1London Group on economic and environmental accounting, 13th meeting 30th September 2008

Sigurd HeibergStatoilHydro

Chairperson, UNECE Ad Hoc Group of Experts on Harmonization of Fossil Energy and Mineral Resources Terminology

Application of the UN Framework Classification for Fossil Energy and Mineral Resources

to energy accounts

2London Group on economic and environmental accounting, 13th meeting 30th September 2008

What is the UNFC?

United Nations Framework Classification for Fossil Energy and Mineral Resources

• Simple, universally applicable scheme for classifying and evaluating energy and mineral reserves and resources

• Allows a common international understanding within and across commodity classes

• Flexible system for application at global, national, industrial, institutional or financial level

• Recommended by ECOSOC in 1997 and 2004 and managed within the UN System by the UN Economic Commission for Europe

• Adopted, adapted or tested in over 60 countries, at this stage principally for application to mineral resources

3London Group on economic and environmental accounting, 13th meeting 30th September 2008

Need for a common global code for energy and mineral resources?

• Globalization of capital and commodities markets is happening!

– Investment flows between North and South and East and West are growing rapidly in all directions, especially in extractive industries

• Common understanding will lead to greater efficiencies in

– International energy studies

– Government management of resource endowments

– Management of corporate assets and associated business processes

– Financial reporting

• Recognize that established systems likely to remain in place to meet specified needs, but demand growing for a common framework

4London Group on economic and environmental accounting, 13th meeting 30th September 2008

UNECE Ad Hoc Group of Experts

• Created in 2004 in UNECE to deliver on ECOSOC Resolution

– Develop one global common code for energy and minerals, including definitions, specifications and guidelines for application

– Establish institutional governing structure to keep UNFC relevant and updated

• Transparent and voluntary process

• Wide range of stakeholders

– Governments, NGOs and business/private sector

– International organizations, incl. IAEA, IEA, IEF, OPEC, WEC and WPC

– Professional associations incl. AAPG, CRIRSCO, EFG, IASB, IOSCO, IVSC and SPE

– Experts involved with development of the current SPE/WPC/ AAPG/SPEE classification were also involved in development of UNFC

– Coordinate with IASB’s Extractive Industries Research Project

5London Group on economic and environmental accounting, 13th meeting 30th September 2008

AHGE Bureau is representative of the Group

Government (1), NGO (1) and private sector (3)

IEA (1)

OPEC (1)

Russian Federation (1)

CRIRSCO (1) and SPE (1)

Close links are maintained with the financial community through IASB, IOSCO and ASC

6London Group on economic and environmental accounting, 13th meeting 30th September 2008

Collaboration with Financial Community

Common code is needed by the financial community

IASB researching development of an International Financial Reporting Standard (IFRS) for extractive activities

A discussion paper inviting comments on accounting and disclosure approaches by the IASB research project team Expected release in 2008

Comments will inform IASB before it decides to develop an IFRS for extractive activity Expected release date for IFRS uncertain

US SEC has proposed: Modernization of the Oil and Gas Reporting Requirements Comments due by 8 September 2008.

Agreement between IASB and FASB (US SEC) to harmonize their rules.

UN (via UNECE AHGE) collaborating closely with IASB and IOSCO (of which SEC a member)

More has happened in the last months than in the last 30 years!

7London Group on economic and environmental accounting, 13th meeting 30th September 2008

Next Steps for 2008/2009

• Develop a proposal for a revised UNFC to be submitted to the Extended Bureau of the Committee of Sustainable Energy as soon as possible

• Propose changes to UNFC through a due and transparent process

• Prepare a discussion paper on Specifications

• Develop Specifications and Guidelines for UNFC application and implementation. SPE and CRIRSCO guidelines to be used extensively

• Follow up on recommendations to consider UNFC for recipient reservoirs for carbon sequestration and natural gas storage

• Continue mapping UNFC to other systems

• Continue cooperation with IASB and other organizations in pursuit of a common global framework

8London Group on economic and environmental accounting, 13th meeting 30th September 2008

To be categorized

Going from Quantities in Place to Project Recoverables

Contingent resourcesProspects Reserves

9London Group on economic and environmental accounting, 13th meeting 30th September 2008

G3G2

G1

G3G2

G1 Sales

G3G2

G1

Non-sales

Business Decisions in Exploration and Production

Prospect exploration

Prospect identification

Feasibility Concept DefinitionBusiness planning

OperationExecution

F4

E3

E3

F4

F4

E2E1

E3

E1

10London Group on economic and environmental accounting, 13th meeting 30th September 2008

Common Elements of Recognised Classifications

Commonality of classifications 2007 SPE/WPC/AAPG/SPEE

Petroleum Resources Management System

2006 CRIRSCO Terminology for minerals

Future recovery by commercial projects

On Production

On Production

Approved for Development

Approved for Development

Commercial Projects

Justified for Development

Reserves

Justified for Development

Mineral Reserves

Potential future recovery by contingent projects

Development Pending (economic)

Development Pending (marginal)

Development Pending Potentially

Commercial Projects

Development On Hold

Mineral Resources

Development Unclarified

Development Unclarified or On Hold

Non-Commercial Projects Development

Not Viable

Contingent Resources

Development Not Viable

Not Defined

Dis

co

ver

ed

Additional discovered quantities in place Unrecoverable Not Defined

Undiscovered recoverable quantities

Prospect Lead Exploration Potential

Prospective Resources

Play Exploration Results

Un

dis

co

vere

d

Additional undiscovered quantities in place Unrecoverable Not Defined

11London Group on economic and environmental accounting, 13th meeting 30th September 2008

UN Framework Classification (UNFC) (for Petroleum)

Total in-place Classification

E1 Economic E2 Potentially economic E3 Intrinsically economic

F1 Justified F2 Contingent F3 Undefined

G1 Reasonably assured G2 Estimated G3 Inferred G4 Potential

Principles

Economic and commercial

viability

Field project status and feasibility

Geological knowledge

12London Group on economic and environmental accounting, 13th meeting 30th September 2008

http://www.unece.org/ie/se/reserves.html

London Group on economic and environmental accounting, 13th meeting 30th September 2008

Thank You!