Probabilistic Reserves Categorization Using Percentiles of a Single Probability Distribution

Abstract

Summary Petroleum reserves assessment is a routine exercise performed by every oil and gas company. The reserves estimation could be achieved using deterministic or probabilistic methods. Depending on the type of data available, different assumptions and data are used at various stages of the assessment throughout the E&P life cycle (i.e., exploration, appraisal, development, depletion, and so on). The accuracy of the reserves estimate is highly dependent on the amount and quality of data available and experience of the evaluator. The estimates become more accurate and refined as more and more data become available. The objective of this paper is to urge the industry to rethink the terminology used for categorizing probabilistic reserves (P90, P50, and P10) using a single probability distribution. As a routine practice, we consider 1P = P90 = proved reserves, 2P = P50 = proved + probable reserves, and 3P = P10 = proved + probable + possible reserves. The reserves categories depend on the range of uncertainty as shown in the Petroleum Resources Classification Framework of the Petroleum Resources Management System (PRMS). It is shown here that P50 (or mean/expected value) of each reserve category is a more robust and logical value to be used for categorizing reserves. The P90 and P10 demonstrate confidence levels of a certain probability distribution, which is owing to the standard deviation (proxy for uncertainty) of the specific distribution and not the range of uncertainty. The range in uncertainty is assessed from varying standard deviations from more than one probability distribution. Therefore, the use of P90 and P10 for reserves categorization contradicts the x-axis title of the Petroleum Resources Classification Framework in the PRMS. The P90, P50, and P10 from a single probability distribution with a single standard deviation will have the same uncertainty (not range of uncertainty). The difference between P90 and P10 is also owing to this single standard deviation. Some examples are presented in this paper to show this and to show that P50 (or mean) with its corresponding standard deviation (indication of uncertainty) could be more appropriately used to book and categorize reserves. The concept of expected value (EV) is also revisited as this may not be correctly reported in some publications.