The E&P industry is taking steps to educate, test and certify qualified petroleum geologists and engineers in the specialty practice of evaluating and estimating petroleum reserves.The primary benefit of the elective certification program would be to heighten understanding and upgrade competencies through a rigorous curriculum designed by experts in the field.A secondary benefit would be to help restore a loss of investor confidence in publicly reported reserves estimates.This loss occurred after several major reserves writedowns during the first quarter of 2004.Also, the self-administered program may head off current initiatives to make third-party reserves audits mandatory, creating an opportunity for industry to take the lead before government does.

For justification, one should look no further than the value of world proved reserves and lesser, yet very significant value of reserves reported to the U.S. Securities and Exchange Commission. At $35/bbl and $5/thousand cubic feet (Mcf), for example, which is significantly lower than fourth quarter 2004 prices, reserves owned by U.S. companies reported to the SEC and investors represent a total value of more than $2 trillion (U.S.).This is a mere 3 percent of worldwide reserves, which are reported in a variety of ways.Inarguably, these staggering values should be estimated in accordance with internationally accepted practices by highly competent evaluators.Evaluator certification is a step in that direction.

Engineers or geologists certified as specialists would be recognized by the administering organization as having advanced skill levels as well as substantial experience in accepted methods.Requirements for accreditation would include prescribed levels of education and special training, experience and job history, knowledge and scoring on certification exams.


The word "certification" means many things to different people.We may see a version of the word used on the orange-colored vest of a roadside worker trained as a certified flagman.Or in a more professional setting, we may choose to look for a "board-certified" physician or attorney, if we have a serious medical or legal problem.In any of these settings, we can take some comfort that the identified individual has received some training and has demonstrated a level of competence to warrant the term "certified."The importance of the term grows as the responsibility and obligations of the certified person increase.Then there is the term "reserves certification," which generally means that a competent, recognized reservoir engineer has prepared an independent reserves report for a reservoir, field or group of fields.A reserves certification may include all categories of reserves and may serve as the primary measure of collateral for project finance, acquisitions or divestitures, perhaps in the billions of dollars.

One further term - the word "evaluator" - deserves further definition for the purpose of this paper and the certification initiative.A reserves evaluator is usually a reservoir engineer by training, who is responsible for estimating hydrocarbon reserves appropriate to some imposed, recognized definitions and who usually forecasts future production volumes, sales quantities, costs, revenues and net income - potentially before and after any income taxes.Some evaluators may additionally be charged with estimating asset market values for various purposes including but not limited to taxation and litigation.From the geoscience perspective, a reserves evaluator may be limited to the preparation of geological maps, models and derivations of reservoir parameters to be used separately by or jointly with a reserves evaluation engineer in a reserves estimation and/or economic projection.

The term "reserves appraiser" seems to be used less now than in the past.Some may use this term as a synonym for reserves evaluator but appraisers often rely on reserves reports prepared by others as the basis of establishing properties values for taxation, property transactions or in litigation applications.

Why would anyone suggest that those of us who practice the profession of petroleum reserves estimation and evaluation should consider developing a program leading to the certification of petroleum reserves evaluators?There is no simple, complete answer to this question other than to provide a level of comfort to those who rely on reserves information — a reassurance that the certified geoscientists and/or engineers have met certain rigorous requirements established by an authoritative, recognized organization or organizations.That level of comfort and risk mitigation does not exist today in most parts of the world.

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