Solutions to 2017 RRMP Quiz

1) What are Reserves?

1. those quantities of petroleum commercially recovered

by application of development projects to known accumulations on a given date
under defined conditions.
2. those quantities of petroleum estimated, as of a given date, to be potentially recoverable
from known accumulations (discovered) by application of development projects, but
which are not currently considered to be commercially recoverable due to one or more
contingencies.
3. those quantities of petroleum which are estimated, as of a given date, to be potentially
recoverable from undiscovered accumulations.
4. those quantities of petroleum anticipated to be commercially recoverable
by application of development projects to known accumulations from a given
date forward under defined conditions.

Explanation

Choice d) corresponds best to the definition of Reserves.

Choice c) describes Prospective Resources (Key word: undiscovered)

Choice b) describes Contingent Resources (Key words: discovered but not yet commercial)

Choice a) is wrong because "…commercially recovered…" suggests this portion of hydrocarbon has
already been recovered/produced to the surface.

2) Reserves must be …………………………………………………………..

1. Discoverable, Recovered, Commercial, and Remaining

2. Discovered, Recovered, Commercial, and Remaining
3. Discoverable, Recoverable, Commercial, and Remaining
4. Discovered, Recoverable, Commercial, and Remaining

Explanation

Reserves must be

Discovered (already discovered or found as of the date of evaluation; not "discoverable" which suggests
something we expect to be found in the future).
Petroleum accumulations can be considered to be discovered if one or several exploratory wells have
established through testing, sampling, and/or logging the existence of a significant quantity of potentially
moveable hydrocarbons.

Recoverable (i.e. able to be recovered or produced to the surface; not "recovered" which suggests
something has already been produced).

Commercial

Commerciality is demonstrated by firm intention to proceed with development which are assessed based
on

 a reasonable timetable for development

 a reasonable assessment of the future economics of such development
 a reasonable expectation that there will be a market
 production and transportation facilities are available or can be made available
 Evidence that legal, contractual, environmental and other social and economic concerns will allow
for the actual implementation

Remaining (i.e. not counting historical production as of the date of evaluation) indicates volumes that
will be commercially recovered from discovered accumulations.

3) If probabilistic methods are used in determining P1 reserves, there should be at least a ……..
probability that the quantities actually recovered will equal or exceed the estimate.

1. 100%
2. 95%
3. 90%
4. 50%

Explanation

The answer key is self-explanatory.

For more detail, see item 3 in http://km.pttep.com/rmp/Wiki/Frequently%20Asked%20Questions.aspx

4) For the company entering into a Production Sharing Contract with the Thai Government, the
Thailand Petroleum Act (2017) limits the petroleum allocated to cover the company's costs to ……. of the
total petroleum produced in a year.

1. 49.5%
2. 50%
3. 50.5%
4. 51%

Explanation
The answer key is self-explanatory.

For more detail on the Petroleum Act (2017) and the Petroleum Income Tax Act (2017), go to

http://km.pttep.com/rmp/Lists/Discussion%20Forum/Flat.aspx?RootFolder=%2Frmp%2FLists%2FDiscussio
n%20Forum%2FNew%20Thailand%20Petroleum%20Act&FolderCTID=0x01200200390E645069DE254BB8B
27598D6B0A756

5) A new official base-case long-term oil price forecast significantly reduces the economic-limit
production rate of project A. This causes the estimate of P1 Reserves of project A to increase. Which
category of reserves movements do you expect to see due to such increase?

1. Extensions and discoveries

2. Improved recovery
3. Purchases or sales
4. Revisions of previous estimates

Explanation

The answer key is self-explanatory.

See item 5 in http://km.pttep.com/rmp/Wiki/Frequently%20Asked%20Questions.aspx

6) Commerciality is one of the criteria for Reserves status. Which of the following is the best evidence
of commerciality?

1. Final Well Report that include recoverable volumes

2. Well Test Report that shows the hydrocarbon reservoir is very large
3. Approved Work Program and Budget that is in line with approved FDP
4. Complete Exploration Risk Analysis and the Mitigation Plans

Explanation

Among the four choices, Choice c) better represents the evidence of commerciality. With Approved Work
Program and Budget that is in line with approved FDP, we usually scrutinize many more elements of
Commerciality status than Final Well Report, Well Test Report, or Complete Exploration Risk Analysis and
the Mitigation Plans.

The elements of Commerciality status that are missed by Choice a), b), and d)

 a reasonable timetable for development

 a reasonable assessment of the future economics of such development
 a reasonable expectation that there will be a market
 production and transportation facilities are available or can be made available
 Evidence that legal, contractual, environmental and other social and economic concerns will allow
for the actual implementation
 Note that this does not mean that a development project with an approved budget& FDP is
always associated with Reserves. In practice, we must be able to verify the five bullet points
above to declare Commerciality of portion(s) of contingent petroleum resources.

7) For PTTEP, what are the two categories of Reserves that are most relevant to the depreciation,
depletion, and amortization (DD&A) of oil and gas properties?

1. P10 Reserves and P90 Reserves

2. Proved and Probable Reserves
3. Proved and Possible Reserves
4. Proved and Proved Developed Reserves

Explanation

According to Global FNA Policies and Procedures: Accounting A107 – Property, Plant and Equipment,
Proved Reserves are used in DDA calculation of the following items of assets:

Proved Developed Reserves are used in DDA calculation of the following items of assets:
8) Which is a typical sequence for a field development?

1. Petroleum Contract Awarded  FID  Field Development Plan Approved  Production

Area Granted  Sales Contract Signed
2. Petroleum Contract Awarded  Production Area Granted  FID  Field Development
Plan Approved  Sales Contract Signed
3. Petroleum Contract Awarded  Production Area Granted  Sales Contract Signed  FID
 Field Development Plan Approved
4. Petroleum Contract Awarded  Field Development Plan Approved  Production
Area Granted  Sales Contract Signed  FID

Explanation

Firstly, a company (or other entities such as a joint venture, etc.) requires the rights to perform petroleum
activities in the designated area. So petroleum contract awarded is the first step of the field development.

Once the company has discovered and judged petroleum accumulation(s) to be commercially viable (and
performed at least the minimal obligation per contract), then it will formulate a Field Development Plan
(FDP).

With the FDP demonstrating a commercial development of the area, it will submit the Production Area
Application (i.e. applying for the license to produce petroleum). With the approval of the Production Area
(PA) from the government, production may start.

Afterwards, the company could secure the market by entering into a petroleum sales contract with the
buyer(s) (especially for gas fields, which is known as gas sales agreement: GSA). This process is to ensure
that there will be a market for the hydrocarbon to be produced from the field.

A final investment decision (FID) is made when the company decides to proceed with committed
investment to develop the field. With FID, the hydrocarbon development project enters an Engineering,
Procurement, Construction, and Commissioning (EPCC) phase. In this phase, the company may engage with
the engineering companies to design all the details of the project for execution, proceed to the procurement
of all the equipment and services and finally construct the infrastructure including the commissioning and
start up.

9) To book reserves, what is the minimum set of requirements for a new oil field development (so
called, a green oil field)?

1. Field development plan approved + Firm intention to develop

2. Petroleum sales agreement approved + Firm intention to develop
3. Final Investment Decision
4. All of the above

Explanation

According to PTTEP and SPE PRMS guidelines, a Reserves status may be declared for a portion(s) of
petroleum resources if
 1. implementation of the development project is justified on the basis of reasonable forecast
commercial conditions at the time of reporting
2. there are reasonable expectations that all necessary approvals/contracts will be obtained.

This is the minimum requirement for the lowest-maturity sub-class of the Reserves, so-called
"Justified for development".

Among the four choices, Choice a) contains the minimum set of requirements for a new oil field
that satisfies the two items above:

Choice b) actually represents the minimum requirements for a new gas field, while Choices c)
represents the more mature sub-class of Reserves, i.e., "Approved for Development".

Note: As implied by the item (ii) above, the guideline does not limit the Reserves booking to
only after the field development plan is approved. Rather, it requires that there are reasonable
expectations that all necessary approvals/contracts will be obtained and there is no known
contingency that could preclude the development from proceeding within a timeframe.

10) Which is incorrect?

1. 1P = P1 = Proved Reserves
2. 2P = Proved plus Probable Reserves = 1P+P2
3. 3P = Proved plus Probable plus Possible Reserves = 1P+P2+P3
4. 3P - P2 = Proved plus Probable Reserves

Explanation

Choice d) should read like:

3P – P2 = P1+P3 = Proved plus Possible Reserves; or alternatively,

3P – P3 = P1+P2 = Proved plus Probable Reserves

See item 3 in http://km.pttep.com/rmp/Wiki/Frequently%20Asked%20Questions.aspx for more detail.

11) If Proved Developed Reserves = 10 MMBOE, Proved Reserves = 10 MMBOE and Probable Reserves =
10 MMBOE, how much is the 2P Reserves?

1. 10 MMBOE
2. 20 MMBOE
3. 30 MMBOE
4. 40 MMBOE

Explanation

2P = P1 + P2 = Proved Reserves + Probable Reserves = 10 + 10 =20 MMBOE.

Note

P1 = P1U + P1D = Proved Undeveloped Reserves + Proved Developed Reserves.

See item 3 in http://km.pttep.com/rmp/Wiki/Frequently%20Asked%20Questions.aspx for more detail.