What are the biggest challenges faced when turning resources into reserves?

In preparation for the World Independent Oil Companies Congress I asked key speakers their thoughts on ‘What are the biggest challenges faced when turning resources into reserves?’. Here are their responses from the end of 2011:

**Mikhail Ivanov, CEO, Volga Gas

In spite of great progress with implementing new technologies in exploration, there is still a high risk of getting sub commercial  discovery when drilling a “wild cat”.

All “sweet” spots were drilled at first, there are comparatively more challenging locations to be drilled at: very deep, offshore, remote, smaller targets with less chances of success.

This challenge leads to higher discovery cost and often higher development cost.

**Andrew Buglass, Head of Energy Structured Finance, Corporate & Institutional Banking, RBS

Technical issues in difficult environments such as deepwater, the Arctic. Otherwise also funding. Suspect regulation/safety less important than looked as if they were going to be.

Access to resources; politics: most still in hands of NOCs. Technology – seabed hydrates

Access to resources: geography, e.g. arctic. Absence of infrastructure in underdeveloped regions

**Alec Robinson, President, Taipan Resources

There are so many things that can impact this.  Investors may get impatient and start selling out.  Raising additional funds for drilling and seismic campaigns, thereby diluting existing investors can be problematical. Technical issues may mean that the reserves are less than expected, sometimes significantly so.  Governments may be forced by domestic political pressures into making retroactive changes to tax regimes and/or licence terms.  Etc.

Do you agree with their comments?

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