Oil and Gas Reserves

Reserves are those quantities of petroleum which are anticipated to be commercially recovered
from known accumulations from a given date forward.

Reserves may be for a well, a reservoir, a field, a nation, or the world. The classifications of
reserves are related to their degree of certainty.

The total estimated amount of oil in an oil reservoir, including both producible and non-
producible oil, is called oil in place.

However, because of reservoir characteristics and limitations in 

petroleum extraction technologies, only a fraction of this oil can be brought to the surface, and
it is only this producible fraction that is considered to be reserves.

The ratio of reserves to the total amount of oil in a particular reservoir is called the recovery
factor.

Determining a recovery factor for a given field depends on several features of the operation,
including method of oil recovery used and technological developments. Fluid Properties such as
Formation Volume Factor, viscosity, density, solution gas oil ratio , reservoir drive mechanism,
interaction between reservoir rock and fluids in the reservoir all influence recovery factor.
 RF = recovery factor, which equals RFP + RFS
The primary recovery factor, RFP, is estimated from the type of drive mechanism
The secondary recovery factor, RFS, equals
RFs = Ed*Ea*Ev (Displacement Efficiency*Areal Sweep Efficiency*Vertical Sweep
Efficiency

Estimation of primary recovery factor

Primary Recovery Factor Drive Mechanism
Drive Mechanisms
(%)
Depletion
    Solution gas 18–25
    Expansion 2–5
Gas cap drive 20–40
Water drive
    Bottom 20–40
    Edge 35–60
Gravity 50–70
 Classifications
All reserve estimates involve uncertainty, depending on the amount of reliable geologic and
engineering data available and the interpretation of that data.

The relative degree of uncertainty can be expressed by dividing reserves into two principal
classifications—"proven" (or "proved") and "unproven" (or "unproved").

Unproved reserves can further be divided into two subcategories—"probable" and

"possible"—to indicate the relative degree of uncertainty about their existence.

The most commonly accepted definitions of these are based on those approved by the
Society of Petroleum Engineers (SPE) and the World Petroleum Council (WPC) in 1997.

Proved reserves

Proved 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" (that is, having a 90% certainty of being produced).

Proved reserves are also known in the industry as "1P".

Proved reserves are further subdivided into "proved developed" (PDD) and "proved
undeveloped" (PUD).

PDD 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 (e.g., drilling new wells) to bring the oil to
the surface.

Until December 2009 "1P" proved reserves were the only type the U.S.
Securities and Exchange Commission allowed oil companies to report to investors. Since
January 2010 the SEC now allows companies to also provide additional optional information
declaring 2P (both proved and probable) and 3P (proved plus probable plus possible) provided
the evaluation is verified by qualified third party consultants, though many companies choose
to use 2P and 3P estimates only for internal purposes.

Unproved reserves are based on geological and/or engineering data similar to that used in
estimates of proved reserves, but technical, contractual, or regulatory uncertainties preclude
such reserves being classified as proved.
Unproved reserves may be used internally by oil companies and government agencies for
future planning purposes .

They are sub-classified as probable and possible.

Probable reserves are attributed to known accumulations and claim a 50% confidence level of
recovery. Industry specialists refer to them as "P50" (i.e., having a 50% certainty of being
produced). The sum of proved plus probable reserves is also referred to in the industry as
"2P" (proved plus probable).

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.

The cumulative amount of proved, probable and possible resources are referred to in the
industry as "3P" (proved plus probable plus possible).
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.

Estimation of reserves is done under conditions of uncertainty. The method of estimation

is called deterministic if a single best estimate of reserves is made based on known
geological, engineering, and economic data.

The method of estimation is called probabilistic when the known geological, engineering,
and economic data are used to generate a range of estimates and their associated
probabilities.
Identifying reserves as proved, probable, and possible has been the most frequent
classification method and gives an indication of the probability of recovery.

Reserves estimates will generally be revised as additional geologic or engineering data

becomes available or as economic conditions change.

Reserves may be attributed to either natural energy or improved recovery methods.

Improved recovery methods include all methods for supplementing natural energy or altering
natural forces in the reservoir to increase ultimate recovery.

Examples of such methods are pressure maintenance, cycling, waterflooding, thermal

methods, chemical flooding, and the use of miscible and immiscible displacement fluids.

Other improved recovery methods may be developed in the future as petroleum technology
continues to evolve.
 Proved Reserves

Proved reserves are those quantities of petroleum which, by analysis of geological and
engineering data, can be estimated with reasonable certainty to be commercially recoverable,
from a given date forward, from known reservoirs and under current economic conditions,
operating methods, and government regulations.

Proved reserves can be categorized as developed or undeveloped.

If deterministic methods are used, the term reasonable certainty is intended to express a high
degree of confidence that the quantities will be recovered.

If probabilistic methods are used, there should be at least a 90% probability that the quantities
actually recovered will equal or exceed the estimate.

Establishment of current economic conditions should include relevant historical petroleum

prices and associated costs and may involve an averaging period that is consistent with the
purpose of the reserve estimate, appropriate contract obligations, corporate procedures, and
government regulations involved in reporting these reserves.
In general, reserves are considered proved if the commercial producibility of the reservoir is
supported by actual production or formation tests.

In this context, the term proved refers to the actual quantities of petroleum reserves and not
just the productivity of the well or reservoir.

In certain cases, proved reserves may be assigned on the basis of well logs and/or core analysis
that indicate the subject reservoir is hydrocarbon bearing and is analogous to reservoirs in the
same area that are producing or have demonstrated the ability to produce on formation tests.

The area of the reservoir considered as proved includes (1) the area delineated by drilling and
defined by fluid contacts, if any, and (2) the undrilled portions of the reservoir that can
reasonably be judged as commercially productive on the basis of available geological and
engineering data.

In the absence of data on fluid contacts, the lowest known occurrence of hydrocarbons controls
the proved limit unless otherwise indicated by definitive geological, engineering or performance
data.
Reserves may be classified as proved if facilities to process and transport those reserves to
market are operational at the time of the estimate or there is a reasonable expectation that
such facilities will be installed.

Reserves in undeveloped locations may be classified as proved undeveloped provided

(1) the locations are direct offsets to wells that have indicated commercial production in the
objective formation,

(2) it is reasonably certain such locations are within the known proved productive limits of
the objective formation,

(3) the locations conform to existing well spacing regulations where applicable, and

(4) it is reasonably certain the locations will be developed.

Reserves from other locations are categorized as proved undeveloped only where
interpretations of geological and engineering data from wells indicate with reasonable
certainty that the objective formation is laterally continuous and contains commercially
recoverable petroleum at locations beyond direct offsets.
Reserves which are to be produced through the application of established improved
recovery methods are included in the proved classification when

(1) successful testing by a pilot project or favourable response of an installed program in the
same or an analogous reservoir with similar rock and fluid properties provides support
for the analysis on which the project was based, and,

(2) it is reasonably certain that the project will proceed.

Reserves to be recovered by improved recovery methods that have yet to be established

through commercially successful applications are included in the proved classification only

(3) after a favourable production response from the subject reservoir from either

(a) a representative pilot or

(b) an installed program where the response provides support for the analysis on which the
project is based and

(2) it is reasonably certain the project will proceed.

Unproved Reserves

Unproved reserves are based on geologic and/or engineering data similar to that used in
estimates of proved reserves; but technical, contractual, economic, or regulatory
uncertainties preclude such reserves being classified as proved.

Unproved reserves may be further classified as probable reserves and possible reserves.

Unproved reserves may be estimated assuming future economic conditions different from
those prevailing at the time of the estimate.

The effect of possible future improvements in economic conditions and technological

developments can be expressed by allocating appropriate quantities of reserves to the
probable and possible classifications.

Probable Reserves
Probable reserves are those unproved reserves which analysis of geological and engineering
data suggests are more likely than not to be recoverable.

In this context, when probabilistic methods are used, there should be at least a 50%
probability that the quantities actually recovered will equal or exceed the sum of estimated
proved plus probable reserves.
In general, probable reserves may include

(1) reserves where sub-surface control is inadequate to classify these reserves as proved,

(2) reserves in formations that appear to be productive based on well log characteristics but lack
core data or definitive tests and which are not analogous to producing or proved reservoirs
in the area,

(3) incremental reserves attributable to infill drilling that could have been classified as proved if
closer statutory spacing had been approved at the time of the estimate,

(4) reserves attributable to improved recovery methods that have been established by repeated
commercially successful applications when

(a) a project or pilot is planned but not in operation and

(b) rock, fluid, and reservoir characteristics appear favourable for commercial application,

(5) reserves in an area of the formation that appears to be separated from the proved area by
faulting and the geologic interpretation indicates the subject area is structurally higher than the
proved area,
(6) reserves attributable to a future work over, treatment, re-treatment, change of equipment,
or other mechanical procedures, where such procedure has not been proved successful in wells
which exhibit similar behaviour in analogous reservoirs, and

(7) incremental reserves in proved reservoirs where an alternative interpretation of performance

or volumetric data indicates more reserves than can be classified as proved.

Possible Reserves
Possible reserves are those unproved reserves which analysis of geological and engineering
data suggests are less likely to be recoverable than probable reserves.

In this context, when probabilistic methods are used, there should be at least a 10% probability
that the quantities actually recovered will equal or exceed the sum of estimated proved plus
probable plus possible reserves.
In general, possible reserves may include

(1) reserves which, based on geological interpretations, could possibly exist beyond areas
classified as probable,

(2) reserves in formations that appear to be petroleum bearing based on log and core analysis
but may not be productive at commercial rates,
3) incremental reserves attributed to infill drilling that are subject to technical uncertainty,

(4) reserves attributed to improved recovery methods when

(a) a project or pilot is planned but not in operation and

(b) rock, fluid, and reservoir characteristics are such that a reasonable doubt exists that the
project will be commercial, and

(5) reserves in an area of the formation that appears to be separated from the proved area by
faulting and geological interpretation indicates the subject area is structurally lower than the
proved area.

Reserve Status Categories

Reserve status categories define the development and producing status of wells and
reservoirs.
Developed: Developed reserves are expected to be recovered from existing wells including
reserves behind pipe.

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.

Improved recovery reserves are considered producing only after the improved recovery
project is in operation.

Non-producing: Reserves subcategorized as non-producing include shut-in and behind-pipe

reserves.

Shut-in reserves are expected to be recovered from

(1) completion intervals which are open at the time of the estimate but which have not
started producing,
 (2) wells which were shut-in for market conditions or pipeline connections, or

(3) 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.

Undeveloped Reserves: 

Undeveloped reserves are expected to be recovered through future investments

(1) from new wells on undrilled acreage,

(2) from deepening existing wells to a different reservoir,

(3) where a relatively large expenditure is required to

a) recomplete an existing well compared to the cost of drilling a new well

b) install production or transportation facilities for primary or improved recovery projects.

 What is Reserve Estimation

•Reserves represent an inventory of the net

worth of a company’s subsurface assets

31/07/23 Estimation of Oil & Gas Reserves 19

 Why Reserve Estimates?
 Guide for management decisions
 Valuation of E & P Companies
 Future exploration drilling and development policy
 Budgeting for drilling and facilities
 To get finance from out side, Oil Loans
 Purchase / Sale of properties
 Basis for Unitization agreement
 Taxation
 Gov. policy and planning
 Disclosure for companies quoted on stock exchanges.
– Reliable, transparent information for potential investors.
 Reserves Classification system

Categorisation on the analogy of SPE system was adopted

in 1995.
This system is applicable to both the In-place hydrocarbon
volume and Reserves.

INPLACE VOLUME RESERVES

PROVED PROVED
PROBABLE DEVELOPED
POSSIBLE UNDEVELOPED
UNPROVED
PROBABLE
POSSIBLE
Reserves Classifications and Definitions
Reserves

Unproved Proved

Possible Probable Developed Undeveloped

Producing Nonproducing
Reserves Classifications and Definitions
Reserves

Unprovedof hydrocarbon
Quantities Proved
believed to be
commercially
Possible Probable Developed Undeveloped
recoverable
from known accumulations
Producing Nonproducing
Reserves Classifications and Definitions
Reserves

Unproved Proved

Quantities
Possible Probable of petroleum
Developed Undeveloped
that can be estimated with
reasonable certainty to
Producing Nonproducing
be commercially
recoverable
Reserves Classifications and Definitions
Reserves
Resources expected
to be recovered from
Unproved Proved
existing wells

Possible Probable Developed Undeveloped

Producing Nonproducing
Reserves Classifications and Definitions
Reserves

Unproved
Recovery from Proved
currently open
completion
Possible Probable Developed Undeveloped
intervals

Producing Nonproducing
Reserves Classifications and Definitions
Reserves
Reserves shut-in or
Unproved behind pipe so they
Proved
are expected to be
commercially
Possible Probable Developed Undeveloped
recoverable

Producing Nonproducing
Reserves Classifications and Definitions
Resources expected to be
recovered
Reserves from
new wells
deepening existing wells
Unproved Proved efforts
expensive additional

Possible Probable Developed Undeveloped

Producing Nonproducing
Reserves Classifications and Definitions
Reserves

Unproved Proved

Technical, contractual,
Possible Probable Developed Undeveloped
economic, or regulatory
uncertainties prevent
definition as proved
Producing Nonproducing
Reserves Classifications and Definitions
Engineering data
Reserves
suggests reserves are
more likely than not
commercially
Unproved Proved
recoverable

Possible Probable Developed Undeveloped

Producing Nonproducing
Reserves Classifications and Definitions
Reserves that may be
Reserves
commercially
recoverable depending
on Unproved
favorable geological Proved
and economic factors

Possible Probable Developed Undeveloped

Producing Nonproducing
(PRMS)
Petroleum resources are the quantities of hydrocarbons naturally occurring on or within the
Earth’s crust.

Resources assessments estimate quantities in known and yet-to-be-discovered accumulations.

Resources evaluations are focused on those quantities that can potentially be recovered and
marketed by commercial projects.

A petroleum resources management system provides a consistent approach to estimating

petroleum quantities, evaluating projects, and presenting results within a comprehensive
classification framework.

A classification system of petroleum resources is a fundamental element that provides a

common language for communicating both the confidence of a project’s resources maturation
status and the range of potential outcomes to the various entities.

The PRMS provides transparency by requiring the assessment of various criteria that allow for
the classification and categorization of a project’s resources.

The evaluation elements consider the risk of geologic discovery and the technical uncertainties
together with a determination of the chance of achieving the commercial maturation status of a
petroleum project
The use of a consistent classification system enhances comparisons between projects,
groups of projects, and total company portfolios.

The application of PRMS must consider both technical and commercial factors that impact
the project’s feasibility, its productive life, and its related cash flows.

Petroleum Resources Classification Framework

Petroleum is defined as a naturally occurring mixture consisting of hydrocarbons in the

gaseous, liquid, or solid state.

Petroleum may also contain non-hydrocarbons, common examples of which are carbon
dioxide, nitrogen, hydrogen sulfide, and sulfur. In rare cases, non-hydrocarbon content can
be greater than 50%.

The term resources as used herein is intended to encompass all quantities of petroleum
naturally occurring within the Earth’s crust, both discovered and undiscovered (whether
recoverable or unrecoverable), plus those quantities already produced.

Further, it includes all types of petroleum whether currently considered as conventional or

unconventional resources.
Figure 1.1 graphically represents the PRMS resources classification system.

The system classifies resources into discovered and undiscovered and defines the
recoverable resources classes: Production, Reserves, Contingent Resources, and
Prospective Resources, as well as Unrecoverable Petroleum.
The horizontal axis reflects the range of uncertainty of estimated quantities potentially
recoverable from an accumulation by a project, while the vertical axis represents the chance of
commerciality, Pc, which is the chance that a project will be committed for development and
reach commercial producing status.

The following definitions apply to the major subdivisions within the resources classification:

Total Petroleum Initially-in-Place:

All estimated quantities of petroleum that are estimated to exist originally in naturally occurring
accumulations, discovered and undiscovered, before production

Discovered Petroleum Initially-In-Place:

Quantity of petroleum that is estimated, as of a given date, to be contained in known

accumulations before production. Discovered PIIP may be subdivided into commercial, sub-
commercial, and the portion remaining in the reservoir as Unrecoverable.

Production is the cumulative quantity of petroleum that have been recovered at a given date.
While all recoverable resources are estimated, and production is measured in terms of the sales
product specifications, raw production (sales plus non-sales) quantities are also measured and
required to support engineering analyses based on reservoir voidage.
The projects shall be subdivided into commercial, sub-commercial, and undiscovered, with the
estimated recoverable quantities being classified as Reserves, Contingent Resources, or
Prospective Resources respectively, as defined below:

1. Reserves are those quantities of petroleum anticipated to be commercially recoverable by

application of development projects to known accumulations from a given date forward
under defined conditions.

Reserves must satisfy four criteria: discovered, recoverable, commercial, and remaining (as of
the evaluation’s effective date) based on the development project(s) applied.

2. Reserves are recommended as sales quantities as metered at the reference point. Where the
entity also recognizes quantities consumed in operations , as Reserves these quantities must be
recorded separately. Non-hydrocarbon quantities are recognized as Reserves only when sold
together with hydrocarbons associated with petroleum production.

If the non-hydrocarbon is separated before sales, it is excluded from Reserves.

3. Reserves are further categorized in accordance with the range of uncertainty and should be
sub-classified based on project maturity and/or characterized by development and production
status.
Contingent Resources are those quantities of petroleum estimated, as of a given date, to be
potentially recoverable from known accumulations, by the application of development
project(s) not currently considered to be commercial owing to one or more contingencies.

Contingent Resources have an associated chance of development.

Contingent Resources may include, for example, projects for which there are currently no
viable markets, or where commercial recovery is dependent on technology under
development, or where evaluation of the accumulation is insufficient to clearly assess
commerciality.

Contingent Resources are further categorized in accordance with the range of uncertainty
associated with the estimates and should be sub- classified based on project maturity
and/or economic status

Undiscovered Petroleum Initially-in-Place is that quantity of petroleum estimated, as of a

given date, to be contained within accumulations yet to be discovered.
Prospective Resources are those quantities of petroleum estimated, as of a given date, to be
potentially recoverable from undiscovered accumulations by application of future development
projects.

Prospective Resources have both an associated chance of geologic discovery and a chance of
development.

Prospective Resources are further categorized in accordance with the range of uncertainty
associated with recoverable estimates, assuming discovery and development, and may be sub-
classified based on project maturity.

Unrecoverable Resources: Those quantities of discovered or undiscovered PIIP that are

assessed, as of a given date, to be unrecoverable by the currently defined project(s).

A portion of these quantities may become recoverable in the future as commercial

circumstances change, technology is developed, or additional data are acquired.

The remaining portion may never be recovered owing to physical/chemical constraints

represented by subsurface interaction of fluids and reservoir rocks
Project Maturity Sub-Classes
The sum of Reserves, Contingent Resources, and Prospective Resources may be referred to as
“remaining recoverable resources.” Importantly, these quantities should not be aggregated
without due consideration of the technical and commercial risk involved with their classification.

When such terms are used, each classification component of the summation must be provided

Other terms used in resource assessments include the following:

Estimated Ultimate Recovery (EUR): Those quantities of petroleum estimated, as of a given

date, to be potentially recoverable plus those quantities that have been already produced.

For clarity, EUR must reference the associated technical and commercial conditions for the
resources; for example, proved EUR is Proved Reserves plus prior production.
Approved for Development: All necessary approvals have been made, capital funds have been
committed, and implementation of the development project is ready to begin or underway.

Justified for development: Implementation of the development project is justified on the basis
of reasonable forecast commercial conditions at the time of reporting, and there are reasonable
expectations that all necessary approvals / contracts will be obtained.

Development Pending: A discovered accumulation where project activities are ongoing to justify
commercial development in the foreseeable future

Development on Hold: A discovered accumulation where project activities are on hold and / or
commercial development may be subject to significant delay.

Development Unclarified: A discovered accumulation where project activities are under

evaluation and where justification as a commercial development is unknown

Development Not Viable: A discovered accumulation where there are no current plans to
develop or to acquire additional data at the time because of limited production potential.

Prospect: A project associated with a potential accumulation that is sufficiently well defined to
represent a viable drilling project
Lead: A project associated with a potential accumulation that is currently poorly defined and
requires more data acquisition and / or evaluation to be classified as prospect

Play: A project associated with a prospective trend of potential prospects but that requires more
data acquisition and/or evaluation to define specific leads or prospects
 Petroleum Reserves Estimation Methods

The process of estimating oil and gas reserves for a producing field continues throughout
the life of the field.

There is always uncertainty in making such estimates.

The level of uncertainty is affected by the following factors:

1. Reservoir type,
2. Source of reservoir energy,
3. Quantity and quality of the geological, engineering, and geophysical data,
4. Assumptions adopted when making the estimate,
5. Available technology, and
6. Experience and knowledge of the evaluator.

The magnitude of uncertainty, however, decreases with time until the economic
limit is reached and the ultimate recovery is realized
 Estimating Recoverable Quantities

Assuming that projects have been classified according to project maturity, estimation of
associated recoverable quantities under a defined project and assignment to uncertainty
categories may be based on one or a combination of analytical procedures.

Analytical Procedures

The analytical procedures for estimating recoverable quantities fall into three broad categories:
(a) analogy, (b) volumetric estimates, and (c) performance-based estimates (e.g., material
balance, history-matched simulation, and decline-curve analysis,.

Pre- and early post-discovery assessments typically are made with analogue field/project data
and volumetric estimation. After production commences and production rates and pressure
information become available, performance-based methods can be applied.

Analogs

Analogs are widely used in resources estimation, particularly in the exploration and early
development stages when direct measurement information is limited.

A close-to-abandonment analogous field is taken as an approximate to the current field. This

method is most useful when running the economics on the current field; which is supposed to
be an exploratory field.
The methodology is based on the assumption that the analogous reservoir is comparable to the
subject reservoir in regard to reservoir description, fluid properties, and most likely recovery
mechanism(s) applied to the project that control the ultimate recovery of petroleum.

By selecting appropriate analogs, where performance data of comparable development plans

are available, a similar production profile may be forecast.

Analogs are frequently applied for aiding in the assessment of economic producibility,
production decline characteristics, drainage area, and recovery factor (for primary, secondary,
and tertiary methods).

Analogous reservoirs, as used in resources assessments, are defined by similarities of features

and characteristics that include but are not limited to the following:

A. Reservoir deposition and structure (e.g., lithology, depositional environment, diagenetic

history, natural fractures, chemical/mineral composition, geometry, mechanical history, and
structural deformation).

B. Petrophysical properties (e.g., net pay and gross thickness, porosity, saturation, permeability,
heterogeneity, and net-to-gross ratio).

C. Reservoir conditions (e.g., depth, temperature and pressure, and size of the petroleum
accumulation and aquifer).
D. Fluid properties (e.g., original fluid type, composition, density, and viscosity).

E. Drive mechanisms

F. Development plan (e.g., well spacing, well type and number, completion methods, artificial lift,
development and operating costs, facility type and constraints, and processing).

The above list is not exhaustive and the comparative analog characteristics must be relevant to
the key characteristics of the project.

It is not necessary for all parameters to match to consider a reservoir as an analog. The
evaluator should consider the specifics of each application and its suitability in providing insight
to assist in the estimation of recoverable resources.

Comparison to several analogs, rather than a single analog, often improves the understanding of
the range of uncertainty in the estimated recoverable quantities from the subject reservoir.

While reservoirs in the same geographic area and of the same geological age typically provide
better analogs, such proximity alone may not be the primary consideration.

In all cases, evaluators should document the similarities and differences between the analog and
the subject reservoir/project. Review of analog reservoir performance is useful in quality
assurance of resources assessments at all stages of development.
 Volumetric Analysis
This procedure uses reservoir rock and fluid properties to calculate PIIP and then estimate that
portion that will be recovered by a specific development project.

The volumetric estimate may be based on either probabilistic or deterministic approaches.

A probabilistic approach is typically applied in the early development stages when data are most
limited.

As the project matures through development, the evaluation methodology often shifts towards
deterministic estimates.

Probabilistic methods use stochastic parameters such as a Monte Carlo simulation.

On the other hand, deterministic calculations are made with discrete values. 

If the deterministic value and the probabilistic value agree, then confidence in the reserve
calculation is increased.

If the two values are very different, the assumptions need to be reexamined.
 Probabilistic estimates :

•Low estimate : P90 - at least a 90 percent

probability that the quantities actually recovered
will equal or exceed the estimated proved reserves,
• Best estimate : P50- at least a 50 percent
probability that the quantities actually recovered
will equal or exceed the sum of the estimated
proved + probable reserves,
• High estimate : P10 -at least a 10 percent
probability that the quantities actually recovered
will equal or exceed the sum of the estimated
proved + probable + possible

31/07/23 Estimation of Oil & Gas Reserves 50

The key uncertainties affecting in-place quantities include but are not limited to the
following:

A. Reservoir geometry, heterogeneity, compartmentalization, and trap limits that impact

gross rock volume.

B. Geological characteristics that define pore volume and petroleum saturation distribution.

C. Position and nature of contacts or limits [e.g., lowest known hydrocarbons (LKH), oil/water
contact, gas/water contact (GWC), gas/oil contact, and tilted contact gradient].

D. Combinations of reservoir quality, fluid types, and contacts that control saturation
distributions (vertically and horizontally).
The gross rock volume of interest is that for the total reservoir. While spatial distribution and
reservoir quality impact recovery efficiency, the calculation of in-place petroleum often uses
average net-to-gross ratio, porosity, and fluid saturations.

In more complex reservoirs, increased well density may be required to confidently evaluate,
assess, and categorize resources.

Given estimates of the in-place petroleum, the portion that can be recovered by a defined set of
wells and operating conditions must then be estimated based on analog field performance
and/or modelling/simulation studies using available reservoir information.

Key assumptions must be made regarding reservoir drive mechanisms.

The estimates of recoverable quantities must reflect the combined uncertainties in the
petroleum in-place and the recovery efficiency of the development project(s) applied to the
reservoir.
 Estimation of Oil & Gas reserves

Recoverable Oil
 
=A x he x phi x So X Sp. Gr X Recovery Factor (in MMt)
Bo
 
Recoverable Solution Gas
 
= Ax h x phi x So X Sp Gr. X GOR X Recovery Factor (in MMm3)
Bo
 
Example

• Area (Sq. Km.) = 0.74

• Rock volume (MMm3) = 2.59
• Porosity (%) = 25.0
• HC saturation (%) (So)= 59.0
• FVF = 1.38
• Sp.gr. = 0.86
• GOR (m3/m3) = 60
CASE STUDY FROM A FIELD FOR VOLUMETRIC ESTIMATION
OIL
Q = A x h x phi x So X Sp. Gr Inplace in MMt
Bo
Q = 0.74 x 3.5 x 0.25x 0.59 X 0.86 = 0.24 MMt
1.38
SOLUTION GAS
Q = 0.74 x 3.5 x 0.25x 0.59 X 0.86 X 60.0 =14.3 MMm3
1.38
INPLACE HYDROCARBON : 0.24 MMt Oil
: 14.3 MMm3 Solution Gas

ULTIMATE RESERVES : 0.24 X RF MMt Oil

: 14.3 X RF MMm3 Solution Gas
 Material Balance Analysis
Material balance methods used to estimate recoverable quantities involve the analysis of
pressure behaviour as reservoir fluids are withdrawn.

In ideal situations, such as depletion-drive gas reservoirs in homogeneous, high-permeability

reservoir rocks and where sufficient and high-quality pressure data are available, estimation
based on material balance may provide very reliable estimates of ultimate recovery at various
abandonment pressures.

In complex situations, such as those involving water influx, compartmentalization, multiphase

behavior, and multilayered or low-permeability reservoirs, shales or CBM, material balance
estimates alone may provide erroneous results.

Evaluators should take care to accommodate the complexity of the reservoir and its pressure
response to depletion in developing uncertainty profiles for the applied recovery project.
 Principle of material conservation

Expansion = Production
 Basic principles Of Material Balance
• A general material balance is simply a volumetric balance. It states that
since volume of the reservoir is constant, the algebraic sum of volume
change of oil, free gas, water and rock volume in the reservoir must be
zero.

• It considers a reservoir as a tank. It is independent of time.

• The material-balance equation is the simplest expression of the

conservation of mass in a reservoir. The equation mathematically defines
the different producing mechanisms and effectively relates the reservoir
fluid and rock expansion to the subsequent fluid withdrawal.
Reservoir modeling or reservoir simulation can be considered a more rigorous form of material
balance analysis.

While such modelling can be a reliable predictor of reservoir behaviour under a defined
development program, the reliability of input rock properties, reservoir geometry, relative
permeability functions, fluid properties, and constraints (e.g., wells, facilities, and export) are
critical.

Predictive models are most reliable in estimating recoverable quantities when there is sufficient
production history to validate the model through history matching.

Production Performance Analysis

Analysis of the change in production rate and production fluid ratios versus time and versus
cumulative production as reservoir fluids are withdrawn provides useful information to predict
ultimate recoverable quantities.

In some cases, before production decline rates become apparent, trends in performance
indicators such as gas/oil ratio, water/oil ratio, condensate/gas ratio, and bottom hole or
flowing pressures can be extrapolated to economic limit conditions to estimate Reserves.

Reliable results require a sufficient period of stable operating conditions after wells in a
reservoir have established drainage areas.
In estimating recoverable quantities, evaluators must consider additional factors affecting
production performance behaviour, such as variable reservoir and fluid properties, transient
versus stabilized flow, changes in operating conditions, interference effects, and depletion
mechanisms.

In early stages of depletion, there may be significant uncertainty in both the ultimate
performance profile and the other factors (e.g., operational, regulatory, contractual) factors
that impact abandonment rate. Such uncertainties should be reflected in the reserves
categorization.

For mature reservoirs, the future production forecast may be sufficiently well defined that the
remaining uncertainty in the technical profile is not significant; in such cases, the best estimate
2P scenario may be justifiable to also use for the 1P and 3P production forecasts.

Other uncertainties (e.g., operational, regulatory, contractual) that will impact the
abandonment rate may still exist, however, and these should be accommodated in the
reserves categorization uncertainty range.

In very low-permeability reservoirs (e.g., unconventional reservoirs), care should be taken in

the production performance analyses because the lengthy period of transient flow and
complex production physics can make analyses very difficult.
Summary of methods used to derive hydrocarbon reserves
Method Application Accuracy
Dependent on quality of
reservoir description.
OOIP, OGIP, recoverable
Volumetric reserves. Use early in life of Reserves estimates often high
field. because this method does not
consider problems of
reservoir heterogeneity.
OOIP, OGIP (assumes
adequate production history
available), recoverable Highly dependent on quality
of reservoir description and
Material balance reserves (assumes OOIP and amount of production data
OGIP known). Use in a mature
available. Reserve estimates
field with abundant variable.
geological, petrophysical, and
engineering data.
Dependent on amount of
Recoverable reserves. Use production history available.
Production history after a moderate amount of
Reserve estimates tend to be
production data is available. realistic.
OOIP, OGIP, recoverable Highly dependent on
similarity of reservoir
reserves. Use early in
Analogy exploration and initial field characteristics. Reserve
estimates are often very
development. general.