Industry Mulls Certifying of Petroleum Reserves Evaluators

In response to concerns over the recent petroleum reserves writedowns, two industry organizations are scheduled to decide this year whether to sponsor a program to certify reserves evaluators.

Regulators, the U.S. Congress and investors recently have called for reforms in how the oil and gas industry estimates and reports petroleum reserves, the lifeblood and main asset of companies with drilling and production operations.

"The program to train and test petroleum engineers and geologists will be modeled to some degree after the one for certified public accountants," said Dan Tearpock, who is leading the initiative for the American Association of Petroleum Geologists.

The Society of Petroleum Evaluation Engineers (SPEE) is also involved. Both will consider a business plan and budgeting for the program after evaluating and deciding on its feasibility this year.

Last year, public companies filing with the U.S. Securities and Exchange Commission reported reserves quantities valued at $2.5 trillion, a mere 3 percent of worldwide reserves.

"In the U.S. and globally, reserves are not audited by independent accountants and are not estimated by evaluators that have to meet any formal standards," said Tearpock. "The problem is international in scope."

The AAPG Division of Professional Affairs has found a lack of uniform standards in definitions and recommended practices and training for reserves estimating and reporting. "A joint committee of the AAPG and SPEE received an enthusiastic endorsement from both associations to continue its investigation and focus on five specific areas: qualifications, recommended practices, reserves definitions, certification and ethics," said Tearpock.

Managing members of the joint committee are Dan Tearpock, AAPG representative; Richard Miller, SPEE; and Ron Harrell, also a member of SPEE. Over the past year, committee managers formed subcommittees to evaluate current industry standards and the need for a formalized certification program. More than 40 volunteers from seven (7) professional societies were involved in the first phase of the study.

AAPG President Patrick J.F. Gratton said, "The current intersociety Exploratory Committee on the Certification of Petroleum Reserves Evaluators may be one of the most important initiatives of its kind underway by the AAPG at this time."

Peter R. Rose, AAPG president-elect, stated, "It is vital that the investment community and government agencies have reliable reserves estimates. The professional associations sponsoring this initiative must show the investment community and governments that we have the expertise, ethics and responsibility necessary to provide reliable reserves estimates. This initiative may be a pivotal program to ensure consistent, reliable reserves estimates in the future."