The SPE/WPC Reserve Definitions: The Impact on Past and Future Reserve Evaluations

Abstract

Abstract Petroleum reserves are one of the most fundamental elements in the international petroleum industry. To the producing company, reserves are the asset base from which future profits and investment capital will be derived. To the investor, they are a reflection of the financial strength of a company and an indication of future growth potential. For a government, they are a major source of energy and a key factor in the continued development the country’s economy. It is essential for future planning that both governments and industiy have a clear understanding of the quantities of oil and gas available for production, as well as, those quantities which are anticipated to become available through additional field development, technological advances, and exploration. To achieve such an assessment, the industry needs a simple and widely understood nomenclature for classifying the current and future quantities expected to be recovered from petroleum reservoirs based on the likelihood of their commercial recoverability. Over the past sixty years, numerous technical organizations, regulatory bodies, and financial institutions have introduced nomenclatures for the classification of petroleum reserves. In 1987, the Society of Petroleum Engineers (SPE) and the World Petroleum Congress (WPC), working independently, developed sets of reserve definitions which were strikingly similar in most key aspects. Both gained wide acceptance and have become the preferred standards for reserves classification across much of the industiy. Soon after their introduction, it became apparent to both organizations that these two could be combined into a single set and that such a development would improve consistency in reserves evaluation and reporting across the industiy. Contacts between representatives of the two organizations started shortly after the publication of the initial sets of definitions and were increased in June 1994. A joint Task Force was established between the SPE, under the guidance of the Oil and Gas Reserves Committee, and the WPC with the assignment of drafting the joint definitions. This effort was completed in the July 1996 and the draft proposals distributed for industry review and comment in August 1996. The revised draft was submitted for consideration to the SPE and WPC Boards of Directors in February 1997. This paper will review the efforts of the SPE/WPC Task Force and highlight the significant differences between past definitions and those now being proposed. It will, also, address the impact the changes will have on industry, discuss implications for existing reserve estimations and bookings, and highlight several outstanding reserve issues not addressed in the current proposal.