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MeneameSpanish oil major Repsol YPF (NYSE: REP) expects to adjust its total proved reserves downward roughly 25%, or 1.25 billion barrels of oil equivalent (boe), the company said in a statement.
The adjustment relates primarily to lower-than-expected natural gas reserves in Argentina, Bolivia and to a lesser degree Venezuela as well as other countries, the statement said.
Bolivia accounts for 52%, or 659 million boe of the downward adjustment, Argentine for 41%, or 509Mboe, Venezuela for 4.7%, or 58.6Mboe, and other countries for 27.7Mboe.
The revisions were made as the result of a study conducted by the company's reserves control group. The reduction represents Repsol YPF's current best estimate and the company expects final proved reserve amounts to be determined by end-February.
The revisions were mainly driven by changes in the applicable legal framework in Bolivia, due to the new hydrocarbon law passed in May 2005, and greater knowledge of certain fields in that country and Argentina, the statement said.
The law, which stipulates a combined tax and royalty rate of 50%, has rendered future production on some fields "no longer commercially viable" and made gas exports to Brazil uncertain after the existing contract expires in 2019, the statement said.
Increased knowledge of fields including Bolivia's Sábalo and San Alberto fields and Argentina's Loma la Lata and Chihuido de la Sierra Negra fields, each of which have shown declines in pressure, also contributed to the downward reserves revision.
Furthermore, proved reserves expected to be produced based on contract extensions in the company's Argentine concession have been eliminated because "renewal of the concession is uncertain," the statement said.
In Venezuela, the company is negotiating to transform commercial arrangements into joint ventures with state oil company PDVSA, which will affect its working interests.
Revising the proved reserves amount will carry with it asset impairment charges less than 50mn euros (US$61.3mn), the statement said.
Decline in production at the fields will mainly occur in the later years of their life and as such the reduction in net cash flow resulting from the adjustment is substantially lessened, the statement said.
The reserves control group reports directly to the company's audit committee, which assumed last April the responsibility for the independent supervision of reserves. The committee is conducting an independent review of the circumstances surrounding the revisions, the statement said.
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