The Proved Crude Oil Reserves of the U. S.

Abstract

EDITOR'S NOTE: Dr. Morris Muskat, who presented the following paper as an SPE Distinguished Lecturer during 1962–63, is now serving on a special SPE committee charged with developing definitions of classifications of proved petroleum reserves necessary for property evaluation. J.J. Arps, with The British-American Oil Producing Co. in Dallas, heads the 11-man SPE committee which plans to conclude its study this fall in time to announce definitions which might be adopted by early 1964. Introduction This paper discusses the proved oil reserves in the U. S., and covers primarily the organizational mechanism and procedures whereby estimates of domestic proved crude oil reserves are developed annually by the Committee on Petroleum Reserves of the API. The results, as this Committee has reported them publicly in recent years, will be briefly reviewed. It should be understood, however, that while the API Committee on Petroleum Reserves, its activities and findings, will be the primary focus of attention, this is not to be considered as a report by the Committee or the API. No one. except the author, carries any responsibility whatever for the comments and opinions expressed here. Our domestic proved oil reserves are not a startling headline making or feature item of the American press. If reference to them appears at all in the daily newspapers outside of oil-producing areas, it is usually as a "filler" note on an inside page. Probably only a small number of you are, or have been previously, engaged in reserves estimation work even in your own companies. And still fewer of you may have any idea of the large and important industry cooperative effort put forth every year to estimate the petroleum reserves of our nation as a whole. Yet the story of our proved reserves can give a measure of what has been accomplished through past efforts, an index of where we stand today and an indication of what the challenges of tomorrow may be. Historical Notes The first organized effort by the API to develop an estimate of the country's over-all reserves of oil seems to have been made in 1935 by a Subcommittee on Known Reserves of the API's Special Committee on Production and Supply. The results were initially reported in an API Weekly Press Release dated Dec. 14, 1935. This Committee's finding was that, as of Jan. 1, 1935, the domestic proved oil reserves were 12.17 billion bbl. This was, happily, more than twice the level of 5.3 billion bbl reported by the Committee of Eleven of the API in 1925, apparently as a one-shot estimate. Soon thereafter, J. Edgar Pew and some of his associates of the API Board of Directors proposed that such estimations of the country's proved oil reserves be reviewed and made annually by an independent committee especially selected for this purpose. As a result, the API Committee on Petroleum Reserves was organized, reporting directly to the Board of Directors of the Institute. This Committee made its first report in 1937, in which it gave its own revision of the earlier estimate as to what the reserves were on Jan. 1, 1935. It also reported new estimates a of Jan. 1, 1937. For the latter date, it found that the total U. S. proved reserves were 13.06 billion bbl. This initial program has been continued since with the same objective, though with more complete dissemination of the effort through a subcommittee organization.***A major development occurred in 1945. The long overdue recognition was then at last given by the industry to natural gas and natural gas liquids as important hydrocarbon resources per se, rather than as incidental by-products of crude oil production. Accordingly, the American Gas Association organized a Gas Reserves Committee to estimate these reserves independently, but in close cooperation with the API Committee. The distinction between crude oil and natural gas liquids was clarified to avoid overtapping in the counting of these products between the API Committee, which limited its attention to crude oil, and the AGA Committee, which estimated the natural gas liquids as well as the natural gas separately. Because these new definitions had not been previously applied sharply by the API Committee, its historical records of crude oil reserves show a small discontinuity at the end of 1945. Beginning with 1946, and continued since then, the API and the AGA Reserves committees have published the results of their annual reviews and year-end estimates in a joint annual report. JPT P. 915^