RESERVES
Reserves are those quantities of petroleum anticipated to be commercially recoverable by application of
development projects to known accumulations from a given date forward under defined conditions.
Reserves must satisfy four criteria: they must be discovered, recoverable, commercial, and remaining based on the
development project(s) applied. Reserves are further subdivided in accordance with the level of certainty associated
with the estimates and may be sub-classified based on project maturity and/or characterized by their development and
production status. To be included in the Reserves class, a project must be sufficiently defined to establish its
commercial viability. There must be a reasonable expectation that all required internal and external approvals will be
forthcoming, and there is evidence of firm intention to proceed with development within a reasonable time frame. A
reasonable time frame for the initiation of development depends on the specific circumstances and varies according to
the scope of the project. While 5 years is recommended as a benchmark, a longer time frame could be applied where,
for example, development of economic projects are deferred at the option of the producer for, among other things,
market-related reasons, or to meet contractual or strategic objectives. In all cases, the justification for classification as
Reserves should be clearly documented. To be included in the Reserves class, there must be a high confidence in the
commercial producibility of the reservoir as supported by actual production or formation tests. In certain cases,
Reserves may be assigned on the basis of well logs and/or core analysis that indicate that the subject reservoir is
hydrocarbon-bearing and is analogous to reservoirs in the same area that are producing or have demonstrated the
ability to produce on formation tests.
On Production
The development project is currently producing and selling petroleum to market.
The key criterion is that the project is receiving income from sales, rather than the approved development project
necessarily being complete. This is the point at which the project
“
chance of commerciality
”
can be said to be
100%. The project
“
decision gate
”
is the decision to initiate commercial production from the project.
Approved for Development
.
All necessary approvals have been obtained, capital funds have been committed, and implementation of the
development project is under way.
At this point, it must be certain that the development project is going ahead. The project must not be subject to
any contingencies such as outstanding regulatory approvals or sales contracts. Forecast capital expenditures
should be included in the reporting entity’s current or following year’s approved budget. The project “decision
gate” is the decision to start investing capital in the construction of production facilities and/or drilling development
wells.
Justified for Development
Implementation of the development project is justified on the basis of reasonable forecast commercial conditions
at the time of reporting, and there are reasonable expectations that all necessary approvals/contracts will be
obtained.
In order to move to this level of project maturity, and hence have reserves associated with it, the development
project must be commercially viable at the time of reporting, based on the reporting entity
’
s assumptions of future
prices, costs, etc. (
“
forecast case
”
) and the specific circumstances of the project. Evidence of a firm intention to
proceed with development within a reasonable time frame will be sufficient to demonstrate commerciality. There
should be a development plan in sufficient detail to support the assessment of commerciality and a reasonable
expectation that any regulatory approvals or sales contracts required prior to project implementation will be
forthcoming. Other than such approvals/contracts, there should be no known contingencies that could preclude
the development from proceeding within a reasonable timeframe (see Reserves class). The project
“
decision
gate
”
is the decision by the reporting entity and its partners, if any, that the project has reached a level of
technical and commercial maturity sufficient to justify proceeding with development at that point in time.
