Subsoil Asset Accounts Results of a questionnaire and points

Subsoil Asset Accounts Results of a questionnaire and points for further discussion Prepared for The London Group Meeting Copenhagen, Denmark 22-24 September 2004 by Kristine Erlandsen, Statistics Norway Martin Lemire, Statistics Canada Ismir Mulalic and Ole Gravgård, Statistics Denmark Raymundo J. Talento, NSCB, the Philippines Jeremy Webb and Chase O’Brien, Statistics New Zealand

Background LG Rome 2003: Subgroup on subsoil asset accounting Purpose: a) Carry out a survey on country practises in the compilation of mineral resources accounting b) Prepare guidelines on the compilation of subsoil asset accounts c) Consider the discussions of the Canberra II Group on the measurement of Non-Financial Assets as they relate to subsoil assets

Questionnaire Questionnaire / survey of country practises Send out by mail April 2003 to 29 countries and organisations Responses from nine countries with subsoil asset accounting: Canada Austria New Zealand Denmark Norway South Africa Netherlands Philippines United Kingdom and from Germany and Sweden: No accounting

Questions Questionnaire Type of accounting (which assets, classification, units of measurement, accounting period) Basis for the accounts (guidelines, data sources) Challenges Dissemination Future plans

Responses type of mineral and energy resources covered Oil and natural gas Austria Non-metallic minerals gold, copper, nickel, iron, uranium, crude bitumen, zinc, silver molybdenum and lead potash developing gold, silver and iron. developing aggregate, limestone, dolomite, clay and other nonmetallic minerals x Canada x Denmark x New Zealand x Norway x The Coal Metallic minerals x x gold, copper, chromate, nickel, limestone and

Resource classification New Zealand The Philippines Responses Proven, Probable Austria Proven, Probable, Possible United Kingdom Proven, Probable, Possible and undiscovered Norway Total recoverable (discovered resources and undiscovered) Denmark Ongoing and approved, planned recovery, possible recovery National level but: Canada,New Zealand and Philippines also Regional level accounting Canada Developed reserves (Established – recoverable –

Responses All nine countries have time series (covering 10-25 years) Years covered by the accounts Years covered Time lag Austria 1975-2000 Canada 1977-2001 3 years Denmark 1991-2002 2 years New Zealand 1992-2001 3 year Netherlands (1986) 1996-2002 Norway 1984-2002 Philippines 1988-1998 (1996) UK 1981- South Africa 1980-2001 1 year 10 month

Responses Guidelines in use Non European countries: SEEA and others European countries: Eurostat-guidelines (for oil and gas) except the Netherlands for valuation

Responses Usefulness of SEEA All nine countries find that SEEA is clear and useful ! But some areas are poorly covered: - Renewable energy stock measurement - Distribution of resource rent between owners - Actual country examples

Methods used for the valuation NPV is the preferred method with 8% per cent return to capital, 4% discount rate and constant extraction ! Responses Eurostat guidelines The Netherlands: Rent appropriated by government Canada and the Philippines: Other methods in use as well

Responses Varying details in monetary asset accounts Basic identity: Opening stock Changes Closing stock New Zealand: split of changes Additions Other changes Denmark: split of changes Extraction New findings etc. Revaluations South Africa: split of deductions Volumes sold Changes in inventories UK and Norway: split of revaluation Time passing Changes in rent

Responses Treatment of uncertainty Philippines, New Zealand, UK: Verbal explanation in publications Canada: Relative measure of reliability Denmark and Norway: Sensitivity analysis (varying discount rate and rate of return on capital)

Responses Dissemination of accounts Internet (CA, DK, PH, NZ, UK) Hard Copies (DK, CA, PH, ZA) Indicators Natural ressource wealth Physical stocks Total ressource base Production/reserve ratio Several countries mention that they intend to derive indicators

Responses Use of the accounts Canada: National balance sheet, index of well-being New Zealand: Analysis of carbon tax policy, Sustainability assessment model Norway and Philippines: Growing interest from ministries The Norwegian experience in the 80’ties !

Responses Other issues of interest Decommisioning costs no experience, but broad interest ”Stocks” of renewable energy (wind, hydro, biomass, etc.)

Responses Countries’ future plans Minor plans for future expansions But: more regular accounts Canada: Diamonds, offshore crude oil and gas Norway: Incorporation of monetary accounts into National Accounts New Zealand: Carbon accounts and renewable energy Philippines: Hydro, oil, gas and other minerals

Responses Some challenges mentioned by respondents General: Lack of data Data quality Confidentiality Lack of expertise and experience Valuation: depletion profile rate of return to capital discount rate Treatment of capital in rent calculation Division of cost between oil and gas Government’s share of revenues from oil and gas

Further sub-group work ? Discussion and prioritising Points for discussion and prioritising Need for harmonization and international comparisons ? Classifications NPV parameters Rate of return, discounting, extraction profiles Consensus rates? Guidelines for regional subsoil accounts ? Would it be useful to try to harmonize the level of detail in the accounting ? Same accounting items for changes in stocks ?

Decommissioning cost ? Further sub-group work ? Discussion and prioritising Supplement SEEA with guidelines ? - renewable energy stock measures - distribution of resource rent between owners, - actual country examples Common standards for reliability measures and sensitivity analysis ? How can experiences best be shared ? Fixed prices calculations of stock values ? Are indicators for subsoil assets an issue for the London Group ?

Next Step for the London Group / sub-group? Further sub-group work ? Discussion and prioritising Continue country survey ? Prepare guidelines ? build on Eurostat guidelines Other ideas ? Ambitions and resources ? New volunteers for the subgroup ?