1. ESCM Draft chapter 6 Energy Accounts Oslo Group-meeting September 24-27, 2013 in Baku, Azerbaijan Prepared by Kristine Kolshus Division for Energy and Environmental Statistics - Statistics Norway kristine.kolshus@ssb.no

2. 2 Overview of presentation  Process of work and present status  Purpose with presentation  Comments virtual meeting (VM)  Proposed content of the chapter 6  Proposed content of the different sub-chapters  Way forward

3. 3 Process of work and present status Process of work and present status  The environmental account team in Statistics Norway coordinates the work.  At the last Oslo group meeting in Helsinki, it was decided that this chapter on energy accounts should refer to SEEA-E, not only physical energy flow accounts.  Process so far mainly on which core areas of SEEA-E to include in the ESCM chapter 6.  Unfortunately a bit behind schedule, but work started up as late as spring 2013.  Focus of the Oslo-group meeting to agree upon the content for chapter 6 and inform on the way forward the next two months.

4. 4 Comments from the Virtual meeting  Although it was decided at the last Oslo group that the coverage of this chapter was energy accounts as defined in SEEA-E, it is challenging to decide what issues to include in order not to make this chapter too long.  The purpose of the VM was therefore to receive feedback on what compilation issues to focus on in this chapter.  Comments from in total 7 countries (Denmark, Netherland, Canada, Colombia, Italy, Australia) and 3 organisations (UNSD, IEA and Eurostat).  The comments were very divided in type of recommendations as well as very different regarding what issues were commented on.

5. 5 Comments in VM divided, but several emphasized the following issues:  Focus on data sources and compilation methods rather than discussing conceptual issues  Text should not duplicate what is already found in SEEA Central Framework, SEEA-Energy and IRES. The descriptions of the framework should be very brief and overlaps avoided.  Moving sub-chapter on “combined presentations for energy”/”hybrid accounts” and other uses of the energy accounts to be covered by the ESCM-chapter related to use and indicators  Give bridge tables to explain to users that only have information on energy balances what adjustments might need to be made so that they can do the physical flow accounts.

6. 6 Proposed issues to be covered in chapter 6  Structures of content now changed in order to follow SEEA-E: 6.1 Introduction 6.2 Physical energy flow accounts 6.3 Monetary flow accounts and other transactions related to energy 6.4 Physical and monetary asset accounts 6.5 Summing up  Wide-ranging issues to be covered – challenge to keep it short.  Some of the areas that originally was included as possible issues to cover in chapter 6 have been recommended to be moved from this chapter in order to be included in other chapters in ESCM. Contact with the coordinator of this chapters have been contacted.

7. 7 Content of sub-chapter 6.1 Introduction  Feedback from the VM: Keep introduction short  6.1.1 Purpose of chapter 6 (which of the core accounts of SEEA-E must be to advise on data sources; possible compilation options; and practical steps in the compilation process.  6.1.2 What are energy accounts.  6.1.3 Why compiling energy accounts (which are the possible applications., i.e. the analysis of the link with the economy. Therefore, a description of the possible uses of energy accounts is very important – but not in chapter 6?  6.1.4: Scope and classifications  Question: Are there agreement on the suggestion to let the topic of uses of energy accounts and indicators to be covered by the ESCM-chapter related to use and indicators?

8. 8 Sub-chapter 6.2 Physical energy flow accounts (I)  Focus in this chapter only on physical flow accounts (SUTs), since the data sources for monetary accounts may be different from the physical ones. Now there is one chapter on “monetary flow accounts and other transactions related to energy”.  Briefly presenting the physical SUT tables 3.4 and 3.5 in SEEA-E of which the compilation strategies and data sources are to be described in this sub-chapter.  Main data sources – clarify that compiling physical energy flow accounts does not need to be depended on compiling energy balances, but that most countries will use the balances as the starting point for compiling these accounts or will compile these accounts at the same time as the balances based on various energy statistics. – introduce the idea of multipurpose data ware-house.

9. 9 Sub-chapter 6.2 Physical energy flow accounts (II)  What compilation strategy to present?  In the proposed draft the “energy balance – first” approach was presented initially and then “basic energy data - first”-approach afterwards.  Question: Are there agreement to the suggestions in VM to initially describe “basic energy data – first” approach in connection with the description of of multipurpose data ware-house. Then afterwards focus on the “energy balances – first” approach, explaining the various five steps as suggested in the draft chapter.  Questions: - Are there many countries that compile the physical energy flow accounts using other approaches than the “energy balances first” approach? - Are there countries compiling physical energy flow accounts using the national accounts as the starting point?

10. 10 Sub-chapter 6.2 Physical energy flow accounts (III)  In sub-chapter on the correction of the SUT for the concepts of the national accounts - most examples from Eurostat-guidelines and European countries - where to find other practical guidance?  Statistical discrepancies - two different ways of approaching this issue: 1. How to minimise statistical discrepancies - not view statistical discrepancies only as an inconvenience - instead it is an opportunity to understand, assure and improve underlying data series”. - therefore also important to include some text on different reasons for statistical discrepancies to occur and what to check in order to minimise the statistical discrepancies. 2. What to do if statistical discrepancies exist? - Are there more than the two approaches mentioned, i.e. adjusting stocks/inventories as in the national accounts or distributing the difference across industries? - what are the recommended approaches to use for minimising statistical discrepancies?

11. 11 Exclude originally proposed sub-chapter on combined presentation for energy – “hybrid accounts”  These combined presentations for energy are one of the main uses of the energy flow accounts, and the starting point for many of the indicators estimated using energy flow accounts, national accounts, air emission accounts etc.  These combined presentations are typically an use of energy accounts, and hence was recommended to be moved to the ESCM chapter on use and indicators.  Include some text on this issue in the last sub-chapter when summing up.  Question: Are there agreement to this recommendation?

12. 12 Sub-chapter 6.3: Monetary flow accounts and other monetary transactions related to energy (I)  These are all extensive accounts is sub-chapter relates to the part of SEEA-E containing: - Monetary supply and use tables - Environmental related activities and expenditures related to energy (ex. Environmental protection expenditures, Resource management expenditures, Environmental Goods and Services Sector) - Taxes and subsidies related to energy production and use

13. 13 Sub-chapter 6.3: Monetary flow accounts and other monetary transactions related to energy (II)  The few comments that were received regarding this area in the VM were related to monetary energy flow accounts and challenging regarding converting between physical and monetary measures using energy prices. Question: Are there countries that do this? Energy prices need to be discussed, as well as energy product classification.  Need also to provide compilation guidance on a range of energy- related transactions described in SEEA-Energy – but need country examples.

14. 14 Sub-chapter 6.4 Physical and monetary asset accounts for energy resources.  Focus on compilation of table 5.3 and 6.1, but in VM it was also mentioned that compilation of physical asset accounts for inventories of energy products (5.4 and 6.6) needed to be covered.  Question: Are there agreement to this recommendation? Who can provide practical guidance in the compilation of table 5.4 and 6.6?  First part of this sub-chapter focuses on how to measure the level of sub- soil assets in physical terms,  while the second part will focus on how to place value on these  Asset accounts are well covered in SEEA CF and SEEA-E, but there are some issues that need better coverage when it comes to compilation issues.

15. 15 Sub-chapter 6.4 Physical asset accounts - how to classify the energy resources?  Recommending to use the UNFCC-Classification Fossil Energy and Mineral Reserves and Resources that recently has been developed. - Guidelines are needed in order to use this framework and to covert from the different national classification systems in use by countries. - Different definitions of the energy resources mean that there is not a consistent starting point for making the valuation calculations.  Question: Are there any countries that have taken this UN-classification system in use?  Not necessarily National Statistical Offices that are responsible for the classification of energy resources.  Although the asset accounts are in physical terms, the size of the stock depends upon the price. It is therefore important to discuss influence of prices on these data – need to know assumptions on prices to understand the data.

16. 16 Sub-chapter 6.4 Monetary asset accounts - how to put value on the energy resources?  SEEA recommends to calculate the total monetary value of the energy resources as the present value of all future net resource rent that the stock of asset are expected to yield.  Assumptions make a big difference!  The valuation of the oil and gas resources is highly dependent on - forecast of future prices & extraction levels - the choice of the discount rate and - the assumptions made in relation to the normal rate of return to fixed capital.  The chapter must discuss different sources in use to obtain the data needed for the estimations, as well as discussing the effect of choosing different assumptions. Uncertainty analysis will be recommended!

17. 17 Example: Effect of changing the assumptions Norway (data from 2001) Oil (and NGL)Natural Gas Unit rent (mill NOK) 3-year moving averageCurrent year 3-year moving averageCurrent year Rate of return Dis- count rate 6 %8 %10 %8 %6 %8 %10 %8 % 0 % 3 837 5643 642 6253 447 6873 572 5063 887 4163 688 4843 489 551 4 297 258 4 % 2 528 8842 400 4232 271 9622 354 215804 618764 443722 268889 447 8% 1 788 9421 698 0681 607 1951 665 381405 984385 208364 433448 786

18. 18 Finalising draft chapter 6 - the way forward → no time to loose !  Based on comments from the Oslo group members, a final draft will be written - to be commented on both by the Oslo group member and by the London Group members.  Include volunteering countries in work with the drafting of the chapter. Sub- chapter 6.4  Compilation of Energy accounts will be in focus also at the London group meeting in Mid-November.  Depending on the further time schedule decided on by the Oslo group, a goal for this work with chapter 6 must be to have a final draft to be presented at the London Group meeting.  Then based on comments in the London group meeting and by the Oslo group members (by electronic/virtual meeting) by the end of November/beginning December internalise the final comments.

19. 19 Issues that are lacking in draft chapter or issues to be moved to other parts of the ESCM or excluded from ESCM? Comments to draft chapter and answers to the questions raised in this presentation can also be sent after the meeting to kristine.kolshus@ssb.no Thank you for your attention!