UNFC Workshop 1Almaty, 10-11 December, 2009

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Brief History of Development of Resource Classification Systems

Jim RossRoss Petroleum (Scotland) Limited

UNFC Workshop 2Almaty, 10-11 December, 2009

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Resource Classification Systems

• 1928 – Petroleum classification of the Soviet Union• 1972 and 1975 – McKelvey Box• 1980 – USGS/Bureau of Mines resource classification system• 1997 – UNFC minerals resource classification• 1997 – NPD resource classification• 2000 – SPE/WPC/AAPG resource definitions and classification• 2001 – NPD resource classification• 2004 – UNFC integration of coal/petroleum/uranium• 2005 – Russian Federation (not yet implemented)• 2006 – CRIRSCO minerals classification template• 2007 – SPE/WPC/AAPG/SPEE Petroleum Resources Management

System (PRMS)• 2009 – Proposed revised UNFC (UNFC-2009)

UNFC Workshop 3Almaty, 10-11 December, 2009

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Resource Classification Systems

• 1928 – Petroleum classification of the Soviet Union• 1972 and 1975 – McKelvey Box• 1980 – USGS/Bureau of Mines resource classification system• 1997 – UNFC minerals resource classification• 1997 – NPD resource classification• 2000 – SPE/WPC/AAPG resource definitions and classification• 2001 – NPD resource classification• 2004 – UNFC integration of coal/petroleum/uranium• 2005 – Russian Federation (not yet implemented)• 2006 – CRIRSCO minerals classification template• 2007 – SPE/WPC/AAPG/SPEE Petroleum Resources Management

System (PRMS)• 2009 – Proposed revised UNFC (UNFC-2009)

UNFC Workshop 4Almaty, 10-11 December, 2009

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McKelvey Box (1972 and 1975)

• Two-dimensional system

– Degree of geological assurance

– Degree of economic feasibility

UNFC Workshop 5Almaty, 10-11 December, 2009

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McKelvey Box (1972 and 1975)

• Fundamental Principles

– Reserves are discovered (identified)

– Reserves are economically recoverable

UNFC Workshop 6Almaty, 10-11 December, 2009

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McKelvey Box (1972 and 1975)

Note: Slightly simplified representation from originals

IDENTIFIED UNDISCOVERED

ECO

NO

MIC

SUB

-EC

ON

OM

IC RESOURCES

Increasing degree of geologic assurance

Incr

easi

ng d

egre

e of

eco

nom

ic fe

asib

ility

RESERVES

Proved Probable Possible

UNFC Workshop 7Almaty, 10-11 December, 2009

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Resource Classification Systems

• 1928 – Petroleum classification of the Soviet Union• 1972 and 1975 – McKelvey Box• 1980 – USGS/Bureau of Mines resource classification system• 1997 – UNFC minerals resource classification• 1997 – NPD resource classification• 2000 – SPE/WPC/AAPG resource definitions and classification• 2001 – NPD resource classification• 2004 – UNFC integration of coal/petroleum/uranium• 2005 – Russian Federation (not yet implemented)• 2006 – CRIRSCO minerals classification template• 2007 – SPE/WPC/AAPG/SPEE Petroleum Resources Management

System (PRMS)• 2009 – Proposed revised UNFC (UNFC-2009)

UNFC Workshop 8Almaty, 10-11 December, 2009

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Norwegian Petroleum Directorate (1997)

• One-dimensional system

– Level of project maturity

– Also requires assessment of uncertainty

UNFC Workshop 9Almaty, 10-11 December, 2009

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Norwegian Petroleum Directorate (1997)

UNDISCOVEREDRESOURCES 9

Prospects 10Leads

11UnmappedResources

DISCOVEREDRESOURCES

6Development

not verylikely

5May be

developedin the long

term

4Early

planningphase

3Late

planningphase

8Possible future

measures toincrease RF

7New

Discoveries

2Approved

development

1In

production

0Ceased

production

RESERVES

UNFC Workshop 10Almaty, 10-11 December, 2009

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Resource Classification Systems

• 1928 – Petroleum classification of the Soviet Union• 1972 and 1975 – McKelvey Box• 1980 – USGS/Bureau of Mines resource classification system• 1997 – UNFC minerals resource classification• 1997 – NPD resource classification• 2000 – SPE/WPC/AAPG resource definitions and classification• 2001 – NPD resource classification• 2004 – UNFC integration of coal/petroleum/uranium• 2005 – Russian Federation (not yet implemented)• 2006 – CRIRSCO minerals classification template• 2007 – SPE/WPC/AAPG/SPEE Petroleum Resources Management

System (PRMS)• 2009 – Proposed revised UNFC (UNFC-2009)

UNFC Workshop 11Almaty, 10-11 December, 2009

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SPE/WPC/AAPG Petroleum Resource Classification System (2000)

• Two-dimensional system

– Level of Project Maturity• Characterised by the probability of the project achieving

production and hence revenue

– Range of Uncertainty• Characterised by the range of estimated recoverable

volumes from the project

This distinction is essential for portfolio analysis,decision-making and portfolio management

UNFC Workshop 12Almaty, 10-11 December, 2009

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McKelvey Box showingSPE/WPC/AAPG Terminology (2000)

DISCOVERED UNDISCOVERED

CO

MM

ERC

IAL

SUB

-CO

MM

ERC

IAL

RESERVES

PROSPECTIVERESOURCES

CONTINGENTRESOURCES

UNFC Workshop 13Almaty, 10-11 December, 2009

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SPE/WPC/AAPG Petroleum Resource Classification System (2000)

DISCOVEREDCOMMERCIAL

DISCOVEREDSUB-COMMERCIAL

UNDISCOVERED

Production

Range of Uncertainty

Proved(1P)

Proved +Probable

(2P)

Proved + Probable + Possible

(3P)

Low

Low

Best High

Best High

RESERVES

CONTINGENTRESOURCES

PROSPECTIVERESOURCES

Unrecoverable

UnrecoverableNote: Slightly simplified

representation from original

Exploration

Appraisal

Developmentand

Production

PROJECT MATURITY

UNFC Workshop 14Almaty, 10-11 December, 2009

RPSLPortfolio System (2001) based on

SPE/WPC/AAPG System

PROJECT STATUSOn Production

Under Development

Planned for Development

Development PendingDevelopment on Hold

Development not Viable

Prospect

Lead

Play

ProjectMaturity

HigherRisk

LowerRisk

DISCOVEREDCOMMERCIAL

DISCOVEREDSUB-COMMERCIAL

UNDISCOVERED

Production

Range of Uncertainty

RESERVES

CONTINGENTRESOURCES

Unrecoverable

Unrecoverable

1P 2P 3P

Low

Low

Best High

Best High

PROSPECTIVERESOURCES

UNFC Workshop 15Almaty, 10-11 December, 2009

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Resource Classification Systems

• 1928 – Petroleum classification of the Soviet Union• 1972 and 1975 – McKelvey Box• 1980 – USGS/Bureau of Mines resource classification system• 1997 – UNFC minerals resource classification• 1997 – NPD resource classification• 2000 – SPE/WPC/AAPG resource definitions and classification• 2001 – NPD resource classification• 2004 – UNFC integration of coal/petroleum/uranium• 2005 – Russian Federation (not yet implemented)• 2006 – CRIRSCO minerals classification template• 2007 – SPE/WPC/AAPG/SPEE Petroleum Resources Management

System (PRMS)• 2009 – Proposed revised UNFC (UNFC-2009)

UNFC Workshop 16Almaty, 10-11 December, 2009

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Norwegian Petroleum Directorate (2001)

UNDISCOVEREDRESOURCES Prospects Leads and unmapped

resources

Inproduction

RESERVES

Licensees have

decided to recover

Approveddevelopment

and operation

plan

Sold and delivered petroleum

Historical Production

CONTINGENTRESOURCES

New discoveries that have not been

evaluated

Developmentnot very

likely

Recovery likely, but

not clarified

In theplanning

phase

Possible futuremeasures to

improve the recovery factor

UNFC Workshop 17Almaty, 10-11 December, 2009

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Resource Classification Systems

• 1928 – Petroleum classification of the Soviet Union• 1972 and 1975 – McKelvey Box• 1980 – USGS/Bureau of Mines resource classification system• 1997 – UNFC minerals resource classification• 1997 – NPD resource classification• 2000 – SPE/WPC/AAPG resource definitions and classification• 2001 – NPD resource classification• 2004 – UNFC integration of coal/petroleum/uranium• 2005 – Russian Federation (not yet implemented)• 2006 – CRIRSCO minerals classification template• 2007 – SPE/WPC/AAPG/SPEE Petroleum Resources Management

System (PRMS)• 2009 – Proposed revised UNFC (UNFC-2009)

UNFC Workshop 18Almaty, 10-11 December, 2009

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CRIRSCO* Minerals Classification Template (2006)

• Two-dimensional system

– Degree of geological knowledge and confidence

– Consideration of “modifying factors” (non-geological issues, both technical and commercial)

* Committee for Mineral Reserves International Reporting Standards

UNFC Workshop 19Almaty, 10-11 December, 2009

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CRIRSCO classification template

MINERALRESOURCES

INFERRED

INDICATED

MEASURED

EXPLORATIONRESULTS

Incr

easi

ng le

vel o

f geo

logi

cal

know

ledg

e an

d co

nfid

ence

Consideration of mining, metallurgical, economic, marketing, legal, environmental,

social and governmental factors(the “Modifying Factors”)

PROVED

PROBABLE

MINERALRESERVES

UNFC Workshop 20Almaty, 10-11 December, 2009

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Resource Classification Systems

• 1928 – Petroleum classification of the Soviet Union• 1972 and 1975 – McKelvey Box• 1980 – USGS/Bureau of Mines resource classification system• 1997 – UNFC minerals resource classification• 1997 – NPD resource classification• 2000 – SPE/WPC/AAPG resource definitions and classification• 2001 – NPD resource classification• 2004 – UNFC integration of coal/petroleum/uranium• 2005 – Russian Federation (not yet implemented)• 2006 – CRIRSCO minerals classification template• 2007 – SPE/WPC/AAPG/SPEE Petroleum Resources Management

System (PRMS)• 2009 – Proposed revised UNFC (UNFC-2009)

UNFC Workshop 21Almaty, 10-11 December, 2009

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SPE-PRMS (2007)

DISCOVEREDCOMMERCIAL

DISCOVEREDSUB-COMMERCIAL

UNDISCOVERED

Production

Range of Uncertainty

RESERVES

CONTINGENTRESOURCES

PROSPECTIVERESOURCES

Unrecoverable

UnrecoverableNote: Slightly simplified

representation from original

1P 2P 3P

1C

Low

3C

Best High

2C

Incr

easi

ng C

hanc

e of

Com

mer

cial

ity

UNFC Workshop 22Almaty, 10-11 December, 2009

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SPE-PRMSProject Maturity Sub-classes

DISCOVEREDCOMMERCIAL

DISCOVEREDSUB-COMMERCIAL

UNDISCOVERED

Production

Range of Uncertainty

RESERVES

CONTINGENTRESOURCES

Unrecoverable

Unrecoverable

1P 2P 3P

1C

Low

2C 3C

Best High

PROSPECTIVERESOURCES

Project Maturity Sub-classesOn Production

Approved for Development

Justified for Development

Development PendingDevelopment Unclarified or On Hold

Development not Viable

Prospect

Lead

Play Incr

easi

ng C

hanc

e of

Com

mer

cial

ity

Note: Slightly modified representation from original

UNFC Workshop 23Almaty, 10-11 December, 2009

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Resource Classification Systems

• 1928 – Petroleum classification of the Soviet Union• 1972 and 1975 – McKelvey Box• 1980 – USGS/Bureau of Mines resource classification system• 1997 – UNFC minerals resource classification• 1997 – NPD resource classification• 2000 – SPE/WPC/AAPG resource definitions and classification• 2001 – NPD resource classification• 2004 – UNFC integration of coal/petroleum/uranium• 2005 – Russian Federation (not yet implemented)• 2006 – CRIRSCO minerals classification template• 2007 – SPE/WPC/AAPG/SPEE Petroleum Resources Management

System (PRMS)• 2009 – Proposed revised UNFC (UNFC-2009)

UNFC Workshop 24Almaty, 10-11 December, 2009

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UNFC-2009 Principles

• Three-dimensional system

– Economic and social viability (E axis)

– Field project status and feasibility (F axis)

– Geological knowledge (G axis)

UNFC Workshop 25Almaty, 10-11 December, 2009

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UNFC-2009 Principles

Feasibility axis

Geologicalaxis

Economicaxis

UNFC Workshop 26Almaty, 10-11 December, 2009

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UNFC-2009

F4

G4G3G2

CategoriesCriteriaAxis

G1

F3F2F1E3

E2

E1

Geological knowledge

Field project status and feasibility

Economic and social viability

G-axis

F-axis

E-axis

UNFC Workshop 27Almaty, 10-11 December, 2009

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UNFC-2009

UNFC-2009 categories and examples of classes

UNFC Workshop 28Almaty, 10-11 December, 2009

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UNFC-2009 (abbreviated version)

443Additional quantities in place associated with potential deposits

433Exploration

Projects

Potential future recovery by successful exploration

activities

1, 2, 343Additional quantities in place associated with known deposits

1, 2, 323Non-Commercial

Projects

1, 2, 322Potentially Commercial

ProjectsPotential future recovery by contingent

development projects or mining operations

1, 2, 311Commercial

Projects

Future recovery by commercial development

projects or mining operations

GFE

CategoriesClass

Non-sales Production

Sales ProductionExtracted

Tota

l com

mod

ity in

itial

ly in

pla

ce

UNFC Workshop 29Almaty, 10-11 December, 2009

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Alignment of Systems

UNFC-2009 CRIRSCO (minerals) SPE-PRMS (petroleum)

Commercial Projects

Mineral Reserves Reserves

Potentially Commercial

Projects Mineral

Resources

Non-Commercial Projects Not Defined

Contingent Resources

Kno

wn

Dep

osit

Additional quantities in place Not Defined Unrecoverable

Exploration Projects

Exploration Results

Prospective Resources

Pote

ntia

l D

epos

it

Additional quantities in place Not Defined Unrecoverable

UNFC Workshop 30Almaty, 10-11 December, 2009

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Conclusions

• Many different classification systems and reserve/resource definitions have been developed

• Some use the same terminology, but are based on different specifications and guidelines– e.g. Proved reserves

• Clear trend towards project-based systems– Provides linkage to business processes and decision-making

• UNFC can provide an “umbrella” classification system– Provides linkage between other systems