Abstract
The Petroleum Resources Management System (PRMS) is a project based framework that classifies and categorizes a project's resources based on their likely commerciality and recoverability. The path from prospective resource to reserves is inferred to be ‘one way’, as re-grading proven reserves is considered a "rare event", but evidence suggests reclassification decisions are more commonplace.
According to PRMS, reserves should only be downgraded if there is "an unforeseeable event that is beyond the control of the company … that causes development activities to be delayed beyond a reasonable time frame". This rather loose definition allows companies to interpret the meaning quite differently. Some choose to leave ‘under threat’ reserves as booked, by claiming the projects are subject to force majeure that might adversely affect their commerciality. Others downgrade such reserves to contingent resources, at least until the critical contingency is removed and the volumes return to the higher class.
Two case studies involving reserves re-grading are given to highlight the applicability (or not) of PRMS to politically unstable areas and mature provinces, respectively. The first example from the Middle East tells how continued civil conflict and international sanctions has led shareholders to invest elsewhere, so that some operators have reclassified reserves. The second example tells how a North Sea operator, responding to pressure from government and partners, initiated a remedial program to get an asset back on stream, and in so doing allowed reserves to remain booked.
Decisions over whether or not to re-grade proven reserves are more prevalent than implied in the PRMS. Consideration should be given to amending the PRMS guidelines to reflect this observation.