Gauging the confidence in publicly reported oil and gas reserves: introducing the Reserves Confidence Metric (RCM)
Don McMillanConsultant, 46 McConnell Crescent, Brookfield, Qld 4069, Australia. Email: don.mcmillan@oilgascbm.com.au
The APPEA Journal 57(1) 88-99 https://doi.org/10.1071/AJ16050
Accepted: 17 February 2017 Published: 29 May 2017
Abstract
Confidence in publicly disclosed reserves and resources is critical to the investment community and the reputation of the oil and gas industry. This paper introduces a commonly utilised industry concept for reviewing reserve estimates in a format that non-professionals can use with confidence. Surveys (McMillan 2014) have indicated a perception that the Society of Petroleum Engineers – Petroleum Resources Management System (SPE-PRMS) lacks consistency and repeatability and treats conventional and unconventional resources differently. This is discussed in detail in this paper, along with an explanation of the confusion caused by these differences. The oil and gas industry is still endeavouring to understand how to treat unconventional resource estimations and this paper endeavours to capture areas of contention and risks in relation to reported reserves.
Reserves Confidence Metric (RCM) is presented as a method for rating confidence in publicly disclosed reserves. RCM, which is derived from the reserves to production ratio, can be used for any reserves standard or guideline. It is a simple metric, which any organisation or individual with limited knowledge of reserves can apply to identify reserves that require further information or should be used with caution.
As an example, RCM is applied to Queensland’s publicly disclosed 2P reserves for all conventional and unconventional Coal Seam Gas (CSG) resources.
Keywords: asset valuations, business decisions, mergers and acquisitions.
Don McMillan has over 30 years’ experience in the oil and gas industry, with the last 10 years’ experience as a consultant. Don is a Fellow of Engineers Australia, and a member of the Society of Petroleum Engineers (SPE), Petroleum Exploration Society of Australia (PESA) and Queensland Petroleum Exploration Association (QUPEX). His areas of expertise are troubleshooting, due diligence and resource assessment and development. |
References
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SPE-PRMS (2007). Society of Petroleum Engineers – Petroleum Resources Management System. Prepared by the Oil and Gas Committee of the Society of Petroleum Engineers, Reviewed and jointly sponsored by World Petroleum Council (WPC), American Association of Petroleum Geologists (AAPG), Society of Petroleum Evaluation Engineers (SPEE). Available at: http://www.spe.org/industry/docs/Petroleum_Resources_Management_System_2007.pdf [Verified 21 February 2017].
