Proven, probable and possible reserves are the three most common categories of reserves used in the oil industry. They are intended to represent the probability that a reserve exists based on the geologic and engineering data and interpretation for a given location, though many governments refuse to disclose verifying data to support their claims.
Proven Reserves - defined as oil and gas "Reasonably Certain" to be producible using current technology at current prices, with current commercial terms and government consent, also known in the industry as 1P. Some industry specialists refer to this as P90, i.e., ideally having a 90% certainty of being produced. Proven reserves are further subdivided into "Proven Developed" (PD) and "Proven Undeveloped" (PUD). PD reserves are reserves that can be produced with existing wells and perforations, or from additional reservoirs where minimal additional investment (operating expense) is required. PUD reserves require additional capital investment (drilling new wells, installing gas compression, etc.) to bring the oil and gas to the surface.
Probable Reserves - defined as oil and gas "Reasonably Probable" of being produced using current or likely technology at current prices, with current commercial terms and government consent. Some Industry specialists refer to this as P50, i.e., ideally having a 50% certainty of being produced. This is also known in the industry as 2P or Proven plus probable.
Possible Reserves - i.e., "having a chance of being developed under favourable circumstances". Some industry specialists refer to this as P10, i.e., ideally having a 10% certainty of being produced in the foreseeable future. This is also known in the industry as 3P or Proven plus probable plus possible.
Concerns over stated reserves
“ [World] reserves are confused and in fact inflated. Many of the so called reserves are in fact resources. They’re not delineated, they’re not accessible, they’re not available for production ”
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— Sadad Al-Husseini, former VP of Aramco, Oct. 2007; by Al-Husseini's estimate 300 billion of the world’s 1200 billion barrels of proved reserves should be recategorized as speculative resources.
One difficulty in forecasting the date of peak oil is the opacity surrounding the oil reserves classified as 'proven'. Many worrying signs concerning the depletion of 'proven reserves' have emerged in recent years.
This was best exemplified by the 2004 scandal surrounding the 'evaporation' of 20% of Shell's reserves.
For the most part, 'proven reserves' are stated by the oil companies, the producer states and the consumer states. All three have reasons to overstate their proven reserves:
-Oil companies may look to increase their potential worth.
-Producer countries are bestowed a stronger international stature
-Governments of consumer countries may seek a means to foster sentiments of security and stability within their economies and among consumers.
The Energy Watch Group (EWG) 2007 report shows total world Proved (P95) plus Probable (P50) reserves to be between 854 and 1255 Gb (30 to 40 years of supply if demand growth were to stop immediately). Major discrepancies arise from accuracy issues with OPEC's self-reported numbers. Besides the possibility that these nations have overstated their reserves for political reasons (during periods of no substantial discoveries), over 70 nations also follow a practice of not reducing their reserves to account for yearly production. 1255 Gb is therefore a best-case scenario. Analysts have suggested that each of the OPEC member nations also has economic incentives to exaggerate their reserves, due to the OPEC quota system, which allows greater output for countries with greater reserves.
The following chart shows suspicious jumps in stated reserves without associated discoveries, as well as the lack of depletion despite yearly production:
Kuwait, for example, was reported by a January 2006 issue of Petroleum Intelligence Weekly to have only 48 Gb in reserve, of which only 24 are "fully proven." This report was based on "leaks of confidential documents" from Kuwait, and has not been formally denied by the Kuwaiti authorities. Additionally, the reported 1.5 Gb of oil burned off by Iraqi soldiers in the first Gulf War are conspicuously missing from Kuwait's figures.
1 comment:
I think it is very interesting that such fastidious regulations exist concerning the different types of oil reserves when the major oil producing organization, OPEC, doesn't even need to abide by the guidelines. While it is nice to think that these regulations will prevent futile oil pursuits from being granted, this is certainly not the case and I for one don't think these definitions are always being considered or used properly. OPEC doesn't have to answer to anyone, so they can define an oil source however they want to, and will often do so in the way that will get them the most money, no matter what damages it may cause in the future. I am afraid that due to the inadherence to the proper use of these definitions, we are living with false information about our environment and our resources. It is disconcerting to think that what we accept as the truth may not really be true, and that there is really nothing we can do to find out one way or the other. Defining oil reserves as proven, probable, and possible, aside from being highly subjective and inherently conspicuous, also has the potential to be completely erroneous. The fact that there are no real regulations on oil production may prove to be very detrimental to our future as consumers of oil nearing peak oil.
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