Resources vs. Reserves

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Del curso dictado por Duke University

Oil & Gas Industry Operations and Markets

1206 calificaciones

Duke University

Oil & Gas Industry Operations and Markets

1206 calificaciones

The oil and gas industry has an enormous impact on all aspects of daily life. Individuals, corporations, and national governments make financial and policy decisions based on the cost, use, and availability of these two natural resources. This two-week course looks at the two most fundamental aspects of the oil and gas industry, its operations and markets, each of which is addressed as a separate module in the course. In the operations module, the course provides an overview of the production of oil and gas, from initial exploration to final transport. The second module focuses on the forces that drive the industry's operations, the oil and gas markets, including the cost of wells, seasonal impacts on prices, and the role of oil reserves. After every lesson, learners will take short quizzes to test their newly acquired knowledge, participant in crowd-sourced discussions about global markets, and complete a final project.

De la lección

Oil and Gas Industry Markets

In this second module, the course shifts to the markets that drive Oil and Gas Industry operations. You will learn about the various costs of the core oil and gas industry activities, the factors that determine the prices that oil, gas and petroleum products sell for, and the effect that the amount of oil and gas remaining in the ground has on the future viability of individual companies to the Industry as a whole.

Original Oil and Gas in Place4:48

Resources vs. Reserves5:42

Access to Conventional Reserves5:45

Additional Types of Unconventional Resources5:54

Conoce a los instructores

Lincoln Pratson
Gendell Professor of Energy & Environment
Nicholas School of the Environment

While an oil and gas expiration and production company makes money by selling

the hydrocarbons it finds and produces, the company's future viability and

thus market value as a business also depends on a company's reserves of oil and

gas still in the ground.

Like a high worth individual with lots of money in the bank, an oil and

gas company with large reserves still to be produced is generally considered

to be a high worth enterprise.

However, the precise amount of reserves a company controls is actually unknown.

It ranges between amounts that are very likely, and very unlikely.

Furthermore, a company's reserves are actually just the economically

producible fraction of the total amount of oil and

or gas that may exist under the company's leases.

This greater volume of oil and or

gas is referred to as the total resource potential or the in-place resource.

A good way to think about reserves versus resources is in terms of

inverse cumulative distributions.

That's just the fancy name for plots in which the amounts of oil and or

gas increase along the X axis, while the probability of exceeding

an amount ranges between 0% and a 100% along the Y axis.

The inverse cumulative distribution for

in place resources follows a backward S-shape curve.

The point at the uppermost left side of the curve is the amount of oil and or

gas that expert geologists and petroleum engineers contracted by the company,

agree is almost certainly in place beneath the company's leases.

The point at the lower-most right side of the curve, on the other hand, is

the largest and least feasible amount of oil, and, or gas estimated to be in place.

Between these two points the curve descends across increasing amounts

of oil and or gas that are evermore more unlikely to exist beneath the leases.

Note that the in place resource curve does not distinguish oil and or

gas that can actually be gotten out of the ground using existing technology

from oil and gas that cannot currently be extracted.

If we restrict our analysis to only that oil and gas that is currently

recoverable regardless of the cost of extraction, then we produce

a second inverse cumulative distribution of technically recoverable resources.

And this curve lies to the left of the in place resource curve.

Going a step further and focusing only on those resources that can be

produced at a profit with existing technology results in a third

cumulative distribution that lies even farther to the left in the plot.

This last curve reflects economically recoverable reserves.

When you look at this last most conservative curve,

keep in mind that the economically recoverable reserves are not all equal.

As before, reserves beneath the left side of this curve

have a greater probability of existing

then those beneath the right side of the economically recoverable reserve curve.

In fact, the economically recoverable reserve curve is often broken

into three segments.

Economically recoverable reserves that have less than 50% probability of existing

are referred to as proved, probable and possible reserves, or 3P reserves.

Economically recoverable reserves that have a 50 to almost 90%

probability of existing are referred to as proved and probable, or 2P reserves.

In economically recoverable reserves that have a 90% or

greater probability of existing are simply proved, or 1P reserves.

This last category, proved reserves, are further subdivided in to developed and

undeveloped reserves.

Proved developed reserves, are those that can be produced from existing wells with

up to moderate additional investment.

Proved undeveloped reserves are those that

can only be brought online by drilling new development wells.

In order to be listed on a U.S. Stock Exchange, an oil and

gas company with reserves must report to investors the amount of 1P or

proven reserves, which is the most conservative estimate of their holdings.

Reserves reported by companies that are not listed on a US stock exchange

are not subject to this restriction.

So their reserves may include probable impossible reserves.

Or even resource estimates, rather than just reserve estimates.

It is also important to keep in mind that economically and technically, recoverable

resources can change from one year to the next depending on the cost of using

available extraction technologies and the prices that oil and gas are selling for.

For example, the cost of fracking and horizontal drilling has declined

since the 1990s, changing formerly tactically recoverable oil and

gas reserves in shales into economically recoverable reserves.

So companies with mineral rights to shale oil and

shale gas have had their economically recoverable reserve curve shift to

the right, increasing both the amount and total value of these company's reserves.

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