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Specifications for UNFC

Please note: The draft document ECE/ENERGY/GE.3/2013/3 was prepared by the Specifications Task Force Phase Two following careful consideration of all comments received from stakeholders during the public comment period. Final approval of this document shall require consensus in the Bureau of the Expert Group on Resource Classification on its form and content, prior to submission to the Expert Group on Resource Classification for its endorsement of the final version (Expert Group on Resource Classification, Fourth Session, Geneva, 23-26 April 2013). The document is being made available subject to the caveat that the draft text in its current form has not been, and shall not be construed to have been, endorsed by any member of the Expert Group on Resource Classification or by any organization that is represented by a member of the Expert Group on Resource Classification.

Please note: These two draft documents were prepared by the Specifications Task Force Phase Two as the “basis for discussion” at the third session of the Expert Group on Resource Classification (Geneva, 2-4 May 2012). The documents were made available subject to the caveat that the draft text related to a few key issues is still under discussion within the Specifications Task Force Phase Two and certain commodity-specific specifications are still under consideration by the Committee for Mineral Reserves International Reporting Standards (CRIRSCO) which may have an impact on the relevant generic specifications as noted herein. Further, parts of the document are still incomplete and consequently no formal approval can be given or implied at this stage. If the members of the Expert Group concur, the Bureau of the Expert Group will release the completed draft document for a formal public comment period only when it has achieved a consensus on the form and content of the document. Subsequent to the public comment period, all changes will require a further consensus to be achieved in the Bureau prior to publication of the final version. 
 

Specifications Task Force Phase One (October 2009 to April 2010)

Specifications Task Force Phase Two (June 2010 to date)

Background

At the meeting of the Group of Experts held in Geneva, April 2009, there was detailed discussion on the recommendations provided by the UNFC Revision Task Force on whether it was needed and/or desirable to develop specifications and guidelines for UNFC-2009. The Expert Group agreed that a Specifications Task Force (comprising four small working groups) should be established to focus on each of the four needs identified to which UNFC-2009 should respond: (a) industry business processes, (b) Government resources management, (c) international energy and mineral studies, and (d) financial reporting.

Mandate of Specifications Task Force Phase One (October 2009 to April 2010)

  1. To document the specific requirements for specifications and guidelines that can be identified for each of the four areas (a) to (d) listed above and indicate whether or not those needs are sufficiently well addressed in the CRIRSCO Template and/or the SPE/AAPG/WPC/SPEE Petroleum Resources Management System (SPE-PRMS).

  2. By considering all four needs together, there would be assurance that consideration would be given to the potential for applying consistent specifications and guidelines across all four needs, thus creating an added value for all.

  3. The Task Force is not requested to attempt to write new specifications and guidelines, but to report back on its findings to the Expert Group at its first Session (April 2010).

  4. The Expert Group will consider what action should be taken, based on the conclusions of the Specifications Task Force.

Members of Specifications Task Force Phase One

Chairman: Jim Ross

  • Energy and mineral studies: Tim Klett and Yuri Podturkin (representing the Russian Working Group)
  • Government resources management: Per Blystad, Kjell-Reidar Knudsen and Ian Lambert
  • Industry business process management: Roger Dixon and David MacDonald
  • Financial reporting: Ferdi Camisani, David Elliott and Danny Trotman

Observers: Michael Lynch-Bell and Charlotte Griffiths

Report of Specifications Task Force Phase One

Stakeholder Requirements for Specifications for UNFC-2009

This Report was presented in draft form to the first session of the Expert Group on Resource Classification as the basis on which it considered how best to accommodate the stated needs of stakeholders for specifications to be provided for UNFC-2009. The Report includes a number of recommendations written by the Task Force based on the stakeholder feedback received. The recommendations also include examples of issues for which generic UNFC-2009 specifications might be considered appropriate.

In view of the unique nature and significance of the information contained in the Report, it was further agreed that a summary should be published as an official ECE document. In line with the report of the eighteenth session of the Committee on Sustainable Energy (ECE/ENERGY/80, para 21(k)), the summary of the Report of the Specifications Task Force was issued as a document for the nineteenth session of the Committee.

Specifications Task Force Phase Two (June 2010 to date)

Mandate of Specifications Task Force Phase Two

The first session of the Expert Group in April 2010 agreed to establish a successor Specifications Task Force, with formal CRIRSCO and SPE involvement, to:

  • consider all issues raised in the final version of the Task Force Report
  • identify those issues that are fully addressed in both the CRIRSCO Template and SPE-PRMS; and
  • recommend that all other issues are either: inappropriate for specifications (e.g. the issue is considered to be a disclosure issue rather than a classification matter); accommodated by modification/addition to the CRIRSCO Template and/or SPE-PRMS; or addressed by developing generic specifications for UNFC-2009.

The recommendations of the Specification Task Force in this regard should be published for public comment and revision (if necessary) before submission to the Expert Group for approval or otherwise.

Members of Specifications Task Force Phase Two

  • Chairman: James (Jim) Ross
  • [Ferdinando Camisani-Calzolari (CRIRSCO) stepped-down effective June 2012]
  • Dan Diluzio (SPE OGRC)
  • Roger Dixon (CRIRSCO)
  • David Elliott
  • Kjell-Reidar Knudsen
  • Leesa Carson (supported by Yanis Miezitis) [Ian Lambert stepped-down effective June 2012 and was replaced by Leesa Carson]
  • Ian Lambert (supported by Yanis Miezitis)
  • David MacDonald
  • Yuri Podturkin (supported by the Russian Working Group)
  • Daniel Trotman

Observers: [Michael Lynch-Bell stepped-down effective June 2012] and Charlotte Griffiths

What are Specifications and Guidelines?

There may be some confusion as to the meaning of these terms and the distinction between them, even though they are common to all classification systems. In the case of resource classification, the “top level” of the system is usually in the form of concise definitions. For example, the definition of a Proved Mineral Reserve in the CRIRSCO Template, the definition of Proved Reserves in SPE-PRMS, and the definitions of E1, F1, etc. in UNFC-2009, all provide the primary basis (i.e. rules) for classifying a resource quantity in that particular category or class.

These definitions are then supplemented by specifications (or “secondary rules”) that provide more detail on how the system is to be applied. Unfortunately, these secondary rules are sometimes referred to as guidelines even though they constitute instructions on what should (or should not) be done when applying the classification system.

Examples of specifications in the CRIRSCO Template (classified therein as “guidelines”) include:

(a) “Under no circumstances can an Indicated Mineral Resource be converted directly to a Proved Mineral Reserve”; and,
(b) “The reported Mineral Reserve figures must not be added to the reported Mineral Resource figures”.

Examples of specifications in SPE-PRMS (classified therein as “guidelines”) include:

(a) “If probabilistic methods are used, there should be at least a 90 per cent probability that the quantities actually recovered will equal or exceed the estimate”; and,
(b) “There must be a reasonable expectation that all required internal and external approvals will be forthcoming, and there is evidence of [a] firm intention to proceed with development within a reasonable time frame”.

Guidelines, as used in UNFC terminology, are not rules/specifications, but merely guidance on how to apply those rules in particular situations. For example, guidelines could include examples of the forms of documentation that might be relied upon to support “evidence of a firm intention” for defining Reserves under SPE-PRMS.

The Revision Task Force report on Specifications and Guidelines (ECE/ENERGY/GE.3/2009/7) also clarified the basis for this distinction, as demonstrated by the following statements:

(a) “Specifications set out the basic rules that are considered necessary to ensure an appropriate level of consistency and coherence. They provide additional instructions on how the definitions must be applied in specific circumstances including, where appropriate, commodity-specific rules”;
(b) “Guidelines provide the underlying detailed guidance that the technical and commercial experts can refer to when undertaking resource estimates in accordance with a classification system. Guidelines are not mandatory rules, but provide guidance on appropriate interpretations of the rules (best or alternative practice) in the context of particular circumstances. Guidelines are particularly appropriate when working under functional specifications and are often usefully supplemented by the provision of actual application examples. However, following the guidelines will not relieve the preparer from the responsibility of complying with the definitions and specifications”.

Background on the development of UNFC-2009

It is also very important that the rationale behind the development of UNFC-2009 is well understood before embarking on the development of specifications and/or guidelines. A comparison between the category definitions of the previous version, UNFC-2004, and those proposed by the Mapping Task Force can be seen in Table 1 of the Mapping Task Force report (ECE ENERGY SERIES No. 33 and ECE/ENERGY/71). The proposal, subsequently adopted in the form of UNFC-2009, was to simplify the category definitions by providing concise, generic definitions only, and to exclude specifications, guidelines, and any commodity-specific references on the basis that these could be addressed separately. This simplification was a key change in the development of UNFC-2009 from UNFC-2004. (For a good example, refer to the changes to the definition of category G4.)

In removing specifications, guidelines and commodity-specific references from the category definitions of UNFC-2009, it was clearly recognized by the Mapping Task Force that these would still be necessary to ensure the consistent application of UNFC-2009 (as they are for any resource classification system), but there were several potential options for their provision and these were agreed to be subject to further consideration. One option was that, at a commodity-specific level, it might be possible to adopt, or link to, in some way, the existing specifications and guidelines in the CRIRSCO Template and SPE-PRMS, thus avoiding a major duplication of effort as well as ensuring that the potential for inconsistencies between these systems and UNFC-2009 was minimised. At the same time, it was recognized that were some aspects of resource classification that were probably not fully addressed in the CRIRSCO/SPE-PRMS systems as well as a possible need for some “high level” specifications (generic, not commodity-specific) for UNFC-2009.

These conclusions then provided the impetus for establishing the Specifications Task Force (Phase One). The Specifications Task Force Phase One set out to contact a wide range of users of resource data and to document what specifications these stakeholders considered necessary in order to ensure that UNFC-2009 could provide a consistent and coherent basis for resource classification that would be appropriate to meet their needs. It was left to the second phase of the project (Specifications Task Force (Phase Two)) to: (i) consider each of the requests for specifications in turn; (ii) recommend which ones should be addressed; (iii) consider whether such specifications should be developed directly for UNFC-2009 and/or provided via some form of linkage to the commodity-specific systems of the CRIRSCO Template and SPE-PRMS where the necessary specifications already existed; and, (iv) where appropriate, to facilitate the development of the text of the specifications. Where these were commodity-specific specifications, primary responsibility for development of the texts would reside with CRIRSCO for solid minerals or SPE for petroleum, as set out in the Expert Group on Resource Classification’s Terms of Reference.

It should be noted that the focus of the Specifications Task Force was, and is, specifications, as defined above, and not guidelines.

Guiding Principles for the Specifications Task Force Phase Two

The Bureau of the Expert Group on Resource Classification established some “guiding principles” in order to facilitate efficient prioritization of the work Specifications Task Force Phase Two, though only to the extent that they do not conflict with prior agreements or decisions, including the Task Force’s mandate as provided by the Expert Group, the Expert Group’s Terms of Reference, and the overall goals of the UNFC as stated in UNFC-2009 and approved by the ECE Committee on Sustainable Energy:

(a) The Specifications Task Force Phase Two should not work on changes to the UNFC main structure of classes or subclasses listed in the UNFC-2009. They should report them to the Bureau of the Expert Group for its consideration.
(b) The Specifications Task Force Phase Two should not work on disclosure requirements as these are covered by various financial and regulatory groups and lie outside the EGRC mandate.
(c) The Specifications Task Force Phase Two should prioritize comments by area and significance of the impact also taking cognizance of the source of the comment. The Task Force should develop a basic discussion format for the specifications so all pertinent information is presented to the Bureau of the Expert Group for a robust discussion.
(d) When the Specifications Task Force Phase Two believes there is a need for a specification or guideline for the UNFC-2009, prior to developing the detailed guidance, it should be sent to the appropriate professional society (SPE, CRIRSCO) to see if it can be accommodated in the SPE-PRMS or CRIRSCO Template.


In order to ensure a fuller appreciation of the context of these “guiding principles”, it is important to note the following:
With respect to (a) it should be noted that the Committee on Sustainable Energy “directed the Expert Group on Resource Classification to encourage testing and application of UNFC-2009 as widely as possible and that feedback on this be monitored and reviewed at least every two years”, so there exists an obligation on the Expert Group to consider potential changes on a regular basis. In any event, since the Expert Group is not a decision-making body, any proposed changes to UNFC-2009 would need to be decided upon by the Committee on Sustainable Energy.

With respect to (b), UNFC-2009 is intended to meet, to the extent possible, the needs of applications pertaining to financial reporting standards (as set out in the Expert Group’s Terms of Reference and approved by the Committee on Sustainable Energy). It is clear that the Expert Group cannot (and has no intention of trying to) set reserve/resource financial disclosure requirements. The Specifications Task Force Phase One report has already noted those suggestions for specifications that it identified as being disclosure requirements and outwith the mandate of the Expert Group. However, care will be required to ensure that specifications that have been requested by stakeholders in the financial sector and which are not disclosure requirements are properly addressed so that quantities reported under UNFC-2009 could provide the necessary basis for financial reporting, if required for that purpose.

With respect to (c), the primary basis for the Specifications Task Force Phase Two to recommend (or not) adoption of a stakeholder-requested specification should be the extent to which it considers that such a specification will “add value” to the application of the classification system in meeting stakeholders’ needs. In this context, “value” reflects the requirements for quality of information, as identified by the Revision Task Force in its report on Specifications and Guidelines (ECE/ENERGY/GE.3/2009/7). These requirements include: relevance, reliability, coherence, materiality and ease of preparation and use.

With respect to (d), the Specifications Task Force Phase Two intentionally included representation from CRIRSCO and SPE so that the most appropriate approach to dealing with requests for specifications could be considered in consultation with these bodies. As noted above, CRIRSCO and SPE have the primary responsibility for the provision of UNFC-2009 specifications that are commodity-specific. To the extent that generic specifications are deemed appropriate for UNFC-2009, these should be developed by the Specifications Task Force Phase Two in cooperation with CRIRSCO and SPE, respecting the philosophy of keeping the UNFC-2009 as simple as possible and using plain language, in line with the recommendations of the Specifications Task Force Phase One report. The Specifications Task Force Phase Two has no mandate to develop “detailed guidance” at this time.

Specifications for Application of UNFC-2009 – Draft Reports prepared by the Specifications Task Force Phase Two the Expert Group, Second Session, 6-8 April 2011

Please note: These two draft documents were prepared as the “basis for discussion” at the second session of the Expert Group on Resource Classification and do not, as yet, represent a consensus view of the Specifications Task Force Phase Two There are a number of issues that are subject to significant divergence of opinions at this time, and the intention of releasing these draft documents was to open up the discussion to the Expert Group in order to obtain additional feedback on the appropriate way forwards, before attempting to achieve a consensus within the Specifications Task Force. In addition, both the Committee for Mineral Reserves International Reporting Standards (CRIRSCO) and the Society of Petroleum Engineers (SPE) have identified specification issues raised by UNFC stakeholders that they wish to consider further from a commodity-specific perspective. No final recommendations will be made by the Specifications Task Force until that process has been completed.


© United Nations Economic Commissions for Europe – 2013