degree of confidence Less likely than Proved More Likely than Possible EUR Probable
2P scenario – more likely than not P10 % probability of value or more
Less likely than Probable 0% Possible
cum prod 1P 2P 3P 3P scenario - unlikely EUR
3232 The “5 Year Rule”
Is the project a well or a program? Does it apply to Reserves or Proved Reserves?
Stale PUD’s (not developed within 5 years)
Re-categorize PUD to Probable Undeveloped?
Reclassify project Reserves to Contingent Resources?
“Split Conditions” 1P 2P 3P RESERVES Different rules for PROVED Proved vs Probable PROBABLE POSSIBLE COMMERCIAL (& Possible)
33 PRMS_COGEH Merger_
SPEE are currently “riding two horses”! SPEE Calgary – maintain COGEH SPEE International – co-sponsor PRMS
COGEH/PRMS Merger PRMS partners input “one piece of the puzzle”
Global Industry Feedback
34 Mapping to National Inventories/Energy Studies
Risking? Chance of Development Chance of Commerciality Chance of Discovery
35 - Future View - An Evolving Industry Model
Regime Specific Requirements Base Document Supplemental (International Standards) Detailed Guidance User/Country Specific
Detailed Evaluation Disclosure Guidelines Guidelines Fundamentals & Examples
Generic – Global Application Template Based on Science
36 QUESTIONS & DISCUSSION
37