1. 1 1 Harmonization of Fossil Energy and Mineral Resource Classifications Sub-soil assets subgroup issue paper prepared by: Julie L. Hass and Kristine E. Kolshus Division for Environmental Statistics Statistics Norway London Group meeting, New York, 19-21 June 2006

2. 2 Issue to be addressed: Harmonisation of subsoil asset classification - new UN Framework Classification One of the issues addressed to be considered in the revision of ch. 8 of the SEEA-2003 (Definition of physical reserves) There has now been developed a harmonized system that we should be aware of: United Nations Framework Classification for Fossil Energy and Mineral Resources (UNFC).

3. 3 Background Many different classification systems for physical subsoil assets in use. If we are to have comparable international statistics on subsoil assets, there is also a need to have a consistent starting point for making the calculations.

4. 4 Treatment in the SEEA-2003 (1) Takes the existence of the physical assets as a given and then focuses on different ways to calculate the value of the assets. Does not discuss in detail the different classification systems used by countries with regards to the physical amounts of petroleum resources…. But refers only to the McKelvey diagram.

5. 5 Treatment in the SEEA-2003 (2) Converting country systems to the McKelvey system requires interpretations to be made by each country, which may not be made in a consistent or comparable way. Different definitions of the physical petroleum resources then mean that there is not a consistent starting point for making the value calculations. Classification of petroleum assets in physical units is not given in a way to secure harmonization among countries. Unclear what assets to include in valuation calculations

6. 6 Selected country practices: CountryReserve Definitions Physical stock used in stock value estimates SEEA? SNA? DiscoveredUndiscovered DK Sum of expected proven, probable & possible No data availableDiscovered reservesSEEA Germany Un-weighted sum of proven and probable No data availableno information available? France Includes proven reserves onlyNo data availableProven reservesSNA NL Remaining expected reserveFuture additions to natural gas reserves from exploration Estimated based on government appropriation of resource rent. ? Austria Weighted sum of proven developed (weight=1), proven undeveloped (0.9), probable (0.5) & possible (0.1) reserves No data availableDiscovered reservesSEEA with weights UK Un-weighted sum of proven and probable Upper and lower range of estimated undiscovered Discovered and (lower range of) undiscovered reserves >SNA but <SEEA Norway Expected level of discovered reserves Expected level of undiscovered Discovered & (expected level of) undiscovered SEEA

7. 7 New since SEEA-2003 was in editing phase United Nations Framework Classification for Fossil Energy and Mineral resources (UNFC). UNECE Ad Hoc Group of Experts on Harmonization of Fossil Energy and Mineral Resources Terminology. http://www.unece.org/ie/se/pdfs/UNFC/UNFCemr.pdf

8. 8 Total Remaining Resources are Categorized by Three Criteria EEconomic and commercial viability FField project status and feasibility GGeological knowledge

9. 9 Categories Economic and commercial viability: E1: Economic E2: Potential economic E3: Intrinsically economic Field project status and feasibility F1: Justified F2: Contingent F3: Undefined Geological knowledge G1: Reasonable assured G2: Estimated G3: Inferred G4: Potential E1, F1, G1 E3, F3, G4

10. 10 Norways Resource Account Presented in the UNFC Classification Account as of 31.12.2003 Figures in million Sm 3 o.e.

11. 11 UNFC and the McKelvey Diagram No conversion between the two systems!

12. 12 Proposed next step & points for discussion (1) Should this be included in the SEEA or in the new Guidelines for subsoil assets? And if so how? Should the UNFC be used as the basis or simply referred to as yet another classification system without further recommendations? If the UNFC system becomes the basis for physical assets, which of the classification system (blocks) should be included in the calculations for valuation? Who should give advice on this? UNFC? Don't need any further advice, the London Group can simply make a decision?

13. 13 Proposed next step & points for discussion (2) We would suggest that the experts from the UNFC need to be consulted regarding which of the assets should be included before the London Group can make their final recommendations in the new manual/compilation guidelines for subsoil assets.