The recent restatements by several Oil and Gas companies of their petroleum reserves has created a lot of short-term publicity, but not a fundamental and widespread discussion regarding the process that is followed to determine a company's reserves.

To minimize the chance of reserves misstatements in the future, some have called for the certification of the individuals preparing a company's petroleum reserves or even the use of outside auditors to certify the reserves claimed, much like the certification of the financial reports by an independent auditor.

This paper will review both sides of such an approach, but conclude that a solution in line with the thinking behind the Sarbanes-Oxley regulations governing a company's financial reporting is more appropriate.

However, while this approach clearly defines the responsibility for the reserves estimate, the reporting of this estimate has to be expanded to ensure more transparency. This paper will recommend that the reserves statement uses a set of probabilistic numbers rather than a single deterministic number.

Finally, the objective of this paper is not necessarily to answer all questions surrounding the process to be followed by a company for stating its reserves, but rather to ensure that there is a fundamental discussion regarding that process, and that in the end the methodology is improved in a practical manner that provides added transparency and accountability.

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