Proven reserves refer to the amount of oil or gas in a tank that is recoverable using current technology. There are two types: developed and undeveloped. Methods for estimating reserves include decline curve analysis, volumetric method, and material balance method. Some countries and companies may overstate their reserves for economic reasons.
Proven reserves, or 1P, is a term used by the oil and natural gas industry. It refers to the amount of oil or gas in a tank in a given economic situation that is recoverable using current technology. In any tank, there is a limited amount that can be mined. These reserves are a way of quantifying exactly how much hydrocarbons can be expected from a well or reservoir.
There are two types of proven reserves: developed and undeveloped. Developed proven reserves already have all or most of the equipment and drilling required to extract the resource. Undeveloped reserves require an investment of money, time and effort before the resource can be extracted.
There are several methods for estimating proven reserves, although no method is entirely accurate. Some experts also argue that some companies and some countries have overstated their reserves for economic reasons. For example, an oil company that claims to have proven reserves would have a higher share price as a result.
One method of estimation is known as decline curve analysis. This is done by plotting output levels over time and then extending the data graphically to estimate future output. The reduction curve analysis can only be applied to a tank already in production; otherwise, the necessary data is not available.
Another method is the volumetric method. This method requires a large amount of initial data to get an accurate estimate. The size of the reservoir and the type of rocks it contains must be known or estimated. This method works best after enough drilling has been done to provide accurate information about the size of the tank and the composition of its contents.
A third method is known as the material balance method. This method examines the relationship between oil, natural gas, and water extracted from an oil source. The ratios are then related to the pressure change in the tank.
As of 2009, the countries with the largest proven reserves are believed to be Saudi Arabia, Canada, and Iran. Doubts have been raised as to whether a number of Organization of the Petroleum Exporting Countries (OPEC) countries actually own their declared reserves. OPEC rules base production quotas on the amount of proven reserves. Countries with higher declared reserves can then sell more oil or natural gas. Most countries lack independent auditors to estimate their reserves, which has fueled suspicions about the accuracy of their figures.
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