Industry comments on US federal reserves reporting rules indicate that oil and gas companies believe seismic data could play important roles.
The Securities and Exchange Commission asked for comments about modernizing its 1978 reserves reporting rules, and some in the industry believe the commission plans to update the procedures.
In the 30 years since the SEC established its rules, the industry has made dramatic advances in seismic surveying and imaging, many of which have been chronicled in this magazine.
Indeed, 3D seismic surveying technology, invented by ExxonMobil Corp. predecessor Humble Oil & Refining Co. in 1963, was hardly available to the wider industry by the time the SEC placed its existing rules in effect in 1978.
The extent to which companies believe seismic information could improve reserves reporting is evident in comments filed with the SEC. The comments reflect many other changes companies believe the commission should make, and full comments are posted on the SEC web site.
The existing SEC rules allow public companies to report only proved reserves and then under relatively narrow definitions of what constitutes “proved.”
Seismic contributions
Confining disclosure to proved reserves, narrowly defined, serves SEC’s goal of reducing the chance that investors will be misled. But some companies favor the reporting of probable reserves as providing a more complete view of a company’s holdings.
The comments indicate that some companies don’t feel that the SEC rules are flexible enough to allow them to give an accurate picture of the variances between conventional oil and gas reserves, enhanced oil recovery project reserves, unconventional gas accumulations, and oil sands reserves.
Devon Energy Corp. commented: “Reserves should be determined using proven, modern technology that is in general use in the petroleum extractive industries. Permitted technologies should include 3D seismic for structural interpretation as well as reservoir limits, where definitive; history-matched reservoir simulation to calculate original hydrocarbons-in-place and recoveries; use of modern pressure gauges in wireline formation testers; and other methods when proven to be reliable through repeated application.
“Any such technology should be proven through actual field and reservoir performance before reserves associated with such technology would be allowed in financial reports.”
BP PLC said, “If pressure-and-fluid and seismic data that have been shown to be good indicators of contact depth in appropriate analogs are available, and the evaluator can demonstrate reasonable certainty of their estimate, then that information should be used.”
Other seismic potential
Some companies commented on the uses of seismic in unconventional gas reservoirs.
Ultra Petroleum Corp. said: “The current staff interpretation that (proved undeveloped) locations must be immediately adjacent to producing units and their interpretation that certainty means absolute certainty for utilization of newer technologies such as 3D seismic for PUD locations more than one offset away is outdated and not consistent with how companies make drilling decisions.
“For our major asset (Pinedale field, Wyo.) we have used our 3D interpretation for the past 7 years drilling a mixture of PUD, probable, possible, and even unengineered locations with 100% success in obtaining commercial wells. In addition, the current interpretation is very difficult to apply to this same field, which has four different well drilling densities with areas approved for 40, 20, 10, and 5 acre development.”
Ultra asked, “If PUD locations are booked as direct offsets to a 40 acre drilled producing well and the area is down-spaced to 10 acres drilling, do we lose PUD locations? Has the certainty been decreased for the other three locations in the booked 40 acre area?”
Southwestern Energy Co. said its experience in the Fayetteville shale indicates that microseismic data from multistage hydraulic fracs can help demonstrate the productivity along the length of a horizontal lateral as long as the data show a consistent pattern that the stimulations treated the entire lateral length.
The next steps
The SEC at some point will file a proposal for new rules.
The commission will allow a 60-day comment period, then review the comments and publish final rules followed by another 60-day comment period.
After that, the commissioners will vote on whether to adopt the final regulations.
Whatever the outcome, oil and gas companies may soon see the fruits of some 30 years of major technological advances begin to be reflected in their reserves reporting.
