Dealing with Reserves Uncertainty in Exploration—a Simple Methodology for Building Consistent, Realistic Reserves Estimates

Quirk, Dave, Rick Ruthrauff, Amerada Hess Corporation, Houston, TX

The size and value of oil and gas reserves discovered by exploration rarely meets expec­tations because of an inherent bias towards highside reserves cases and a tendency to over­look the lowside.

One of two methods is generally used for calculating reserves - probabilistic and deter­ministic. Probabilistic methods deal better with uncertainty but depend on mathematical assumptions and distributions that are prone to errors whereas deterministic methods are easy to apply but tend to focus on overly optimistic models. Instead, an alternative approach is proposed which incorporates the advantages of probabilistic and deterministic techniques and largely avoids their disadvantages.

The approach is termed Real Points Reserves Iteration (RPRI) and involves using a min­imum of two deterministic cases which are iterated using simple statistics to produce a full reserves size distribution. The method is quick, understandable and easy to use and helps avoid overoptimism by using empirical observations to predict realistic lowside reserves. Calculating probabilities such as the chance of commercial success is straightforward and directly linked to historical data. RPRI uses specific maps and reservoir data which can be used directly by engineers and economists whilst individual prospect reserves are easily checked for consistency by peers and management without long technical review.

Although rules and guidelines are not required, the RPRI technique can be tailored to fit neatly with other processes in individual companies. Ultimately, it can be used to build and rank an exploration portfolio that is not only robust but has predictable outcomes.