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OIL AND GAS RESERVESESTIMATING
WE HAVE MET THE ENEMY, AND HE IS US
Peter R. Rose
Senior Associate, Rose & Associates, LLP.,and President AAPG
Austin, Texas
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1. rite !our na"e on t#e $or"
%. o''o( instructions
). Tr! #ard to ans(er o*+ecti e'!-. rite !our ans(ers do(n
. No +oint entures // (or0 inde endent'!
2. P34 is a s"a'' nu"*er5 P14 is a 'ar6enu"*er
R7LES O T8E GAME
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DETERMINISTI9 ESTIMATE A single number (best guess) amonga wide range of possible real
outcomes.
Low confidence in being preciselycorrect.
Amount of uncertainty affectswillingness to invest in your estimate.
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OR :%4, 8O M798 ARE ;O7 PREPARED
TO : >
:%> :1>4?>
%4?>14?>
?>9#ance o$ esti"atin6
t#e exact nu"*er o$ *eans>
!REMOTE!
UNCER A!N " # C$N%!&ENCE
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E=PRESSING 9ON IDEN9E I
' Traditiona' En6ineerin6 9on ention // @14 >
' Ran6es o$ Nu"*ers 9orres ondin6 to9on$idenceB
Confidence ( *)
* +, beans
* +,, beans
* + ,,, beans
* -,, beans
* - ,,, beans
* -, ,,, beans
er!, er! #i6#
#i6#
"oderate
$air'! #i6#
'o(
er!, er! 'o(
Confidence ( *)
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E=PRESSING 9ON IDEN9E II
LET 7S SPE9I ;
/0ig1 Confidence2 3,4 sure * 53, value
/Low Confidence2 +,4 sure * 5+, value
/6,76, Confidence2 6,4 sure * 56, 8edian
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Su eriorit! O$ Pro*a*i'istic Met#od
C. . . sti'' +ust esti"ates c'oa0ed in ro*a*i'ities> Advantages
+. 8easure our estimating accuracy by comparingprobabilistic forecasts against actual outcomes
-. Use statistical principles to ma9e better estimates(lognormal e:pectation calculate mean ofdistribution defined low;side # 1ig1;side criteria
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P1 Geo'o6ica''! ossi*'e5 *ut extre"e'! un'i0e'! P14 Reasona*'e Maxi"u" P 4 8a'$ *e'o(, 8a'$ a*o e, t#e Median P34 Reasona*'e Mini"u"P33 As s"a'' as it cou'd *e . . . ;et detecta*'e
5RAC !CAL A R!E" 5ARA8E ER=
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Su eriorit! O$ Pro*a*i'istic Met#od
C. . . sti'' +ust esti"ates c'oa0ed in ro*a*i'ities> Advantages
+. 8easure our estimating accuracy by comparingprobabilistic forecasts against actual outcomes
-. Use statistical principles to ma9e better estimates(lognormal e:pectation calculate mean ofdistribution defined low;side # 1ig1;side criteria
@. Reality;c1ec9s ;; natural limits unrealistic e:tremesanalog distributions
. %aster more efficient
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9o" are !our ori6ina' C*estesti"ate circ'ed nu"*er, ite" %,
co'ored $or"F (it# !our nei6#*or Does an!one in t#e audience #a e acirc'ed nu"*er t#at is E=A9TL;
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Anot1er bean slide . . .
Ne( con$idence/'e e'B
N$ E REA=$NA
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I a" CReasona*'! 9ertain t#at t#ere are *eans or "ore.
NOTEB T8IS IS A PRO
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9OMPLI9ATIONS+. A larger estimate may be in your personal
interest-. "our boss may prefer larger to smaller
estimates
@. 5ossible conseHuences if actual result is lesst1an your estimate
a) Negative 5ress
b) Employer &isciplinesc) =tate 5enaliIes
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7.S. SE9 RE 7SES TO SPE9I ;T8E 9ON IDEN9E/LEVEL OREASONABLE CERTAINTY
3 3 4 E
? , 4 E
3 6 4 E
F G 4 E
3 , 4 E G 6 4
E
3 ? 4 E
6 , 4 E
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. . .
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CPro ed Reser es
. . . are the estimated quantities which geologicaland engineering data demonstrate withreasonable certainty to be recoverable. . .
.sec.6o di isions cor $in $or"s re6sx. #t"
1is is t1e foundational statement of w1atwe t1in9 is an outdated (+3G?) system.
LetJs ta9e a loo9 at t1e evolution of t1e wording
r e a s o n a
b l e
c e r
t a i n t
y
(((
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13)2
E er! reasona*'ero*a*i'it!
132-Reasona*'e
certaint!
13J2
9a enSPE J3
13K1Re ised de$.$or ro ed
13KJ
Pro edro*a*'e &ossi*'e
13JK
Pro ed (reasona*'e
certaint!
API
"ergin and 0obbs -,,6 ogK
SPE
7S SE9 13K% ;ear/end
ricin6
133JPro*a*i'istic
"et#ods6uide'ines
u*'is#ed
CPro ed Reser es
r e a s o n a
b l e
c e r
t a i n t
y
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DETERMINISM GETS
IN9REASINGL; 9OMPLE=' Pro ed, Pro*a*'e, Possi*'e
' De e'o ed & 7nde e'o ed' ei6#tin6 sc#e"es to account $oruncertaint!
' > A 'ica*i'it! to 7ndri''ed Pros ectsand P'a!s>
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PRO
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PRO
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Reser es Esti"atin6B A Di ided Industr!
Ex 'orationB u''! Pro*a*i'istic
ProductionB Most'! Deter"inisticPro ed, Pro*a*'e, Possi*'e,
De e'o ed, 7nde e'o ed, etc.F
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T O VIE S O E&P OR BDeter"inistic Vie(B Pro*a*i'istic Vie(B
T I M
E & : :
7N9ERTAINT;
T I M E & : :
7N9ERTAINT;
CT8E ANS ER
Deter"inis"F
P 3
4
P .
4
P 1
4
STOPQ7se t#is ti"e &
:: to $ind ot#erros ects
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Deter"inis" Pro"otes 7naccounta*i'it!Atte" ts to re resent #i6#'! uncertain ara"eters (it#a sin6'e, C recise nu"*er, and (it#out ex ressin6
#o( "uc# uncertaint! surrounds it.Pro ed, Pro*a*'e, Possi*'eB ter"s not de$ined
uantitati e'!, so i" ossi*'e to "easure and ca'i*rateesti"atin6 a*i'ities o*+ecti e'!
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So t#e Deter"inistic Met#od isunaccounta*'e toB
Pro$essiona's
9'ients and E" 'o!ers
In estors
Genera' Pu*'ic
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PRO
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Resistance to c1ange Resistance to c1ange
5ropped up by =EC 5ropped up by =EC
Accountants canJt deal wit1 uncertainty Accountants canJt deal wit1 uncertainty
Encourages false confidence Encourages false confidence
&esire to remain unaccountable &esire to remain unaccountable
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DETERMINISM EN9O7RAGES7NREALISTI9 T8IN ING A
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One Si" 'e Re"ed! to Start ixin6 t#e Pro*'e"
A uni$ied state"ent $ro" t#e E&P ro$essiona'
co""unit! t#at CPro ed H 34 con$idence.' I" osed De$inition on SE9
' Su ort o$ Pro$essiona' Societies>
' Su ort o$ In$'uentia' 9o" anies>Industr! ro$essiona's created t#is ro*'e" //Industr! ro$essiona's created t#is ro*'e" //
#! don t (e, as res onsi*'e Pro$essiona's, c#an6e it>#! don t (e, as res onsi*'e Pro$essiona's, c#an6e it>
a't e''!, POGOF
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OIL AND GAS RESERVESESTIMATING
WE HAVE MET THE ENEMY,
AND HE IS US
Peter R. Rose
Senior Associate, Rose & Associates, LLP.,and President AAPG
Austin, Texas