Reserves Estimation: Introduction

The term "reserves" means different things to different people. To the banker, reserves are the amount of capital retained to meet probable future demands. To the oil and gas operator, reserves are volumes of crude oil, natural gas, and associated products that can be recovered profitably in the future from subsurface reservoirs.

Reasons for Reserve Estimates

Estimates of oil and gas reserves are required for different purposes by different segments of the industry and at different stages in the life of a particular oil and gas property. Segments of the industry concerned with oil and gas reserves include

· companies and individuals responsible for exploration, development, and operation of oil and gas properties

· buyers and sellers of oil and gas properties

· banks and other financial institutions involved in the financing exploration, development, or purchase of oil and gas properties

· agencies with regulatory or taxation authority over oil and gas operators

· investors in oil and gas companies

Depending on the scope of their operation, operators of oil and gas properties require reserve estimates at various stages of exploration, development, and production. Of concern are

· potential reserves on undrilled prospects

· proved, probable, and possible reserves on prospects being developed

· sizing and design of equipment to process reserves and transport them to market

· opportunities for additional profit from incremental reserves that might be attributable to stimulation of producing wells, infill drilling, equipment modifications or additions or improved recovery projects.