It is expected that different reserve estimators estimating reserves for an unconventional Reservoir have similar results (eg +/-10%).

Transcription

1 Discussion Panel

2 Survey Results

3 It is expected that different reserve estimators estimating reserves for a conventional Reservoir have similar results (eg +/-10%). Geoscientist Engineer Total Sample Agree Neutral Disagree Sample Agree Neutral Disagree Sample Agree Neutral Disagree 16 69% 19% 13% 19 68% 21% 11% 37 70% 19% 11% It is expected that different reserve estimators estimating reserves for an unconventional Reservoir have similar results (eg +/-10%). Geoscientist Engineer Total Sample Agree Neutral Disagree Sample Agree Neutral Disagree Sample Agree Neutral Disagree 16 38% 25% 38% 19 26% 42% 32% 37 35% 32% 32% Observations: 1. Confidence in the repeatability of Conventional reserve's is greater than Unconventional reserve s. 2. Engineers have less confidence in Unconventional reserves? [Engineers & Geologists more aligned with conventional reserves]

4 Only a portion of Contingent Resources are converted to Reserves in the life of the project. Geoscientist Engineer Total Sample Agree Neutral Disagree Sample Agree Neutral Disagree Sample Agree Neutral Disagree 16 63% 31% 6% 19 63% 26% 11% 37 65% 27% 8% If only a portion is converted does Contingent Resources have any meaning outside the project management. Development Not Viable [Project Maturity Sub-Class]

5 Definition of an unconventional resource discovery is clearly defined Geoscientist Engineer Total Sample Agree Neutral Disagree Sample Agree Neutral Disagree Sample Agree Neutral Disagree 16 31% 19% 50% 19 11% 53% 37% 37 19% 38% 43% Interestingly Geoscientists strongly disagree whereas the Engineers are more neutral.

6 The PRMS does not require deterministic or probabilistic methods to equate. Do you believe this should be reconsidered? Geoscientist Engineer Total Sample Agree Neutral Disagree Sample Agree Neutral Disagree Sample Agree Neutral Disagree 16 38% 44% 19% 19 47% 26% 26% 37 41% 38% 22% Some participants pointed out that the deterministic results should fall in-between the P10 and P90 case. PRMS permits Zero Proven reserves Applications of PRMS state:..,a deterministic estimate is, as stated in the PRMS, a single discrete scenario that should lie within the range that would be generated by a probabilistic analysis Page 13 A deterministic estimate is a single discrete scenario with in the range of outcomes that could be derived by probabilistic analysis Page 12

7 Reported Proved reserves are economic. Geoscientist Engineer Total Sample Agree Neutral Disagree Sample Agree Neutral Disagree Sample Agree Neutral Disagree 16 69% 25% 6% 19 63% 32% 5% 37 65% 27% 8% PRMS permits Zero Proven reserves How can a project with zero reserves be economic?

8 Reported Contingent Resources and Reserves are unrisked. Geoscientist Engineer Total Sample Agree Neutral Disagree Sample Agree Neutral Disagree Sample Agree Neutral Disagree 16 63% 31% 6% 19 37% 37% 26% 37 46% 32% 22% Would unrisked estimates satisfy the Range of uncertainty Principle.

9 PRMS reserve estimates presented by public companies believable.. Geoscientist Engineer Total Sample Agree Neutral Disagree Sample Agree Neutral Disagree Sample Agree Neutral Disagree 16 19% 81% 0% 19 42% 37% 21% 37 32% 57% 11% Engineers are more confident than Geologists PRMS Contingent Resource estimates presented by public companies believable. Geoscientist Engineer Total Sample Agree Neutral Disagree Sample Agree Neutral Disagree Sample Agree Neutral Disagree 16 19% 56% 25% 19 16% 58% 26% 37 19% 57% 24% PRMS Prospective Resource estimates presented by public companies believable. Geoscientist Engineer Total Sample Agree Neutral Disagree Sample Agree Neutral Disagree Sample Agree Neutral Disagree 16 19% 25% 56% 19 16% 63% 21% 37 16% 46% 38% CR & PR estimates starting to lose creditability - Last column

10 Discussion panel

11 Panel Discussion 1: Discontinuity Issue The discontinuity issue refers to the issue that deterministic and probabilistic techniques may yield different estimates due to the discrete nature of deterministic inputs compared to applying distributions to the input parameter as required by the probabilistic method. The PRMS has no requirement of repeatability with boundaries at the discretion of the reserve estimator and only a portion of resources required for reserves. The two permitted methodologies [deterministic & probabilistic] are not required to reconcile. [Section 4.2] Question for panel: Should they be made to reconcile; or should the estimator only have to be able to explain the difference; or it does not matter, the estimator can choose the method they wish dependent on the situation (eg data available) at hand?

12 Panel Discussion 2: Reserves have to be commercial which includes a requirement for them to be economic. Question 1 for panel: Do proved reserves have to be economic per PRMS? If they are not economic, does PRMS imply that there should be zero proved reserves. A company proposed to finance a project based on 2P outcome. If the project is developed and only 1P quantities are produce. Hindsight the project is uneconomic but 1P volumes where converted to production.

13 Panel Discussion 2: Reserves have to be commercial which includes a requirement for them to be economic. Question 2 for panel: Is it just a notation in PRMS (Section 3.1.2) that external reporting may impose stricter requirements that prevent a 1P to be reported in particular circumstances.

14 Panel Discussion 2: Reserves have to be commercial which includes a requirement for them to be economic. Question 3 for panel: What does economic mean? Is the requirement at the project level or at the reserves category level? PRMS Glossary Page 35

15 Panel Discussion 2: Reserves have to be commercial which includes a requirement for them to be economic. Question 4 for panel: Are there any circumstances that allow Probable and Possible reserves without nonzero Proved per PRMS?

16 Panel Discussion 3: Project basis of PRMS Questions for panel: Why the need for a project? What does this mean as a project moves from Prospective Resources to Contingent Resources to Reserves? What is the difference between a defined project and an undefined project? What values should be recorded in PRMS? What is meant by unrisked vs risked? Should there be a limit on what can be carried as Contingent Resources if they are economic only under very unrealistic commercial assumptions and the entity has no plans to progress them to reserves.

17 Ideas for Improvements

18 Idea Recommendations Remarks PRMS Resource Classification Framework Figure Contingent Resources Unrecoverable & Development not viable categories. Contingent & Prospective Resources Discovery definition Deterministic method. Swap the axis s. Have the range of uncertainty on the Y axis and the Chance of commerciality on the X- axis Commercial test be employed. Ideally all of Contingent Resources will be converted to reserves not just a portion. Be removed Have a time limit. Unconventional Resource needs clarification Deterministic method should only present Proved, probable & possible reserves discretely Visually the time line should be on the x- axis. This assists in explaining the range of uncertainty concept. If only a portion of Contingent resources are required to convert to Reserves the number has no meaning. The goal is production and these categories distort the numbers The goal is production in our lifetime. Discovery of Unconventional resource should include discovery of the extraction method. Proved & probable calculated discretely cannot equal 2P reserves {Probabilistic]

19 Idea Recommendations Remarks Discontinuity Probabilistic Vs Deterministic. Deterministic range of uncertainty should fall in the P10 to P50 range. If deterministic Proven Reserves are permitted on the P0 to P10 range the number has very little meaning Prospective Resources Definition of a prospect Better qualification definition of volumes reported as Prospective Resources More guidance on definition of a prospect Better link between Reserves and Development Plans/Commitments/Licensing status but are really Basin Resource Potential volumes Project Definition Project Definition (a perennial PRMS issue) for unconventional gas can vary between a single well if in N. America to 20,000 wells if doing a CSG-LNG export project. How can a project be broken down into component parts. How to handle volumes that may be committed for sales but will not be developed for decades. Chance of Development Should quantification of Chance of Development be included in the PRMS

20 Idea Recommendations Remarks Analogue Greater definition of an analogue and how it can be used Needs to be tightened up as can be misused and provide overly optimistic projections if all factors not taken into account in selecting analogue, including well spacing, completion type and heterogeneity of the reservoir. Technology Under Development Development Status Assumptions cannot be used for current estimates of CR until technology proven Should be a requirement in PRMS to disclose development status of Reserves and Contingent resources Estimates should be calculated based on known technology

21 Reporting P10s and P90s Change to what is in every statistical field and all other fields of science: P10 is the low case and P90 is the high case. Not More of an annoyance than anything else, but the amount of time spent explaining to probability/uncertainty and statistical sure why these got switched around in the petroleum field professionals why/how these are different than any models that produce them would be significant! Gas saturation/inerts% (CBM) More clarity around the role of gas saturation calculations and the role of inerts in those calculations and the economic implications There can be a fair amount of variance in how individual certifiers take into account gas saturation (in CBM) and its implications on the economics of a project. There seems to be no guidance on how inerts (i.e. CO2) affect gas saturation and procedures to identify/correct for that Permeability (CBM) Recognition that permeability measurements in exploration wells can be quite unreliable. Guidance on bands, or a lower band, on permeability based on proposed development well type (e.g. vertical, horizontal etc) Different certifiers have different criteria for permeability cut offs for CRs, and though these resources are not too highly valued, they do carry some significant market impressions with them. Thus, for CBM, getting the permeability factored in should be a thoughtful, and some what repeatable, process. It is recognised that perm measurements are slippery but there should be enough examples around the world for CBM to start to give more guidance on this

22 Idea Recommendations Remarks Better Definition of reserves from Pilot Vs Existing production Create Caveat Reserves Company Scaling factor Consideration for inclusion of high level review checklist Whereby previous reserve data is used to evalutate new reserve data Should a firm FID be required before reserves can be booked? Current wording on whether a project is commercial is too vague. Consideration for review checklist to assess whether the reserves estimation process/report meets PRMS requirements (sort of compliance test). When a new development is added previous development plan should be assessed on achievement & an appropriate factor applied.