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Exploration and production

Exploration and production of oil, gas and mineral resources

What is exploration and production?

During the exploration phase, companies prospect to identify potential mineral or petroleum deposits. Once located, the reserves are modelled by the company and certified by an accredited agency before application for a production license.

Once the required studies (e.g. environmental impact assessments, feasibility studies, etc.) are completed and the mine or field is developed, commercial production commences.

Mineral and petroleum production is the process of extracting minerals or petroleum from the ground.

EITI countries disclose figures on volumes of production, exports and their market value.

Oil production volumes per country in 2013

Initializing chart.

Understanding production figures

Production figures refer to the volumes or quantity of production. In the mining industry, these figures are typically reported in tonnes for most bulk commodities (such as copper and coal), in ounces for precious metals (such as gold and silver), and in carat for gemstones. In the petroleum industry, these figures are reported in barrels of oil equivalent for petroleum products (such as crude oil, condensate and natural gas). While different regions and companies sometimes report production volumes in different units (for instance using the imperial system), production volume figures can be converted into similar units for ease of comparison.

Production figures, in both volume and value, are typically provided as annual aggregates. Daily average production figures are available by dividing annual production by 365. Fluctuations in benchmark commodity prices can lead to greater fluctuations in the market value of production than in volumes.

The more disaggregated the data (e.g. monthly or daily), the more accurate the total annual production figures. Some countries, such as Nigeria on oil, publish monthly production figures (in EITI Report). 

Market value of production

The market value of production is typically calculated by multiplying the volume of production by the benchmark price for the specific commodity.

Market values of production do not reflect the revenue or income of the extractive company, since those include additional costs and revenues that are not related to production volumes. In calculating production value, for metallic minerals in particular, differences between the international benchmark price and the category of the product for which volume is being reported may be noted. For example, production volume will likely be reported for copper concentrate, while the international price is for refined copper metal. A conversion factor is therefore needed to strip away the ‘refined’ value contained in price.

What does the EITI Standard require?

The EITI Standard requires countries to disclose the volumes and market value of production, as well as exports of each extracted mineral and petroleum product. These data should be submitted by the relevant state and region.

“EITI Reports are important for tracking the performance of each company in terms of compliance with their obligations towards state revenue. Detailed reporting will enable better analysis and comparisons with other data sources which will hopefully shed light on potential lost revenue and give policy recommendations to improve extractive industry governance.”
Maryati Abdullah, National Coordinator of PWYP Indonesia