Proved Reserves: Why They Grow Despite Fears of Running Out

Madison Weaver
Cabot Oil & Gas
External Affairs Intern, Pittsburgh

Proved reserves of natural gas and other natural resources grow with technology, a point modern Malthusians such as fractivists never quite seem to grasp.

Natural gas reserves can be looked at like a large iceberg: proved reserves consist of natural gas that is known to be recoverable, while underneath a huge rests a huge amount of reserves that may or may not be recoverable.

Let’s explain.

With each improvement in research, technology, and infrastructure, the amount of natural gas that can be retrieved from deep underground changes.

Proved reserves consist of natural gas that scientists know to exist and can be economically recovered with the current technology. This natural gas is like the visible, known ice in the iceberg metaphor.

Unproved reserves are like the vast amount of ice that may or may not lie under the proved reserves. Unproved reserves are not currently recoverable because the necessary technology does not exist, it may be too expensive to economically recover them, or scientists are not certain if they exist.

Even unproved reserves can be broken down into probable and possible reserves. Probably reserves have 50% certainty of extraction, while possible reserves have a 10%. To put that in perspective, proved reserves must have an 85% certainty.

Each year, the amount of natural gas in each type of reserves change. Proved reserves shrink as natural gas is recovered. Unproved reserves grow as new resource fields are discovered. Unproved gas can move into the proved category as improvements in technology and cost efficiency make recovering difficult reserves possible and more economical.

For instance, in 2016 proved reserves of natural gas in the U.S. increased by 5%, or 16.8 trillion cubic feet (Tcf) according to the Energy Information Administration. Pennsylvania added the most reserves at 6.1 Tcf alone, while Oklahoma and Ohio followed with 3.7 and 3.1 Tcf, respectively.

Proved Reserves

Reserve Status Categories

Reserve status categories define the development and producing status of wells and reservoirs.

Developed: Developed reserves are expected to be recovered from existing wells including reserves behind pipe. Improved recovery reserves are considered developed only after the necessary equipment has been installed, or when the costs to do so are relatively minor. Developed reserves may be subcategorized as producing or non-producing.

Producing: Reserves subcategorized as producing are expected to be recovered from completion intervals which are open and producing at the time of the estimate. Improved recovery reserves are considered producing only after the improved recovery project is in operation.

Non-producing: Reserves subcategorized as non-producing include shut-in and behind-pipe reserves. Shut-in reserves are expected to be recovered from (1) completion intervals which are open at the time of the estimate but which have not started producing, (2) wells which were shut-in for market conditions or pipeline connections, or (3) wells not capable of production for mechanical reasons. Behind-pipe reserves are expected to be recovered from zones in existing wells, which will require additional completion work or future recompletion prior to the start of production.

Undeveloped Reserves: Undeveloped reserves are expected to be recovered: (1) from new wells on undrilled acreage, (2) from deepening existing wells to a different reservoir, or (3) where a relatively large expenditure is required to (a) recomplete an existing well or (b) install production or transportation facilities for primary or improved recovery projects.

Reposted, with permission, from Well Said Cabot.

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