|
|
1P |
Equivalent to Proved Reserves |
2P |
The Sum of Proved Reserves plus
Probable Reserves |
3P |
The Sum of Proved Reserves plus
Probable Reserves plus Possible Reserves |
Accumulation |
An individual body of moveable
petroleum. |
Analogous Reservoir |
An analogous reservoir is one in
the same geographic area that is formed by the same, or very
similar geological processes as, a reservoir in question (or
under study for reserves evaluation) as regards sedimentation,
diagenesis, pressure, temperature, chemical and mechanical
history, and structure. It also has the same or similar
geologic age, geologic features, and reservoir rock and fluid
properties. Analogous features and characteristics can include
approximate depth, pressure, temperature, reservoir drive
mechanism, original fluid content, oil gravity, reservoir size,
gross thickness, pay thickness, net-to-gross ratio, lithology,
heterogeneity, porosity and permeability. The development
scheme for a reservoir (e.g. as reflected by well spacing) can
also be important in establishing the relevance of the analogy. |
Associated Gas |
Associated Gas is a natural gas
found in contact with or dissolved in crude oil in the
reservoir. It can be further categorized as Gas-Cap Gas or
Solution Gas. |
Barrels of Oil Equivalent |
See Crude Oil Equivalent |
Behind-pipe Reserves |
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. |
Bitumen |
See Natural Bitumen |
Buy Back Agreement |
An agreement between a host
government and a contractor under which the host pays the
contractor an agreed price for all volumes of hydrocarbons
produced by the contractor. Pricing mechanisms typically
provide the contractor with an opportunity to recover investment
at an agreed level of profit. These agreements may include
financial incentives for more efficient, lower cost developments
and production levels higher than the minimum level agreed.
These agreements may give rights to oil volumes and generally
carry a risk for the contractor. They may allow booking of
reserves. |
Carried Interest |
A carried interest is an
agreement under which one party (the carrying party) agrees to
pay for a portion or all of the pre-production costs of another
party (the carried party) on a license in which both own a
portion of the working interest. This arises when the carried
party is either unwilling to bear the risk of exploration or is
unable to fund the cost of exploration or development directly.
Owners may enter into carried interest arrangements with
existing or incoming joint venture partners at the exploration
stage, the development stage, or both. |
Coalbed Methane |
Natural gas contained in coal
deposits, whether or not stored in gaseous phase. Coalbed
methane, though usually mostly methane, may be produced with
variable amounts of inert or even non-inert gases. |
Commercial |
A project is commercial if the
degree of commitment is such that the accumulation is expected
to be developed and placed on production within a reasonable
time frame. A reasonable time frame for the initiation of
development depends on the specific circumstances but, in
general, should be limited to around 5 years. |
Committed Project |
Petroleum development projects
are committed when firm commitments have been made for the
expenditures and activities needed to bring a discovered
accumulation to the production stage.
Undeveloped projects are committed only when it can be clearly
demonstrated that there is intent to develop them and bring them
to production. Intent may be demonstrated with firm
funding/financial plans, declarations of commerciality,
regulatory approvals and satisfaction of other conditions that
would otherwise prevent the project from being developed and
brought to production.
These commitments should be unconditional,
except for timing that may be dependent on the development of
prior committed projects. An example of this would be where
production is dedicated to a long-term sales contract and will
only be developed as and when the capacity is required to
satisfy the contract. |
Completion |
Completion of a well. The
process by which a well is brought to its final classification -
basically dry hole, producer, or injector. A dry hole is
completed by plugging and abandonment. A well deemed to be
producible of petroleum, or used as an injector, is completed by
establishing a connection between the reservoir(s) and the
surface so that fluids can be produced from, or injected into
the reservoir. Various methods are utilized to establish this
connection, but they commonly involve the installation of some
combination of borehole equipment, casing and tubing, and
surface injection or production facilities. |
Completion Interval |
The specific reservoir
interval(s) that is (are) open to the borehole and connected to
the surface facilities for production or injection. |
Concession |
A grant of access for a defined
area and time period that transfers certain rights to
hydrocarbons that may be discovered from the host country to an
enterprise. The enterprise is generally responsible for
exploration, development, production and sale of hydrocarbons
that may be discovered. Typically granted under a legislated
fiscal system where the host country collects taxes, fees and
sometimes royalty on profits earned. |
Condensate |
Condensates are a portion of
natural gas of such composition that are in the gaseous phase at
temperature and pressure of the reservoirs, but that, when
produced, are in the liquid phase at surface pressure and
temperature. |
Contingent Project |
Development and production of
recoverable quantities has not been justified, due to conditions
that may or may not be fulfilled. |
Contingent Resources |
Those quantities of petroleum
which are estimated, on a given date, to be potentially
recoverable from known accumulations but which are not currently
considered to be commercially recoverable. |
Continuous-Type Deposit |
A petroleum accumulation that is
pervasive throughout a large area and which is not significantly
affected by hydrodynamic influences. Examples of such deposits
include "basin-center" gas and gas hydrate accumulations. |
Conventional Crude Oil |
Petroleum found in liquid form,
flowing naturally or capable of being pumped without further
processing or dilution (see Crude Oil). |
Conventional Deposit |
A discrete accumulation related
to a localized geological structural feature and/or
stratigraphic condition, typically with each accumulation
bounded by a down-dip contact with an aquifer, and which is
significantly affected by hydrodynamic influences, such as the
buoyancy of petroleum in water. |
Conventional Gas |
Conventional Gas is a natural
gas occurring in a normal porous and per- meable reservoir rock,
either in the gaseous phase or dissolved in crude oil, and which
technically can be produced by normal production practices. |
Conveyance |
Certain transactions that are in
substance borrowings repayable in cash or its equivalent and
shall be accounted for as borrowings and may not qualify for the
recognition and reporting of oil and gas reserves. These
include: 1) a) Cash advances to operators to finance exploration
in return for the right to purchase oil or gas discovered. b)
Funds advanced for exploration that is repayable by offset
against purchases of oil or gas discovered, or in cash if
insufficient oil or gas is produced by a specified date. 2)
Funds advanced to an operator that are repayable in cash out of
the proceeds from a specified share of future production of a
producing property, until the amount advanced plus interest at a
specified or determinable rate is paid in full, shall be
accounted for as a borrowing and do not qualify for the
recognition of reserves. The advance is a payable for the
recipient of the cash and receivable for the party making the
advance. Such transactions fall into a category commonly
referred to as production payments. |
Cost Recovery |
Under a typical
production-sharing agreement, the contractor is responsible for
the field development and all exploration and development
expenses. In return, the contractor recovers costs (investments
and operating expenses) out of the gross production stream. The
contractor normally receives payment in oil production and is
exposed to both technical and market risks. |
Crude Oil |
Crude Oil is the portion of
petroleum that exists in the liquid phase in natural underground
reservoirs and remains liquid at atmospheric conditions of
pressure and temperature. Crude Oil may include small amounts of
non-hydrocarbons produced with the liquids. Crude Oil has a
viscosity of less than or equal to 10,000 centipoises at
original reservoir temperature and atmospheric pressure, on a
gas free basis. |
Crude Oil Equivalent |
Converting gas volumes to the
oil equivalent is customarily done on the basis of the heating
content or calorific value of the fuel. There are a number of
methodologies in common use. Before aggregating, the gas volumes
first must be converted to the same temperature and pressure.
Common industry gas conversion factors usually range between 1.0
barrel of oil equivalent (boe) = 5.6 thousand standard cubic
feet of gas (mscf) to 1.0 boe = 6.0 mscf. |
Cumulative Production |
Production of oil and gas to
date. |
Current Economic Conditions |
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. |
Deterministic Estimate |
The method of estimation of
reserves or resources is called deterministic if a single best
estimate is made based on known geological, engineering, and
economic data. |
Developed Reserves |
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
sub-categorized as producing or non-producing. |
Development not Viable |
Of significant size, but
awaiting development of a market or removal of other constraints
to development, which may be technical, environmental, or
political, for example. |
Development on Hold |
No current plans to develop or
to acquire additional data at this time. |
Development Pending |
Requires further data
acquisition and/or evaluation in order to confirm commerciality. |
Discovered |
The term applied to a petroleum
accumulation/reservoir whose existence has been determined by
its actual penetration by a well, which has also clearly
demonstrated the existence of moveable petroleum by flow to the
surface or at least some recovery of a sample of petroleum. Log
and/or core data may suffice for proof of existence of moveable
petroleum if an analogous reservoir is available for comparison.
(See also “Known Accumulation”: Petroleum quantities that are
discovered are in “known accumulations” or “known reservoirs”). |
Discovered
Petroleum-initially-in-place |
That quantity of petroleum which
is estimated, on a given date, to be contained in known
accumulations, plus those quantities already produced therefrom.
Discovered Petroleum-initially-in-place may be subdivided into
Commercial and Sub-commercial categories, with the estimated
potentially recoverable portion being classified as Reserves and
Contingent Resources respectively. |
Dry Gas |
Dry Gas is a natural gas
containing insufficient quantities of hydrocarbons heavier than
methane to allow their commercial extraction or to require their
removal in order to render the gas suitable for fuel use. (Also
called Lean Gas) |
Dry Hole |
A well found to be incapable of
producing either oil or gas in sufficient quantities to justify
completion as an oil or gas well. |
Economic |
In relation to petroleum
reserves and resources, economic refers to the situation where
the income an operation exceeds the expenses involved in, or
attributable to, that operation. |
Economic Interest |
U.S. Treasury Regulation Sec. 1.
611-1(6)(1): An economic Interest is possessed in every case in
which the taxpayer has acquired by investment any Interest in
mineral in place and secures, by any form of legal relationship,
income derived from the extraction of the mineral ... to which
he must look for a return of his capital. |
Entitlement |
Reserves consistent with the
cost recovery plus profit hydrocarbons that are recoverable
under the terms of the contract or lease are typically reported
by the upstream contractor. |
Estimated Ultimate Recovery |
Those quantities of petroleum
which are estimated, on a given date, to be potentially
recoverable from an accumulation, plus those quantities already
produced therefrom. |
Exploration |
Prospecting for undiscovered
petroleum. |
Field |
An area consisting of a single
reservoir or multiple reservoirs all grouped on, or related to,
the same individual geological structural feature and/or
stratigraphic condition. There may be two or more reservoirs in
a field that are separated vertically by intervening impermeable
rock, laterally by local geologic barriers, or both. It could
be defined differently by regulatory authorities. |
Flare Gas |
Total volume of vented or flared
gas. |
Flow Test |
An operation on a well designed
to demonstrate the existence of moveable petroleum in a
reservoir by establishing flow to the surface and/or to provide
an indication of the potential productivity of that reservoir.
Some flow tests, such as drill stem tests (DSTs),
are performed in the open hole. A DST is used to obtain
reservoir fluid samples, static bottomhole pressure
measurements, indications of productivity and short-term flow
and pressure buildup tests to estimate permeability and damage
extent.
Other flow tests, such as single-point tests
and multi-point tests, are performed after the well has been
cased. Single-point tests typically involve a measurement or
estimate of initial or average reservoir pressure and a flow
rate and flowing bottomhole pressure measurement. Multi-point
tests are used to establish gas well deliverability and absolute
open flow potential. |
Fluid Contacts |
Typically defined as Oil/Water
Contact or Gas/Oil Contact |
Forward Sales |
There are a variety of forms of
transactions that involve the advance of funds to the owner of
an interest in an oil and gas property in exchange for the right
to receive the cash proceeds of production, or the production
itself, arising from the future operation of the property. In
such transactions, the owner almost invariably has a future
performance obligation, the outcome of which is uncertain to
some degree. Determination as to whether the transaction
represents a sale or financing rests on the particular
circumstances of each case. |
Fuel Gas |
Gas used for field and plant
operations. Substantial savings can be achieved to the
operating cost of a project by avoiding the purchase of
alternative supplies of gas or refined fuels such as diesel.
SPE guidance allows the option to include fuel
gas as part of the reserves estimate as long as an appropriate
expense for the gas is included in the cash flow analysis. |
Gas Balance |
In gas production operations
involving multiple working interest owners, an imbalance in gas
deliveries can occur. These imbalances must be monitored over
time and eventually balanced in accordance with accepted
accounting procedures. |
Gas Cap Gas |
Gas-Cap Gas is a free natural
gas which overlies and is in contact with crude oil in the
reservoir. It is a subset of Associated Gas. |
Gas Plant Products |
Gas Plant Products are natural
gas liquids recovered from natural gas in gas processing plants
and, in some situations, from field facilities. Gas Plant
Products include ethane, propane, butanes, butanes-propane
mixtures, natural gasoline and plant condensates, sulphur,
carbon dioxide, nitrogen and helium. |
Geostatistical Methods |
A variety of mathematical
techniques and processes dealing with the collection, analysis,
interpretation and presentation of masses of geological,
geophysical and engineering data to (mathematically) describe
the variability and uncertainties within any reservoir unit or
pool; specifically related here to resource and reserve
estimates, including the definition of (all) well and reservoir
parameters in 1, 2 and 3 dimensions and the resultant modeling
and potential prediction of various aspects of performance.
Examples of such processes include: Monte Carlo
simulation, 2D gridding and modeling of the spatial variability
of geological and petrophysical properties, simulated annealing,
object-based simulation, multiple-point statistics, the use of
(semi) variograms, and 3D stochastic modeling. New applications
include fuzzy mathematics, fast flow simulation, well
intervention, and lithology and fluid prediction. |
Hydrocarbons |
Hydrocarbons are chemical
compounds consisting wholly of hydrogen and carbon. |
Improved Recovery |
Improved Recovery is the
extraction of additional petroleum, beyond Primary Recovery,
from naturally occurring reservoirs by supplementing the natural
forces in the reservoir. It includes water-flooding, secondary
processes, tertiary processes and any other means of
supplementing natural reservoir recovery processes. (also
called Enhanced Recovery) |
Injection |
The forcing or pumping of
substances into a porous and permeable subsurface rock
formation. Examples of injected substances can include either
gases or liquids. |
Known Accumulation |
The term accumulation is used to
identify an individual body of moveable petroleum. The key
requirement to consider an accumulation as known, and hence
contain reserves or contingent resources, is that each
accumulation/reservoir must have been penetrated by a well. In
general, the well must have clearly demonstrated the existence
of moveable petroleum in that reservoir by flow to surface or at
least some recovery of a sample of petroleum from the well.
However, where log and/or core data exist, this may suffice,
provided there is a good analogy to a nearby and geologically
comparable known accumulation. |
Lead |
Potential area where one or more
accumulations are currently poorly defined and require more data
acquisition and/or evaluation in order to be classified as a
prospect. A lead will occur within a play. |
Lease Condensates |
Lease Condensate is natural gas
liquids recovered from produced gas (associated and
non-associated), in gas-liquid separators or field facilities. |
Loan Agreement |
A loan agreement is typically
used by a bank, other financial investor, or partner to finance
all or part of an oil and gas project. Compensation for funds
advanced is limited to a specified interest rate. The lender
does not participate in profits earned by the project above this
interest rate. There is normally a fixed repayment schedule for
the amount advanced, and repayment of the obligation is made
before any return to equity investors. Risk is limited to
default of the borrower or failure of the project. Variations in
production, market prices, and sales do not normally affect
compensation. Reserves are not recognized under this type of
agreement. |
Low/Best/High Estimates |
The range of uncertainty
reflects a reasonable range of estimated potentially recoverable
volumes for an individual accumulation or a project. In the case
of reserves, and where appropriate, this range of uncertainty
can be reflected in estimates for proved reserves (1P), proved
plus probable reserves (2P), and proved plus probable plus
possible reserves (3P) scenarios. For other resource categories,
the equivalent terms Low Estimate, Best Estimate, and High
Estimate are recommended. |
Lowest Known |
The deepest observed occurrence
of a producible hydrocarbon accumulation as demonstrated by well
log, flow test or core data. |
Mineral Interest |
Mineral Interests in Properties
Including (I) a fee ownership or lease, concession or other
interest representing the right to extract oil, or gas subject
to such terms as may be imposed by the conveyance of that
interest,(ii) royalty interests, production payments payable in
oil or gas, and other nonoperating interests in properties
operated by others; and (iii) those agreements with foreign
governments or authorities under which a reporting entity
participates in the operation of the related properties or
otherwise serves as producer of the underlying reserves (as
opposed to being an independent purchaser, broker, dealer or
importer). Properties do not include other supply agreements or
contracts that represent the right to purchase, rather than
extract, oil and gas. |
Monte Carlo Simulation |
A type of stochastic
mathematical simulation which randomly and repeatedly samples
input distributions (e.g. reservoir properties) to generate a
results distribution (e.g. recoverable petroleum volumes). |
Natural Bitumen |
Natural Bitumen is the portion
of petroleum that exists in the semi-solid or solid phase in
natural deposits. In its natural state it usually contains
sulphur, metals and other non-hydrocarbons. Natural Bitumen has
a viscosity greater than 10,000 centipoises measured at original
temperature in the deposit and atmospheric pressure, on a gas
free basis. In its natural viscous state, it is not normally
recoverable at commercial rate through a well. Natural Bitumen
generally requires upgrading prior to normal refining. (Also
called Crude Bitumen) |
Natural Gas |
Natural Gas is the portion of
petroleum that exists either in the gaseous phase or is in
solution in crude oil in natural underground reservoirs, and
which is gaseous at atmospheric conditions of pressure and
temperature. Natural Gas may include amounts of
non-hydrocarbons. |
Natural Gas Liquids |
Natural Gas Liquids are those
portions of natural gas which are recovered as liquids in
separators, field facilities or gas processing plants. Natural
Gas Liquids include but are not limited to ethane, propane,
butanes, pentanes, and natural gasoline. Condensate may or may
not be included. |
Natural Gas Liquids to Gas Ratio |
Ratio of natural gas liquids to
gas (in barrels/million cubic feet) in an oil field, calculated
using measured natural gas liquids and gas volumes at stated
conditions. |
Net Profits Interest |
An interest that receives a
portion of the net proceeds from a well, typically after all
costs have been paid. |
Net Working Interest |
A company’s working interest
reduced by royalties or share of production owing to others
under applicable lease and fiscal terms. |
Non Hydrocarbon Gas |
In the event that
non-hydrocarbon gases are present, the reported volumes should
reflect the condition of the gas at the point of sale.
Correspondingly, the accounts will reflect the value of the gas
product at the point of sale. Hence, if gas sold as produced
includes a proportion of carbon dioxide, for example, the
reserves and production should also include that CO2. In the
case of the CO2 being extracted before sale and the sales gas
containing only hydrocarbon gases, the reserves and production
should reflect only the hydrocarbon gases that will be sold. |
Non-Associated Gas |
Non-Associated Gas is a natural
gas found in a natural reservoir that does not contain crude
oil. |
Non-Conventional Gas |
Non-Conventional Gas is a
natural gas found in unusual underground situations such as very
impermeable reservoirs, hydrates, and coal deposits. |
Non-producing Reserves |
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. |
Offset Well Location |
Potential drill location
adjacent to an existing well. The offset distance may be
governed by well spacing regulations. Proved volumes on the
existing well are indicated by either conclusive formation test
or production. For proved volumes to be assigned to an offset
well location there must be conclusive, unambiguous technical
data which supports the reasonable certainty of production of
hydrocarbon volumes and sufficient legal acreage to economically
justify the development without going below the shallower of the
fluid contact or the lowest known hydrocarbon. |
On Production |
Currently producing and selling
petroleum to market. |
Operator |
The company or individual
responsible for managing an exploration, development, or
production operation. |
Overlift / Underlift |
Production overlift or underlift
can occur in annual records because of the necessity for
companies to lift their entitlement in parcel sizes to suit the
available shipping schedules as agreed among the parties. At any
given financial year-end, a company may be in overlift or
underlift. Based on the production matching the company's
accounts, production should be reported in accord with and equal
to the liftings actually made by the company during the year,
and not on the production entitlement for the year. |
Penetration |
The intersection of a wellbore
with a reservoir. |
Petroleum |
Petroleum is a naturally
occurring mixture consisting predominantly of hydrocarbons in
the gaseous, liquid or solid phase. |
Petroleum-in-Place |
Petroleum-in-Place is the total
quantity of petroleum that is estimated to exist originally in
naturally occurring reservoirs. Oil-in-place, gas-in-place,
bitumen-in-place, are defined in the same manner. |
Pilot Project |
A small scale test or trial
operation that is used to assess the suitability of a method for
commercial application. |
Planned for Development |
Satisfies all the criteria for
reserves, and there is a firm intent to develop, but detailed
development planning and/or necessary approvals/contracts have
yet to be finalized. |
Play |
Recognized prospective trend of
potential prospects, but which requires more data acquisition
and/or evaluation to define specific leads or prospects. |
Pool |
See Reservoir. |
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. Often referred to as
P3. |
Primary Recovery |
Primary recovery is the
extraction of petroleum from reservoirs utilizing only the
natural energy available in the reservoirs to move fluids
through the reservoir rock or other points of recovery. |
Probabilistic Estimate |
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. |
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 anticipated to be proved by normal step-out
drilling 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 favorable 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 workover, treatment, re-treatment,
change of equipment, or other mechanical procedures, where such
procedure has not been proved successful in wells which exhibit
similar behavior 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. Often referred to as
P2. |
Producing Reserves |
Reserves subcategorized as
producing are expected to be recovered from intervals which are
open and producing at the time of the estimate. Improved
recovery is considered producing only after the improved
recovery project is in operation. |
Production |
The quantity of petroleum
produced in a given period. |
Production Sharing Contract |
In a production-sharing contract
between a contractor and a host government, the contractor
typically bears all risk and costs for exploration, development,
and production. In return, if exploration is successful, the
contractor is given the opportunity to recover the investment
from production, subject to specific limits and terms. The
contractor also receives a stipulated share of the production
remaining after cost recovery, referred to as profit
hydrocarbons. Ownership is retained by the host government;
however, the contractor normally receives title to the
prescribed share of the volumes as they are produced. Reserves
consistent with the cost recovery plus profit hydrocarbons that
are recoverable under the terms of the contract are typically
reported by the upstream contractor. |
Profit Split |
Under a typical
production-sharing agreement, the contractor is responsible for
the field development and all exploration and development
expenses. In return, the contractor is entitled to a share of
the remaining profit oil or gas. The contractor receives payment
in oil or gas production and is exposed to both technical and
market risks. |
Project |
This represents the link between
the petroleum accumulation and the decision-making process,
including budget allocation. A project may, for example,
constitute the development of a single reservoir or field, or an
incremental development for a producing field, or the integrated
development of a group of several fields. In general, an
individual project will represent the level at which a decision
is made on whether or not to proceed (i.e., spend money), and
there should be an associated range of estimated recoverable
volumes for that project. |
Prorationing |
The allocation of production
among reservoirs and wells or pipeline allocation of capacity
among shippers, etc. |
Prospect |
Potential accumulation that is
sufficiently well defined to represent a viable drilling target. |
Prospective Resources |
Those quantities of petroleum
which are estimated, on a given date, to be potentially
recoverable from undiscovered accumulations. |
Proved Developed Reserves |
Proved Developed Reserves are
those Proved Reserves that can be expected to be recovered
through existing wells and facilities and by existing operating
methods. Improved recovery reserves can be considered as Proved
Developed Reserves only after an improved recovery project has
been installed and favorable response has occurred or is
expected with a reasonable degree of certainty. (See Developed
Reserves) 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 sub-categorized 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 re-completion prior to
the start of production.
|
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 development 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. Often
referred to as P1, sometimes referred to as “proven”. |
Proved Undeveloped Reserves |
Proved Undeveloped Reserves are
those Proved Reserves that are expected to be recovered from
future wells and facilities, including future improved recovery
projects which are anticipated with a high degree of certainty
in reservoirs which have previously shown favorable response to
improved recovery projects. (See Undeveloped) |
Purchase Contracts |
A contract to purchase oil and
gas provides the right to purchase a specified volume at an
agreed price for a defined term. Under purchase contracts,
exposure to technical and market risks are borne by the seller.
While a purchase or supply contract can provide long-term access
to reserves through production, it does not convey the right to
extract, nor does it convey a financial interest in the
reserves. Consequently, reserves would not be recognized by the
buyer under this type of agreement. |
Pure-Service Contract |
A pure-service contract is an
agreement between a contractor and a host government that
typically covers a defined technical service to be provided or
completed during a specific period of time. The service company
investment is typically limited to the value of equipment,
tools, and personnel used to perform the service. In most cases,
the service contractor's reimbursement is fixed by the terms of
the contract with little exposure to either project performance
or market factors. Payment for services is normally based on
daily or hourly rates, a fixed turnkey rate, or some other
specified amount. Payments may be made at specified intervals or
at the completion of the service. Payments, in some cases, may
be tied to the field performance, operating cost reductions, or
other important metrics. Risks of the service company under this
type of contract are usually limited to nonrecoverable costs
overruns, losses owing to client breach of contract, default, or
contract dispute. These agreements generally do not have
exposure to production volume or market price; consequently,
reserves are not usually recognized under this type of
agreement. |
Range of Uncertainty of
recoverable hydrocarbon quantities |
See Resource Uncertainty
Categories. |
Raw Natural Gas |
Raw Natural Gas is natural gas
as it is produced from the reservoir. It includes varying
amounts of the heavier hydrocarbons which liquefy at atmospheric
conditions, and water vapor; and may also contain sulphur
compounds such as hydrogen sulphide, and other non-hydrocarbon
gases such as carbon dioxide, nitrogen or helium, but which,
nevertheless, is exploitable for its hydrocarbon content. Raw
Natural Gas is often not suitable for direct utilization by most
types of consumers. |
Reasonable Certainty |
If deterministic methods for
estimating reserves are used, then 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 volumes
actually recovered will equal or exceed the estimate.
The Security and Exchange Commission considers
the concept of reasonable certainty to imply that, as more
technical data becomes available, a positive, or upward,
revision is much more likely than a negative, or downward,
revision. |
Recoverable Resources |
Those quantities of hydrocarbons
which are estimated to be producible from accumulations, either
discovered or undiscovered. |
Recovery Efficiency |
A numeric expression of that
portion of in-place quantities of petroleum estimated to be
recoverable by specific processes or projects, most often
represented as a percentage. |
Reserves |
Reserves are those quantities of
hydrocarbons which are anticipated to be commercially recovered
from known accumulations from a given date forward. |
Reservoir |
A subsurface rock formation
containing one or more individual and separate natural
accumulations of moveable petroleum that is confined by
impermeable rock and is characterized by a single-pressure
system. Also referred to as Pool. |
Resource Uncertainty Categories |
Any estimation of resource
quantities for an accumulation or group of accumulations is
subject to uncertainty and should, in general, be expressed as a
range. The function of the three primary categories of reserves
(proved, probable, possible) is to illustrate the range of
uncertainty in the estimate of the potentially recoverable
volume of petroleum from a known accumulation. Such estimates,
which are done initially for each well or reservoir, may be made
deterministically or probabilistically and are then aggregated
for the accumulation/project as a whole. Provided a similar
logic is applied for all volumetric estimates (including
contingent and prospective resources), the estimate of
uncertainty for each accumulation can be tracked over time from
exploration through discovery, development, and production. This
approach provides an extremely effective basis for evaluating
the validity of the methodology used for the estimate of
potentially recoverable volumes. The range of uncertainty
reflects a reasonable range of estimated potentially recoverable
volumes for an individual accumulation or a project. In the case
of reserves, and where appropriate, this range of uncertainty
can be reflected in estimates for proved reserves (IP), proved,
plus probable reserves (2P), and proved, plus probable, plus
possible reserves (3P) scenarios. For other resource categories,
the equivalent terms low estimate, best estimate, and high
estimate are recommended. |
Resources |
See Total petroleum
initially-in-place. |
Revenue Sharing Contract |
Revenue-sharing contracts are
very similar to the production-sharing contracts described
earlier, with the exception of contractor payment. With these
contracts, the contractor usually receives a defined share of
revenue rather than a share of the production. As in the
production- sharing contract, the contractor provides the
capital and technical expertise required for exploration and
development. If exploration efforts are successful, the
contractor can recover those costs from the sale revenues. A
very similar type of agreement is commonly known as a
risked-service contract. This type of agreement is also often
used where the contracting party provides expertise and capital
to rehabilitate or institute improved recovery operations in an
existing field. Provided that the requirements for reserves
recognition are satisfied, reported reserves are typically based
on the economic interest held or the financial benefit received. |
Reversionary Interest |
The right of future possession
of an interest in a property when a specified condition has been
met. |
Risk |
The probability of loss or
failure. As “risk” is generally associated with the negative
outcome, the term “chance” is preferred for general usage to
describe the probability of a discrete event occurring. |
Risk and Reward |
Risk and reward associated with
oil and gas production activities stems primarily from the
variation in revenues from technical and economic risks. Many
companies use exposure to risk in conjunction with the rights
that they are assigned to operate and to take volumes in kind to
support reserves reporting. Technical risk affects a company's
ability to physically extract and recover hydrocarbons and is
usually dependent on a number of technical parameters. Economic
risk is a function of the success of a project and is critically
dependent on the ability to economically recover the in-place
hydrocarbons. |
Risk Service Contract |
These agreements are very
similar to the production-sharing agreements with the exception
of contractor payment. With a risked-service contract, the
contractor usually receives a defined share of revenue rather
than a share of the production. As in the production-sharing
contract, the contractor provides the capital and technical
expertise required for exploration and development. If
exploration efforts are successful, the contractor can recover
those costs from the sale revenues and receive a share of
profits through a contract-defined mechanism. Under existing SEC
regulations, it may be more difficult for the contractor to
justify reserves recognition, and special care must be taken in
drafting the agreement. Provided that the requirements for
reserves recognition are satisfied, reported reserves are
typically based on the economic interest held or the financial
benefit received. |
Royalty |
Royalty refers to payments that
may be due to the host government, mineral owner, or landowner,
in return for the producer having access to the petroleum. Many
agreements allow for the producer to lift the royalty volumes,
sell them on behalf of the royalty owner, and pay the proceeds
to the owner. A few agreements provide for the royalty to be
taken only in kind by the royalty owner. |
Shut-in 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. |
Solution Gas |
Solution Gas is a natural gas
which is dissolved in crude oil in the reservoir at the
prevailing reservoir conditions of pressure and temperature. It
is a subset of Associated Gas. |
Sour Natural Gas |
Sour Natural Gas is a natural
gas that contains sulphur, sulphur compounds and/or carbon
dioxide in quantities that may require removal for effective
use. |
Stochastic |
Adjective defining a process
involving or containing a random variable or variables or
involving chance or probability such as a stochastic
stimulation. |
Sub-Commercial |
A project is Sub-commercial if
the degree of commitment is not such that the accumulation is
expected to be developed and placed on production within a
reasonable time frame. A reasonable time frame for the
initiation of development depends on the specific circumstances
but, in general, should be limited to around 5 years. |
Sweet Natural Gas |
Sweet Natural Gas is a natural
gas that contains no sulphur or sulphur compounds at all, or in
such small quantities that no processing is necessary for their
removal in order that the gas may be used directly as a
non-corrosive domestic heating fuel. |
Taxes |
Enforced contributions to the
public funds, levied on persons, property, or income by
governmental authority. |
Total Petroleum
Initially-in-place |
The entire resource base (Total
Petroleum-initially-in-place) is generally accepted to be all
those estimated quantities of petroleum contained in the
sub-surface, as well as those quantities already produced. This
was defined previously by the WPC as "Petroleum-in-place" and
has been termed "Resource Base" by others. |
Uncertainty |
The range of possible outcomes
in an estimate. |
Under Development |
All necessary approvals have
been obtained, and development of the project is underway. |
Undeveloped Reserves |
Undeveloped reserves are
expected to be recovered: (1) from new wells on undrilled
acreage, (2) from deepening existing wells to a different
reservoir, or (3) where a relatively large expenditure is
required to (a) recomplete an existing well or (b) install
production or transportation facilities for primary or improved
recovery projects. |
Unitization |
Process whereby owners of
adjoining properties allocate reserves, production, costs, etc. |
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. |
Unrecoverable Resources |
The portion of discovered or
undiscovered petroleum-initially-in-place quantities not
currently considered to be recoverable. A portion of these
quantities may become recoverable in the future as commercial
circumstances change, technological developments occur, or
addition data is acquired. |
Well Abandonment |
The permanent plugging of a dry
hole or of a well that no longer produces petroleum or is no
longer capable of producing petroleum profitably. Several steps
are involved in the abandonment of a well: permission for
abandonment and procedural requirements are secured from
official agencies; the casing is removed and salvaged if
possible; and one or more cement plugs and/or mud are placed in
the borehole to prevent migration of fluids between the
different formations penetrated by the borehole. |
Wet Gas |
Wet (Rich) Gas is a natural gas
containing sufficient quantities of hydrocarbons heavier than
methane to allow their commercial extraction or to require their
removal in order to render the gas suitable for fuel use. |
Working Interest |
A company’s equity interest in a
project before reduction for royalties or production share owed
to others under the applicable fiscal terms |