Category: 

What are Proven Reserves?

Article Details
  • Written By: M. J. Memon
  • Edited By: Lauren Fritsky
  • Last Modified Date: 20 November 2016
  • Copyright Protected:
    2003-2016
    Conjecture Corporation
  • Print this Article
Free Widgets for your Site/Blog
President Richard Nixon had an entire speech prepared in case the Apollo 11 astronauts became stranded on the Moon.  more...

December 8 ,  1965 :  Pope Paul VI promulgated Vatican II into ecumenical law.  more...

Proven reserves, or 1P, is a term used by the oil and natural gas industry. It refers to the amount of oil or gas in a reservoir under the given economic situation that is recoverable using current technology. In any reservoir, there is a limited amount that can be extracted. These reserves are a way of quantifying exactly how much hydrocarbons can be expected from a well or reservoir.

There are two types of proven reserves: developed and undeveloped. Developed proven reserves already have all or most of the equipment in place and the necessary drilling needed to extract the resource. Undeveloped reserves require an investment of money, time and effort before the resource can be extracted.

Several methods exist to estimate proven reserves, though no method is entirely precise. Some experts also allege that some companies and countries have overestimated their reserves for economic reasons. For example, an oil company that claims to have high proven reserves would have a higher stock price as a result.

One method of estimation is known as decline curve analysis. This is done by plotting output levels against time and then graphically extending the data to estimate future output. Decline curve analysis can only be applied to a reservoir already in production; otherwise, the necessary data is not available.

Ad

Another method is the volumetric method. This method requires a great deal of initial data to get an accurate estimate. The dimensions of the reservoir and the type of rocks it contains must be known or estimated. This method works best after enough drilling has taken place to yield accurate information as to the reservoir size and the composition of its contents.

A third method is known as the materials balance method. This method examines the ratio of oil, natural gas and water extracted from an oil source. The ratios are then related to the changing pressure in the reservoir.

As of 2009, the countries with the largest proven reserves were believed to be Saudi Arabia, Canada and Iran. Questions have been raised as to whether a number of countries in the Organization of Petroleum Exporting Countries (OPEC) actually possess their stated reserves. OPEC rules base output quotas on the amount of proven reserves. Countries with higher stated reserves can therefore sell more oil or natural gas. Most countries do not have independent auditors estimate their reserves, which has fueled suspicion as to the accuracy of their figures.

Ad

You might also Like

Recommended

Discuss this Article

chivebasil
Post 2

@backdraft - You are right that nothing is ever for sure. And there are lots of examples of oil companies making huge bets and coming up with dry wells. But the big thing to remember is that proven world oil reserves are running empty and we now must move into a number of speculative reserves.

We have heard a lot of talk about the oil that could be pumped out of Alaska or the oil sand in Canada. Industry experts point to huge supplies of oil that might exist on this continent. But all of these numbers are speculative, no one really knows for sure how much oil is down there and how challenging it will be to get it out. This is important to remember when you hear experts guaranteeing the stability of our energy future. We are moving into an ear of a lot of uncertainty.

backdraft
Post 1

There is one really important line in this article "Several methods exist to estimate proven reserves, though no method is entirely precise." The big thing to remember here is that no method is entirely precise. This is important because oil and gas exploration is both highly expensive and also very destructive to the environment. If a large scale project is going to be carried out it has to provide results. Unfortunately there is no way to guarantee that it will. All the brightest minds in the world can still make huge mistakes.

Post your comments

Post Anonymously

Login

username
password
forgot password?

Register

username
password
confirm
email