The Oil Drum

"...an estimated quantity of all hydrocarbons statistically defined as crude oil or natural gas, which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions."

Estimated Quantity
Statistically Defined
Reasonable Certainty
Recoverable

The number of variables inherent in statements such as these are tremendous. Reservoirs can become compartmentalized during production. Oil masses can become separated during water floods. Over-production can strand large volumes of oil. What kind of oil is it? Sour? Sweet? How much crap has to be separated from it?

Who estimated the quantity using what methods?
What statistics model was used to define the reserves?
What data was used for input? What was inferred?
Certainty? What the hell is reasonable, and who is the judge? Recoverable? How soon? How much cost? At what volume?

This is NOT an exact science - it's not science at all. It is simply a WAG in clothed in incredible double-speak...

Corporations and governments whose financial futures are tied to their reserves will ALWAYS overstate their reserves simply because it increases the value of their assets. How many reservoir engineers have been told something like, "Joe, don't you think your estimates here are a little on the conservative side? Why don't you go and take another look at it?" When the CEO asks a question like that, what happens? What happens in the face of this type of not-so-subtle pressure?

The assets determine how much money they can borrow to grow their little company. ARAMCO asset values determine how much money the worlds banks will extend to them. Every step along this path is fraught with upwardly mobile numerical abuse. I do not say "potential abuse", as the very definitions invite it, and there is proof of it on the books of every oil company in the world.

Whatever the number that is bandied about publicly, the error will always be on the high side of the reserve picture...

Whatever the numbers people come up with here, I am confident we will never quite do as well in the field as we do on paper.