6 Oil and gas reserves

6.1 Estimating reserves

Exploration companies need to understand how much petroleum remains to be found in a given area or play before they commit significant expenditure to new ventures. More generally, reserves and their depletion in different parts of the world have profound political implications for ensuring future energy supplies: petroleum resources lie at the centre of global political affairs.

Estimating the amount of petroleum in a field can be achieved in a variety of ways and with differing levels of accuracy, according to the amount of data that is available. The reserves estimate for a virgin basin – one that has yet to be drilled – may be based simply on the supposed richness of the source rock or comparisons with analogous basins that contain petroleum. Conversely, in an established play that is peppered with wells and seismic data, it should be possible to define the undrilled prospects and determine how likely they are to contain given reserves.

In recent years a virgin basin to the north of the Falkland Islands in the southern Atlantic has begun to be evaluated, and several exploration wells have been drilled. Media reports (and some oil companies) claim that more than 5 billion barrels of oil will be discovered here in due course. How would you assess the validity of their claim?

Any estimation of reserves that is based on sparse data must be treated with caution. It would be more correct to quote the range of likely outcomes (e.g. 0 to over 5 billion barrels) at this early stage, rather than one possible outcome. Billion-barrel oil provinces normally have prolific source rocks, large structural traps and excellent reservoir rocks, so the diligent geoscientist should seek such evidence.

It is also possible that the reports are designed to generate enthusiasm and encourage potential investors, particularly because the initial drilling campaign off the Falkland Islands was allegedly disappointing.

One particularly useful approach to reserves estimation is based on the observation that the largest discoveries are normally made early in the life of a play, because they are in the biggest structures that get identified and drilled first: they are the least risky and income from them allows costs to be recovered quickly. Then, as the number of exploration wells increases, so the average volume of reserves proven by each discovery diminishes. This typical pattern is illustrated in Figure 15 where, at point A, the first major discovery defines the play and reserves estimates increase rapidly. Over time, when point B is reached, only smaller fields within the play remain undiscovered and the rate of reserves additions declines. If only one play exists in this basin, then the total reserves discovered over time will approach the estimate at point B*. This trend, described by the curve A–B–B*, is referred to as a creaming curve by analogy with skimming the cream off the top of the milk.

However, if a second play is discovered (Figure 15, point C), reserves estimates increase rapidly again, and the cumulative reserves for the basin as a whole will approach point D* in time. Discovery of a third play, at point E, will increase the reserve estimate still further. The discrete creaming curves describe the evolution of plays over time and give a measure of their contribution to the basin as a whole.

Figure 15: Hypothetical creaming curves for new plays discovered within a basin. See text for discussion of the figure.

Activity 4

Examine Figure 16, showing the creaming curves for the Norwegian sector of the North Sea.

Figure 16: Creaming curves for the Norwegian sector of the North Sea. For use with Activity 4.

  1. Which is the most productive play and how much resource has it yielded?
  2. How many targets were drilled in the Upper Jurassic play before the largest discovery was made?
  3. Do you think it is likely that the Palaeocene play will yield a single discovery in excess of its current reserves?

(1) The Lower and Middle Jurassic play is the most productive, having yielded 2016 million toe. (2) About 50 wells were drilled before the Upper Jurassic play was discovered and a further 100 before the largest discovery was made. (3) The Palaeocene play has been targeted about 150 times and still no major discovery has been made. It seems unlikely that this play will have much impact.

It is clear therefore that assessments of reserves rely upon the current state of knowledge within a basin or play. Many basins that appear to be thoroughly explored continue to provide surprises as new play tests are conducted, and thus it is useful to remember the explorer's adage:

‘We usually find oil in new places with old ideas. Sometimes, also, we find oil in an old place with a new idea, but we seldom find oil in an old place with an old idea. Several times in the past we thought we were running out of oil whereas we were only running out of ideas.’

(Parke A. Dickey)