3 - Resource classification

3.1 Main terms used

Reporting shall be in accordance with The Norwegian Offshore Directorate's resource classification.

Below is a short description of terms used;

Historical production

RC0 includes petroleum quantities that have been produced (sold and delivered).

Reserves

Reserves comprise the remaining recoverable, marketable petroleum resources in RC1-3.

Petroleum quantities in projects in production should be reported in RC0+1.The term RC0+1 has been established to show the estimated original recoverable quantities from a project based on the current understanding of the size of the quantities not yet produced. Sold and delivered quantities are also included.

Contingent resources

RC4, 5, 6 and 7 represent recoverable petroleum quantities in projects where a development decision has not yet been made.

Undiscovered resources

RC8 comprises undiscovered petroleum quantities in mapped prospects. The total risk-weighted recoverable resources in prospects that lie partly or completely within the field's/discovery's licensed area shall be reported.

Effective date

Expected resource class as of 31.12. of the current year shall be used as a basis. If a decision is expected by the end of the current year (31.12.), the project shall be reported in the resource class that results from this decision. An example of this is if a Plan for Development and Operation (PDO) is expected to be submitted to the authorities before the end of the year, the project shall be reported in RC3.

Note that for recovery projects, both volumes in-place and recoverable volumes shall be reported. Low, base, and high estimates shall be reported for the petroleum volumes. For projects with project category A, ref resource classification, no in-place volumes shall be reported.

Projects related to pipelines and terminals are classified similar to the classification of recoverable resources, according to decision status (planned, decided, approved).

3.2 Resource Classes

An overview and the main tables from the Directorate’s resource classification are shown below.

Figure 3 1 Overview of resource classification

Table 3‑1 Overview of classes, resource classes (sub-classes), project categories and uncertainty categories

Table 3-2 Classes and resource-classes

Table 3-3 Project categories¹

¹ Project categories are not used for projects in RC 0, 1, 6, 8 and 9

Table 3-4 Uncertainty categories

3.3 Problem areas

3.3.1 Clarification of the distinction between contingent resources and reserves

Additional volumes in field projects must be classified either as reserves or as contingent resources.

The following criteria shall be applied to classify projects as reserves:

1. The project is regarded as normal optimization within approved plans, e.g.:

• Better reservoir management
• Improved sweep
• Well maintenance/re-completions
• 4D seismicImprovements to existing production facilities (improving robustness/removal of bottlenecks)

2. Well projects that have a high probability of implementation, where the following conditions are met::

• Wells can be drilled from an available drilling facility
• Wells can be drilled with available technology
• Wells that are a part of a long-range plan for future activity within approved drainage areas

The probability of implementation should take into account:

• Economy of drilling targets based on expected production, and all costs related to drilling and maintenance of drilling facilities.
  
  
• Technical feasibility of drilling with respect to depleted reservoir, faults, rock mechanical problems, complex reservoir, and well integrity.
  
  
• Availability of drilling facility without additional major investment. For investment in new drilling facility, the date when the new facility will be completed, should be taken into consideration.
  
  
• Availability of infrastructure, such as sub-sea installations and risers.

Quantities from all projects with wells mentioned above shall be reported as reserves in resource class, RC 0+1, 2 or 3. If the operator wishes, quantities from well projects classified as reserves can be reported in separate consistent profiles, as follows:

• RC0+1: Quantities from projects with wells in production
• RC2: Quantities from projects with wells with approved budget
• RC3: Remaining quantities from projects with wells that can be reported as reserves  

Wells planned to be drilled, but do not meet the criteria above, will be linked to the quantities of petroleum which are classified as contingent resources in resource class 4, 5, 6 or 7.

Examples of other projects with contingent resources on fields are:

• Recovery methods under evaluation or significant expansion of existing recovery methods that will yield extra volumes and a higher recovery factor if implemented (project category A), or
  
  
• Segments/ parts of the reservoir not currently PDO-approved, and which will yield increased STOOIP/GIIP (project category F), or
  
  
• Changes to new form of operation, new or modified facility that will yield higher/accelerated production and possibly also lower costs.
  
  
• Projects that will result in significantly longer lifetime for the field.

In all cases, the project must undergo a defined decision process with milestones/decision gates, and costs must be included.

The reserves reported should be considered profitable, assuming long-term assumptions regarding product prices and operating costs. Projects where most of the investments are sunk costs should be reported as reserves when total cash flow, including contingent resources, are expected to be profitable.

At one stage, continued operation for a field will become unprofitable. Dependent on other possibilities for continued operation of the field, the so-called uneconomic tail production should be reported as a contingent resource. If there is a reasonable probability for continued operation based on contingent or undiscovered resources, not restricted to current license acreage, this should preferably be reported in RC5A. If more immature, the resources should
be reported in RC7A.

3.3.2 RC 6 – fields and discoveries

RC6 is used for deposits which, even in the long-term, probably cannot be recovered profitably, and for resources in minor, non-tested discoveries where recovery is not very likely. If the deposit is a supplementary resource to a field, it is reported under the field. Stand-alone discoveries are to be reported separately.

Improved recovery measures on fields (project category A) which have been evaluated and found to be unprofitable, shall not be reported in RC6. If resources can be realized with other measures later, they could be included in RC7A.

3.3.3 Undiscovered resources in/nearby fields and discoveries

Undiscovered recoverable resources in or nearby fields and discoveries will either comprise prospects or undrilled segments in the field/discovery, which for different reasons are not defined as a separate prospect.

The main rule is that undiscovered, recoverable risked volumes should be reported in RC8. Risked volumes are calculated by multiplying expected recoverable petroleum quantities, given a discovery, by the probability of making a discovery. The total risked volume that lies completely or partly within own licensed area and can be recovered in connection with the field/discovery, shall be reported. Prospects that extend over the borders of the production licence, or into adjoining production licences, are to be reported as total risked volumes. In some cases where the discovery probability is high, and the volumes are included in the base of a development solution, und