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London Group on economic and environmental accounting, 13th meeting 30th September 2008 1 Sigurd Heiberg StatoilHydro Chairperson, UNECE Ad Hoc Group of.

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Presentation on theme: "London Group on economic and environmental accounting, 13th meeting 30th September 2008 1 Sigurd Heiberg StatoilHydro Chairperson, UNECE Ad Hoc Group of."— Presentation transcript:

1 London Group on economic and environmental accounting, 13th meeting 30th September Sigurd Heiberg StatoilHydro 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

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

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

4 London Group on economic and environmental accounting, 13th meeting 30th September 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 IASBs Extractive Industries Research Project

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

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

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

8 London Group on economic and environmental accounting, 13th meeting 30th September To be categorized Going from Quantities in Place to Project Recoverables Contingent resources Prospects Reserves

9 London Group on economic and environmental accounting, 13th meeting 30th September G3 G2 G1 G3 G2 G1 Sales G3 G2 G1 Non-sales Business Decisions in Exploration and Production Prospect exploration Prospect identification Feasibility Concept Definition Business planning OperationExecution F4 E3 E3 F4 F4 E2 E1 E3 E1

10 London Group on economic and environmental accounting, 13th meeting 30th September Common Elements of Recognised Classifications

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

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

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

14 London Group on economic and environmental accounting, 13th meeting 30th September 2008 Back-up

15 London Group on economic and environmental accounting, 13th meeting 30th September UN Economic Commission for Europe (UNECE) Economic and Social Council Five UN Regional Commissions UNECE: Europe, CIS, North America, Turkey & Israel Based in Geneva, 56 Governments Mission to foster sustained economic growth and cooperation among its member countries Assist countries with transition and developing economies

16 London Group on economic and environmental accounting, 13th meeting 30th September History of UNFC 1992 German Government proposes 3-D classification to UNECE Working Party on Coal to meet the need for an internationally acceptable reserve/resource classification system capable of integrating transitioning economies from Eastern Europe and Former Soviet Union 1996 UNECE Working Party on Coal adopts UNFC for Solid Fuels & Mineral Commodities 1997 UN Economic & Social Council (ECOSOC) invites global application of the UNFC for Solid Fuels & Mineral Commodities through ECOSOC Resolution 1997/ UNECE Task Force & Council for Mining & Metallurgy Institutions (now Committee for Mineral Reserves International Reporting Standards) integrate existing definitions for minerals into a single, universally applicable set of definitions 2001 UNECE creates Group of Experts to extend the UNFC to petroleum and other mineral resources (e.g. uranium) 2003 UNECE Committee on Sustainable Energy adopts UNFC for petroleum & minerals 2004 UN ECOSOC recommends appropriate measure taken for global application of UNFC for petroleum & minerals UNFC 2004 in Resolution 2004/233 Early Focus on Solid Fuels & Minerals Petroleum & Other Minerals Global System Present UNECE Ad Hoc Group of Experts developing UNFC as global common code

17 London Group on economic and environmental accounting, 13th meeting 30th September UNFC for Petroleum E 1 Economic E 2 Potentially economic E 3 Intrinsically economic F 1 Justified F 2 Contingent F 3 Undefined G 1 Reasonably assured G 2 Estimated G 3 Inferred G 4 Potential Categories E F G + Non-Sales production + Sales production

18 London Group on economic and environmental accounting, 13th meeting 30th September Codification The criteria (E, F, G) are divided into categories (1, 2, 3, 4). Resource quantities are classified by an E, an F and a G category E1, F1, G1 E3, F3, G4

19 London Group on economic and environmental accounting, 13th meeting 30th September Codification continued The categories are quoted in fixed order: EFG The category letters are removed, but the numbers are retained. The resources are identified by a number code (111), (334), etc. Codification facilitates communication independent of alphabet. 111 E3, F3, G4 334 E1, F1, G1

20 London Group on economic and environmental accounting, 13th meeting 30th September UNFC and other classifications – the McKelvey

21 London Group on economic and environmental accounting, 13th meeting 30th September UNFC and the SPE PRMS Society of Petroleum Engineers Petroleum Resource Management system ReservesReserves –111,112,113 Proved reserves 111 Contingent resourcesContingent resources –121,122,123,221,222,223, …….. Prospective resources –334 SPE PRMS Reserves Contingent resources Prospective resources

22 London Group on economic and environmental accounting, 13th meeting 30th September Classes of quantities – defined by combination of categories ReservesReserves –111,112,113 Proved reserves 111 Contingent resourcesContingent resources –121,122,123,221,222,223, …….. Prospective resources –334 SPE PRMS

23 London Group on economic and environmental accounting, 13th meeting 30th September Mapping of UNFC to other classifications Mapping Task Force established June 2007 Mapping UNFC to the SPE PRMS, CRIRSCO Template and Russian Federation Classification Systems Mapping was built upon results from SPE and CRIRSCO mapping for IASB research project for reporting extractive activities Results presented at the 4th AHGE meeting April 2008

24 London Group on economic and environmental accounting, 13th meeting 30th September Mapping continued Observations: –Current (2004) UNFC has different category labels for solid minerals and petroleum –Current (2004) UNFC has different definitions for solid minerals and petroleum –Common expressions have multiple meanings, also in English e.g. Reserves

25 London Group on economic and environmental accounting, 13th meeting 30th September Proposed measures : –Remove labels (name tags) of categories Cultivate numerical codification principle to avoid misunderstanding and ambiguity through translation and comparison to other classifications –Develop generic, principles-based, definitions Common definitions for petroleum and minerals Appropriate for Umbrella system in order to facilitate harmonization Shorter definitions –Revise UNFC based on new definitions developed by Mapping Task Force Mapping continued

26 London Group on economic and environmental accounting, 13th meeting 30th September Mapping Results The mapping of the CRIRSCO Template and the SPE- PRMS system against the revised UNFC definitions illustrates the very high level of harmonisation that has been achieved. The existing guidelines for the two systems (SPE PRMS and CRIRSCO Template) could be applied to the UNFC with little, if any, modification. The mapping of the Russian Federation classification systems to proposed new UNFC definitions shows high, but not perfect alignment.

27 London Group on economic and environmental accounting, 13th meeting 30th September Concluding Remarks UNFC is the only global system comprising both minerals and fossil energy (petroleum) UNFC will serve needs in international energy studies, national resource management, company business process management and financial reporting UNFC is both an umbrella system to which other classifications can map, but also a system on its own UNFC is harmonised with SPE PRMS (Petroleum) and CRIRSCO (Minerals) systems UNFC developed by stakeholders (including the UN ECOSOC) with the assistance of professional organisations UNFC (2004) being revised ONE COMMON SYSTEM IS ACHIEVED THROUGH UNFC

28 London Group on economic and environmental accounting, 13th meeting 30th September UNFC – Summary Strengths Formalised project status categories Clarifies requirement for commitment Highlights on sustainability pathways No language issues (numerical system) Can be used for other energy types (e.g. coal, uranium) Endorsed by United Nations Opportunities Develop common terminology with SPE/WPC/AAPG/SPEE, CRIRSCO, and others Development of specifications and guidelines Encourage and facilitate routine use


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