There are currently almost as many definitions for reserves as there are evaluators, oil and gas companies, financial agencies, securities commissions, and government departments. Each one uses its own version of the definitions for its own purposes.
But today, with the unstable economic conditions in the oil and gas industry, the lower quality of reservoirs that are being discovered, and the new recovery methods that are being developed, estimating the reserves is becoming more unpredictable. These factors have made it imperative to develop a universal set of definitions for reserves that will meet the needs of all users. Also important is the need for guidelines so that all evaluators and users will understand the process of calculating and subsequently classifying reserves of oil and gas and related substances.
The task of writing the reserves definitions was undertaken by the Petroleum Society's Standing Committee on Reserves Definitions. This document comprises the committee's 1993 report.
The definitions developed by this committee are similar to those currently in use, particularly in North America. They have been reviewed by users in the oil and gas industry, and representatives from regulatory agencies, government departments, industry associations, and technical and professional organizations. This document presents the definitions of oil and gas resources and reserves and a recommended reserves classification system. The definitions are given in Sections 2.2 to 2.5 of Chapter 2. Guidelines to illustrate the application of the definitions are presented in Chapter 3. At the end of the document is a glossary of related terms that have been prepared in conjunction with the definitions.
The Standing Committee believes the recommended definitions and guidelines are suitable for use with respect to all types of oil and gas and related substances, including offshore situations and oil sands. Although those segments of the industry have used somewhat different terms and definitions, the principles reflected in the recommended definitions are applicable. The fundamental principle is that those quantities that are known to exist and to be economically recoverable are reserves. The total quantities, whether or not they have been discovered, are resources. Reserves and resources are further categorized depending on the level of certainty that they will be recovered.
It is the view of the Standing Committee that current reserves estimation methods and categories, in general, match the recommended definitions and guidelines. The committee, therefore, does not expect that major changes to reserves estimates would result from adoption of the definitions, although it recognizes that for some specific reserves estimates (generally for small pools) changes could be significant. The committee hopes that, over time, reserves evaluators will increasingly conform to the recommendations and thus contribute to the overall quality and consistency of reserves estimates.
This document has been prepared by the Standing Committee on Reserves Definitions and sponsored by the Petroleum Society of the Canadian Institute of Mining, Metallurgy and Petroleum. The committee is composed of representatives of oil and gas companies, geological and petroleum engineering consulting firms, Canadian industry associations, financial and accounting organizations, regulatory agencies, and government.