September 8, 2008
Serafim Ltd is a reservoir engineering consultancy and software company involved in reserves evaluations and reporting.
On page 30 of SEC document describing the proposed revisions to the oil and gas reporting requirements (http://www.sec.gov/rules/proposed/2008/33-8935.pdf), comments are requested as follows "Is our proposed definition of "reliable technology" appropriate? Should we change any of its proposed criteria, such as widespread acceptance, consistency, or 90% reliability?"
We would like to suggest that, in line with statistical theory and widespread practical experience in fields such as medical testing, reliability criteria be expressed in terms probabilities of false positives or false negatives (or statistical Type I and Type II errors).
Part of the current proposed definition of "reliable technology" on page 29 reads – "Consistent with current industry practice, expressed in probabilistic terms, reliable technology has been proved empirically to lead to correct conclusions in 90% or more of its applications." We would like to suggest the alternative wording "Consistent with current industry practice, expressed in probabilistic terms, a technology needs, in order to be considered "reliable technology" to have, proven empirically, a false positive rate of 10% or less in the formation being evaluated or in analogous formations."
Peter Cunningham, Senior Reservoir Engineer