Oil companies find aspects of US Securities and Exchange Commission reserves reporting regulations troublesome and have difficulty persuading SEC engineers to fully embrace technology, said D. Ronald Harrell, chairman of Ryder Scott Co. LP.
Ryder Scott helps oil and gas producers comply with SEC requirements.
“The SEC reserves definitions were written solely from a North American perspective where state or province regulators determined appropriate well spacing metrics to optimize recovery and to protect competing mineral rights,” Harrell said.
For example, SEC’s “one-offset” limits the addition to reserves from step-out drilling to wells drilled just one location away from commercial producers, based on 40-acre spacing for oil and 160-640-acre spacing for gas. He said industry wants an administrative relaxation of this rule, adding that industry would in turn provide evidence to justify specific cases.
Harrell noted that the one-offset rule “is virtually unknown today outside North America.”
Another issue between SEC engineers and producers is that producers increasingly rely on pressure gradient information from wells in a common reservoir to calculate a water contact.
“The SEC engineers consider this methodology unreliable at this time, reversing a previously held position,” Harrell said. “Most evaluators consider this technique to be good science with adequate data and would urge a reconsideration by the SEC, again in compelling cases with good data.”
He also noted that SEC engineers do not accept the booking of improved recovery reserves, including from pressure maintenance, without a nearby (25-50 mile) analog.
“Most evaluators would conclude that some reservoirs have sufficiently positive parameters of porosity, permeability, saturations, fluid characteristics, and reservoir geometry to declare some measure of improved recovery to be reasonably certain-and would ask the SEC engineers’ consideration of such,” Harrell said.
At the industry’s suggestion, SEC relaxed one long-standing restriction when it ruled that a flow test is not required to book reserves as proved in the deepwater Gulf of Mexico. But a flow test still is required outside the deep water, and some producers see that as a double standard.
Shelf operators are required to perform expensive flow tests before booking reserves. They argue that the flow test requirement makes some marginal fields uneconomical.
