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$: Evalua on of Oil and Gas Reserves and Resources for Public ... · PDF filePROFESSIONAL PRACTICE STANDARD \MAY 2017 2 Evalua on of Oil and Gas Reserves and Resources for Public Disclosure$
MAY 2017

Evalua on of Oil and Gas Reserves and Resources for Public Disclosure

PROFESSIONAL PRACTICE STANDARD

PROFESSIONAL PRACTICE STANDARD MAY 2017


DOCUMENT HISTORY

Date Version Revision Descrip on

April 2003 1.0 Ini al issue for membership use.

May 2017 2.0 Updated current prac ces and address changes to the securi es legisla on and governing prac ces. Issued for membership use.

CONTENTS

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Prac ce Standards Commi ee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

1.0 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

1.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

1.2 Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

1.3 Defi ni ons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

2.0 Evalua on And Classifi ca on Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

3.0 Standards For Preparing Evalua ons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

3.1 Professional Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

3.2 Quality Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

3.3 Technical Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

3.4 Accountability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

3.5 Informa on Gathering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

3.6 Third-Party Evalua on . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

3.7 Informa on Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

3.8 Documenta on . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

3.9 Professional Objec vity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

3.10 Professional Competence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

3.11 False Precision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

3.12 Related Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

PROFESSIONAL PRACTICE STANDARD MAY 2017


PROFESSIONAL PRACTICE STANDARD MAY 2017 1


PREFACE

An APEGA professional prac ce standard presents a level of performance expected of APEGA Professional Members. Although prac ce standards are not specifi cally legislated, Part 8 (General) of the General Regula on under Sec ons 58 and 59 permits APEGA to publish guides that defi ne for clients the scope of professional services to be expected and allows Council to issue publica ons for promo ng high standards of professional services. Professional Members are expected to conform to prac ce standards, which direct what is deemed to be acceptable prac ce.

Prac ce standards use the words must, should, and may to indicate three types of ac ons.

Must indicates that requirements must be followed to conform to the professional prac ce standard (must equals is required to).

Should indicates that among several possibili es one is recommended as par cularly suitable without men oning or excluding others, or that a certain course of ac on is preferred but not necessarily required, or that (in the nega ve form) a certain course of ac on is disapproved of but not prohibited (should equals is recommended that).

May indicates that a course of ac on is permissible within the limits of the standard (may equals is permi ed).

PRACTICE STANDARDS COMMITTEE

APEGA’s Prac ce Standards Commi ee (PSC) publishes professional prac ce standards, bulle ns, and guidelines to promote high levels of professional service. A subcommi ee of the PSC prepared this version of the prac ce standard. At the me the standard was completed, the subcommi ee had the following members:

Charles Welsh, P.Geo., Chair

John Etherington, P.Geol.

David Ellio , P.Geol.

Jim Jenkins, P.Eng.

Jim Gouveia, P.Eng.

The par cipants recognize the diligence and rigour provided by the team of the previous version.

Send comments to improve this document to:Director, Professional Prac ceAPEGA1500 Sco a One, 10060 Jasper AvenueEdmonton, Alberta T5J 4A2



1.0 OVERVIEW

This document is a standard of prac ce for the evalua on of oil and gas reserves and resources for the purpose of public disclosure such as:

• mandated disclosure by securi es regulators

• disclosure through other regulatory bodies (e.g., Na onal Energy Board, Alberta Energy Regulator)

• voluntary disclosure through publica ons (e.g., news releases, technical papers)

Publicly disclosed evalua ons of oil and gas reserves and resources are used to make investment, regulatory, and other decisions. Conduc ng resource and reserve evalua ons is professional prac ce as defi ned by the Engineering and Geoscience Professions Act. One of APEGA’s roles as the regulator of the engineering and geoscience professions is to maintain appropriate standards of professional prac ce.

Evaluators and auditors may be required to publish their reports in other jurisdic ons and be subject to the technical or public disclosure standards of those jurisdic ons. The same or be er ethical principles and standards of prac ce than those required by evaluators and auditors are to be used in preparing the reports.

1.1 PurposeThis professional prac ce standard defi nes APEGA’s expecta ons for the prepara on of oil and gas reserve and resource evalua ons. APEGA’s commi ees and boards may use this prac ce standard to assess the professional prac ce of a Professional Member or Permit Holder.

1.2 ScopeThe Canadian Oil and Gas Evalua on (COGE) Handbook is the technical standard for the professional prac ce of evalua ng and classifying oil and gas reserves and resources in Alberta.

The Evalua on of Oil and Gas Reserves and Resources for Public Disclosure prac ce standard provides the professional and ethical standards to which Alberta evaluators and auditors are required to adhere. This standard applies to evalua ons and audits that will, or can reasonably be expected to, become public (e.g., regulatory submissions, court documents). It should also apply to evalua ons of oil and gas reserves and resources prepared for a company’s internal purposes. This prac ce standard includes the recovered product types defi ned in Na onal Instrument 51-101:

• bitumen • coalbed methane • conven onal natural gas



• gas hydrates • heavy crude oil • light crude oil and medium crude oil combined • natural gas liquids • shale gas • synthe c crude oil• synthe c gas • ght oil

• ght gas

The rela onship between this prac ce standard and Alberta securi es administra on is described in Appendix E to Volume 1, sec on 3.3 in the COGE Handbook as follows:

“The Canadian Securi es Administrator provides Standards of Disclosure for Oil and Gas Ac vi es for Canadian issuers under Na onal Instrument 51-101. NI 51-101 refers to the Canadian Oil and Gas Evalua on (COGE) Handbook to provide addi onal guidance to evaluators regarding assessment and repor ng of petroleum reserves and resources and their associated future net revenue. By this reference, the COGE Handbook guidelines have the force of NI 51-101 disclosure regula ons unless specifi cally added or amended in NI 51-101.

Under Volume 1 Sec on 3.3, the COGE Handbook contains guidance on Qualifi ca ons of Evaluators and Auditors, Enforcement, and Discipline. Overseeing professional conduct of individual evaluators and permit holding organiza ons in Canada falls under the responsibility of provincial professional organiza ons that regulate the prac ce of engineering, geology and geophysics. Included in the COGE Handbook under Appendix E is the Prac ce Standard for Evalua on of Oil and Gas Reserves and Resources for Public Disclosure published by The Associa on of Professional Engineers and Geoscien sts of Alberta (APEGA). All engineers and geoscien sts prac cing within the Province of Alberta are required to register with APEGA and those engaged in oil and gas reserves and resource evalua ons are subject to the guidance in Appendix E.

It is recognized that, while NI 51-101 and the COGE Handbook provide Canadian federal regula ons regards reserves and resources public disclosures, the professional oversite is administered by the jurisdic on in which individual members and permit holders are registered. Thus each province or territory or foreign jurisdic on may issue and enforce guidance similar to that promulgated by APEGA. Op onally, they can refer to the APEGA guidance as a minimum requirement.”

The principles of this prac ce standard regulate the conduct of evaluators and auditors regardless of the report scope or audience. Although this prac ce standard refers to the COGE Handbook, the principles also apply to disclosures under regula ons and guidance provided by jurisdic ons outside of Canada that do not fall under NI 51-101 or the COGE Handbook. Evaluators and auditors should defi ne and follow the regula ons and guidelines applicable to the jurisdic on of their report.



The professional obliga ons contained in this prac ce standard apply to all work performed by the registrants in the areas of oil and gas evalua on, classifi ca on, and repor ng and may exceed mandated public disclosure regula ons.

1.3 Defi ni onsFor the purposes of this professional prac ce standard, the following terms and defi ni ons apply.

ActThe Engineering and Geoscience Professions Act

AuditA third-party assessment of an es mate and classifi ca on of an oil and gas reserve and resource quan es and their economic value to an organiza on.

AuditorA third-party Qualifi ed Reserves Auditor, as defi ned in the Canadian Oil and Gas Evalua on Handbook, is a Professional Member with suffi cient educa onal background, training, and experience to exercise reasonable and prudent judgement when advising a company whether its resources and reserves are presented according to standards prescribed by the technical and fi nancial regulators for the jurisdic on in which they are reported.

Authen ca onApplica on of a Professional Member’s stamp, signature, and date as prescribed by APEGA’s Authen ca ng Professional Documents prac ce standard. Such authen ca on can include a Permit Number.

Canadian Oil and Gas Evalua on Handbook The technical standard for the professional prac ce of evalua ng and classifying oil and gas reserves and resources in Alberta.

Evalua onThe es ma on and classifi ca on of oil and gas reserve and resource quan es and their economic value

EvaluatorA Qualifi ed Reserves Evaluator, as defi ned in the Canadian Oil and Gas Evalua on Handbook, is a Professional Member with suffi cient educa onal background, training, and experience to exercise prudent judgement when classifying and es ma ng resources and reserves and when preparing and analyzing cash fl ows. The evaluator may be employed by a third-party Permit Holder or by the company owning the resources being classifi ed and evaluated.



MayA course of ac on permissible within the limits of the professional prac ce standard (may equals is permi ed)

MustRequirements that must be followed to conform to the professional prac ce standard (must equals is required to)

Permit HolderA company that engages in the prac ce of engineering and/or geoscience in Alberta as part of its business

Professional MemberA Professional Engineer or Professional Geoscien st authorized to prac se engineering and/or geoscience under the Act

Public DisclosureAny informa on released outside of an origina ng offi ce intended as advice or background that would be useful to decision makers or the public

Reasonableness Within context, a reasoned confi dence of a Professional Member in his or her interpreta on, exercising good prac ce

Responsible MemberA Professional Member who provides overall direc on and is responsible for the quality management program under which Professional Members prac se the professions of engineering and geoscience

ShouldAmong several possibili es one is recommended as par cularly suitable without men oning or excluding others, or that a certain course of ac on is preferred but not necessarily required, or that (in the nega ve form) a certain course of ac on is disapproved of but not prohibited (should equals is recommended that)

2.0 EVALUATION AND CLASSIFICATION PROCESS

Evalua on of oil and gas reserves and resources is technical work prepared to provide es mates of the quan es, quali es, and values of known or poten al hydrocarbon resources considered to be prospec ve or known accumula ons. Recoverability is based on technical feasibility, economic factors, and other factors relevant to commerciality. The public, regulators, and others use and rely on these es mates while making investment, regulatory, and other decisions.



The evalua on process requires a mul disciplinary approach, o en involving a variety of geoscience and engineering prac ces, followed by economic analyses. The evalua on report must be fi t for its intended purpose.

First, physical parameters are gathered and analysed to provide an es mate of the quan es of hydrocarbons that could be technically recovered from the accumula on. Second, economic analysis determines the quan es that could be economically recovered. The resul ng es mate of quan es and values is a forecast of future outcomes.

Best prac ce is to assess and report the full range of poten al outcomes. All available data, such as seismic data and pressures for decline analyses and its eff ects on reservoir characteriza on, should be used or considered to assist in the evalua on process. However, all reasonable eff orts to verify these data must be made.

3.0 STANDARDS FOR PREPARING EVALUATIONS

3.1 Professional WorkThe evalua on of oil and gas reserves and resources for public disclosure is professional prac ce as defi ned in the Act.

Evaluators and auditors must apply their exper se to the gathering, analysis, and documenta on of their work.

Evaluators and auditors must engage appropriate exper se from others on ma ers outside their areas of exper se.

Evaluators and auditors must use all available technology to assist in the evalua on.

3.2 Quality ManagementQuality management for this prac ce standard is defi ned as a formal process to create and maintain systems described in ISO 9001/1201 or a similar process.Evaluators, auditors and Permit Holders conduc ng reserve and resource evalua ons must develop, maintain, and apply a quality management program to ensure the ongoing integrity of the evalua on work. This program should list:

• management’s role and responsibili es as defi ned in APEGA’s Professional Prac ce Management Plans professional guideline

• evaluators’ and auditors’ roles and responsibili es

• evaluators’ and auditors’ qualifi ca ons

• how to access all relevant and verifi able data



• how data, documents, and records will be managed

• how professional documents will be authen cated per APEGA’s Prac ce Standard for Authen ca ng Professional Documents

• how confl icts between data and outcomes will be resolved

3.3 Technical StandardsIn preparing evalua ons for Canadian disclosure, evaluators and auditors must follow, at minimum, the technical standards of the COGE Handbook prepared and maintained by the Calgary Chapter of the Society of Petroleum Evalua on Engineers, unless another relevant standard is required by another jurisdic on, such as the United States Securi es Exchange Commission, the Inter-Provincial Advisory Commi ee on Energy Petroleum Resources Management System, or the United Na ons Framework Classifi ca on for Fossil Energy and Mineral Reserves and Resources.

Members of APEGA’s Prac ce Standards Commi ee have reviewed the COGE Handbook and are sa sfi ed that the technical elements of the handbook are appropriate, evaluators and auditors must use improved technical methods to validate and interpret the data. Evaluators and auditors must consider all relevant engineering, geology, geophysics, and economic data, and other factors rela ng to commerciality.

In preparing evalua ons for non-Canadian disclosure, evaluators and auditors must clearly iden fy the specifi c standard to which the evalua ons were prepared. The standard selected must be publicly available.

3.4 AccountabilityEvaluators and auditors are accountable for the quality and integrity of reserve and resource evalua ons conducted under their direc on and guidance. Inappropriate infl uence must not aff ect the results of evalua ons prepared under their direc on.

Responsible Members supervising the evaluators and auditors involved in the evalua on must authen cate (sign, date, and stamp) all fi nal evalua on documents. Evaluators and auditors should refer to APEGA’s Authen ca ng Professional Documents professional prac ce standard and Relying on Work Prepared by Others professional guideline for clarifi ca on of authen ca on requirements.

3.5 Informa on GatheringEvaluators and auditors must incorporate all available and relevant informa on up to the eff ec ve date when preparing a reserve and resource evalua on. Evaluators and auditors must verify all data and all work done to gather the data.



3.6 Third-Party Evalua onEvaluators and auditors preparing third-party evalua ons must obtain wri en assurance from their clients that all relevant data, as at the eff ec ve date, have been made available. Best prac ces suggest that evaluators and auditors should require that the clients obtain prior approval for the public disclosure of any excerpt from a third-party evalua on report.

3.7 Informa on AnalysisTo write a proper evalua on, evaluators and auditors should, at a minimum:

• review and include all relevant and current data and mapping informa on

• explain any geological or seismic mapping disagreements

• reconcile confl ic ng data

• properly apply appropriate analy cal techniques and check for alterna ve interpreta ons

• check for reasonableness

• document how they reconciled confl ic ng data (e.g., using mul ple methods to determine resource and reserve es mates result in inevitable diff erences)

• properly apply appropriate analy cal techniques and check for alterna ve interpreta ons to assess the uncertainty in the evalua on

• ensure that reasonable and objec ve data analysis and documenta on have been performed, with clear reference to the reserve and resource defi ni ons, analy cal approaches, economic standards, and other factors that must be met before comple ng a reserve and resource evalua on

• consider the technically advanced processes that may be available

• consider appropriate environmental methods as per APEGA’s Environmental Prac ce professional guideline

• assess the quality and completeness of all relevant informa on, iden fy gaps and inconsistencies, and ensure that the reserve and resource evalua on is founded on the best interpreta on of the informa on, as at the eff ec ve date.

Reserve and resource evalua ons rely on a broad spectrum of prior engineering and geoscience reports. Evaluators should carefully review prior work to assess its reliability and applicability (see APEGA’s Relying on Work Prepared by Others professional guideline).

3.8 Documenta onEvaluators and auditors must document their work suppor ng the reserve and resource evalua on according to APEGA’s Authen ca ng Professional Documents professional prac ce standard, and they must include the following informa on:



• quality and completeness of the informa on used to complete the evalua on

• ra onale for dealing with any inconsistencies

• analysis techniques used

• any limita ons or compromising factors aff ec ng the reasonableness of the evalua on

• any data excluded from the analyses and an explana on of why the data were excluded

• reserve and resource defi ni ons and other professional or regulatory standards used

Data and technical analyses must be retained to be available to qualifi ed auditors, when required. Reten on periods are not specifi ed in NI51-101 or the COGE Handbook. However, the Alberta Limita ons Act allows civil claims up to 10 years, represen ng the minimum reten on period for data and informa on.

3.9 Professional Objec vityEvaluators and auditors must not allow unsupported technical opinion or other inappropriate infl uences to aff ect the analysis or conclusions of the evalua on. Evaluators and auditors should consult the applicable professional and regulatory standards for guidance on independence in evalua ons.

3.10 Professional CompetenceThe technical knowledge and judgement necessary for profi cient reserve and resource evalua on requires a combina on of academic training and work experience. Evaluators and auditors should use mentoring, con nuing professional development, and career management to develop and maintain the necessary competency.

Technical, economic, environmental, and societal factors must be part of a professional evalua on, and this growing complexity lends itself to a team approach. Permit Holders should ensure that their evalua on staff develops and follows specifi c training and capability development plans.

The plans should include a team approach and an appropriate risk assessment.

APEGA’s Code of Ethics emphasizes that Professional Members must:

• only undertake work that they are competent to perform by virtue of training and experience

• express opinions on professional ma ers only on the basis of best available knowledge and industry best prac ces



3.11 False PrecisionEvaluators and auditors must ensure that the results of an evalua on are presented in a manner consistent with the certainty of the expected outcome. Evaluators and auditors must ensure that the accuracy of an es mate is not misrepresented by the manner of the documenta on.

Evaluators and auditors should also include in the evalua on report a statement regarding the forward-looking nature of reserve and resource evalua ons and the poten al for future material change because of new informa on or changing economic, regulatory, or opera ng condi ons.

3.12 Related Documents This standard must be read in conjunc on with the current versions of the following APEGA professional prac ce standards and guidelines available at www.apega.ca:

Authen ca ng Professional Documents

Relying on Work Prepared by Others

Environmental Prac ce

Determining the Need for Professional Involvement in Outsourced Engineering

Determining the Need for Professional Involvement in Outsourced Geoscience

Professional Prac ce Management Plans