Glossary of Technical Terms Used in Reservoir Engineering: Demonstrated

Demonstrated

"Demonstrated" in Oil & Gas: Beyond Just a Showing

The term "demonstrated" in the oil and gas industry carries a weight that goes beyond simply "showing" something exists. It signifies a proven and established fact, backed by rigorous evidence and documented records.

In the context of oil and gas reserves, "demonstrated" reserves are those that have been thoroughly investigated and confirmed through:

  • Exploration and appraisal drilling: This involves drilling wells to gather data on the presence, size, and quality of the reservoir.
  • Geological and geophysical studies: These studies use techniques like seismic surveys to understand the subsurface structure and potential for hydrocarbon accumulations.
  • Engineering evaluations: This stage involves detailed analysis of the reservoir, including reservoir pressure, fluid properties, and production rates, to determine the volume of recoverable hydrocarbons.

Why does "demonstrated" matter?

  • Financial Reporting and Valuation: Investors and lenders rely on the classification of reserves as "demonstrated" to make informed decisions. Demonstrated reserves represent a higher level of certainty compared to "probable" or "possible" reserves, making them more attractive for investment.
  • Resource Planning and Management: Oil and gas companies use demonstrated reserve estimates to plan future development projects, determine production targets, and manage their assets effectively.
  • Regulatory Compliance: Many jurisdictions require companies to report their reserves using a standardized classification system, including "demonstrated" reserves. This ensures transparency and accountability in the industry.

Demonstrated reserves can be further categorized into:

  • Proven reserves: This category signifies the highest level of certainty, with reserves already being produced or having been produced in the past.
  • Probable reserves: These reserves are considered likely to be produced, based on historical data and ongoing geological and engineering studies.

"Demonstrated" - a cornerstone of confidence:

In the oil and gas industry, the term "demonstrated" serves as a key indicator of certainty and reliability. It ensures that investors, regulators, and stakeholders can make informed decisions based on solid evidence and proven resources. This distinction plays a crucial role in shaping the financial stability and long-term sustainability of the oil and gas sector.


Test Your Knowledge

Quiz: "Demonstrated" in Oil & Gas

Instructions: Choose the best answer for each question.

1. What does the term "demonstrated" signify in the oil and gas industry?

a) A potential resource that may exist but hasn't been confirmed. b) A proven and established fact backed by rigorous evidence. c) A resource that is currently being produced. d) A preliminary estimate of the resource's size and quality.

Answer

b) A proven and established fact backed by rigorous evidence.

2. Which of the following is NOT a method used to confirm "demonstrated" reserves?

a) Exploration and appraisal drilling. b) Geological and geophysical studies. c) Financial analysis of the company's stock price. d) Engineering evaluations.

Answer

c) Financial analysis of the company's stock price.

3. Why is the "demonstrated" classification of reserves important for investors?

a) It helps them understand the company's marketing strategy. b) It provides a more accurate picture of the company's financial health. c) It allows them to assess the likelihood of future production and profit. d) Both b) and c).

Answer

d) Both b) and c).

4. What is the highest level of certainty in the classification of "demonstrated" reserves?

a) Probable reserves. b) Possible reserves. c) Proven reserves. d) Confirmed reserves.

Answer

c) Proven reserves.

5. Which of the following is NOT a benefit of using "demonstrated" reserves for resource planning and management?

a) Enhanced transparency and accountability in the industry. b) More accurate production target setting. c) More effective asset management. d) Increased reliance on speculation and guesswork.

Answer

d) Increased reliance on speculation and guesswork.

Exercise:

Scenario: You are a financial analyst evaluating two oil and gas companies, Company A and Company B. Both companies have reported significant reserves, but Company A classifies its reserves as "demonstrated", while Company B only mentions "possible" reserves.

Task:

  1. Explain to a potential investor why the classification of reserves matters in this case.
  2. Which company would you recommend investing in, and why?

Exercice Correction

1. **Explanation to Investor:** The classification of reserves is crucial because it reflects the level of certainty about the existence and recoverability of the oil and gas resources. "Demonstrated" reserves indicate that the resource has been thoroughly investigated and proven, while "possible" reserves imply a lower level of certainty and greater risk. 2. **Investment Recommendation:** Given the information, I would recommend investing in Company A. The classification of their reserves as "demonstrated" suggests a higher level of confidence in the resource's existence and potential for production. This translates to a lower risk for investors and a higher likelihood of profitable returns. Company B, with only "possible" reserves, presents a higher risk due to the uncertainty surrounding the actual resource volume and recoverability.


Books

  • Petroleum Engineering Handbook: This comprehensive handbook covers all aspects of oil and gas exploration, production, and reservoir engineering, including reserve estimation and classification.
  • The Economics of Oil and Gas: This book delves into the financial aspects of the industry, emphasizing the importance of reserve classification for valuation and investment decisions.
  • Society of Petroleum Engineers (SPE) publications: The SPE offers a wide range of technical publications on various topics related to oil and gas, including reserve estimation and reporting.

Articles

  • "Reserve Classification and Reporting" by Society of Petroleum Engineers: This article provides a detailed overview of the different categories of reserves and the criteria used to define them.
  • "Demonstrated Reserves: The Cornerstone of Oil and Gas Investment" by Oil and Gas Journal: This article explores the importance of demonstrated reserves for investors and the impact of their classification on financial decisions.
  • "The Evolution of Reserve Classification in the Oil and Gas Industry" by SPE: This article traces the historical development of reserve classification and its implications for the industry.

Online Resources

  • Society of Petroleum Engineers (SPE): The SPE website offers a vast library of technical resources, including publications, presentations, and training materials related to oil and gas reserves and reserve classification.
  • The Oil & Gas Journal: This industry publication provides daily news, analysis, and technical articles on various aspects of the oil and gas sector, including reserve estimations.
  • U.S. Securities and Exchange Commission (SEC): The SEC website provides regulations and guidance on the reporting of oil and gas reserves by public companies.

Search Tips

  • Use specific keywords like "oil and gas reserves classification," "demonstrated reserves," "proven reserves," and "probable reserves."
  • Combine keywords with specific geographic locations or companies to narrow your search.
  • Use quotation marks to find exact phrases, e.g., "demonstrated reserves" to find results that contain the exact phrase.
  • Filter your search results by date, file type, or other criteria to refine your search.
Similar Terms
Training & Competency Development
Reservoir Engineering
Most Viewed

Comments


No Comments
POST COMMENT
captcha
Back