You’ve probably heard the word oil reserves many times in the news and social media. While you may already know what oil reserves meaning is, as someone in the oil and gas field or interested in it, the layman’s definition is not enough.
Oil and gas have time and again proven to be invaluable resources. Even though there has been a shift to renewable energy and fuel, oil and gas remain valuable commodities. In fact, many economies around the world largely rely on these minerals.
There are a lot of factors at play when it comes to reserves. Then there’s the question of searching and estimating the oil and gas reserves.
Oil Reserves Definition
The definition of oil reserves on Investopedia is an ‘estimate of the amount of crude oil present in a particular economic region.’ The Society of Petroleum Engineers defines it as the quantity of oil or petroleum that is commercially recoverable from a given date forward.
While there are different oil reserves definitions online, the oil reserves meaning is the same. It basically refers to the reserves or amounts of oil present in a location.
Sometimes reserves of oil are referred to by a particular location, like a field or well. Many times reserves are referred by the country. So the actual reserve of the oil depends on what location they are present at.
The gas reserve definition is similar, except the estimates are for natural gas, not crude oil.
Types of Reserves
As there is an element of uncertainty when it comes to mineral reserves, including crude oil and natural gas, reserves are of two types mainly: proven and unproven.
Proven reserves are those that have a high level of certainty of recoverable oil or any other mineral, for that matter. This certainly is typically as high as 90 percent. This indicates that there are certain amounts of oil in a location that can be physically extracted using the existent technologies and under current political conditions.
Proven reserved are further classified into two categories: proven developed and proven undeveloped.
- Proven developed (PD): PD reserves are those that can be produced from existing wells or fields. In other words, this refers to reserves in oil fields already producing oil.
- Proven undeveloped (PUD): PUD reserves refer to the mineral reserves that are present in a location but require work and investment to extract. Any reserves underneath the surface where there is no well yet are essentially PUD reserves.
Unproven reserves are those that are based on geological and engineering analytical data. These reserves are only an estimate and may have technical or legal uncertainties. For instance, any reserves underneath that engineers haven’t yet figured out how to recover are unproven reserves.
These reserves are also sometimes called possible reserves. Obviously, companies looking for reserves need to turn unproven reserves into proven ones by physical intervention and more study of the areas.
Reserve Estimation Methods
Reserve estimates can vary by the method or technique used for estimation. More importantly, even if the estimation is correct, not all the oil or gas may be recoverable. This is why many estimates of reserves oil and gas don’t necessarily reflect the potential production of the wells in a field or even a country.
The following three techniques are common for oil and gas reserve estimation:
The volumetric method relies on not just the size of the reservoir but also the physical conditions of the rock formation, as well as the fluids underneath.
This method uses a recovery factor, which basically involves comparing the size and conditions with an existing well or field. Right now, the recovery factor for oil fields around the world ranges from 10 to 60 percent.
The volumetric method is typically the first method used for estimation after the discovery of reserves.
Materials Balance Method
The material balance method uses a specific equation that takes into account the volume of oil, water, and gas that a reservoir is producing. It also takes into account any pressure changes in the flow to estimate the remaining reserves.
Think of it like a water tank that produces water into the pipes with pressure when full. As the tank empties, the pressure drops. This is the basic assumption behind this method.
As you can guess, this method of estimation is for wells that have some level of production. So this comes in handy for estimating the remaining reserves of a well or field when it’s already functional.
Again, data from similar fields becomes useful as the pressure changes in similar past wells can help indicate how much oil is still there in the formation.
Production Decline Curve Method
This method predicts the future reserves of a well. The decline curves can be exponential, hyperbolic, or harmonic. This method of estimation is basically for predicting depletion and planning shut-in.
This method is pretty accurate because it takes into account all reservoir characteristics, as well as historical data.
Countries with the Most Oil and Gas Reserves
The top five countries with the most proven oil reserves are:
- Venezuela (302 billion barrels)
- Saudi Arabia (267 billion barrels)
- Iran (155 billion barrels)
- Iraq (145 billion barrels)
- Kuwait (101 billion barrels)
Source: OPEC (2018)
The top five countries with the most proven natural gas reserves are:
- Russia (38 trillion cubic meters)
- Iran (32 trillion cubic meters)
- Qatar (24.7 trillion cubic meters)
- Turkmenistan (19.5 trillion cubic meters)
- United States (12.9 trillion cubic meters)
Source: NS Energy
Oil and gas reserves basically refer to the amount of the resource in a given location that is recoverable (extractable). Of course, these reserves are calculated after discovery.
There are several methods, but in the initial stages, the volumetric method is best. Reserves can be proven or unproven. While we already have ample data about proven reserves, the number can change for unproven reserves.
Also, there’s heavy investment in the discovery and reserve estimation of crude oil these days, as this valuable resource is depleting gradually. Current reserves may not be enough to keep the world running.