1

1

Harmonization of Fossil Harmonization of Fossil Energy and Mineral Resource Energy and Mineral Resource

ClassificationsClassifications

Sub-soil assets subgroup issue paper prepared by:

Julie L. Hass and Kristine E. Kolshus

Division for Environmental Statistics

Statistics Norway

London Group meeting, New York, 19-21 June 2006

2

Issue to be addressed: Harmonisation of subsoil asset classification - new UN Framework Classification

• One of the issues addressed to be considered in the revision of ch. 8 of the SEEA-2003 (Definition of physical reserves)

• There has now been developed a harmonized system that we should be aware of:

United Nations Framework Classification for Fossil Energy and Mineral Resources (UNFC).

3

Background

• Many different classification systems for physical subsoil assets in use.

• If we are to have comparable international statistics on subsoil assets, there is also a need to have a consistent starting point for making the calculations.

4

Treatment in the SEEA-2003 (1)

•Takes the existence of the physical assets as a “given” and then focuses on different ways to calculate the value of the assets.

•Does not discuss in detail the different classification systems used by countries with regards to the physical amounts of petroleum resources….

• But refers only to the McKelvey diagram.

5

Treatment in the SEEA-2003 (2)

•Converting country systems to the McKelvey system requires interpretations to be made by each country, which may not be made in a consistent or comparable way.

•Different definitions of the physical petroleum resources then mean that there is not a consistent starting point for making the value calculations.

• Classification of petroleum assets in physical units is not given in a way to secure harmonization among countries.

• Unclear what assets to include in valuation calculations

6

Selected country practices:

Country Reserve Definitions Physical stock used in stock value estimates

SEEA?

SNA?Discovered Undiscovered

DK Sum of expected proven, probable & possible

No data available Discovered reserves SEEA

Germany Un-weighted sum of proven and probable

No data available no information available ?

France Includes proven reserves only No data available Proven reserves SNA

NL Remaining expected reserve Future additions to natural gas reserves from exploration

Estimated based on government appropriation of resource rent.

?

Austria Weighted sum of proven developed (weight=1), proven undeveloped (0.9), probable (0.5) & possible (0.1) reserves

No data available Discovered reserves SEEA with weights

UK Un-weighted sum of proven and probable

Upper and lower range of estimated undiscovered

Discovered and (lower range of) undiscovered reserves

>SNA but <SEEA

Norway Expected level of discovered reserves

Expected level of undiscovered

Discovered & (expected level of) undiscovered

SEEA

7

New since SEEA-2003 was in editing phase

• United Nations Framework Classification for Fossil Energy and Mineral resources (UNFC).

• UNECE Ad Hoc Group of Experts on Harmonization of Fossil Energy and Mineral Resources Terminology.

• http://www.unece.org/ie/se/pdfs/UNFC/UNFCemr.pdf

8

Total Remaining Resources are Categorized by Three Criteria

E Economic and commercial viability

F Field project status and feasibility

GGeological knowledge

9

CategoriesEconomic and commercial viability:

E1: EconomicE2: Potential economicE3: Intrinsically

economic

Field project status and feasibilityF1: JustifiedF2: ContingentF3: Undefined

Geological knowledgeG1: Reasonable

assuredG2: EstimatedG3: InferredG4: Potential

E1, F1, G1E1, F1, G1

E3, F3, G4E3, F3, G4

10

Norway’s Resource Account Presented in the UNFC Classification

UNFC

ClassType

Cate-gory

Mill

Sm 3

o.e.0 3779

1 28372A 362F 387

3A 4123F 402

Sum 4074 111-2

4A 274 1214F 49 1225A 120 221

5F 55 2227F 3 3327A 400 331

4F 297 1225F 401 2237F 66 333

Sum 1665

8 & 9 3400 334

Pro

sp

ecti

ve

reso

urc

es

NPDFieldsR

eserv

es

Co

nti

ng

en

t re

so

urc

es

Discoveries

UNFC

ClassType

Cate-gory

Mill

Sm 3

o.e.0 3779

1 28372A 362F 387

3A 4123F 402

Sum 4074 111-2

4A 274 1214F 49 1225A 120 221

5F 55 2227F 3 3327A 400 331

4F 297 1225F 401 2237F 66 333

Sum 1665

8 & 9 3400 334

Pro

sp

ecti

ve

reso

urc

es

NPDFieldsR

eserv

es

Co

nti

ng

en

t re

so

urc

es

Discoveries

3400663400

401120 55

274

40743779

346

3400663400

401120 55

274

40743779

346

Account as of 31.12.2003Figures in million Sm3 o.e.

11

UNFC and the McKelvey Diagram

No conversion between the two systems!

12

Proposed next step & points for discussion (1)• Should this be included in the SEEA or in the new

Guidelines for subsoil assets? And if so how?

• Should the UNFC be used as the basis or simply referred to as yet another classification system without further recommendations?

• If the UNFC system becomes the basis for physical assets, which of the classification system (blocks) should be included in the calculations for valuation?

•Who should give advice on this? UNFC? Don't need any further advice, the London Group can simply make a decision?

13

Proposed next step & points for discussion (2)

• We would suggest that the experts from the UNFC need to be consulted regarding which of the assets should be included before the London Group can make their final recommendations in the new manual/compilation guidelines for subsoil assets.