EPmag.com | February 2011

S tandards Pertaining to the Estimating and Auditingof Oil and Gas Reserves Information” from the Soci-

ety of Petroleum Engineers (SPE), which incorporatesthe requirements of the 2007 SPE/WPC/AAPG/SPEEReserves and Resources System, gives clear guidelines asto what is expected of modern reserves reporting. Thefundamental idea of providing online reporting soft-ware that is secure, simple, and yet powerful in its flexi-bility is equally applicable to reserves reporting.

The SPE standard states, “The sufficiency and reliabil-ity of the database is of primary importance in the esti-mation of reserves and other reserves information.” Theinformation within such a database reflects the totalhydrocarbon resources of an oil company, and whetherin place, contingent, or prospective, these resources areits primary assets. Accurate reporting against these assetsis not only needed to comply with regulations, but also isused to define the total value and share price of thecompany so it can secure finance and investment oppor-tunities for the future.

It makes sense, therefore, that a centralized systemshould contain all of the key information and properties

relating to the company’s property portfolio to give acomplete view of the business, not only to ease theprocess of auditing, but also to provide a powerful busi-ness tool upon which to base strategic decision-making.

Audit-readyThe values of reserves are heavily scrutinized, and sup-porting software should contain comprehensive securitywith a clear audit trail that always is available. The SPEdocument calls for a review of the policies, procedures,controls, documentation, and guidelines as part of anaudit of reserves information. Policies and proceduresshould be incorporated into a single database as accom-panying “metadata,” ensuring that information can bepresented quickly and clearly to the auditor. Further-more, the controls and reporting available within such adatabase application can prove data integrity and evendocument the business process for the user.

The SPE says that checks should be made on adher-ence to policies, procedures, and controls. Automatictracking of changes with details of what was changed,when, and by whom simplifies operational processes andensures compliance with auditing requirements.

The SPE also recommends that historical reserves andrevision trends be part of an audit. To comply with this

requirement, it is essential that all information,historical and current, is contained within onedatabase. By storing all of this information in asecure “cloud,” a complete inventory can bestored in one place with an audit trail that can betraced. This single window on informationenables revisions, re-appraisals, and additions tobe viewed quickly, with the added benefit ofdetailing why a change was made, what waschanged, and by whom. Furthermore, methodsby which reserves are estimated and which organ-ization or person provided the estimate can beidentified, truly giving a complete view of theways in which values have been derived.

System flexibilityDatabase management might seem like an ITissue, but in the area of reserves information, this

digitalOIL FIELD

Cloud computing stacks up for SPE-friendly reserves managementAn online solution helps oil companies manage their most important assets.

Dr. Esther Hayes, EnergySys

“

The graphical report shows production forecast and reserve categoriza-

tion. (Figures courtesy of EnergySys)

AS SEEN IN FEBRUARY 2011

Copyright, Hart Energy Publishing, 1616 S. Voss, Ste. 1000, Houston, TX 77057 USA (713)260-6400, Fax (713) 840-8585

database is fundamental to how companies run theiroperations. The SPE requires that significant changesfrom anything other than production should be accom-modated. This could be geographical or political differ-ences, for example, or inflation or price variances. Asystem needs to allow for the investigation of multiplelong-term investment scenarios and offer the flexibilityto show the effects that any changes have on the currentor alternative business strategies. Changes must be inaccordance with review/appraisal cycles and must becompletely audited. A modern solution should take datafrom reserves portfolios and development definitionsand handle all of the reserves inventory management,including calculating monthly and annual forecasts withvalues for revenue, expenses, reserves, production, andnet present value, giving users confidence in both theirbusiness decisions and their ability to meet auditingrequirements.

The solutionThe EnergySys Reserves Management application takesoperational data from production and allocation report-ing systems – or even directly from an email – so the lat-est information regarding reserves decline is readilyavailable in the reserves inventory. This also gives theuser the capability to review forecasts against actual data,providing the information required to continuallyimprove estimates and future projections.

The latest online application, built on a common corealso used for the company’s Hydrocarbon Allocationand Production Reporting applications, is a single placefor all statutory and supporting data. It provides flexiblecalculations and reporting to meet diverse needs –

whether for internal, customer, or regulatoryrequirements. It allows for any number of alterna-tive development scenarios defined by productionand reserve profiles, capital and operationalexpenditure schedules, price profiles, different lev-els of project risk, and long-term price and cost dis-counts. Standard workflows and calculations areprovided within the system, including calculationlogging to clearly show how values have been deter-mined and that data integrity has been main-tained. It is simple for an auditor to reviewinformation and confirm good data governancenow and for the future.

A modern product should offer flexibility andusability along with complete security and traceabil-ity. Its aim should be to remove any difficulty associ-ated with audits for both the company beingaudited and the auditor.

No more spreadsheetsMany companies continue to rely on spreadsheets tomanage their reserves information despite the fact thatspreadsheets do not address many of the problems identi-fied here. In fact, spreadsheets can exacerbate theseissues. Inherent problems associated with validating andcontrolling data entry into spreadsheets along with ques-tions related to avoiding unintentional modification, sys-tem reliability and data integrity, version control, andchange tracking make spreadsheets unsuitable for man-aging information of this kind. The entire system shouldmake processes demonstrable with clear and quickreporting to show an auditor how the reserves were esti-mated and how data are managed.

EnergySys has recognized the value in having a solutionthat can be up and running in days or weeks rather thanmonths, with the right people able to access the rightinformation, wherever and whenever they need it.

Online, user-friendlyThere also is a growing recognition in large organizationsthat IT is not a core skill except in very specialized areassuch as seismic data processing and analysis, where high-performance computing and sophisticated algorithms areemployed. Deployment of reserves management systemstraditionally has been associated with long implementa-tion times and substantial upfront costs. An online servicecan reduce these factors significantly. Users access thebest available technology and security developmentsthrough a managed online service. The only challengethen is to build the application – and by adopting a ready-made application, the hard work already is done.

digitalOIL FIELD

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.