Oil and gas reserves and resource quantification
Flaring a flow test marks the first outward sign of a new oil or gas discovery. This moment can trigger a complex process to determine if the find qualifies for reserves assessment. The industry relies on detailed classification schemes to quantify volumes accumulated underground. These schemes allow management and investors to make quantitative comparisons between assets before underwriting significant costs. Public companies registering securities in the U.S. market must report proved reserves under Securities and Exchange Commission requirements. The 2018 petroleum resources management system provides a consistent approach to estimating quantities within a comprehensive framework. This system was jointly developed by the Society of Petroleum Engineers, the World Petroleum Council, and several other geological societies. It summarizes how to estimate oil and gas quantities while complying with reporting requirements for listed companies.
Proven reserves are discovered volumes claimed to have reasonable certainty of being recoverable under existing economic conditions. Industry specialists refer to this category as P90, meaning there is a 90% certainty of producing that volume. Proven reserves may be referred to as proven developed or proven undeveloped depending on the required investment. Companies listed on U.S. stock exchanges could verify their claims confidentially until January 2010 when rules changed. Since then, the SEC allows companies to provide additional optional information declaring 2P and 3P estimates. Probable additional reserves are attributed to known accumulations with a probability of at least 50%. Possible additional reserves carry a lower chance of recovery due to varying interpretations of geology. The probabilistic sum of proven, probable, and possible reserves is referred to in the industry as 3P where there is a 10% chance of delivering or exceeding the P10 volume.
The total estimated quantity contained in a subsurface reservoir is called oil initially in place. Only a fraction of this can be brought to the surface and considered recoverable. Three main categories of technique determine resource estimation based on maturity levels. Analog methods involve identifying areas containing producing assets that are geologically similar to those being estimated. Volumetric calculations use equations involving gross rock volume, porosity, and saturation factors. Performance-based methods utilize production rates and pressure data once production has commenced. Reservoir simulation uses computer models to predict fluid flow through porous media. Daily production can be matched against forecasts to establish model accuracy. These techniques must be compared with previous estimates before reserves can be adjusted and booked.
Reserves reporting of discovered accumulations is regulated by tight controls for informed investment decisions. Accounting processes are governed by strict definitions administered by authorities regulating the stock market. Publicly traded companies require external reporting of resources and reserves to comply with governmental legal requirements. The Securities and Exchange Commission mandates specific disclosure rules for U.S. listed entities. Energy companies may employ independent reserve valuation consultants to provide third-party reports as part of SEC filings. Other national or industry bodies may voluntarily report resources but are not required to follow the same strict definitions. Many governments do not disclose verifying data publicly even when they possess it. Some national oil companies provide unaudited claims for their oil reserves instead of revealing engineering field data.
Experience shows that initial estimates of newly discovered oil fields are usually too low. As years pass, successive estimates of ultimate recovery tend to increase over time. This typical increase in estimated volume is known as reserve growth. The numbers disclosed by some national governments are suspected of being manipulated for political reasons. International goals for decarbonisation led the International Energy Agency to state in 2021 that countries should no longer expand exploration. Countries must stop investing in projects to expand reserves to meet climate goals set by the Paris Agreement. Initial estimates grow because more data becomes available during development. Improved matching between predicted and actual production performance also drives these increases.
Oil or gas in unconventional reservoirs are much more tightly bound to rock matrices than conventional accumulations. These deposits require different approaches to both extraction and resource estimation. Categories include coalbed methane, basin-centered gas, tight gas, shale oil, natural bitumen, and oil shale. Ultra-low permeability reservoirs exhibit a half slope on flow-rate plots believed caused by drainage from matrix surfaces. Commercial viability depends entirely on the technology applied to extraction. Pilot projects may be needed to define reserves under these circumstances. Any other resource estimates are likely to be analog-only derived volumes which remain speculative. Non-unique flow characteristics mean that commercial viability depends on nearby producing analogs with evidence of economic viability.
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Common questions
What is the 2018 petroleum resources management system and who developed it?
The 2018 petroleum resources management system provides a consistent approach to estimating quantities within a comprehensive framework. This system was jointly developed by the Society of Petroleum Engineers, the World Petroleum Council, and several other geological societies.
How are proven reserves defined under existing economic conditions?
Proven reserves are discovered volumes claimed to have reasonable certainty of being recoverable under existing economic conditions. Industry specialists refer to this category as P90, meaning there is a 90% certainty of producing that volume.
When did Securities and Exchange Commission rules change regarding confidential verification for U.S. stock exchanges?
Companies listed on U.S. stock exchanges could verify their claims confidentially until January 2010 when rules changed. Since then, the SEC allows companies to provide additional optional information declaring 2P and 3P estimates.
Which three main categories of technique determine resource estimation based on maturity levels?
Three main categories of technique determine resource estimation based on maturity levels including analog methods, volumetric calculations, and performance-based methods. Analog methods involve identifying areas containing producing assets that are geologically similar to those being estimated while volumetric calculations use equations involving gross rock volume, porosity, and saturation factors.
What does reserve growth mean in the context of newly discovered oil fields?
Reserve growth refers to the typical increase in estimated volume where initial estimates of newly discovered oil fields are usually too low. As years pass, successive estimates of ultimate recovery tend to increase over time because more data becomes available during development.