Proved reserves
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Proven reserves (also called measured reserves, 1P, and reserves) is a measure of fossil fuel energy reserves, such as
oil reserves An oil is any nonpolar chemical substance that is composed primarily of hydrocarbons and is hydrophobic (does not mix with water) & lipophilic (mixes with other oils). Oils are usually flammable and surface active. Most oils are unsaturate ...
,
natural gas Natural gas (also called fossil gas or simply gas) is a naturally occurring mixture of gaseous hydrocarbons consisting primarily of methane in addition to various smaller amounts of other higher alkanes. Low levels of trace gases like carbo ...
reserves, and coal reserves. It is defined as the " antity of energy sources estimated with reasonable certainty, from the analysis of geologic and engineering data, to be recoverable from well established or known reservoirs with the existing equipment and under the existing operating conditions." A reserve is considered proven if it is probable that at least 90% of the resource is recoverable by economically profitable means. Operating conditions are taken into account when determining if a reserve is classified as proven. Operating conditions include operational break-even price, regulatory and contractual approvals, without which the reserve cannot be classified as proven. Price changes therefore can have a large impact on the classification of proven reserves. Regulatory and contractual conditions may change, and also affect the amount of proven reserves. If a reserve's resources can be recovered using current technology but is not economically profitable it is considered "technically recoverable" but cannot be considered a proven reserve. Reserves less than 90% recoverable but more than 50% are considered "probable reserves" and below 50% are "possible reserves".


Numbered terms

The ''engineering'' term P90 refers to 90 percent engineering probability, is a commonly accepted specific definition by
Society of Petroleum Engineers The Society of Petroleum Engineers (SPE) is a 501(c)(3) not-for-profit professional organization whose stated mission is "to collect, disseminate, and exchange technical knowledge concerning the exploration, development and production of oil an ...
, it does not take into account anything except technical concerns. Therefore, it is different from the business term which does take into account current break-even profitability, and regulatory and contractual approval, but is considered a very rough equivalent. The definition is certainly not universal. Energy Watch Group uses a different definition, P95.


More terms

Disregarding economics, the proper ''engineering'' term for the total technologically extractable amount is the
Producible fraction Proven reserves (also called measured reserves, 1P, and reserves) is a measure of fossil fuel energy reserves, such as oil reserves, natural gas reserves, and coal reserves. It is defined as the " antity of energy sources estimated with reasonabl ...
, which is easily confused with the ''business'' term ''proven reserves''. However, the purely engineering term is also misleading in that squeezing the last bits of fossil fuel out follows the
diminishing returns In economics, diminishing returns are the decrease in marginal (incremental) output of a production process as the amount of a single factor of production is incrementally increased, holding all other factors of production equal ( ceteris parib ...
and at some point is so costly that it becomes highly impractical, as seen on a bell curve, which is why measures like P90 and P95 were created. The term ''proven reserves'' is further subdivided into ''proved developed reserves'' and ''proved undeveloped reserves''. Note that it does not include ''unproven reserves'', which is broken down into ''probable reserves'' as well as ''possible reserves''. These reserve categories are totaled up by the measures 1P, 2P, and 3P, which are inclusive of all reserves types: * "1P reserves" = proven reserves (both proved developed reserves + proved undeveloped reserves). * "2P reserves" = 1P (proven reserves) + probable reserves, hence "proved AND probable." * "3P reserves" = the sum of 2P (proven reserves + probable reserves) + possible reserves, all 3Ps "proven AND probable AND possible." New proven reserves are commonly added by new field discoveries. ''Reserves growth'' also commonly occurs in previously existing fields, as the characteristics of the reservoir become better understood, as fields are extended laterally, or new oil and gas reservoirs are found in existing fields. Reserve growth may also take place due to technological and economic changes.


Russian reserve categories

In
Russia Russia (, , ), or the Russian Federation, is a transcontinental country spanning Eastern Europe and Northern Asia. It is the largest country in the world, with its internationally recognised territory covering , and encompassing one-eig ...
, reserves categories A, B, and C correspond roughly to developed producing reserves, undeveloped reserves with approved development, and discovered resources without a firm plan to develop yet. The designation ABC corresponds to estimated recoverable reserves.


Reserve evaluations, valuations and certifications

Oil companies employ specialist, independent, reserve valuation consultants - such as Gaffney, Cline & Associates, Sproule, Miller and Lents, Ltd., DeGolyer and MacNaughton, Ryder Scott, Netherland, Sewell & Associates Inc. (NSAI),
Lloyd's Register Lloyd's Register Group Limited (LR) is a technical and professional services organisation and a maritime classification society, wholly owned by the Lloyd’s Register Foundation, a UK charity dedicated to research and education in science and ...

LR
, Evolution Resources, Cawley, Gillespie & Associates Inc. (CG&A) and others - to provide third party reports as part of Securities and Exchange Commission (SEC)
SEC filings The SEC filing is a financial statement or other formal document submitted to the U.S. Securities and Exchange Commission (SEC). Public companies, certain insiders, and broker-dealers are required to make regular SEC filings. Investors and fin ...
and
SPE SPE may refer to: Science and technology * Spe (planet), 14 Andromedae b * Serum protein electrophoresis * Solar particle event,generating very high energy protons * Solid phase extraction, from a mixture * Epitaxy#Solid-phase, Solid-phase epitax ...
br>Petroleum Resources Management System (PRMS)
for other Stockmarket listings. On December 30 2009, recognising advances in exploration and valuation technology, the SEC allowed 2P probable and 3P possible reserves to be reported, along with 1P proved reserves, though oil companies also have to verify the independence of third party consultants. Since investors view 1P reserves with much greater importance than 2P or 3P reserves, oil companies seek to convert 2P and 3P reserves into 1P reserves.Gianna Bern ''Investing in Energy: A Primer on the Economics of the Energy Industry'' 2011 p55 "Similarly, producers will try to convert their 2P reserves into 1P reserves by virtue of the certification process, which we will ... Bankers, investors, and analysts view 1P reserves with much greater importance than 2P or 3P reserves. ..."


See also

* Estimated ultimate recovery *
List of countries by proven oil reserves A ''list'' is any set of items in a row. List or lists may also refer to: People * List (surname) Organizations * List College, an undergraduate division of the Jewish Theological Seminary of America * SC Germania List, German rugby unio ...
*
Oil reserves An oil is any nonpolar chemical substance that is composed primarily of hydrocarbons and is hydrophobic (does not mix with water) & lipophilic (mixes with other oils). Oils are usually flammable and surface active. Most oils are unsaturate ...
*
Natural gas Natural gas (also called fossil gas or simply gas) is a naturally occurring mixture of gaseous hydrocarbons consisting primarily of methane in addition to various smaller amounts of other higher alkanes. Low levels of trace gases like carbo ...


References

{{Fossil Fuel Reserves Energy development Energy economics Peak oil