Crude estimates prompt review

Estimates of oil and gas reserves can fluctuate by billions of dollars from year to year, a government document shows.

A lack of confidence in the reserves has prompted a major review of how they are calculated.

Estimates of gas reserves play a key role in determining when and where gas-fired power stations will be built and planning for the price of electricity. Gas reserve estimates also affect planning for emissions liabilities and electricity grid investment planning.

Oil reserves estimates affect government planning for tax and royalty revenue.

A paper released by Energy and Resources Minister Gerry Brownlee outlines problems with the reporting and disclosure regime which includes a perceived lack of confidence in the accuracy, precision and consistency of reserve information reported by industry and published by the Ministry of Economic Development.

There were also concerns that the quality of petroleum reserve data was not sufficient for the ministry to verify and validate reserve estimates.

The paper says neither the ministry nor industry has any visibility of the upside and downside potential at existing fields.

This year there was a net oil reserves increase of 6 per cent (9.2 million barrels) and a net increase in gas reserves of 14 per cent (260 petajoules). Last year there was a net oil reserves decline of 7 per cent (13.8 million barrels) while gas reserves declined 12 per cent (270 petajoules).

Over the past few years and applying an average export crude price, the value of oil reserves showed gains of up to $5.5 billion and losses of up to $2 billion from one year to the next.

The minister said industry participants had a month to respond to the document.

The paper proposes three options:

*Carrying out more extensive analysis of existing information, but with no regulatory change.

*Extending the reporting requirements to include information on a wider range of potential resources, in a similar way to Britain.

*Extending the reporting requirements to allow the Government to come to a full independent assessment of reserves, similar to Norway.

Brownlee said any changes to the reporting regime could be in place early next year.

Petroleum Exploration and Production Association executive officer John Pfahlert said the paper was a fair summary of inconsistency in reporting reserves by different companies.