“Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information” from the Society of Petroleum Engineers (SPE), which incorporates the requirements of the 2007 SPE/WPC/AAPG/SPEE Reserves and Resources System, gives clear guidelines as to what is expected of modern reserves reporting. The fundamental idea of providing online reporting software that is secure, simple, and yet powerful in its flexibility is equally applicable to reserves reporting.

The SPE standard states, “The sufficiency and reliability of the database is of primary importance in the estimation of reserves and other reserves information.” The information within such a database reflects the total hydrocarbon resources of an oil company, and whether in place, contingent, or prospective, these resources are its primary assets. Accurate reporting against these assets is not only needed to comply with regulations, but also is used to define the total value and share price of the company so it can secure finance and investment opportunities for the future.

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The graphical report shows production forecast and reserve categorization. (Figures courtesy of EnergySys)

It makes sense, therefore, that a centralized system should contain all of the key information and properties relating to the company’s property portfolio to give a complete view of the business, not only to ease the process of auditing, but also to provide a powerful business tool upon which to base strategic decision-making.

Audit-ready
The values of reserves are heavily scrutinized, and supporting software should contain comprehensive security with a clear audit trail that always is available. The SPE document calls for a review of the policies, procedures, controls, documentation, and guidelines as part of an audit of reserves information. Policies and procedures should be incorporated into a single database as accompanying “metadata,” ensuring that information can be presented quickly and clearly to the auditor. Furthermore, the controls and reporting available within such a database application can prove data integrity and even document the business process for the user.

The SPE says that checks should be made on adherence to policies, procedures, and controls. Automatic tracking of changes with details of what was changed, when, and by whom simplifies operational processes and ensures compliance with auditing requirements.

The SPE also recommends that historical reserves and revision trends be part of an audit. To comply with this requirement, it is essential that all information, historical and current, is contained within one database. By storing all of this information in a secure “cloud,” a complete inventory can be stored in one place with an audit trail that can be traced. This single window on information enables revisions, re-appraisals, and additions to be viewed quickly, with the added benefit of detailing why a change was made, what was changed, and by whom. Furthermore, methods by which reserves are estimated and which organization or person provided the estimate can be identified, truly giving a complete view of the ways in which values have been derived.

System flexibility
Database management might seem like an IT issue, but in the area of reserves information, this database is fundamental to how companies run their operations. The SPE requires that significant changes from anything other than production should be accommodated. This could be geographical or political differences, for example, or inflation or price variances. A system needs to allow for the investigation of multiple long-term investment scenarios and offer the flexibility to show the effects that any changes have on the current or alternative business strategies. Changes must be in accordance with review/appraisal cycles and must be completely audited. A modern solution should take data from reserves portfolios and development definitions and handle all of the reserves inventory management, including calculating monthly and annual forecasts with values for revenue, expenses, reserves, production, and net present value, giving users confidence in both their business decisions and their ability to meet auditing requirements.

The solution
The EnergySys Reserves Management application takes operational data from production and allocation reporting systems – or even directly from an email – so the latest information regarding reserves decline is readily available in the reserves inventory. This also gives the user the capability to review forecasts against actual data, providing the information required to continually improve estimates and future projections.

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This single window on information enables revisions, re-appraisals, and additions to be viewed quickly, with the added benefit of detailing why a change was made, what was changed, and by whom.

The latest online application, built on a common core also used for the company’s Hydrocarbon Allocation and Production Reporting applications, is a single place for all statutory and supporting data. It provides flexible calculations and reporting to meet diverse needs – whether for internal, customer, or regulatory requirements. It allows for any number of alternative development scenarios defined by production and reserve profiles, capital and operational expenditure schedules, price profiles, different levels of project risk, and long-term price and cost discounts. Standard workflows and calculations are provided within the system, including calculation logging to clearly show how values have been determined and that data integrity has been maintained. It is simple for an auditor to review information and confirm good data governance now and for the future.

A modern product should offer flexibility and usability along with complete security and traceability. Its aim should be to remove any difficulty associated with audits for both the company being audited and the auditor.

No more spreadsheets
Many companies continue to rely on spreadsheets to manage their reserves information despite the fact that spreadsheets do not address many of the problems identified here. In fact, spreadsheets can exacerbate these issues. Inherent problems associated with validating and controlling data entry into spreadsheets along with questions related to avoiding unintentional modification, system reliability and data integrity, version control, and change tracking make spreadsheets unsuitable for managing information of this kind. The entire system should make processes demonstrable with clear and quick reporting to show an auditor how the reserves were estimated and how data are managed.

EnergySys has recognized the value in having a solution that can be up and running in days or weeks rather than months, with the right people able to access the right information, wherever and whenever they need it.

Online, user-friendly
There also is a growing recognition in large organizations that IT is not a core skill except in very specialized areas such as seismic data processing and analysis, where high-performance computing and sophisticated algorithms are employed. Deployment of reserves management systems traditionally has been associated with long implementation times and substantial upfront costs. An online service can reduce these factors significantly. Users access the best available technology and security developments through a managed online service. The only challenge then is to build the application – and by adopting a ready-made application, the hard work already is done.

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