Oil and Gas Reserves Classification, Estimation, and Evaluation

Abstract

Distinguished Author Series articles are general, descriptive representations that summarize the state of the art in an area of technology by describing recent developments for readers who are not specialists in thetopics discussed. Written by individuals recognized as experts in the area, these articles provide key references to more definitive work and present specific details only to illustrate the technology. Purpose: to informthe general readership of recent advances in various areas of petroleum engineering. Introduction The life-style of 20th-century man has been influenced more by oil and gasthan any other natural resource, and indications are that oil and gas reserveswill increase in importance the remainder of this century. Oil and gasproduction provides inexpensive portable energy and supplies feedstock to anportable energy and supplies feedstock to an international petrochemical industry that manufactures synthetic textiles and medicines and supports worldagriculture. Crops are planted, cultivated, treated with pesticides, fertilized, harvested, moved to market, and pesticides, fertilized, harvested, moved to market, and cooked with oil and/or gas. Wars have been fought to ensure petroleum availability, and reserveestimates have dictated actions of governments, entire industries, individual companies, lending institutions, and private investors. Many petroleum engineers spend a major part of their professional lives developing estimatesof reserves professional lives developing estimates of reserves and production capabilities, along with new methods and techniques for improving theseestimates. To understand the confidence levels and risks of the estimates, aclear and consistent set of reserve classifications must be used. The confidence levels and the techniques implemented by the petroleum engineer depend on the quantity and the maturity of the data available. The dataquality, therefore, establishes the classification assigned to the reserve estimates and indicates the confidence one should have in the reserveestimates. Almost all applications of oil and gas reserve estimates require, in thefinal analysis, an economic evaluation that considers the predicted production capacity and the capital and operating cost estimates. The economic analysis isthe thermometer used to indicate the health of the reserves owner and will berepresentative and reliable only if the data, reserve estimating procedures, and reserve classifications are understood and applied properly. Reserve Classification and Nomenclature The need for one universal classification and nomenclature system forpetroleum reserves has long been recognized by the various technical societies, professional organizations, governmental agencies, professional organizations, governmental agencies, and the petroleum industry. In spite of the need for astandardization of definitions and concepts, differences in definitions continue to cloud the absolute meaning of reserve definitions published bytechnical societies and regulatory bodies. The societies have established studygroups to recommend a classification system; however, a universal systemacceptable to all estimators and users has not been agreed upon. A study group established in 1980, consisting of representatives of oilproducing countries, recommended a set of definitions and classifications. Ajoint committee of SPE, AAPG, and API developed a set of definitions and aglossary of terms in 1981. These definitions, considered consistent with U.S.DOE and Securities and Exchange Commission (SEC) definitions, are presentedhere along with my comments on their use. Proved Reserves. Proved reserves of crude oil, Proved Reserves. Provedreserves of crude oil, condensate, natural gas, or natural gas liquids areestimated quantities as of a specific date, which geological and engineering data demonstrate with a reasonable certainty to be recoverable in the futurefrom known reservoirs under existing economic conditions. JPT P. 373