Reserves Classification-Class-1

RESERVES CLASSIFICATION
WHY IS A RESERVES DEFINITION NEEDED?

• Most of the parameters that define the reserves of a
Reservoir cannot be measured directly, and must be
determined indirectly through geologic and reservoir
engineering analysis and interpretations.
• As a result, the estimates of oil and gas reserves have an

intrinsic uncertainty.
• The Definitions of reserves are designed to promote

uniformity and a standard measurement of the assets,
providing a structure to quantify risk and uncertainty through
its categorization.
What Is A Resource ?
 The term “resources” is generally applied
to all quantities of petroleum (recoverable
and unrecoverable) naturally occurring on or
within the Earth’s crust, discovered and
undiscovered, plus those quantities already
produced.
• In these definitions ,those quantities estimated to be
initially-in-place are defined as such and the
recoverable portions are defined separately.
Resource is a concept used for exploration blocks.
What Is A Reserve?
• The term “reserves” is generally applied to
the discovered quantities of petroleum
anticipated to be commercially recoverable
from known accumulations from a given date
forward under defined conditions.
 Under existing or anticipated economic conditions
 By established operating practices
 Under current or anticipated gov. regulations.
• Reserve estimates involve some degree of uncertainty

which depends chiefly on the amount of reliable
geologic and engineering data available at the time of
the estimate and the interpretation of these data.
4
Why Reserve Estimates?
 Measure effectiveness of exploration and development
 Budgeting for drilling and facilities
 To get finance from out side
 Purchase / Sale of properties
 Unitization
 Taxation
 Gov. policy and planning
 Disclosure for companies quoted on stock exchanges.
– Reliable, transparent information for investors and
potential investors.
• Attempts were made from time to time to
classify the reserves based on the magnitude
of uncertainties involved in developing them
• However no universally accepted classification
of reserves was available
Reserves Classification system followed in
ONGC Before 1995
• Russian system of reserve classification, reserves
were are classified as follows:
– Geological reserves
– Recoverable reserves
– Balance of reserves
The categories assigned them are
• A category
• B category
• C1 category
• C2 category
• Z category
• The reserves are classified in western system
which is widely applied the world over into
three categories:
– PROVED – certain to be to produced
– PROBABLE – less certain to be produced
– POSSIBLE – least certain to be produced
• These categories of reserves were revised
by different companies based on techno-
economic viabilities
Reserves Classification system followed in ONGC
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
3P Reserve definitions
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. having a 90%
certainty of being produced.
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 – it is referred to as P50 - i.e. 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. having a 10%
certainty of being produced. - This is also
known in the industry as 3P or Proven plus
probable plus possible.
Reserves Classifications and
Definitions
Reserves
Unproved Proved
Possible Probable Developed Undeveloped
Producing Nonproducing
Definitions
Reserves
Unprovedof hydrocarbon
Quantities Proved
believed to be
commercially
recoverable
from known accumulations
Definitions
Reserves
Unproved Proved
Quantities
Possible Probable of petroleum
Developed Undeveloped
that can be estimated with
reasonable certainty to
be commercially
recoverable
Definitions
Reserves
Resources expected
to be recovered from
Unproved Proved
existing wells
Definitions
Reserves
Unproved
Recovery from Proved
currently open
completion
intervals
Definitions
Reserves
Reserves shut-in or
Unproved behind pipe so they
Proved
are expected to be
commercially
recoverable
Resources expected to be
Definitions
recovered from
Reserves
new wells
deepening existing wells
Unproved Proved efforts
expensive additional
Definitions
Reserves
Unproved Proved
Technical, contractual,
economic, or regulatory
uncertainties prevent
definition as proved
Definitions
Engineering data
Reserves
suggests reserves are
more likely than not
commercially
Unproved Proved
recoverable
Definitions
Reserves that may be
Reserves
commercially
recoverable depending
on Unproved
favorable geological Proved
and economic factors
(PRMS)
Petroleum Resources Management
System (PRMS)
• In year 2007, Society of Petroleum Engineers
(SPE), the World Petroleum Council (WPC), the
American Association of Petroleum Geologists
(AAPG) and the Society of Petroleum Evaluation
Engineers (SPEE) sponsored a project to evaluate
and suggest a unified system of reserves
categorization.
• A system called Petroleum Resources
Management System (PRMS) was proposed after
lot of deliberations among the experts
Petroleum Resources Management
System (PRMS)
• The new system builds on the previous set of
definitions and incorporates best practices
identified in other international petroleum
and mineral classification systems. These
technical definitions are offered for any
company, agency, country or other
stakeholder to use.
2007 SPE-PRMS: Major Principles
• The System is “Project–Based”.
• Classification is based on project’s chance of
commerciality.
• Categorization is based on recoverable quantity
uncertainty.
• Applies to both conventional and unconventional
resources
26
They must satisfy the following criteria:
Has project been defined?
Is timeframe reasonable?
Have economics been defined, and are they positive?
Does a market exist, or is it reasonably certain that it will exist?
Is there reasonable certainty that facilities will exist?
Is there reasonable certainty that all consents will be obtained
Has government approved the plan and have partners committed
to it?
If no to any of these, then it is Contingent Resources;
if yes to all, then Reserve.
The system defines the major recoverable
resources classes:
• Production,
• Reserves,
• Contingent Resources
• Prospective Resources
• Unrecoverable.
SPE-WPC-AAPG Classification System
CONTINGENT RESOURCES
• Quantities of petroleum estimated, as of a given date, to

be potentially recoverable
• project(s) are not yet considered for commercial
development due to
 Currently no viable markets,
 Commercial recovery is dependent on technology
under development,
 Evaluation of the accumulation is insufficient to
clearly assess commerciality.
Contingent Resources are further sub-classified based on

project maturity and/or characterized by their economic
status.
UNDISCOVERED PETROLEUM INITIALLY-IN-PLACE
•Petroleum estimated, as of a given date, to be contained

within accumulations yet to be discovered.
 PROSPECTIVE RESOURCES
petroleum estimated, as of a given date, to be
potentially recoverable by application of future
development projects and have both an associated
chance of discovery and a chance of development.
Prospective Resources are further subdivided in accordance

with the level of certainty associated with recoverable
estimates assuming their discovery and development and may
be sub-classified based on project maturity.
UNRECOVERABLE
Portion of Discovered or Undiscovered Petroleum Initially-in-

Place quantities which is estimated, as of a given date, not to
be recoverable by future development projects.
A portion of these quantities may become recoverable in the

future as commercial circumstances change or technological
developments occur.
The remaining portion may never be recovered due to physical
/ chemical constraints represented by subsurface interaction of
fluids and reservoir rocks.
Project Maturity Sub-Classes
Example, Company A …
commitment
• Has a large stranded gas discovery
• Tested gas at high (presumably commercial) rates
• Multi tcf volumes recoverable
• No local market
• Proposal to build LNG plant
• Partners all have board approval for investment
• Local community supportive
• Government promises support, but has yet to
approve environmental protection plan, and
hence overall development plan
• Does A have reserves?
37
Example, Company B …
commitment
• Has a Southern North Sea discovery
• Many appraisals, flowed at commercial rates
• B generated a development plan in 1996 which was
commercial, and submitted to UK DTI
• In 1997, C submitted revised development plan,
before UK DTI had responded on the original
• In 1998, B submitted a further revised plan
• In 1999, B requested audit approval of reserves
filing to SEC, claiming corporate commitment to
develop, based on order placed for FPSO
• Would you agree?
38
Recovery Factor
• Recovery factor is defined as a mathematical
multiplier used (in the form of percentage) to
determine how much hydrocarbon can be
exploited commercially from a total pool of in-
place hydrocarbon.
39
RECOVERY FACTOR
B
A Depends on :
• Rock properties, PI , Reservoir Heterogeneity ,

Operating energy system , PVT etc.
B Depends on :
• Porosity, Hydrocarbon Saturation, Reservoir

Thickness, Area etc.
1-Sor- Swi
RECOVERY FACTOR = ----------------
1- Swi
= ( So-Sor) / So
Sor is the key factor for primary recovery estimates

• Limited / no lab data
• Lab data not in actual condition
•Sor = C* So ???
•Sor ~ 20 % - 25 %
Simple Calculation
• Average So in most of the oil field ~ 50 %

• Sor ~ 25 % to 20 %
• Max. Recovery factor ~ 50 to 60 %
• With permeability variance of 0.6 -0.7

Recovery Factor ~ 30 % to 42 %
RF Vs OIIP of 3300 Oil Fields :
World Wide (Outside N.America)
(International Energy Agency Oil reserves conference: 11 November 1997

"Distribution and evolution of recovery factor")
Recovery Factor Vs Depth of Occurrences
(International Energy Agency Oil reserves conference:

1997,"Distribution and evolution of recovery factor")
•The parabolic trend line peaks at 40% for a reservoir depth of 2000 m
• it is fascinating to find that the recovery factor trend line is nil for reservoirs
deeper than 7000 m
•The range is very large, but shortens for reservoirs deeper than 4000 m.)
Recovery Factor as function of
drive mechanism
DRIVE RECOVERY (%) RANGE MEDIAN
Solution Gas Drive 12 - 37 20
Gas Cap Drive 15 - 60 33
Water Drive 18 - 84 50
( Courtesy of IHRDC)
Recovery factor as function of API gravity
OIL TYPE RECOVERY(%)

Heavy Oil 5% - 20%
Medium to Light Oil 20 – 55%
Condensate 50 – 80%
¹ Source: C&C Reservoirs (SPE 84459).

However it is to be remembered always that
• Recovery factor is assumed to depend mainly upon oil price,
when it depends mainly on the geology and physics of the
reservoir
• Publishing "reserves" is a political act and publishing "recovery
factor" is a promotional act on the part of the technical side
of a company.
• “People believe that the recovery factor is a function of the
technology level when it is mainly due to geology, and the
quality of the reservoir and not the quality of the production
scheme or the present technology” – Jean Laherrere,
The API equation for oil recovery of solution gas drive reservoirs
The API equation for oil recovery of solution Water drive reservoirs

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RESERVES CLASSIFICATION

WHY IS A RESERVES DEFINITION NEEDED?

• As a result, the estimates of oil and gas reserves have an

• The Definitions of reserves are designed to promote

• Reserve estimates involve some degree of uncertainty

Categorisation on the analogy of SPE system was adopted

INPLACE VOLUME RESERVES

Proven reserves - defined as oil and gas

Probable reserves - defined as oil and gas

Possible Probable Developed Undeveloped

Possible Probable Developed Undeveloped

Possible Probable Developed Undeveloped

Possible Probable Developed Undeveloped

Possible Probable Developed Undeveloped

• Quantities of petroleum estimated, as of a given date, to

Contingent Resources are further sub-classified based on

•Petroleum estimated, as of a given date, to be contained

Prospective Resources are further subdivided in accordance

Portion of Discovered or Undiscovered Petroleum Initially-in-

A portion of these quantities may become recoverable in the

• Rock properties, PI , Reservoir Heterogeneity ,

• Porosity, Hydrocarbon Saturation, Reservoir

Sor is the key factor for primary recovery estimates

• Average So in most of the oil field ~ 50 %

• Max. Recovery factor ~ 50 to 60 %

• With permeability variance of 0.6 -0.7

(International Energy Agency Oil reserves conference: 11 November 1997

(International Energy Agency Oil reserves conference:

Recovery factor as function of API gravity

OIL TYPE RECOVERY(%)

¹ Source: C&C Reservoirs (SPE 84459).

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