Enterprise risks loom in petrochem

Enterprise risk managers should factor at least 20 risk categories into estimates of prospective and contingent resources in mining or petrochemical operations.

In addition to corporate and site risks, enterprise risk should account for industry risks like financing; operational risks in exploration, development and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; uncertainty of estimates and projections related to production; costs and expenses; health, safety, environment, and security.

Lion Energy president and CEO, Brian Thurston, lists many corporate governance elements and enterprise risks in a report on a deal with Africa Oil.

Canadian based Lion Energy says TSX Venture Exchange has granted approval for a farm-in agreement with Africa Oil Corp, allowing an interest in five petroleum blocks in Kenya and Puntland, Somalia.

Thurston also lists enterprise risks relevant to drilling equipment availability and efficiency, ability to attract and retain key personnel, commodity price and foreign exchange rate fluctuations, securing political, state, bureaucratic and regulatory approvals.

Assessment of corporate contingent and prospective resources was completed by an independent agency, in accordance with standards established by the Canadian Securities Administrators in National Instrument 51-101; Standards of Disclosure for Oil and Gas Activities.

Minimum commercial field size should take into account local economic, environmental, political and regulatory issues, including infrastructure, Thurston reported.

Commercial recoverability have to take into account contingencies like economic, legal, environmental, political, and regulatory matters, or lack of markets.

Contingent Resources are classified in accordance with the level of certainty associated with the estimates, and may be sub classified based on project maturity, or characterised by their economic status.

Several contingencies in the Kenya and Somalia blocks, for example, prevent classification of contingent resources as ‘reserves’.

Prospective resources carry a chance of discovery and a chance of development. Prospective resources are further subdivided in accordance with the level of certainty associated with recoverable estimates, assuming their discovery and development, and may be sub classified based on project maturity.

Risks and uncertainties that could cause results to differ from those anticipated, include;

Discovery uncertainty
Estimate uncertainty
Reservoir porosity
Net hydrocarbon pay thickness
Fluid composition and water saturation
Reservoir pressure, density, viscosity
Gas to oil ratio
Reservoir permeability
Presence or absence of water drive
Mineralogy of the reservoir rock
Well performance
Reliability of production
Process facilities
Availability and quality of source water
Availability of fuel gas
Ownership considerations
Access to equity or debt markets
Development Plan
Access to Infrastructure
Market prices
Exploration success
Business and economic conditions
Stock exchange rules
Regulatory requirements

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