Gauging the confidence in publicly reported oil and gas reserves: introducing the Reserves Confidence Metric (RCM)

Abstract

Confidence in publicly disclosed reserves and resources is critical to the investment community and the reputation of the oil and gas industry. This paper introduces a commonly utilised industry concept for reviewing reserve estimates in a format that non-professionals can use with confidence. Surveys (McMillan 2014) have indicated a perception that the Society of Petroleum Engineers – Petroleum Resources Management System (SPE-PRMS) lacks consistency and repeatability and treats conventional and unconventional resources differently. This is discussed in detail in this paper, along with an explanation of the confusion caused by these differences. The oil and gas industry is still endeavouring to understand how to treat unconventional resource estimations and this paper endeavours to capture areas of contention and risks in relation to reported reserves. Reserves Confidence Metric (RCM) is presented as a method for rating confidence in publicly disclosed reserves. RCM, which is derived from the reserves to production ratio, can be used for any reserves standard or guideline. It is a simple metric, which any organisation or individual with limited knowledge of reserves can apply to identify reserves that require further information or should be used with caution. As an example, RCM is applied to Queensland’s publicly disclosed 2P reserves for all conventional and unconventional Coal Seam Gas (CSG) resources.