Norway Outlines How It Classifies Reserves

Based on the recent focus on the oil companies' revision of reserves, the Norwegian Petroleum Directorate (NPD) hereby provides a brief account of how petroleum resources and reserves are classified and recorded by the authorities in Norway.

Management of the petroleum resources is an important task for the authorities, in the same way as organizing the activities to exploit them is for the industry, and organizing the financial requirements is for those who finance the recovery of resources. One of the NPD's primary tasks is to maintain an overview of the total petroleum resources so that the authorities have the best possible basis on which to plan measures for good management of the resources and for forecasting future production and activities.

The NPD has prepared a resource classification system based on the maturity of the resources in relation to development and recovery of the petroleum volumes. Our understanding of how much can be recovered from a field at any given time changes over time based on new knowledge about the natural conditions, technological developments and external framework conditions. All operators report their estimates to the NPD in accordance with this resource classification system. The estimates consist of expected values with associated uncertainty. In addition, the NPD makes it own assessments of the estimates.

The NPD's resource classification system consists of three classes: reserves, contingent resources and undiscovered resources. The reserves are based on what has been approved for recovery, while contingent resources require approval in order to be recovered. The classes are divided into appropriate categories that specify the status of the projects/measures necessary to bring the undiscovered resources into production. Undiscovered resources require exploration in order to be discovered and realized. A field may have resources in all categories, but only the reserves are published for a field.

Historically speaking the reserves in fields have been conservatively estimated. This is natural as the reserves are only based on the decisions made at any given time. As the field is developed through production it is natural that the remaining resources are reclassified as reserves when adjacent deposits and projects for increased recovery are approved for implementation. History shows that decisions are constantly made to implement new projects on the fields, and this increases the reserves. The reserve estimate for the Norwegian shelf is currently 4.1 billion Sm3 oil equivalents. The NPD believes this figure will increase by more than 20% based on the opportunities for increased recovery on each field.
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