Petroleum reserves

Recently Released Guidelines Supplement Petroleum Resources Management System

The Guidelines for Application of the Petroleum Resources Management System (AG) document was issued in November 2011.


The Guidelines for Application of the Petroleum Resources Management System (AG) document was issued in November 2011 to accompany and support the Petroleum Resources Management System (PRMS). The AG updates the 2001 document Guidelines for the Evaluation of Petroleum Reserves and Resources. This document will assist reserves evaluators throughout the world in understanding PRMS and how it should be applied in financial, regulatory, and reporting activities. Two new chapters have been added to the AG, eight others have been updated, and a comprehensive glossary has been added.


The AG was issued by SPE, along with the American Association of Petroleum Geologists (AAPG), the World Petroleum Council (WPC), the Society of Petroleum Evaluation Engineers (SPEE), and the Society of Exploration Geophysicists (SEG). It is available free to the public on the SPE website.

SPE has a long history of developing common standards for petroleum-resource definitions to provide consistency, transparency, and reliability to benefit stakeholders involved in international finance, regulation, and reporting. In 1997, SPE and the WPC achieved a milestone in standardization when they approved the Petroleum Reserves Definitions. In 2000, SPE, WPC, and AAPG approved an updated version of the definitions, published as the Petroleum Resources Classification System and Definitions. In 2001, SPE issued Guidelines for the Evaluation of Petroleum Reserves and Resources, the predecessor of AG, to provide guidance for application of the 1997 and 2000 definitions. Then, in 2007, SPE, WPC, AAPG, and SPEE approved the PRMS. SEG subsequently endorsed PRMS.

PRMS has rapidly become the global standard for resources definitions and classification. For example, the US Securities and Exchange Commission used PRMS as a guide for its updated rules, Modernization of Oil and Gas Reporting, published 31 December 2008.

SPE and its sister organizations recognized that new guidelines were required to provide guidance for application of PRMS, replacing the 2001 guidelines. The 2001 guidelines were the starting point for AG, which has been updated by adding two new chapters and by modifying eight existing chapters. The two new chapters are

  • Assessment of Petroleum Resources Using Deterministic Procedures (Chapter 4)
  • Unconventional Resources Estimation (Chapter 8)

The eight updated chapters are

  • Introduction (Chapter 1)
  • Petroleum Resources Definitions, Classification, and Categorization Guidelines (Chapter 2)
  • Seismic Applications (Chapter 3)
  • Probabilistic Reserves Estimation (Chapter 5)
  • Aggregation of Reserves (Chapter 6)
  • Evaluation of Petroleum Reserves and Resources (Chapter 7)
  • Production Measurement and Operational Issues (Chapter 9)
  • Resources Entitlement and Recognition (Chapter 10)

The complete document is available at no cost at

The SPE Oil and Gas Reserves Committee (OGRC) established an Applications Guidelines Subcommittee in April 2007 to develop the AG. Following selection of chapter authors and completion of drafts for all chapters, the OGRC adopted a formal review process involving all sponsoring organizations. Chapter editing committees were formed for each chapter, and expert members from all stakeholder societies participated. Each committee worked with the chapter authors to incorporate comments and to endorse the revised chapter. A steering committee coordinated the process.

Following review and approval of all chapters, SPE posted the draft document on its website from December 2010 to March 2011 for industry review and comment. Chapter editing committees and the steering committee reviewed all comments received, and chapter editing committees worked with authors to address relevant comments. The globally integrated effort to develop, review, and revise the document involved more than 40 subject-matter experts from SPE, AAPG, SPEE, SEG, and WPC.

The SPE Board of Directors approved the final document in June 2011. By October 2011, the endorsing organizations (AAPG, SPEE, SEG, and WPC) approved the final document, which was released to the public in November 2011. While the SPE OGRC played the lead role in the effort to produce the AG, the collective work by representatives of all five professional organizations involved reduced the time for approval of the document greatly. This multiorganization integration, from start to finish, can lead to enhanced results in future projects of this kind.

Content of AG

This section provides a short summary of each chapter in the AG.

Chapter 1—Introduction. This chapter outlines the history of SPE and sister-society efforts to provide common standards for petroleum resource definitions, leading to the AG. It also provides a brief summary of each chapter that follows.

Chapter 2—Petroleum Resources Definitions, Classification, and Categorization Guidelines. This chapter reviews the PRMS principles and definitions on which classification and categorization of resources are based. The chapter emphasizes that PRMS is based on defined projects designed to recover oil or gas resources and provides examples of projects. It then provides examples of how resources estimated to be recovered from projects can be classified (as prospective resources, contingent resources, or reserves) and how, after classification, the resources can be placed into appropriate categories.

Chapter 3—Seismic Applications. Chapter 3 focuses on the application of 3D-seismic data to estimate reserves and resources volumes that have been classified and categorized by use of the principles of PRMS. The chapter acknowledges that 2D seismic may still play an important role when estimating prospective resources volumes but points out that 3D-seismic acquisition and interpretation are the norm as a project matures. The chapter notes that the role of seismic is fundamental in determining in-place volumes of hydrocarbons. Importantly, the chapter describes the uncertainty that arises when predicting trap geometry, rock/fluid properties, or fluid flow by use of seismic data. The reader is also provided with an explanation of how seismic can be used in reservoir surveillance.

Chapter 4—Assessment of Petroleum Resources Using Deterministic Procedures. Chapter 4 summarizes application of deterministic procedures to estimate the range of recoverable hydrocarbon resources by use of analogy, volumetric methods, and production-performance methods. It illustrates both incremental and scenario approaches. The chapter illustrates application of these recognized methods to an example oil reservoir, which it follows through classification as prospective resources, or contingent resources, and as reserves. The oil reservoir is produced through different stages of maturity with water injection, supplemental artificial lift, and enhanced-recovery projects. The chapter also illustrates application of material-balance methods to a volumetric gas reservoir.

Chapter 5—Probabilistic Reserves Estimation. Chapter 5 illustrates application of the scenario method (with results translated to a pseudoprobability curve) and the probabilistic method, commonly based on Monte Carlo simulation. The strengths and weaknesses of each method are explained.

Chapter 6—Aggregation of Reserves. Chapter 6 provides guidelines for aggregating (summing) reserves starting at the well or reservoir level and proceeding to the field, property, or project level. It points out that probabilistic aggregation (rather than arithmetic summation) will lead to more-reliable sums of 1P and 3P reserves (when correlations between variables are taken into account), and that arithmetic summation is appropriate for 2P reserves.

Chapter 7—Evaluation of Petroleum Reserves and Resources. This chapter provides guidelines for estimating the value of investing in existing and planned petroleum-recovery projects. The guidelines are provided to promote consistency in project evaluations and in the presentation of evaluation results while following PRMS principles. The methodology presented is based on discounted-cash-flow analysis. Recommended principles are illustrated with application to an example international oil field (including associated gas), with 1P, 2P, and 3P production forecasts and reserves estimates available. Evaluation by use of the expected-value concept, based on decision-tree analysis or on Monte Carlo simulation, is also illustrated.

Chapter 8—Unconventional Resources Estimation. Chapter 8 provides overviews of several different unconventional resources and preliminary information on evaluation approaches for these resources:

  • Extraheavy oil
  • Bitumen
  • Tight gas formations
  • Coalbed methane
  • Shale gas
  • Gas hydrates

Because evaluation techniques for unconventional resources are in their infancy, the authors expect that the material in this chapter will be updated and expanded in future editions of the AG. Treatments of individual unconventional resources in this chapter can include discussions of topics such as

  • Resource potential
  • Reservoir characteristics
  • Drilling and development
  • Commercial issues
  • Classification of reserves

Chapter 9—Production Measurement and Operational Issues. The objective of this chapter is to provide clear linkage between estimates of subsurface quantities, measurements of raw production, sales quantities, and the price received for products. The chapter summarizes PRMS guidance that allows consistent treatment of topics such as

  • Lease fuel
  • Associated nonhydrocarbon components
  • Natural-gas reinjection
  • Underground natural-gas storage
  • Shared processing facilities
  • Hydrocarbon-equivalence issues

Chapter 10—Resources Entitlement and Recognition. This chapter emphasizes principles for reserves and resources recognition under PRMS and determination of net quantities, rather than specific government regulations, financial reporting guidelines, or classification of reserves and contingent resources into the various certainty categories of PRMS. The chapter includes discussions of

  • Regulations, standards, and definitions
  • Reserves and resources recognition
  • Agreements and contracts

Example cases are included in the chapter: a base-case example; production-sharing-contract terms, normal tax treatment; contractor entitlement calculation; contractor reserves calculations; crude-price sensitivity; production-sharing contract, carried tax treatment; reserves sensitivity; and assessing other categories of reserves and resources.
Reference Terms. This appendix to the AG provides definitions of terms used in the document and states where the term is used in references and where (chapter) and how many times the term is used in the AG.

This article, written by Special Publications Editor Adam Wilson, contains highlights of paper SPE 162520, “New Guidelines Document Assists With PRMS Applications,” by W. John Lee, SPE, University of Houston; Satinder Purewal, SPE, Energy Equity Resources; and D. Ronald Harrell, SPE, Ryder Scott, prepared for the 2012 SPE Annual Technical Conference and Exhibition, San Antonio, Texas, USA, 8–10 October. The paper has not been peer reviewed.