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Certification of Petroleum Reserves Evaluators: The Time Is Now?

Daniel J. Tearpock
Chairman/CEO Subsurface Consultants & Associates, LLC. Houston, Texas

During the past 2 years there has been a lot of publicity regarding reserves writedowns and concerns about the reliability of reserves disclosures. From the standpoint of oil and gas companies and their investors, to Wall Street, the SEC and the international investment community, reserves are an important part of every day life in the energy industry. From evaluating fields to buy, to determining whether or not to participate in a certain prospect; from estimating reserves of a new discovery, to conducting a study in a mature field looking for upside potential, the bottom line is how much oil or gas can be placed on the books, produced and what is the return on investment.

Beginning with Enron, the recent major reserves writedowns and the passing of the Sarbanes-Oxley Act by the United States Congress in 2002, not to mention investor confidence in our oil and gas industry, the time has come to explore the establishment of a certification program and the certification of both petroleum geoscience and engineering reserves evaluators.

An exploratory intersociety committee has been formed by the American Associations of Petroleum Geologists (AAPG) and the Society of Petroleum Engineering Evaluators (SPEE) to evaluate establishing a voluntary program for the Certification of Petroleum Reserves (geoscientists and engineers) Evaluators.

The committee has five (5) subcommittees including:

    • Certification
            o Testing, training and continuing education
    • Qualifications
    • Recommended practices
            o Geoscience and Engineering
    • Reserves definitions, and
    • Ethics

Based on recent publications, a company’s reserves appear to be the single most important factor in determining the value of an oil and gas company. With worldwide reserves valued at over $600 Trillion, it is vital that private and public oil and gas companies, as well as national oil companies (NOC’s) and government agencies have reliable reserves estimates. The intent of a certification program is to improve the industry reserves estimation process and the ultimate reserves numbers. It has the potential to provide the financial community with a greater confidence in the estimates of oil and gas reserves. It provides the opportunity to develop better standards in both reserves estimation and disclosure. It offers training to those who recognize the need. It provides recognition of expertise, by established industry associations, to those individuals who qualify and pass the certification process and become certified. And, it moves our industry one step closer to self-regulation, thereby hopefully providing proof to government agencies and the investment community, that we as an industry, have the experience, expertise, ethics and professionalism necessary to provide accurate and reliable oil and gas reserves estimates.