UNFC Petroleum Application Example: Testing of Norwegian Resource Classification to UNFC. Pilot Study performed by Norwegian Petroleum Directorate (NPD) and Statoil Presented on behalf of NPD by Sigurd Heiberg Workshop on Sustainable Mining and the UNFC - Challenges and Opportunities in India Workshop, New Delhi, India, 29-30 October 2013

Outline Introduction Pilot study

NPD classification and reporting The mapping of Norwegian Resource Account to UNFC

"General rules mapping” Detailed classification of individual projects

Comparison of the two approaches

Conclusions

The Norwegian Petroleum Directorate (NPD)

• A governmental specialist directorate and administrative body • Established in 1972 • Reports to the Ministry of Petroleum and Energy (MPE) • Headquarter in Stavanger • A staff of a little over 200

Statoil in a Nutshell

4

Integrated energy company with HQ

in Norway

• Proved reserves on Dec.31.2012: 5422 mill boe

Highlights Financial Operational

23328 employees in 37 countries

World’s 40th largest company*

• Production (2012): ~2.0 million boe/d

• The world’s largest operator in water depths > 100m

• The second largest gas exporter to Europe

• Listed in New York (NYSE) and Oslo (OSBX)

• One of the world’s largest net sellers of crude oil

• Market cap: ~USD 80 billion

• Norwegian government owns 67 percent

Statoil

• Transparency International: World’s most transparent company

Source: Fortune 500

Petroleum sector in Norway

70 fields in production

15 fields under development

136 discoveries

1450 exploration wellbores

3600 development wellbores

7.4 billion scm o.e. remaining (46 billion boe)

44 %

24 %

6 %

7 %

19 %

Pilot Study: Testing NPD classification to UNFC

• General rule categorisation of NPD project status categories to UNFC

• Individual project classification to UNFC • Investigate if Government’s needs are met by the UNFC

system • Propose improvements

07/11/2013 6

Oil Companies Annual Reporting to Norwegian authorities

• By regulation to the Petroleum Law: • ”Reporting shall include corporate financial data,

projects, resource volumes and forecasts for production, costs and environmental discharges/emissions as specified by the recipient.”

• Reporting is done according to NPD classification, which is project based.

• 23 companies reported 240 files for appr 850 projects • Reported data is basis for establishing the yearly

resource account

11/7/2013 8

NPD classification (2001)

Classes and Project Categories

Reserves

Contingent resources

Undiscovered resources

1 2 F/A 3 F/A

In production Under development

Decided for development

4 F/A 5 F/A

6 7 F/A

8 9

In planning phase Recovery likely, but undecided

Recovery not very likely Not evaluated / Improved recov. pot.

Prospects Leads and plays

Discovered

Un- discovered

Classes Project Categories

Historic prod. 0 Sold and delivered

F = First, A = Additional

Rec

over

able

qua

ntiti

es

UNFC – 2009, with examples of classes

07/11/2013 9

UNFC; classes and sub-classes.

10

Classification of project by ”General rules categorization”

Norwegian Resource Account in UNFC

UNFC - 2009 As of 2010 NPD

12 935 Total

Sales Production 5 521 Sold and delivered 0

Non-sales production

Class Sub-class E F G Category Class

Commercial projects

On production 1 1.1 1, 2, 3 2 506 In production 1

Reserves Approved for Development 1 1.2 1, 2, 3 221 Under development 2 F/A

Justified for Development 1 1.3 1, 2, 3 396 Decided to recover 3 F/A

Potentially Commercial

Projects

Development pending 2 2.1 1, 2, 3 654 In planning phase 4 F/A

Contingent resources

Development on hold 2 2.2 1, 2, 3 570 Recovery likely but

undecided 5 F/A

Non-Commercial Projects

Development unclarified 3.2 2.2 1, 2, 3 397

Not yet evaluated/Improved rec.

Projects 7 F/A

Development not Viable 3.3 2.3 1, 2, 3 N/A Recovery not very likely 6

Additional quantities in place 3.3 4 1, 2, 3 N/A

Exploration Projects

No sub-classes defined 3.2 3 4 2 670

Prospects 8 Undiscovered resources Leads and Plays 9

Additional quantities in place 3.3 4 4 N/A

MSm³ o.e.

New general rules

• Closer investigation of UNFC and NPD definitions and project characteristics suggest alternative general transformation rules:

• E-axis • Most RC 4 projects qualify for E1.1, (not E2)

• They are economic on the basis of current market conditions rather than expected to become economically viable in the near future

• F-axis • Most RC 5 projects qualify for F2.1 (not F2.2) • Most RC 7F projects qualify for F2.1 (not F2.2)

• Project activities are ongoing to justify development in the foreseeable future, rather than on hold or being significantly delayed.

RC = NPD Project Status Category

Norwegian Resource figures of 31.12.2011 based on “general rule categorisation” (2012)

As of 2011

13 126 Total

5 743 Sold and delivered 0

Class Sub-class E F G Category ClassOn production 1 1.1 1, 2, 3 2 344 In production 1Approved for Development

1 1.2 1, 2, 3 433 Under development 2 F/A

Justi fied for Development

1 1.3 1, 2, 3 384 Decided to recover 3 F/A

1.1 2.1 1, 2, 3 594 In planning phase 4 F/ADevelopment

pending2 2.1 1, 2, 2 798

Recovery l ikely but undecided

5 F/A

Development on hold

2 2.2 1, 2, 3 190 Improved rec. Projects 7 A

Development unclari fied

3.2 2.1 1, 2, 3 185 Not yet eva luated 7 F

Non-Commercial Projects

Development not Viable

3.3 2.3 1, 2, 3 N/A Recovery not very l ikely 6

3.3 4 1, 2, 3 N/A

Prospects 8

Leads and Plays 9

3.3 4 4 N/A

MSm³ o.e.

4 2 455Undiscovered

resources

Additional quanti ties in place

UNFC - 2009 NPD

Sales Production

Potentially Commercial

ProjectsContingent

resources

Additional quanti ties in place

Exploration Projects

No sub-classes defined

3.2 3

Non-sa les production

Commercial projects Reserves

Classification of individual projects to UNFC

Mapping of individual projects to UNFC

General rule categorisation applied as start Projects classified as reserves is straight forward. There are no alternatives. For the “contingent resources” projects, more classes have to be considered when classifying the projects. The white boxes are optional classes ready to cater for more granularity than the example classes in Fig 2 in the UNFC-publication can offer.

Attribute: ”Project stoppers” Uncertainty in resource volume

Reservoir properties

Technology is lacking

Lack of infrastructure in the area

No gas solution

Lack of capacity in existing systems

No commercial agreement

Rig availability

Environmental requirements

HSE requirements

Other

Consequences of “project stoppers” • Technology is lacking

• RC4A (from E1.1F2.1 to E2F2.1)

• RC5A (from E2F2.1 to E2F2.2)

• Lack of infrastructure in the area • RC4F (from E1.1F2.1 to E1.1F2.2)

• RC4A (from E1.1F2.1 to E1.1F2.2)

• RC5F (from E2F2.1 to E2F2.2)

• RC5A (from E2F2.1 to E2F2.2)

• No gas solution • RC4F (from E1.1F2.1 to E1.1F2.2)

• RC5F (from E2F2.1 to E2F2.2)

• RC5A (from E2F2.1 to E2F2.2)

• Lack of capacity in existing systems • RC4F (from E1.1F2.1 to E1.1F2.2)

• RC5F (from E2F2.1 to E2F2.2)

• RC5A (from E2F2.1 to E2F2.2)

• No commercial agreement • RC4F (from E1.1F2.1 to E2F2.1)

• RC4A (from E1.1F2.1 to E2F2.1)

Decision Gates (DG)

DG versus UNFC categories

• DG 1 - Decision on concretization. • One economic solution for developing the project has been

demonstrated, and the project proceeds into a concept identification and selection phase

• If the project has passed DG1, the Norwegian Resource category should be RC4 and not RC5 • 10 projects were reclassified from RC5 to RC4 and moved from E2 to

E1.1 if no other reason keep them in E2

DG checks of UNFC categories

• DG 2 - Decision to continue. • Equivalent to concept selection and start-up of pre-engineering. A cost

estimate with reduced uncertainty will be prepared.

• If DG2 is reported close (i.e.2012) then E1.1 was used even if the project stoppers indicate E2 • They are economic on the basis of current market conditions

rather than expected to become economically viable in the near future

• 17 projects were moved including those 10 already moved due to DG1

Norwegian Resource Account based on individual project categorisation to UNFC classes (2012)

The amounts represents the G1 + G2 except for E3.2F3

Norwegian Resource Account of 31.12.2011 Unit: Million Standard Cubic Meter Oil Equivalents (Mill S m3 O.E.)

Comparison

• General rules categorisation 2012 • Project individual categorisation 2012

Mapping results

Norwegian Resource Accounts per 31.12.2011 according to UNFC (2012)

Mapping to UNFC- classes defined by UNFC Sub-categories

Aggregated mapping to UNFC-classes defined by UNFC categories

Mapping results

Norwegian Resource Accounts per 31.12.2011 according to UNFC (2012)

Mapping to UNFC- classes defined by UNFC Sub-categories

Aggregated mapping to UNFC- classes defined by UNFC categories

Mapping results

Norwegian Resource Accounts per 31.12.2011 according to UNFC (2012)

Mapping to UNFC- classes defined by UNFC Sub-categories

Aggregated mapping to UNFC- classes defined by UNFC categories

Lessons learned

• The granularity of UNFC may make this a stronger tool for resource management than our current NPD classification (especially if the F and A can be included as sub-categories)

• The usability of the UNFC is considerably reduced if application is restricted to map the example classes given in UNFC fig 1

• The QC and guidelines of the Norwegian Reporting Regulations must be improved for the “Project stopper” attributes

Stage-gate process and structure

Select Project Appraise Operate Execute Define Resource

Appraise

IDENTIFY SELECT DEVELOP EXECUTE OPERATE

Assess Select Define Execute Operate Review

APPRAISE SELECT DEFINE EXECUTE

G1

G2

EXPLORATION

GO

G3

G4

IDENTIFY SELECT DEFINE EXECUTE OPERATE

Phased Project Process

DSP1 DSP2 DSP3 DSP4

Identify

Prepared by Jean-Marc Soucy SKOLKOVO Schlumberger Project Management Chair

Decision Gates (DG)

Summary • UNFC was successfully used to classify the projects that constitutes the

total Norwegian Resource Accounts

• This year’s ”General rules categorisation” to smaller UNFC-classes and sub-classes was successful. Considered more correct than mapping of “primary” classes because important granularity was not accounted for

• We have to utilize the sub-classes and sub-categories to capture the variability of the projects.

• The differences between direct project classification and class mapping results are minor. For high level aggregation “General Rules categorisation” might be sufficient.

• This pilot demonstrate that the mapping between NPD system and the UNFC is acceptable

• UNFC is well suited for National level use by Governments

• The project status approach has evolved over the last 20 years and has come into more general use in the last few years,.

Thank you!

Acknowledgement to Pilot Study Group: Kjell Reidar Knudsen (NPD) Astrid Nåvik (NPD, now Statoil) Karin Ask (Statoil) Magnar Haugvaldstad (NPD) Omar Ali (NPD) Per Blystad (NPD) Tom Andersen (NPD) Øystein Lie (Statoil)