Efficient Regulatory Models:

Transcription

1 Efficient Regulatory Models: Interim steps required in building independent regulators Presented by Sproule June 16, 2017 Alison M. Redford, Q.C. & Warren Chung, P.Eng. Copyright 2017 Sproule

2 Disclaimers This material is private. It does not take into account any specific business objectives of the recipient. The information herein does not constitute advice, nor an offer to buy or sell instruments, products or services. Dealing in commodities, financial instruments, derivatives or other products involves risk. The recipient of this material should not deal in these products unless it understands their nature and its exposure. It should seek independent advice before making any investment or other decision. While every effort has been made to ensure the information herein is accurate, its accuracy cannot be guaranteed. The author accepts no liability for any damages (including, but not limited to, lost profits) arising from reliance upon this material. Unauthorized copying of this material is strictly prohibited without the prior written consent of the author. This presentation may contain forward-looking information and statements (collectively, "forward-looking statements") within the meaning of applicable Canadian securities legislation, concerning the outlook of commodity prices and the potential impact these could have on industry netbacks. Forward-looking statements include, but are not limited to, statements with respect to the estimation of commodity prices, permitting time lines, currency exchange rate fluctuations, government regulation of oil and gas exploration and development activities, environmental risks, and judicial ruling. Generally, these forward-looking statements can be identified by the use of forwardlooking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" or the negative connotations thereof. All such forward-looking statements are based on the opinions and estimates of the relevant management as of the date such statements are made and are subject to important risk factors and uncertainties, many of which are beyond the Corporation's ability to control or predict. Copyright 2017 Sproule Page 2

3 Overview Background Case Studies Guyana need for thoughtful policy development Peru addressing pipeline spill remediation and mitigation Pakistan technical support and planning to create an efficient and transparent regulator Regulatory Strategy and Development Framework Alberta Model Technical Capacity Building: Value for Policy Makers Common Language: Understanding Resources and Reserves Resources and Reserves Classifications, Sub-Classifications Technical Uncertainties Standards of Estimation Concluding Remarks Copyright 2017 Sproule Page 3

4 Background Whether you are seeking to resolve an issue or to engage in wider policy discussion, it is essential to have all stakeholders engaged and agreeing to the outcomes. Transparency Environmental Sustainability Economic Development How do different stakeholders approach these issues can they agree? Copyright 2017 Sproule Page 4

5 Case Studies Copyright 2017 Sproule Page 5

6 Guyana Experience In the news Copyright 2017 Sproule Page 6

7 Guyana Experience On the ground Georgetown Port Court of Appeal Ministry of Infrastructure Copyright 2017 Sproule Page 7

8 Peru Experience Stakeholder Engagement Needed Copyright 2017 Sproule Page 8

9 Pakistan Experience Technical support and planning to create an efficient and transparent regulator Reducing Regulation + Increasing Certainty = Efficiency Copyright 2017 Sproule Page 9

10 Constructive Engagement Model Government Regulator Industry Associations and Communities Companies Alberta Government Alberta Energy Regulator (AER) Canadian Association of Petroleum Producers (CAPP) CNRL Shell Nexen Encana Etc. Copyright 2017 Sproule

11 Scenario Planning and Capacity Building: Value for Policy Makers Seeking Consensus on a Country Based Energy Strategy Holland Energieakkoord ( ) Agreement on Energy for Sustainable Growth Mitigation Action Plans and Scenarios (MAPS) University of Cape Town South Africa Colombia Peru Copyright 2017 Sproule Page 11

12 Scenario Planning and Capacity Building: Value for Policy Makers Learning by doing is the willingness to reflect on action and then change if the current trajectory is not meeting objectives. Such an approach benefits from generous sharing of any relevant expertise amongst peers, humility and patience with process. - MAPS Copyright 2017 Sproule Page 12

13 Technical Capacity Building: Scenario Planning Copyright 2017 Sproule Source: MAPS Page 13

14 Civil Society Regulatory Strategy and Development Framework Monetize the value of the natural resources for your country and people through transparent and consistent regulation that achieves social license and creates investor confidence. Scenario Planning and Capacity Building Policy, Planning & Legal Integrated Sustainable Resource Development Infrastructure Planning Integrated Project Management & Oversight Regulatory Components & Compliance Water Air Tailings management Flaring Land Use Policy Legal Framework Regulation and Regulatory Review Inter-jurisdictional Royalty Regimes Contract Models Bidding & Tenure Licensing Price Consultation Consultation COP21 & Climate Change Consultation Environmental Targets Permitting Disclosure Measurement Data Management Transparency Social & Community Development Infrastructure Development Environment Management Clean Technology Social License Environmental Fiscal Regimes Compliance & Enforcement Industry Stakeholders C O N S U L T I N G E N G A G E M E N T Energy Value Chain 14

15 How Can We Talk to Each Other? Common Language Understanding resources and reserves Used by: National policy makers Industry Investment community Copyright 2017 Sproule Page 15

16 Resources and Reserves Classifications, Sub-Classifications Increasing Commerciality Simplified Roadmap to Reserves Petroleum Source Trap Petroleum Deposit Seismic Identify Potential Existence Prospective Resource Drill, Log, Test Discover Resource Contingent Resource Technology, Economics, Commitment Commercial Reserves Proved Probable Possible Definitions of Resources and Reserves Classifications Reserves Sub-Classifications Prospective Resources Contingent Resources Reserves Certainty Quantification of Certainty Status Production Shorthand To be potentially recoverable From undiscovered accumulations By application of future development projects Consider risks associated with likelihood of discovery and likelihood of development Petroleum Estimated To be potentially recoverable From discovered accumulations Using established technology or technology under development Discovered; consider risks associated with likelihood of development To be commercially recoverable From discovered accumulations Using established technology Discovered, owned, recoverable, producible, commercial, Proved Probable Possible 90% probability that volumes produced will meet or exceed estimated volumes (1P or P90) 50% probability that volumes produced will meet or exceed estimated volumes (2P or P50) 10% probability that volumes produced will meet or exceed estimated volumes (3P or P10) Producing Developed Non-Producing Undeveloped - Producing Developed Non-Producing Undeveloped - Producing Developed Non-Producing Undeveloped - PDP PDNP P+PDNP P+PDP P+PDNP P+PUD P+P+PDP P+P+PDNP P+P+PUD Increasing Certainty Copyright 2017 Sproule Page 16

17 Technical Uncertainties Example Sources of Technical Uncertainty Geology Engineering Geological interpretation based on seismic and well logs (apply appropriate cutoffs), interpretation of original volumes in place based on rock and fluid properties (pay, porosity, water saturation, formation volume factor). Well performance and production forecasting, expected recovery based on analogous reservoirs, degree of field delineation and development, incremental benefit from application of new technologies. Copyright 2017 Sproule Page 17

18 Common Standards of Estimation Common Standards of Estimation COGEH SEC SPE-PRMS Application Jurisdiction Canada United States General; Worldwide Intended Purpose General Application, Securities Reporting Securities Reporting General Application Copyright 2017 Sproule Page 18

19 Concluding Remarks Every country is unique and will face unique policy objectives. Cannot rely on modeling regulatory structures based on other countries experiences. Considerations: Policy goals economic, climate, community participation Stakeholder realities Relationship with industry national oil companies, international oil companies Legal framework Existing institutional capacity There are lessons to be learned that can support your national goals. Copyright 2017 Sproule Page 19

20 Contact us Alison M. Redford Warren Chung Corporate Headquarters 140 Fourth Avenue SW, Suite 900 Calgary, AB, Canada T2P 3N3 T TF Colombia Calle 93 A #14 37, Oficina 314 Bogotá, Colombia T Brazil Avenida Nilo Peçanha, 50 / 408 Centro Rio de Janeiro, RJ, Brazil T Copyright 2017 Sproule Page 20

21 Copyright 2017 Sproule About Sproule

22 Copyright 2017 Sproule

23 Practice areas designed to support your organization Strategic Insights & Analysis > Technical Insights & Analysis > Operational Insights & Analysis > Disclosure Compliance > Strategic Advisory Reservoir Characterization Asset Management Reserves Certification Reduce risk and improve business results with independent advisory services from experts with in-depth technical and market insights. M&A and Bid Round Advisory Technical Due Diligence Expert Witness Testimony Asset Planning and Portfolio Optimization Regulatory Strategy and Development Understand reservoir rocks and fluids to accurately characterize plays and basins and increase revenue through efficient and effective recovery techniques. Geological, Geophysical, and Petrophysical Interpretations Static Reservoir Modelling Dynamic Reservoir Simulation Integrated Studies Operate oil and gas assets efficiently by employing best practices and delivering on stakeholder objectives. Oil and Gas Asset Management Land Management Liability Management Field Operations Abandonment & Reclamation Accounting Administration Build shareholder confidence and maximize resourcebased investments with independent analysis of petroleum volumes and economics. Independent Reserves Certification Competent Person s Reports Resource Assessments Energy Training Think Energy. Discover Value. Copyright 2017 Sproule

24 Strategic Advisory Regulatory Strategy and Development Experts Alison Redford, QC Practice Area Director, Regulatory Strategy Warren Chung, P.Eng. Petroleum Engineer A national petroleum sector can create significant economic, social and even environmental benefits when a fair and transparent regulatory infrastructure is in place. Sproule brings together policy experience and technical expertise to offer an impartial service, rooted by the political, economic and social context of the nation. Consultants develop fit-for-purpose models that enable improvement to governance and simultaneously meet the needs of producers, government, investors and local communities. Services Legislative and Regulatory Frameworks Bid Round Advisory Services Sustainable Resource Development Contract Negotiation and Performance Monitoring (PSAs /Royalty Frameworks) Contract Audit and Management (Ministry) Fiscal Regimes In Country Value and Procurement Public Consultation Plans and Stakeholder Engagement Technology Transfer Benefits Governments can meet economic challenges and secure investment through effective and sustainable development of their natural resources. Investors can dramatically reduce the risk of doing business when they understand the regulatory framework the rules of the game. Exploration & Production (E&P) companies can explore opportunities globally and maintain shareholder confidence with consistent and fair practices being employed around the world. Communities can become engaged by participating in the process of how their nation develops its natural resources to benefit their people for the long term. Copyright 2017 Sproule Page 24