Transcript PPT

7.1 METHODOLOGY FOR THE
VALUATION OF NATURAL
RESOURCES
Advisory Expert Group (AEG) on National
Accounts
Washington D.C., September 8 – 10, 2014
Peter van de Ven
Head of National Accounts, OECD
Introduction (1/2)
• Physical stocks:
– The measurement of physical stocks is a necessary intermediary
step before valuation can start
– The international comparability of physical stocks needs to be
improved
– Moving to the classification advocated by the SEEA 2012 is
difficult in practice
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Introduction (2/2)
• Valuation: When computing NPVs, several issues have
to be considered:
– How to forecast commodity prices when they are volatile?
– How to compute NPVs that do not only rely on currently
observed prices?
– How to ensure that production and price forecasts are
consistent?
=> Statistical / Economic modelling may help
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International comparability of physical
stocks of natural resources (1/2)
Overview of existing classifications
Abbreviation
CRIRSCO,
SPE-PRMS
UNFC-2009,
SEEA-2012
Full Name
Committee For Mineral Reserves
International Reporting Standards
Society of Petroleum Engineers –
Petroleum Resources Management
System
United Nations Framework
Classification for Fossil Energy and
Mineral Resources
System of Environmental-Economic
Accounting – Central Framework
Subject Resource
Minerals
Latest
edition
(first
edition)
2013
(2006)
Fossil Energy (crude
oil and natural gas)
2007
Minerals and Fossil
Energy
2009
(1997)
Renewable and nonrenewable natural
resources and land
2012
(2003)
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International comparability of physical
stocks of natural resources (2/2)
Australia’s subsoil assets as measured by ABS, BP, EIA, and
USGS, and how these definitions relate to SEEA-2012
Proved
Measured
Fundamental Characterization
Solid Mineral
Classes
PRMS
Classes
Mineral Project
Development Stage
PRMS Sub-Class
UNFC E
axis
UNFC F
axis
UNFC G axis
Probable
Possible
Indicated
Inferred
1P/1C Low
Estimate
BP and EIA
2P/2C Best Estimate
USGS
3P/3C High Estimate
On Production
Discovered and Commercially
Recoverable
Mineral
Reserves
Reserves
Project Implementation
Feasibility Study
Discovered and Not
Commercially Recoverable
Mineral
Resources
Contingent
Resources
On Production
Approved for
Development
Justified for
Development
Prospective
Resources
1
2
3
1
1.2
1
2
3
1
1.3
1
2
3
2.1
2.1
2.2
2.2
1
1
1
1
2
2
2
2
3
3
3
3
1
2
3
Development Pending
Order of Magnitude
Studies
Development
Unclarified or on Hold
1
2.1
2.1
3.2
Development not Viable
2.2
2.3
Discovered
Not Economic
Exploration
Results
1.1
Pre-Feasibility Study
Unrecoverable
Undiscovered
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Conceptual Studies
3.3
4.1
1
2
3
Prospect
3.2
3.1
4.1
4.2
4.3
Lead
Play
3.2
3.2
3.3
3.2
3.3
4.2
4.1
4.1
4.1
4.2
4.2
4.2
4.3
4.3
4.3
E axis
F axis
Unrecoverable
Australia's Natural Resource System
Economically Demonstrated Resources
(EDRs)
Reported Categories
JORC Reserves and
JORC Resources
(measured and
indicated) Development
Pending
SEEA2012
Class A
SEEA2012
Class B
SEEA2012
Class C
G axis
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Valuation of natural resource stocks (1/5)
•
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Valuation of natural resource stocks (2/5)
Nominal and real oil prices (U.S. dollars per barrel)
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Valuation of natural resource stocks (3/5)
•
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Valuation of natural resource stocks (4/5)
Classical reference in the literature: Brennan-Schwartz (1985) –
Evaluating natural resource investments
NPV of a mine as a function of the current resource price:
Value of
the mine (v)
or output (q)
Current resource
price (s)
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Valuation of natural resource stocks (5/5)
• Admittedly, relying on statistical/economic modelling involves crucial
assumptions:
– Identifying the main sources of uncertainty (here, we only
considered price uncertainty)
– Specifying the right stochastic process for commodity prices
– Specifying how extraction costs depend on current production or
remaining reserves. Difficult task given the current scarcity of
data on extraction costs, but one more reason for environmental
accountants to consider the improvement of these data as a
priority
• However … providing convincing unit rent and production forecasts
is also problematic when one wants to directly compute the NPV of
a natural resource stock
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Issues to be addressed by the AEG
• Does the AEG agree that the volatility of commodity
prices is a key issue for the valuation of natural
assets?
• Does the AEG agree that relying more heavily on
modelling (dynamic optimisation) may be a reasonable
way forward for the valuation of natural resources (and
possibly other assets)?
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Thank you for your attention!
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