Royal Dutch Shell Evaluation of Oil Reserves — страница 8

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and Interpretation Guidelines §II F- 3, 2001). To conclude, one can say that instead of providing the whole range of probability SEC rules are aiming on presenting a single best number. This approach does not provide the investors with the comprehensive picture of the oil reserves probabilities. This in turn, makes it much harder for the investors to assess the one single number of their interest, namely the median or expected oil reserves. To tackle the problem of the information insufficiently so-called probabilistic definitions were accepted by the industry. Although, these definitions are not accepted for the public reporting (at least not in US and EU), they are widely accepted among professionals and are normally used for reporting both by the oil engineers in the

companies and by the independent oil consultants (SPE Oil Reserves Definition, 1997; CERA, 2005, p 14 sq) In the probabilistic approach, oil reserves are broke down in to three categories: Proved, Probable and Possible. Proved reserves are defined just as they are under the SEC definition – the reserves with reasonable certainty and commercially recoverable or the amount of oil that can be extracted with the certainty of 90%. Although, the definitions are confusingly close, they are not identical, as the deterministic definition of proved reserves is widely interpreted as a single best prediction, it does not always correspond to 90% (OGJ, 2003, p31) The unproved reserves imply that technical, contractual, economic, or regulatory uncertainties preclude such reserves being

classified as proved. Unproved reserves may be further classified as probable reserves and possible reserves. For probable reserves it is required that, there is at least 50% probability that the reserves eventually recovered will be equal or exceed the total quantity of proved and probable reserves. Generally speaking the reserves that are normally included into this category are the reserves, which are expected to be proved in the coming years, by normal drilling procedure, reserves in formation and incremental reserves that require further evaluation and all in all the reserves that require further treatment Possible reserves are ones, for which the technical analysis suggests that they are more likely not to be recovered or in terms of the probabilistic approach the reserves,

for which there is at least 10% probability that the amount of oil eventually recovered will be equal or exceed the total quantity of proved, probable and possible reserves. The reserves under this category are generally those based on geological interpretations and can possibly exist beyond the areas classified as probable. These reserves require further geological data gathering (SPE Oil Reserves Definition, 1997). The difference between two approaches would be better understood, if illustrated graphically. When the technical and geological analysis of an oil field is made, the probability distribution of oil reserves is usually assumed to be lognormal. This assumption is rather common for the industry, yet it is not the only one possible (O’Connor, 2000 p3 sq; Campbell

et al, 2003 p1 sqq; Laherrere, 2004, p 4 sqq). In other words, this assumption implies that at the certain stage of an oil extraction project management already knows that particular oil field or oil producing region posses the reserves that are enough for commercial production. Still the precise quantity of the reserves remains uncertain and company’s engineers use the Monte-Carlo approach in order to model the distribution of reserves (Thanh, SPE, 2002, p 2). As the companies reporting under the deterministic SEC approach often interpret the proved reserves definition to be the most likely (mode) value of the reserves (SEC Financial Reporting and Interpretation Guidelines §II F- 3, 2001), under the lognormal distribution, companies would report the reserves at 60-65%

probability as the proved ones (Laherrere, 2004, p 4). Reserves reported under this approach are shown in Figure 2.1: Deterministic Approach Proved Reserves In the Figure2.2, probabilistic approach is illustrated under the same assumption of the lognormal reserves distribution. Figure 2.2: Probabilistic Approach Proved Probable Possible As one can see, although the names are the same, the values granted to the proved reserves under different approaches are not identical. In the deterministic approach prescribed by SEC and used by Shell the probable reserves do not represent reserves recovered under 90% probability and in the same time they do not represent the mean reserves (P50 = Proved + Probable under the probabilistic approach), which could signal the expected volumes of the