Estimation of Oil & Gas Reserves

 

By definition, it is something kept back or saved for future something kept back or saved for future use a special purpose.

The term “Reserves” means different things to different people. To the oil & gas operators, reserves are volume of crude oil, natural gas, and associated products that can be reserved profitably in the future from subsurface reservoirs.

Reasons for Reserve Estimates :

Segments of the industry concerned with oil & gas reserves:

• Companies interested in exploration and development of oil and gas properties. 

•  Banks involved in the financing exploration, development, or purchase of oil and gas properties. 

• Agencies with regulatory or taxation authority over oil and gas operators. 

• Investors in oil and gas companies.

Depending on the scope of their operation, operators require reserve estimates:

• Sizing & design of equipment and facilities to process and transport them to market. 

•  Assigning the FDP and corresponding cost (Budget) 

• Establishing future production profiles 

• Quantifying impact of key uncertainties.

 

Uncertainties in Reserve Estimates :

Estimates of commercially recoverable hydrocarbons reserves are inherently uncertain (physical & commercial). 

• Physical uncertainties:  

-       Recovery from subsurface reservoirs depends largely on the heterogeneities of the reservoir rock.

-       Reservoir Extension

-      The type of reservoir drive mechanism, etc. 

•  Commercial uncertainties: 

-      The costs to acquire exploration and development rights (CAPEX)  

-     The costs to produce, process, and transport oil and gas to market (OPEX)

-      The market value of the volumes sold (Prices) 

Why is a reserves Definition Needed ?

·         Most of the parameters that define the reserves of a Reservoir cannot be measured directly, and must be determined indirectly through geological and reservoir engineering analysis and interpretations.

•   As a result, the estimates of oil and gas reserves have an intrinsic uncertainty. 
•   The definitions of reserves are designed to promote uniformity and standard measurement of the assets, providing a structure to quantify risk and uncertainty through its categorization.

Visual definition of resources and reserves :

Determining the resource and reserves at any time is a difficult task , and the values will change over time .

The resource might be technically recoverable, economics will dictate how much is produced at a given time and price . Because global and local economics change more a less continually, the amount of resource that is actually extracted  or extractable will also vary with time . It  is this amount of the resource that can be considered the reserves , both proven and probable .

Proven   (P)	Discovered reserves which can be produced under current economic conditions (80% chance). Developed and undeveloped
Probable   (P+P)	Discovered reserves which have a reasonable probability of production with present technology and economics (50% chance).
Possible (P+P+P)	Reserves not yet discovered with less chance to be produced (20% chance).

 

 Reserves are :

•  Reserves are those quantities of petroleum which are anticipated to be commercially recovered from known accumulations from a given date forward.
•  All reserve estimates involve some degree of uncertainty.
• The uncertainty depends chiefly on the amount of reliable geologic and engineering data available at the time of the estimate and the interpretation of these data.
• The relative degree of uncertainty may be conveyed by placing reserves into one of two principal classifications, either proved or unproved.
• Unproved reserves are less certain to be recovered than proved reserves and may be further sub-classified as probable and possible reserves to denote progressively increasing uncertainty in their recoverability.

 

1.  Proven Reserves:

·         Proven reserves are those reserves claimed to have a reasonable certainty (normally at least 90% confidence) of being recoverable under existing economic and political conditions, with existing technology. Industry specialists refer to this as P90 (having a 90% certainty of being produced). Proven reserves are also known in the industry as 1P.

• Proven reserves are further subdivided into "proven developed" and "proven undeveloped".
• Proven developed reserves are reserves that can be produced with existing wells and perforations, or from additional reservoirs where minimal additional investment (operating expense) is required.
• Proven undeveloped reserves require additional capital investment e.g., drilling new wells to bring the oil to the surface.
• Proven reserves can further be categorized on the basis of status of wells and reservoirs as developed and Undeveloped; producing and nonproducing. 

a.      Developed reserves:

Developed reserves are expected to be recovered from existing wells. Improved recovery reserves are considered developed only after the necessary equipment has been installed, or when the costs to do so are relatively minor. Developed reserves may be subcategorized as producing or non-producing.

®    Producing:  

    Reserves subcategorized as producing are expected to be recovered from completion intervals which are open and producing at the time of the estimate.

®    Non-producing:

Reserves subcategorized as non-producing include shut-in and behind-pipe reserves.

Shut-in reserves are expected to be recovered from:

• completion intervals which are open at the time of the estimate but which have not started producing,
• wells which were shut-in for market conditions or pipeline connections, or
• wells not capable of production for mechanical reasons. Behind-pipe reserves are expected to be recovered from zones in existing wells, which will require additional completion work or future recompletion prior to the start of production.

 b.      Undeveloped Reserves:

Undeveloped reserves are expected to be recovered:

•     from new wells on undrilled acreage,
•     from deepening existing wells to a different reservoir, or where a relatively large expenditure is required to: 
• recomplete an existing well or
• install production or transportation facilities for primary or improved recovery projects.

 2.      Unproven Reserves:

•      Unproven reserves are based on geological and/or engineering data similar to that used in estimates of proven reserves, but technical, contractual, or regulatory uncertainties make such reserves being classified as unproven.
•         Unproven reserves may be used internally by oil companies and government agencies for future planning purposes but are not routinely compiled. They are sub-classified as probable and possible

a.      Probable:

Probable reserves are attributed to known accumulations and claim a 50% confidence level of recovery. Industry specialists refer to them as P50 (having a 50% certainty of being produced). These reserves are also referred to in the industry as 2P (proven plus probable).

b.      Possible:

Possible reserves are attributed to known accumulations that have a less likely chance of being recovered than probable reserves. This term is often used for reserves which are claimed to have at least a 10% certainty of being produced (P10).

Reasons for classifying reserves as possible include varying interpretations of geology, reserves not producible at commercial rates, uncertainty due to reserve infill (seepage

from adjacent areas) and projected reserves based on future recovery methods. They are referred to in the industry as 3P (proven plus probable plus possible).