Ahmed Serry, 1

PETROLEUM RESOURCES AND RESERVES EVALUATION Senior reservoir engineer

 1. PRMS CATEGORIES

2. RESERVES: MORE FOCUS

PRMS Categorization 3. EVALUATION METHODS

4. EVALUATION PROCEDURES

5. REPORTING
 SPE/WPC/AAPG classification & categorization
the vertical axis represents the
level of status/maturity of the
accumulation (classification)

The horizontal axis represents the range of uncertainty in the estimated

potentially recoverable volume for an accumulation (categorization)
Uncertainty

For the predictive example shown, the uncertainty in estimated porosity is a substantial
fraction of the entire porosity range at this particular scale.
 Uncertainty

 Any estimation of resource quantities for

an accumulation is subject to both
technical (in- place or RF) and commercial
uncertainties, and should, in general, be
quoted as a range.

 The Range of Uncertainty, reflects a

reasonable range of estimated
potentially recoverable volumes for an
individual accumulation.

 Ranges from low uncertainty (high confidence) to high uncertainty (low confidence)
 Technical Uncertainty

 In order for volumes to move from one category to

the next, the technical issues which cause them to be

placed in less certain categories must be resolved.

 In the majority of cases, this requires that additional

data must be obtained before any greater certainty can

be recognized.

This may include, among other things, the drilling of additional wells, the monitoring of current
production to better understand performance or the implementation of a pilot to have greater
confidence in the volumes that full scale development projects may eventually produce.
PRMS Categories

 Volumes can be described either

 INCREMENTALLY

 or CUMULATIVELY
PRMS Categories for reserves
NOMENCLATURE MATRIX (RSC)
Reserves: More Focus
Reserves: More Focus
Proved Reserves Criteria – vertically

 All the agencies give specific guidance that limit quantities assigned to their low estimate case
(proved, measured) including:
 LKH (lowest known Hydrocarbon)
- if a hydrocarbon/water contact is not penetrated in a wellbore, volumetric calculations of
proved reserves should be restricted by the lowest known structural elevation of occurrence
of hydrocarbons as defined by well logs, core analysis or formation testing (in the same
reservoir).
Proved Reserves Criteria

- The SPE allows the use of definitive geological, engineering or performance data, which

would include pressure data, but in general only if supported by other data confirming the

existence of a single pressure system.

Proved Reserves Criteria – laterally

 Lateral Extent – in addition to the drilling spacing unit (DSU) (or drainage area) of the
productive well, proved reserves are limited to immediate offset locations (8 offset DSU’s
including diagonals) assuming they are within the productive limits of the reservoir, appear to
have lateral continuity to the productive wells based on geological and engineering data and
thus can be reasonable judged as economically productive.

 Geophysical data is specifically listed in addition

to geological and engineering data used in
judging proved limits
Proved Reserves Criteria – laterally
Reserves: More Focus
Reserves: Developed Non-Producing

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 yet

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 start of production.

In all cases, production can be initiated or restored with relatively low expenditure

compared to the cost of drilling a new well.

Reserves: Undeveloped Reserves

(1) from new wells on undrilled acreage in known accumulations,

(2) from deepening existing wells to a different (but known) reservoir,

(3) from infill wells that will increase recovery,

or (4) where a relatively large expenditure (e.g. when compared to the cost of drilling a

new well) is required to:

(a) recomplete an existing well

or (b) install production or transportation facilities for primary or improved recovery projects
Reserves: More Focus
 step-out drilling
reserves anticipated to be proved by normal step-out
01 drilling where sub-surface control is inadequate to classify
these reserves as proved,

Formations aren’t analogous to producing

reserves in formations that appear to be productive,
based on well log characteristics, but lack core data
02 or definitive tests and which are not analogous to
producing or proved reservoirs in the area,

separated from the proved area by faulting

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
03 higher than the proved area,

Probable reserves
are those unproved reserves which analysis of
geological and engineering data suggests are alternative interpretation of performance
incremental reserves in proved reservoirs where
an alternative interpretation of performance or
more likely than not to be recoverable 04
volumetric data indicates more reserves than can
be classified as proved

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Possible reserves
are those unproved reserves which
analysis of geological and engineering
data suggests are less likely to be
recoverable than probable reserves.

possibly exist beyond areas classified as probable,

A reserves which, based on geological interpretations, could possibly exist beyond areas classified as probable

infill drilling

B Incremental reserves attributed to infill drilling that are subject to technical uncertainty.

separated from the proved area by faulting

A 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.

reserves attributed to improved recovery methods

B rock, fluid, and reservoir characteristics are such that a reasonable doubt exists
To Estimate Petroleum Resource Volumes

1. Identify the maturity of the project

2. Identify the uncertainty
Findings and Analysis - Classification & Assessment Approach
 The Nature and Purpose of Estimating Reserves Information

 Such Reserves information typically may include

 Estimates of Reserves information are

made by or for entities as a part of their

Reserves quantities.
ongoing business practices.

future producing rates

 The exact type and extent of Reserves

information must necessarily take into

future net revenue
account the purpose for which such

Reserves information is being prepared present value of such future

net revenue
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 Estimating Reserves involves extensive judgments

 It is subject to changes in existing knowledge and technology; fiscal and economic

conditions; applicable contractual; and the purposes for which the Reserves
information is to be used
Estimating Reserves in Accordance With Engineering Principles

 The estimating and auditing of Reserves information is predicated upon certain

historically developed principles of geoscience, petroleum engineering, and

evaluation methodologies, which are in turn based on principles of physical science,

mathematics, and economics.

Methods of Estimating Reserves
The acceptable methods for estimating Reserves include:

Analogy to other reservoirs if geographic location, formation characteristics, or similar factors render such analogy

appropriate. In no event should the result of two or more methodologies be averaged to provide an estimate of Reserves
 RESERVES EVALUATION methods

 The resources estimation process is continuous during the life of the field due to risk and
inaccuracy that are considered an endemic problem
 reserve estimation challenge is a function of time and available data
 Methods of Estimating Reserves

 In estimating Reserves information for a property or group of properties, QREs

(Qualified Reserves Evaluators) will determine the geological and engineering methods

to be used in estimating Reserves information by considering some parameters:

Traditional Reserves Estimation Methods
Indirect estimating methods

 Volumetric and Analogous Methods.

 Static data-based volumetric methods to estimate petroleum initially in-place (PIIP)
and analogous methods to estimate recovery efficiencies are the
 used during exploration, discovery, post-discovery, appraisal, and initial development
(or exploitation) stages of the E&P life cycle of any recovery project.

indirect estimating procedures direct estimating procedures

Indirect estimating methods

 These procedures may be called “indirect” because the EUR cannot be derived
directly, but requires independent estimates of reservoir-specific PIIP volume and
appropriate recovery efficiency (RE).
 It is generally expressed in terms of a simple classical volumetric relationship defined
by
EUR (STB or scf) = PIIP (STB or scf) × RE (fraction of PIIP)
Direct estimating methods

 In the later stages of production, recoverable volumes can also be estimated

“directly” using dynamic-data-based production performance analysis

1. MBE

2. DCA

3. RESERVOIR SIMULATION
 RESERVES EVALUATION PROCEDURES

 Under the PRMS 2018, Reserves estimates may be prepared using deterministic or

probabilistic methods.

 With the deterministic method, the QRE selects

a single value for each parameter to be used in

the calculation of Reserves.

 The discrete value for each parameter is

selected on the basis of the QRE’s opinion of

the value that is most appropriate for the

corresponding Reserves category.

Deterministic

PRMS: “The method of estimation of Reserves or Resources is called deterministic if a discrete

estimate(s) is made based on known geoscience, engineering, and economic data.”
▪ Low case – conservative estimate
– For 1P Reserves: “Reasonably certain” (high
degree of confidence) that the stated volume or
more will be recovered

▪ Middle case – best estimate (most likely) – For

2P Reserves: Equally likely that more or less than
the stated volume will be recovered

▪ High case – optimistic estimate

– For 3P Reserves: A low chance that the stated
volume or more will be recovered
Deterministic approach
It must be recognized that PRMS embraces two equally-valid deterministic approaches

to reserves estimation:

 the “incremental” approach

 and the “scenario” approach.

Both approaches are reliable and arrive at comparable results, especially when

aggregated at the field level; they are simply different ways of thinking about the same

problem
Deterministic approach - scenario approach

▪ Estimate based on minimum (most

conservative) value of parameters –

considered “proved” or 1P

▪ Estimate based on most likely values of

parameters, considered “proved plus

probable” or 2P

▪ Estimate based on maximum (most

aggressive) value of parameters considered

“proved plus probable plus possible” or 3P.

Deterministic approach - scenario approach
Deterministic approach - scenario approach
- Three separate analyses are prepared to bracket the uncertainty through sensitivity

analysis (i.e., estimated values by three reasonable sets of key input parameters of

geoscience and engineering data).

- Depending on the stage of maturity,

these scenarios underpin the PRMS
categorization of Reserves (1P, 2P, and 3P)
and Contingent Resources (1C, 2C, and 3C)
of the projects applied to discovered
petroleum accumulations, or Prospective
Resources (1U, 2U, and 3U) of the
undiscovered accumulations.
 Advantages of a deterministic approach

deterministic approach
it describes a specific case where physically
Because of the last two advantages,
A inconsistent combinations of parameter values
can be spotted and removed.
investors and shareholders like the
deterministic approach and it is widely
used to report Proved Reserves for
regulatory purposes.

Advantages
it is direct, easy to there is a long history
explain, and manpower B C of use with estimates
efficient. that are reliable and
reproducible

08-Oct-23 40
 Disadvantages of a deterministic approach

▪ Computation of 1P estimate usually

assumes all minimum values of parameters
occur in same outcome – extremely
unlikely, resulting in unrealistically low
reserve estimate with very small probability
of occurrence

▪ 3P estimate unrealistically high, small

probability of occurrence
Disadvantages of a deterministic approach

 The major disadvantage of the deterministic approach is that it does not quantify

the likelihood of the low, best and high estimates.

Degree of uncertainty in estimates neither quantified nor related to one another

Probabilistic reserves estimation procedures may be better

alternative
RESERVES EVALUATION PROCEDURES
Probabilistic

PRMS: “The method of estimation of Resources is called probabilistic when the known

geoscience, engineering, and economic data are used to generate a continuous range of

estimates and their associated probabilities.

Probabilistic

Percentile, n, is the value of the variable above which n percent of observations fall.

▪ P10 > P50 > P90

▪ There is a 10% chance of the true value being higher than the P10 estimate of that value.”

▪ Low case (e.g. 1P reserves) = P90 volume

– 90% probability (P90) that stated volume or
more will be recovered
▪ Middle case (e.g. 2P reserves) = P50 volume
– 50% probability (P50) that stated volume or
more will be recovered
▪ High case (e.g. 3P reserves) = P10 volume
– 10% probability (P10) that stated volume or
more will be recovered
Aggregation Methods

 Oil and gas quantities are generally estimated and categorized according to certainty

of recovery within individual reservoirs or portions of reservoirs; this is referred to as

the “reservoir level” assessment.

 This cumulative summation process is generally referred to as “aggregation.”

 Aggregation Methods
 These estimates are summed to arrive at estimates for fields, properties, and projects.
 Further summation is applied to yield totals for areas, countries, and companies; these
are generally referred to as “resource reporting levels.”.
 The uncertainty distribution of the individual estimates at each of these levels may
differ widely, depending on the geological settings and the maturity of the resources.
 Aggregation Methods

 Two general methods of aggregation may be applied:

1. arithmetic summation of estimates by category and

2. statistical aggregation of uncertainty distributions.

There is typically significant divergence in results from applying

these alternative methods.

Aggregation Methods
Aggregation Methods
General Considerations in Estimating Reserves
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 PRMS foundation principles
Net Resources are allocated based on
contractual entitlement

The System is “Project–Based” Reserves/resources are estimated

in terms of the sales quantities

Classification is based on Applies to both conventional

project’s chance of commerciality and unconventional resources

Categorization is based on Estimates based on

recoverable uncertainty deterministic and/or probabilistic methods

Base case uses evaluator’s forecast

of future conditions