United Nations Framework Classification Meeting the challenges in total resource development and channelling investments Charlotte GRIFFITHS Deputy Director Sustainable Energy Division UNECE UMREK Workshop Ankara, Turkey, 26–27 January 2017 U M R E K National Resources and Reserves Reporting Committee

UN Regions UNECE ESCWA ESCAP ECA ECLAC 2

Sustainable Development Goals & Paris Climate Agreement 17 GOALS TO TRANSFORM OUR WORLD 3

UNFC United Nations Framework Classification for Fossil Energy and Mineral Reserves and Resources 2009 - name change coming soon as part of UNFC revision Global, generic, principles-based system Applicable to solid minerals, fluids, renewables (geothermal), injection projects Based on three criteria Economic and social viability Field project status and feasibility Geological knowledge Developed by Expert Group on Resource Classification at UN Economic Commission for Europe, Geneva – with a global mandate 4

Why is UNFC needed? Need for common global language for energy and mineral resource estimates “Terminology chaos” What are “proved reserves”? What are “mineral resources”? Increasing overlap between mining and oil & gas industries Major issue with respect to “unconventional” resources CRIRSCO Template (family of codes eg JORC, PERC) designed for mined solids SPE-PRMS (for petroleum) designed for fluids Long-term planning (at company and national level) Need to see total resource base for “sustainability” Increasing need to be able to compare renewable energy resources with non-renewable resources

Proved reserves must be… Why three criteria… Proved reserves must be… Economic to extract (commercially feasible) Global Physical Resource (defined with high confidence) Feasible technically to extract

UNFC – How it works E axis categories G axis categories F axis categories G axis categories (General physical confidence)

UNFC Class: 111 UNFC – how it works 8 Category Definition E1 Extraction and sale has been confirmed to be economically viable. UNFC Class: 111 Category Definition F1 Feasibility of extraction by a defined development project or mining operation has been confirmed. Category Definition G1 Quantities associated with a known deposit that can be estimated with a high level of confidence. 8

UNFC – examples of classes E1, F1, G1 9

UNFC – sub-categories The system allows further granularity through sub- categories Important for discovered sub-economic resources (i.e. helps to understand why they are not reserves and barriers to progression) These are optional These sub-classes also align with some mining companies’ reporting practices If using JORC, PERC etc will allow expansion to cover total resource base

UNFC – using sub-categories UNFC Classes defined by categories and sub-categories Total commodity initially in place Extracted Sales Production Non-sales Production Class Sub-class Categories E F G Known Deposit Commercial Projects On Production 1 1.1 1, 2, 3 Approved for Development 1.2 Justified 1.3 Potentially Development Pending 2 2.1 On Hold 2.2 Non-Commercial Unclarified 3.2 Not Viable 3.3 2.3 Additional quantities in place 4 Potential Deposit Exploration [No sub-classes defined] 3 Each criterion is sub-divided into 3 or 4 defined categories Optional use of sub-categories for more granularity 11

UNFC and CRIRSCO Template are aligned Sales Production Non-sales Production Class Commercial Projects Potentially Commercial Non-Commercial Additional quantities in place Exploration Extracted Class Mineral Reserves Mineral Resources Not reported Exploration Target (quantities not reported) All remaining resources Reported Total commodity initially in place Not reported 12

How can we use alignment? Quantities can be estimated using current well-established commodity-specific systems e.g. CRIRSCO family of codes (JORC, PERC, etc.) Reporting under these systems can continue unchanged, but the same quantities can also be reported under UNFC using the numerical codes UNFC can be used for estimates not covered by CRIRSCO codes and hence cover the full resource base Reporting is then independent of commodity type, extraction methodology and ambiguous terminology The systems operate in parallel – they are not competitors

UNFC history 1992 1997 2004 2009 Started development of system UNFC for solid fuels and mineral commodities published 2004 UNFC extended to cover oil, natural gas & uranium 2009 UNFC-2009 published

UNFC history continued 2013 UNFC-2009 incorporating Specifications (ECE Energy Series No. 42) 2014 Red Book and UNFC Bridging Document published 2014 Application to renewables started Renewables specifications 2015 Guidelines for application to nuclear fuels

UNFC history continued 2016 Injection Project Specifications 2016 Generic Renewable Specifications 2016 Geothermal Specifcations 2016 Bridging document to Russian Federation Oil & Gas Classification

UNFC UNFC stakeholders Governments Creators of energy Industry management of resources to provide data and information necessary to deploy technology, management and finance to serve host countries, shareholders and stakeholders Creators of energy & mineral studies Industry UNFC to facilitate formulation of consistent and far-sighted policies Financial Community to provide information necessary to allocate capital appropriately so reducing costs

Governments (UNECE & non-UNECE) EGRC Expert Group on Resource Classification – comprehensive global constituency representing all users of resource information Academia Governments (UNECE & non-UNECE) EGRC International organizations Industry Financial Sector Incl. standard setters Professional Societies & Associations

UNFC Bridged to Russian Federation Working to bridge to Chinese UNFC – United Nations Framework Classification for Fossil Energy and Mineral Reserves and Resources Bridged to Russian Federation Environmental and Social Guidance Working to bridge to Chinese 19

Domains of application of UNFC

Government vs corporate reporting Manage the full resource base Requirement for both governments and companies Need to understand both short-term potential (reserves) and long-term potential (discovered and undiscovered resources) Government reporting externally Government reporting is variable, but full disclosure of resource base provides a basis for meaningful global studies Usefulness is currently limited by inconsistent use of terminology (e.g. resources) Corporate reporting externally Corporate reporting is appropriately constrained by securities regulators and stock exchanges (e.g. CRIRSCO family of codes) Main goal is to protect investors and disclosures are constrained UNFC can become basis for regulatory/public reporting system Onus on user of estimate (Government, Stock Exchange etc) to provide detailed specifications on assurance process and/or experience of Evaluator 21

UNFC evaluator / competent person UNFC Generic Specification M – “Evaluators must possess an appropriate level of expertise and relevant experience in the estimation of quantities associated with the type of deposit under evaluation.” Term Competent Person is widely used in association with regulations addressing public corporate resource reporting in the extractive industries. At its 8th session, 25-28 April 2017, EGRC will consider providing two guidance notes to support: - UNFC-2009 Specification for Evaluator Qualifications – Top-level guidance Competent Person Requirements and Options for Resources Reporting – Detailed guidance on generic requirements for public reporting and disclosures for all commodities

Competent person requirements Competent Person has long been a common facet of stock exchange rules pertaining to public reports issued for a range of company transactions. EGRC guidance will address requirements related to: - Estimation of quantities or volumes - Classification of resources for reporting for (a) national resource management functions (b) public reporting by companies (c) financial reporting functions of companies and (d) internal resource management Will include options for generic requirements on: Disclosure and responsibility Education and experience Continuous training and licenses Professional body affiliation etc.

Energy needs investment! Sustainable energy = USD 1.25 trillion per annum = 3x current levels 24

Comparing energy projects

Comparing energy projects

Comparing energy projects

Ongoing initiatives Specifications and Bridging Renewable energy projects – Solar, Bioenergy, Wind, Hydro Anthropogenic resources China solid minerals and petroleum Russia solid minerals Guidelines / Best practice documents The Nordic UNFC project Uranium/Thorium Competent Person Environmental and social guidance EU projects: GeoERA, FORAM, COST Minea Africa: UNFC = African Mineral Resource Management System Coming: UNFC revision, groundwater?

Delivering on SDGs and SE4ALL Securing affordable and sustainable energy for the future requires a common standard for: Global communications about energy Recognition of environmental and social considerations Developing long-sighted policies for global markets Government resources management for security and efficiency Cost effective allocation of financial resources Industry processes to ensure common understanding of impact of new technologies and optimization of project management decisions UNFC 29

Conclusions Cooperation with Turkey – integral to UNFC development Long-term planning (at company and national level) - need to see total resource base for “sustainability” Aligned to CRIRSCO family of codes UNFC can be used for regulatory/public reporting - Onus on user of estimate (Government, Stock exchange etc) to provide detailed specifications on assurance process and/or experience of Evaluator Aids investors Global communications tool

Questions? Thank you for your attention! Join the next meeting of the Expert Group on Resource Classification "Beyond classification: managing resources sustainably” Palais des Nations, Geneva, Switzerland 25–28 April 2017 Thank you for your attention! reserves.energy@unece.org www.unece.org/energy/se/reserves.html