SPE-202577-MS

An Overview of Reserves and Resources Evaluation in Unconventionals

Celal Hakan Canbaz, Ege University; Cenk Temizel, Saudi Aramco; Ahsen Ozesen, TPAO; Simel Gayde, Heriott-
Watt University; Firat Aksahan, Ege University

Copyright 2020, Society of Petroleum Engineers

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Abstract
Reserve/Resource estimation plays a crucial role in a feasible oil and gas business. Tendency of producing
more from unconventional reservoirs and their relatively new as well as different structure brought on a
learning curve for the applications of new reservoir evaluation methods. This study clearly desribes all
reserve and resource evaluation techniques, the latest developments in this area by providing a single-source
up-to-date reference for reserves evaluation in unconventionals.
An extensive review of literature has been applied to describe all available reserve evaluation techniques
and their utilization, applicability and robustness, the history of using these techniques, types of technologies
which applied in conventional reservoirs and transferred to unconventionals, and their incremental benefits
of usage.This paper includes a real worldwide case studies which are illustrated with applications, and
briefly describes the challenges, drawbacks, also pros and cons case by case. In the end, each case leads to
conclusions on the criteria of application of methods as they related to SPE, SEC and PRMS.
In this study, "reserve and resource estimation" of unconventional reservoirs is investigated. The
techniques are described by giving their methodology, as well as identifying the crucial parameters and
the key factors of the applying procedure for the estimations. For instance, the main key factor of reserves
evaluation is consistency and abiding by the rules outlined by SEC, PRMS and other bodies in terms of
technical and economic aspects.
Currently, some studies includes the certain examples of reserve evaluation methods in conventional
reservoirs, and limited number of works in unconventionals. However, there is no study which is not only
outlines the key elements in one study, but also deducts lessons from the real field applications that will shed
light on the utilization of the methods in the future applications. This study will close the gap and become
a reference study in unconventional oil industry.

Introduction
Nowadays it has been accepted that natural gas, which is the primary energy sources, become the third
largest energy source. This energy source spread out to the world by means of geographically more than oil.
Main reason of holding more domestic reserves than oil is because of abundance of unconventional gas such
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as shale gas, coalbed methane (CBM), tight gas and others (Umbach 2013). According to the assessments of
IEA (International Energy Agency), it has been predicted that by 2035 the unconventional gas production
will increase to the triple of 1.6 trillion cubic meters (tcm) (IEA 2011, 2012).
Conventional reserve production was started by 1859 in Pennsylvania which the reserves were
located at the depth with an easy access. As the oil prices rise gradually, the investments aimed to
develop unconventional resources increased as well. As reaching conventional petroleum gets harder, the
"unconventional reserve" term has been born in order to define the accumulation way of oil and gas in
the industry. Therefore, the new alternatives for oil and natural gas production has been dispatched by
2000-2010s. These accumulations of unconventional reserves are also vast in size and lower in profitability.,
it is required to have advanced technology solutions in order to each unconventional reserve. Nowadays,
the most active place where unconventional oil and gas resources are in place is the North America. It can
be created a pyramid which takes into consideration the technology needed and price for them. That can
be seen in Fig. 1.

Figure 1—Types of Unconventional Resources

According to Mohammed Hamed and Ammar Mohsen, (Dec 2015) shale oil is existing in the following
countries as, USA, Germany, China, Brazil, Morocco and Jordan. On the other hand, tight was accumulated
in the countries which are listed below by 2001.

• North America with 19%

• Western Europe with 5%

• Latin America with 17%

• Central and Eastern Europe with 1%

• Former Soviet Union with 12%

• Middle East and North Africa with 11%

• Sub-Sahara and Africa with 10%

Worlds estimated total volume of 7.405 tcf of gas located in tight gas in 2001.
SPE-202577-MS 3

The significant difference between shale oil and conventional oil is that the accumulation in different
geological and physical properties.

Executive Summary
Especially in the USA, the improvement on exploration of unconventional gas specifically shale gas, lead the
American and the global gas market to have a milestone. There is a possibility that usage of unconventional
gas may poise natural gas demand and security to supply energy withing Asia and Europe (Temizel et al.,
2018). In order to have stable and long-term contracts, gas contracts/market is depended on oil in Europe
and Asia.
Unconventional reserves popularity, especially shale gas, extremely increase which was resulted by the
natural gas industry to reach the summit in the oil and gas industry (Science Direct: Shale gas exploitation:
Status, problems, and prospect). Regarding this statement, shale gas production reached up to 275 million
m3 in 2012 which used to stand for 40% of the whole natural gas production. According to the report of
EIA (Energy Information Administration) in 2013, the top ten countries that have both shale oil and shale
gas were listed and shown in Table 1 and Table 2.

Table 1—Top 10 countries that have shale oil (Modified from EIA Report 2013).

Rank Country Shale Oil (Billion Barrels)

1 Russia 75

2 US 58

3 China 32

4 Argentina 27

5 Libya 26

6 Australia 18

7 Venezuela 13

8 Mexico 13

9 Pakistan 9

10 Canada 9

World Total 345

Table 2—Top 10 countries that holds shale gas (Modified from EIA Report 2013).

Rank Country Shale Gas (Billion Barrels)

1 China 75

2 Argentina 58

3 Algeria 32

4 US 27

5 Canada 26

6 Mexico 18

7 Australia 13

8 South Africa 13

9 Russia 9

10 Brazil 9

World Total 7,299

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Main Shale Resource Basins in the World

In line with the study of European Commissions, shale oil basins throughout the world were covered in
detail. This study consists of the unconventional resource potential for 26 countries. 22 out of these countries
have a high potential of holding shale oil basins (European Unconventional Oil and Gas Assessment
(EUOGA)). The green shaded countries shown in Fig. 2 are the ones that participated in this survey and
therefore, in the report.

Figure 2—Countries which participating EUOGA.

According to EIA Report 2013 - US basin, Shale formation basins which are both assessed with/without
resource estimation were illustrated in Fig. 3 with red and yellow color-coded map below respectively.
Due to lack of information, in the yellow shaded locations, there is no resource estimated. On the other
hand, the study in 2013 completed for the red shaded areas which include basin with a certain amount of
unconventional reserve (EIA 2013).
SPE-202577-MS 5

Figure 3—Map illustrating assessed unconventional resources (Shale Oil and Shale Gas), (Ahmed and Meehan, 2016).

Europe. Even though environmental group oppose to growth in unconventional gas by means of proper
waste water management, green house gas emission, seismic events and ground water safety, there has been
huge amount of unconventional gas explorations in Europe (Poland, France, Germany, Great Britain) at the
same time with rest of the world. According to HIS CERA study, the highest unconventional gas production
scenario may reach to 200 bcm from 60 bcm of annual production by 2025.
United Kingdom
According to Ahmed and Meehan (2016), a considerable amount of shale gas and shale oil share that Europe
holds are occupied in the United Kingdom which is listed in Table 3.

Table 3—Shale Resources that was laid in the UK (Ahmed and Meehan, 2016, 2016).

Risked, Technically
Resource Type Risked Shale Sources Non-risked Shale Sources
Recoverable Shale Resource

Shale Gas (Tcf) 134 623 26

Shale Oil (Billion bbl) 17 54 0,7

Poland
It has been assessed that Poland could be the Europe's Qatar or Norway in the way of shale gas supply. The
Baltic Basin which has a simple geological structure, is the most likely potential region for shale resources.
On the other hand the other, even though the Podlasie and Lublin basins have potential shale resource, they
have complex structure, that may limit horizontal shale drilling (Ahmed and Meehan, 2016). The volume
of risked technically recoverable unconventional resources that Poland basins hold is illustrated in Table 4.

Table 4—Technically recoverable shale resources of Poland Basins (Ahmed and Meehan, 2016, 2016).

Resource Type Technically recoverable shale gas/shale oil resource

Shale Gas (Tcf) 146

Shale Oil (Billion bbl) 1,8

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Middle East-Saudi Arabia. Saudi Arabia has a significant potential of shale gas and tight gas.
Unconventional resource exploration was reported by 2013, where unconventional gas resource activities
were explored in Paleozoic formation in Rub' Al-Khali Basin. According to Sahin 2013, by taking into
account of lognormal model that has been studied in this paper; very large amount of unconventional
resources is existing in Arabian Peninsula (Sahin 2013). It is certain that, according to Saudi Aramco
Company, the unconventional gas meets the kingdom's energy need which this situation positioned the
company's program for the next generation. Even though Saudi Arabia has a huge amount of unconventional
gas potential, North America still leads the position in unconventional resources. In another words, Saudi
Arabia and African countries follow up the second and third position right after the North America by means
of unconventional gas resource potential.
North America. In the US, the most important unconventional resources are shale gas and tight oil.
There type of unconventional resources is produced by the processes of hydraulic fracturing and horizontal
drilling. As there is huge amount of shale gas production takes place in US, as a result market gas prices
decrease throughout the world. On the other hand, since there is higher oil price in the world, this lead tight
oil production feasible.
US Shale Oil and Gas plays
According to EIA, in Figure 4, it is clear that the trend on shale gas and tight oil had dramatical increase
right after 2010 and increase by around 8 tcf in 5 years. Even though, in 2010, there was relatively higher
tight gas production, by 2010, the production of shale and tight gas first reached the same and even reached
the peak (EIA, 2013).

Figure 4—US Natural Gas Production by the type of resources (EIA, 2016)

As it is known in conventional wells, for each shale gas well has its own lithology properties and reservoir
characteristics. However, there are two major shale basins, which are Eagle Ford and Haynesville, are similar
SPE-202577-MS 7

with each other within the same depth ranges. As it can be seen in Table 5, US has 11 different shale basins
with a significant amount of shale oil and shale gas production (Ahmed and Meehan, 2016).

Table 5—US Unconventional Resource Production Throughout the Basins with Well Number (Ahmed and Meehan, 2016).

Shale Play Vertical Horizontal Wells Total Rigs Running

Well Gas Oil Wells Gas Dlr Oil Dlr

Barnett 5,005 14,199 0 19,204 11 11

Marcellus 2,462 6,999 10 9,471 81 0

Fayetteville 65 5,405 0 5,47 9 0

Woodford 304 1,565 748 2,617 6 6

Haynesville 75 3,278 0 3,353 39 1

Bakken 248 0 10,336 10,584 0 192

Eagle Ford 56 3,487 7,173 10,716 10 206

Niobrara 1,969 0 3,594 5,563 16 46

Utica 107 291 179 577 27 22

Wolfcamp 148 368 2,224 2,606 1 243

Monterey 451 oil 0 29 480 45 0

Total US Land Rigs Running 313 1,539

Canada Shale Oil and Gas Basins

Canada has taken fifth place in the list of largest energy producers in the world. Canada holds unconventional
resources as tight oil – 573 tcf and tight gas – 9 bbl. These unconventional resources as shale oil and shale
gas cover 10% and 56% of the reserves respectively (Erbach, 2014).
Rest of The World. In these days, shale resources have been tested and operated by hydraulic fracturing
operation in order to get a commercial production from resource in some countries such as, Russia, China,
Brazil, Australia, UK, Mexico and Argentina etc.
Russia
Russian has two main basins according to Ahmed and Meehan, 2016, which are the Timan-Pechora and
the Bazhenov. Even though the reserves in Bazhenov can be count for commercial production, there is no
shored detail for public about the reserves/resource amount for the Timan-Pechora Basin. So, the volume
of shale resource that Bazhenov basin holds is shown in Table 6.

Table 6—Volume of shale resource that Russia holds in the Bazhenov basin.

Resource Type Risked shale gas/shale oil in place Technically recoverable shale gas/shale oil resource

Shale Gas (Tcf) 1,92 285

Shale Oil (Billion bbl) 1,243 74,6

China
There are seven (7) main basins in China which has a significant shale oil and shale gas resources. These
basins are listed as, Sichuan, Tarim, Junggar, Songliao, the Yangtze Platform, Jianghan and Subei. It is
known from EIA Report of 2013 that, China has 1,115 tcf risked, TR (technically recoverable) shale gas,
whereas; risked technically recoverable shale oil cover 32.2 Bbbl out of 643 Bbbl. The distribution of
unconventional resources (shale gas and shale oil) is given in Table 7.
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Table 7—Shale oil and shale gas volumes of some basins in China (modified from Ahmed and Meehan, 2016)

Basin Shale Gas (tcf) Shale Oil (Billion bbl)

Sicuhan 626 –

Tarim 216

Junggar 36 32.2

Songliao 16

Additional risked TRR 222 –

Total 1,115 643

Brazil
Even though Brazil owns most of the oil and gas basins on offshore, there are 18 basins which are mainly
undeveloped and slightly explored sedimentary. Major destination of shale in Brazil which has around 2 to
2.5% of TOC (Total Organic Content), is the Devonian Black Shale. For other basins and formations, there
is lack of information and source rock immaturity, therefore limited data is collected to determine shale gas
and shale oil potential (Ahmed and Meehan, 2016). The volume of unconventional resources (shale gas and
shale oil) Brazil holds is illustrated by Table 8.

Table 8—Brazil's unconventional resource amount withing the basins of Parana, Solimões and Amazonas.

Technically recoverable
Resource Type Risked shale gas/shale oil in place
shale gas/shale oil resource

Shale Gas (Tcf) 1,279 245

Shale Oil (Billion bbl) 134 5,4

Australia
Australia is considered to have a vast amount of unconventional resources which commercial production
can be supplied beside the US and Canada. However, to proceed and get into production phase for the
unconventional resource basins in Australia may proceed slower than expected since the basins are located
remote areas in the country. Table 9 gives the data of unconventional resources of Australia.

Table 9—The amount of Unconventional Resources in Australia.

Technically recoverable
Resource Type Risked shale gas/shale oil in place
shale gas/shale oil resource

Shale Gas (Tcf) 2,046 437

Shale Oil (Billion bbl) 403 17,5

Northern South America

Northern South America has shale gas and shale oil potential within marine-deposited formations composed
in three main basins which can be listed as the Middle Magdalena Valley and Llanos basins (Colombia) and
the Maracaibo-Catatumbo basins (Venezuela and Colombia).
Colombia accounts for 6.8 Bbbl and 55 Tcf of risked TRR, while western Venezuela has 13.4 Bbbl and
167 Tcf. For the current EIA and ARI assessment, the Maracaibo-Catatumbo basin was re-evaluated while
new shale resource assessments were undertaken in the Middle Magdalena Valley and Llano basins. TRR
of shale gas and shale oil in northern South America are estimated as around 222 Tcf and 20.2 Bbbl (Ahmed
and Meehan, 2016, 2016).
Other South American Countries
SPE-202577-MS 9

Bolivia, Chile, Paraguay, Uruguay have potential unconventional resources as shale gas and shale oil. The
formation that accumulate into the basins are marine-deposited Cretaceus and Devonion formations. There
are three basins that shale formation accumulated; they called:
i. Parana Basin (Paraguay and Uruguay)
ii. Chaco Basin (Bolivia and Paraguay)
iii. Magallanes Basin (Chile)
Extensions of the basins listed above were located near to the Brazil and Argentina. In these four South
American countries there are significant amount of risked, technically recoverable unconventional resources
which are believed that shale gas with the amount of 162 Tcf and shale oil as 7.2 Bbbl.
Argentina
Argentina owns potential shale gas and shale oil within the Neuquen Basin as it is mentioned by Usman.
In the South Argentina shale is classified as "Cretaceous". In early stage, exploration and commercial
production was achieved for Neaquen Basin by such companies, Exxon, Apache, EOG, Total, YPF and
some small ones. Within this basin in Los Molles and Vaca Muerta formations 50 different vertical wells
were drilled and positive results were accomplished in 2014. According to EIA Report – 2013, Argentina
has an estimated 802 Tcf of risked, shale gas in-place out of 3,244 Tcf of risked, technically recoverable
shale gas resources. In Table 10, all shale oil and shale gas resources which was made up of all 6 major
basins in Argentina were listed.

Table 10—The amount of Unconventional Resources in Argentina.

Resource Type Risked shale gas/shale oil in place Technically recoverable shale gas/shale oil resource

Shale Gas (Tcf) 802 3,244

Shale Oil (Billion bbl) 480 27

Reserve Replacement Ratio

The reserve replacement ratio implies whether the well is sufficient for the future production or not.
The reserve replacement ratio implies whether the well is sufficient for future production or not. In Figure
5, proved reserves and RRR by the year 2014, within the companies of Exon Mobil, Shell, Chevron, and
BP was illustrated. According to Figure 5, XOM has the highest volume of the reserve as 25 billion barrels
of equivalent oil (boe). On the other hand, BP reserves are around 17 billion boe which is coming right after
ExxonMobil. However, if the reserve replacement ratio is below 100%, that proves the company depletes
reserves more than production which results in a reduction of revenues/profit of the company in the future
times (Ramkumar, 2015).
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Figure 5—Proved Reserves and RRR in 2014 within 4 petroleum company (Ramkumar 2015).

Economically recoverable resources are explained as the reserves that supply the company significant
profit for the current market conditions when they are produced. For oil and gas resources, "economic
recoverability" depends on three factors which are drilling and completion operation, produced oil and gas
through out the whole life of that particular well, and prices determined for producing oil and gas.

Reserve Audits and Business View

As it is indicated in the report of Weijermars (2012), especially for new unconventional reserve addition it
used to be a slow process, however in the light of SEC's new regulations on reserve-booking, this process
got easier and quicker in a way which lead an increase in proved gas reserves.
In terms of auditing the reserves, there are such frameworks that covers the important role and regulate
for oil and gas companies which are, Petroleum Resources Management System (PRMS), SEC, and UN
Framework Classification (UNFC). If the duties of these frameworks about to be talked, PRSM generally
supply companies the management for reserves, and where the SEC's reporting rules aim to be in favor of
investing companies. Lastly, UNFC is the framework that accept reports of national oil companies. On the
other hand, PRSM covers the standards of oil and gas industry such as AAPG, SPE, SPEE, SEG 2011, WPC
which supply the users to manage hydrocarbon resources (Weijermars, 2012).
There are two main reasons of higher instability risk in the gas reserves asset inventor for unconventional
gas than conventional gas operators. These are:
1. Gas-to-Oil Asset Ratios are higher.
2. Profit Margins are lower or negative for Unconventional-Gas Operators
Even though gas-to-oil ratio is lower in conventional-gas operators (<<1), for unconventional ones this
ratio remains higher (>>1) (Weijermars, 2012).

Reserves and Resources Evaluation Overview

Reserves and Resources Evaluation Methods in Unconventionals
Reserves Evaluation. Today, issues such as limited human resources and natural resources, economic
fluctuations and environmental conditions compel the oil industry to make more efficient production and
SPE-202577-MS 11

to make the necessary plans to improve existing products. At the beginning of these plans are reservoir
evaluation and fluid properties analysis. Accurate measurement and understanding of reservoirs are critical,
especially to ensure the successful development of the reservoir. Reservoir evaluation aims to define
the formational distribution properties of the reservoir numerically and qualitatively and to simulate the
storage and production status of the resource in the reservoir and includes the determination of reservoir
properties from reservoir core samples, logs, and pressure and temporary velocity data (Clarkson et. al.,
2012). Shale-gas reservoirs, unlike conventional oil-gas reservoirs, can now be presented as a kind of self-
producing and self-storing gas reservoirs, where we can now clearly distinguish between reservoirs types
by their definition of conventional and unconventional reservoirs. The depletion of conventional oil and
gas resources day by day has led the attention to unconventional sources. Although these resources can be
found in large quantities, they are not resources that can be produced economically by conventional means.
Therefore, to reduce errors and inaccuracies in the process, it is necessary to make reserve evaluations and
calculations in such a way that existing uncertainties can be accepted in advance (Pratami et. al., 2019).
Conventional reservoir evaluation primarily includes the analysis of petrological and physical features and
some basic features. In the unconventional reservoir evaluation, in addition to the conventional reserve
evaluation, the positive and negative effects of various geological factors such as shale mineral composition,
structure, clay, kerogen types, and maturity are also determined and analyzed. There are tried and correct
methods developed for conventional reservoirs and emerged as a result of fluid storage and transport
mechanisms. As for unconventional reserves, these issues are not well understood, and it is considered to be
too early to develop such methods for such reservoirs. In addition to the reservoir characterization process
in unconventional reservoirs, hydraulic cracks are also considered in the reservoir evaluation. On the other
hand, by the data obtained from the logs taken in shale gas reservoirs, properties such as shale thickness
and systemic analysis results are evaluated in detail to determine the parts where the gas accumulates in the
target shale layer (Zhang et. al., 2018).
Rather than general steps determined as reservoir evaluation methods, it is adopted to use unique methods
for the reserve in each region. Particularly, rock gas reservoirs vary between regions due to their variable
geological features and development techniques. For example, in one study, the reservoir evaluation flow
consists of five main steps, as follows (Wang, 2017).

• Carrying out analysis related to physical properties of cores, basic parameters of geochemistry, etc.

• Calculation of the content of gas adsorbed in the rock by conducting gas adsorption tests of cores.

• Determination of parameters such as gas saturation, water saturation, oil saturation, porosity, the
abundance of organic matter, rock types using data obtained from good logs.
• Conducting economic evaluations using three-dimensional seismic data and parameters such as
OOIP-OGIP, mineral content, fluid saturation, temperature, pressure.
In another study, it was stated that reservoir gas and storage capacities should be taken into consideration
primarily in the evaluation of shale gas reservoirs and some of the methods used in this direction are given
below (Zou, 2017).

• To determine three reservoir evaluation parameters according to the geological characteristics of

shale gas, the test method applied.
• To classify the parameter range considering the actual conditions of shale gas.

• To compare the parameters with the Chinese and overseas shale gas parameter ranges.

• Creating a rubric for evaluation parameters.

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In summary, the methods used in reservoir evaluation differ according to the characteristics such as
geographical situation, geological structure and the current state of the reserve. In this context, the methods
used in reservoir evaluation as the clearest steps can be determined as follows.
Reservoir Sample Analysis
Reservoir sample analysis is the method used to evaluate properties such as absolute permeability, porosity,
absorption by examining the cores taken from the unconventional reservoir and the interruptions obtained.
Well Log Analysis
Well log analysis, which is one of the methods used primarily in the evaluation of shale gas reservoirs, has
made significant progress especially in the last year. The method of well logging analysis seems to be a
useful technique for studies such as porosity, water saturation, and evaluation of free gas storage.
Pre and Post-Frac Well Test Analysis
Well, tests are generally performed and analyzed before and after cracking. Pre-cracking tests are carried
out to determine the design of the cracking process and the initial pressure and permeability of the reservoir.
Post cracking well test analysis is generally suitable for evaluating properties such as conductivity and
cracking half-length.
Rate-Transient and Production Data Analysis
Analytical and empirical methods developed for use in unconventional reservoirs are of great importance
for the applicability of analysis of production data.
Fluid Profile Analysis
Another method in reservoir evaluation is to determine the fluid profile. Recent advances in petroleum
science and especially sensor technologies provide a more reliable evaluation of the reservoir structure
by using fluid analysis data for the well. While determining the fluid properties vertically and laterally
during the reservoir discovery and evaluation, it improves the quality of the discovery and also enables the
planning of the reservoir development process. To make healthy, reliable and high-quality evaluations, the
data obtained must also be of high quality (Pfeiffer et. al., 2013).

Figure 6—Field Development Optimization Workkflow for Unconventional Gas Reservoirs

SPE-202577-MS 13

Finally, an excellent review of the currently accepted practices is performed and put them in 3 functions.
The sources of literature considered in the first method should consist of highly reliable scientific articles
by experienced authors. In this method, uncertainty is relatively high in some countries due to problems
caused by insufficient data usage (Temizel et al., 2018). The second method is the method frequently used
worldwide by engineers to estimate shale gas reserves. The problem with this method is that geometrically
calculated shale gas reserves are not always correct. In the last method, however, the reserve can only be
used if it has been produced within a certain period, and regular model updates are required periodically
after a certain data collection.
In summary, since unconventional reservoirs also show different characteristics in different regions such
as conventional reservoirs, separate reservoir evaluation methods have been developed for each different
geography. As a result, the most important thing will be to reach the most accurate data most healthily for
a reliable evaluation and to analyze them with the most appropriate method.
Resource Evaluation. Many shale gas reservoirs were previously thought of only as source rocks, but
today's technology has shown that large amounts of natural gas and fluids can be produced from source
rocks using horizontal drilling and hydraulic fracturing methods. However, the failure to accurately estimate
the gas resources and shale gas development economy during the process of developing shale gas causes
an uncertain situation that needs a probabilistic solution (Dong et. al., 2013).
To accurately evaluate the current potential of shale gas sources accumulated in unconventional
reservoirs, it is recommended to apply the volume method and then the analogy method. The degree of
research and the amount of data is very important in the implementation of these methods. For example,
while the volume method is mostly applied in areas with a high degree of research and a high amount of
data, the analog method is preferred in regions with a low level of research and a small amount of data.
The volume method, which is preferred in areas with high research and high amount of data and supported
by the analog method, is used to evaluate shale gas sources. The total of the adsorption gas and free gas
in the formation gives the total shale gas source volume. The amount of free gas is determined using core
and water saturation amounts, while adsorption gas is determined by desorption and log operations. Shale
structures in areas where data is limited and unexplored are determined by comparison with shales with
high discovery level and data amount. The analog method is used in this way. In the analog method, it is
necessary to evaluate and understand the geological conditions of existing sources (Xinjun et. al., 2012).
Besides, two new methods have been developed, which are based on development strategies such as
hydraulic cracking, in the process of evaluating and calculating operational resources. The first method is
adapted from the Monte Carlo-based approach, where random numbers generated for the listed features will
be used to calculate the spaced probability of reserves. The second approach is based on basic well testing
procedures, which can also refer to cracking design. These two different methods are dynamically flexible,
as the reserves can be integrated into development scenarios (Pratami et. al., 2019).
14 SPE-202577-MS

Figure 7—Methane Distribution in Shale (Caineng Zou, 2017).

Monte Carlo Modification

Monte Carlo simulation is used to model how likely different results will occur in a process where
predictability becomes difficult due to unstable variables. Essentially, the Monte Carlo method is a method
used to observe the effects of uncertainties on decision making and process analysis processes on the
outcome. (Kok et. al., 2006). Using Monte Carlo simulation in the energy industry is particularly common
in the oil and gas industry. Investments in the sector are seen as risky due to the high probability of results.
When these risks are combined with the uncertainties of the data obtained, volumetric determinations can
be made for hydrocarbon reserves with the Monte Carlo method.
Shale gas reserves are built as part of the well, the single fracture slab-model, for the evaluation of
future uncertainties and reserve classification. In the design of the prepared model, there are three fixed
reservoir features such as fluid properties, rock-liquid flow properties and single-slab properties for each
model (Pratami et. al., 2019).
SRV (Stimulated Reservoir Volume)based Approach
Considering very low permeability shale reservoirs, reservoir performance can only be increased by
providing a wide cracking network in the shape shown by the microseismic cracking map. While features
such as single-plane-fracture, half-length and conductivity are sufficient to define stimulation performance
in conventional reservoirs, these features are insufficient in unconventional reservoirs. For this reason,
stimulated reservoir volume (SRV) value is used in unconventional reservoirs to determine and improve
well performance (Temizel et al., 2020).
Considering the production of the shale gas field as an example, one of the primary concerns is the
prediction of the value of initial gas in place. Unlike conventional reservoirs, where gas is stored as free
gas, in rock gas reservoirs, most of the "gas in place" is stored as free gas in both matrix pores and cracks,
and trapped gas on the surface of matrix particles. The volume of cracks extending transversely from the
horizontal well is called stimulated reservoir volume (SRV). It is essentially a complex structure network
SPE-202577-MS 15

created by cracks representing the total volume of hydraulically cracked reservoir rocks with Simulated
Reservoir Volume (SRV). SRV is created in the formation and modeled by calculating a combination of
many mechanisms, such as the presence of natural cracks and their interaction with cracks caused by
hydraulic fracture, stress anisotropy, and fluid viscosity. There are two methods used to calculate SRV. The
first method is the analytical method and it is applied using a pressure drawdown analysis test. Certain
adjustments are required to convert the DV value obtained in method 1 to SRV. This is particularly important
because method 1 evaluates the volume to be properly drained based on a good performance, while the SRV
concept is generally evaluated geometrically due to shearing and deformation occurring in the reservoir
rock. Thus, the results of both methods are rarely considered similar in conventional reservoirs.
In summary, two new methods developed for use in the evaluation and classification of hydrocarbon
reserves can be mentioned. The adapted version of Monte Carlo simulation for reservoir evaluation is
the first developed method. The reservoir development works carried out with the hydraulic fracturing
method to provide the recovery of reserves with different features. These methods are also used to estimate
conventional hydrocarbon reserves depending on the results obtained. This method is also very useful in
determining the future production profile of the reservoir. The second method is based on the data obtained
from good tests. This method is used to quickly estimate the drainage volume of the well after hydraulic
cracking in an unconventional reservoir. (Pratami et. al., 2019).
As a result, the two different methods used for technical analysis and evaluation of unconventional
reservoirs and resources are primarily functional and flexible methods to determine the potential and
potential efficiency of the reserves during the production phase. It also plays an important role in
the production and development processes. Additionally, different unconventional oil and gas resource
evaluaiton methods for different resource types are also can be seen in Table 11.

Table 11—Optimization of unconventional oil and gas resource evaluation methods

Unconventional oil and gas resource evaluation methods

Resource Type
China Overseas

Delphi method, geological analogy method, residual

FORSPAN method (USGS analogy method), resource
resource analysis method, accumulation-dispersion balance
network density method (ExxonMobil analogy method),
calculation method, formation-fluid abnormal pressure
stochastic simulation method (Canbaz et al., 2019),
Tight sandstone gas recovery method, accumulation condition analysis and
single-well reserve estimation method, statistical method
prediction method, basin simulation method, sweet-spot
(discovery process method and spatial resource distribution
scale sequence model method of deep-basin gas reservoir,
and prediction method)
volume method

Graded resource abundance analogy method, EUR analogy

Tight Oil method, small surface element method (volume method) FORSPAN method, small surface element method
and basin simulation method

Resource abundance analogy method, EUR analogy

USGS analogy method, single-well reserves estimation
Shale Gas method, volume method, adsorption method of unit rock
method
gas

Coalbed Methane Volume method Volume method, analogy method

Gas Hydrate Volume method Volume method

Volume method, spatial resource distribution and prediction

Oil Shale Volume method, pyrolysis simulation method
method

Oil Sands Volume method Volume method

Differences of Conventional and Unconventional Evaluation

Hydrocarbon reservoirs are generally divided into two categories: ‘conventional’ and ‘unconventional’.
Operations for improvement and development in reservoirs designated as "Unconventional" reservoirs are
generally carried out by applying advanced engineering methods such as gas/vapor injection, hydraulic
16 SPE-202577-MS

cracking, horizontal good placement. An Unconventional reservoir does not have a precise definition, but
the classification seems to depend on technology. Moreover, new technologies are becoming more and more
commonplace, which creates the possibility for some reservoirs to move from the unconventional to the
conventional category soon. More than two-thirds of hydrocarbon reserves worldwide can be categorized as
unconventional. Today, unconventional reservoirs are divided into seven main categories: tight sandstone,
coal bed methane, shale, carbonate, metamorphic rocks, heavy oil and bitumen and gas hydrate (Ebrahimi,
2015; Canbaz et al., 2019).
Conventional oil production around the world will start to drop hardly to stop soon, and the difference
between demand and supply is thought to be compensated by the production from unconventional reserves.
As a result, the cost of producing large quantities of oil and gas from unconventional reserves will be high.
However, the potential for rock gas deposits is still very promising for long-term production (Kamali and
Rezaee, 2012). Due to increasing energy demands, conventional gas reserves seem insufficient. Therefore,
exploration and production of unconventional gas reserves are essential to meet increasing energy demands.
It is known that gas concentrations in these reserves are "continuous" and tend to accumulate in wider
areas rather than discrete traps. The geological location of unconventional gas is more complex and
challenging than conventional gas. For two of the unconventional types of gas, coal bed methane and gas
shales, gas source, trap, and reservoir are the same, as in conventional gas reserves, three separate elements
cannot be mentioned. Three natural gas sources, namely tight gas sands, coal bed methane and gas shales,
form today's unconventional gas. By definition of shale gas, it is a commercially available organic-rich fine
grain rock storage gas. Shale gas formations are generally thick and common, and they also have very low
matrix permeability. The cracking method is used to make the products made from shale gas economical.
Therefore, primary porosity is low and production rates are low (20 Mcf / d to 500 Mcf / d), but cover very
large areas. The production life is long and typically lasts 25 to 80+ years with low drop rates. Total organic
carbon (TOC) in shale gas reaches 1 to 20% (Kamali and Rezaee, 2012).
Also, there are important differences between unconventional and conventional reservoirs, such as
pressure-dependent permeability and leakage. Fracture network is thought to be formed by hydraulic
cracking, which is spread through natural cracks, which is considered a similar concept with SRV. Then,
a common conceptual model, Discrete Fracture Network (DFN) or a fracture network model was used for
simulation purposes (Whang and Zhang, 2019). As in the unconventional reservoir, the concept of a limited
number of spatially distributed large natural cracks, which intersect with hydraulic cracks and form regular
or irregular shaped cracks, has been adopted by many. In practice, however, this model uses a limited number
of natural cracks, less than the number of digital grids. It also uses the double-porous double permeability
model for the fluid flow mechanism that has been applied for conventional reservoirs for several years.
In summary, the differences between conventional and unconventional reservoirs begin while they are
still in the research phase, and production continues, covering the entire process. It differs from conventional
reservoirs by the methods used in the healing phase of unconventional reservoirs. While more than half of
the hydrocarbon reserves in the world are called unconventional reservoirs today, it is also expected that
unconventional reservoirs can be defined as conventional reservoirs thanks to the developing technologies
shortly. The decrease in hydrocarbon production from conventional sources and the increase in interest
towards unconventional has been a subject that has been discussed in all aspects of the sector for years.
Unlike conventional reserves, topics such as the geological location and structure of unconventional
resources, how much it is worth the economic risks and the extra work done, especially the environmental
effects of remediation works are constantly evaluated. However, the demand for unconventional reservoirs
is constantly increasing, thanks to their high potential and long-term production promise. This brings along
more detailed studies on these sources and the continuity of the different methods applied. Although the
costs are high, the fact that the conventional reservoirs are running out rapidly and the necessity of meeting
the increasing energy demands causes the unconventional reserves to be overwritten more.
SPE-202577-MS 17

Table 12—Shale Gas Resources Distribution in the World (Caineng Zou, 2017)

Region Shale Gas (10^12 m3) Region Shale Gas (10^12 m3)

North America 108.7 Sub-Saharan Africa 7.8

Latin America 59.9 Central Asia & China 99.8

Western Europe 14.4 Pacific Region (OECD) 65.6

Central Europe and Eastern Europe 1.1 Other Asia Pacific Region 8.9

Former Soviet Union 17.7 Southern Asia –

Middle East and North Africa 72.2 Global 456.2

Challenges of Conventional and Unconventional Evaluation

Unconventional reservoirs are rock types on the surface that carry important hydrocarbon resources such as
oil and gas. Unconventional reservoirs can cover many different types of formations, including gas hydrates,
tight gas sandstones, heavy oil sandstones, gas and oil shales (Temizel et al., 2018; Temizel et al., 2019).
Gas and oil shales, also called source rocks, are organically rich unconventional reservoirs because they
contain organic matter or organic matrix. With the shale gas revolution that started in 2011, the problem
of researching the properties of gas and oil shales has been raised all over the world. One of the most
critical questions remains in this regard today is the question of oil and water saturation in shale reservoirs.
The analysis of the information obtained as a result of researches to solve the problem reveals that there
is no universal technique to solve the problem. The application of the combined multi-frequency nuclear
magnetic resonance (NMR) for shales is used to provide complete information about the type and volume of
liquids in the pore cavity of oil shales. Other insufficient information methods include retort analysis, Dean-
Stark extraction, rock evaluation pyrolysis, electrical resistance and dielectric permeability measurements
(Nikolaev and Kazak, 2019).
Reserve Prediction Challenges. The reserve estimation process for unconventional reservoirs is much
more complex than for conventional reservoirs. In 2017, Blaizot stated that oil schists are difficult to measure
fluid saturation, as they have short production backgrounds and very tight permeability (Blaizot, 2017).
When making a reserve estimate, reservoir characterization and recovery factor determination are the most
critical questions to be considered for source rocks. However, a reliable liquid fluid saturation evaluation is
the cornerstone of reservoir characterization and reserve estimation, both in rock core samples and in wells.
Economic Challenges. Although it is considered to be an advantage that conventional resources are in a
downward trend and alternatively unconventional resources worldwide, data on unconventional resources
are considered insufficient to evaluate. Due to disruptions in search and development, manufacturability,
recovery costs, and environmental concerns, the use of unconventional resources remains in the background
in the global market. To address these issues, the authors propose a multi-dimensional and heterogeneous
data warehouse and mining approach backed by ontology. Thanks to the reliability of the methods used, the
proposed methodology can solve problems related to the organization of unconventional resources and help
the adaptation of technology. The proposed methodology is applicable in any basin for all unconventional
reservoir ecosystems around the world.
Current discovery and development costs of conventional resources also support the economy for
non-conventional resources. Seismic technologies can discover connections between cracks, including
low permeability reservoirs, pore estimates. It is necessary to organize and appropriately separate the
data obtained to evaluate unconventional oil reservoirs using not only one but more than one source
(Nimmagadda et. al., 2013).
Although unconventional gas sources are widespread worldwide, it has not received enough attention,
with a few exceptions. Lack of geological and technical information about the resources obtained from
18 SPE-202577-MS

unconventional reservoirs causes this situation. Also, current market conditions and policies implemented
in these conditions prevent unconventional sources from developing in many countries. Besides, the
dimensions of the data owned by the manufacturers are very large. Therefore, large storage devices are
needed to store all data of unconventional sources that define oil and gas fields.
It is a tiring process to store, evaluate, map and model hundreds of data tables. The integration of
enormous data is a serious work and workload problem in large oil and gas companies, especially when
large-scale unconventional resources are considered.
To benefit from unconventional reserves, it is necessary to use modern technological solutions that
provide economically advantageous quantities of reservoir fluids. It is therefore important to analyze a series
of steps that allow adaptation and selection of optimal solutions (Stopa et. al., 2015).
Drilling and Completion Challenges of Unconventional Wells. Choosing the right path for drilling
unconventional hydrocarbon springs is closely related to the characteristics of the reservoir rock. Due to
the nature of such reservoirs, such as low permeability and rock heterogeneity, access to the maximum
reservoir volume should be ensured during drilling. For unconventional reservoirs, drilling operation can
be performed in a vertical, directional, horizontal and multilateral way.
Unconventional Reservoir Stimulation Challenges. Unconventional oil reservoirs are characterized by
the negative properties of rocks and the negative parameters of reservoir fluids. Such oil reservoirs have
been formed in many parts of the world and are considerably higher than global hydrocarbon resources. To
obtain products from these reserves with stimulation methods such as hydraulic cracking or pickling, it is
necessary to analyze the economic dimension of oil.
Processes to promote crude oil production, such as hydraulic cracking or pickling, are designed to
improve the efficiency of wells by improving the permeability properties of reservoir rocks. In the hydraulic
cracking operation, the determining factor for the spread of cracks in the tension distribution on the
underground surface. Stresses occurring in the formation of rocks are the most compressive stresses and
are mainly caused by the weight of the rocks above. The formation of horizontal cracks is possible in oil-
bearing areas due to shallow depths or redirection of the main stress directions due to tectonic events. The
size and direction of stress are important for the spread direction of cracks in rocks.
Hydraulic cracking is currently considered as one of the most important stimulation methods in the
oil and gas industry, especially for low permeability reservoirs such as shale gas and tight gas, which
significantly increase the efficiency and overall recovery factor of wells (Cai et. al., 2019). Problems related
to unconventional oil and gas production in hydraulic fracture processes include the capture of the aqueous
phase, deflection mechanisms of fracture nets and incompatibility of fluid with formation.
Challenges of Artificial Lift Systems on the Unconventional Oil Reservoirs. Oil and gas are still
leaders in the global energy market. The recent serious increase in unconventional oil and gas production
has significantly increased the balance between global demand and oil and gas supply. However, several
important fundamental questions about unconventional oil and gas resources have not been adequately
answered. Little is known about the discovery and development characteristics of unconventional oil and
gas, as well as the distribution and accumulation patterns. Due to its negative and challenging properties,
unconventional oil reservoirs require the use of the latest and expensive technologies. For this reason,
it has not been operated in the past for economic reasons (the low price of oil) or lack of suitable
extraction technology. In addition to its low permeability and heterogeneity features, these reserves are
characterized by problems and technologies such as low energy, artificial lift requirements, large pressure
losses, production, and directional drilling. Also, the high depth of the formation of hydrocarbons and
negative rock properties often make it impossible to apply conventional solutions. One of the most popular
pumping equipment is a rod pump, but the applicability of this solution is limited by the TVD (true vertical
depth) of the wells and the slope of the well. In some cases, the load of the rod pump unit in deep oil
SPE-202577-MS 19

wells can be reduced using a fiberglass rod, but this is a very costly solution. At low production volume,
the scarcity of oil volumes available in unconventional reservoirs results in an unprofitable picture. A long
stroke pump unit can be applied to a depth of approximately 5,000 m and these pumps can also be used
in directional or horizontal wells. A disadvantage of such pumps is low resistance to solid particles. The
hydraulic jet lift system also works with a hydraulic drive system from the surface and is resistant to solid
particles. This type of pump can be installed in wells with a depth of 5000 m. However, the device has low
energy efficiency and it may not be economical to use in low flow wells. Both of these hydraulic pumps
require high-pressure piping on the surface (Nimmagadda et. al. 2013). Progressive Cavity Pump (PCP) and
Electric Submersible Pump (ESP) are also used as artificial lift systems in unconventional oil reservoirs.
The production figures to be obtained as a result of the use of this equipment must be of a quantity that
can make the use of pumps profitable.
Unconventional reservoirs, such as shale, coal and tight sandstone reservoirs, are generally highly
heterogeneous formations with low porosity and very low permeability properties. The strong physical
and chemical interactions between the liquids present in the reservoir and the pore surfaces lead to
the inability to apply conventional approaches to characterize the fluid flow in these porous reservoir
rocks. Therefore, new theories, techniques, geophysical and geochemical methods are urgently needed to
increase petrophysical properties, fluid transport and production efficiency from unconventional reservoirs.
Petrophysical characterization includes studies that have many applications in the physical and chemical
properties of rocks and their interactions with liquid and petroleum, especially in the oil and gas industries.
Key parameters studied in petrophysics are lithology, porosity, water saturation, permeability, and density.
Petrophysical characterization is the basis for understanding some special features of unconventional
reservoirs.
It covers a wide range of research studies such as petrophysical characterization, liquid transport physics
in microporous structures and macro reservoirs, hydrocarbon extraction, earth sciences, environmental
problems, hydrology, and biology.
As a result, although much progress has been made in the oil and gas industry regarding unconventional
resources, there are still many questions and problems regarding the realistic importance of unconventional
hydrocarbons and their sustainability as a viable fuel source. Considering the discovery and consumption
rate comparison, it is an indisputable fact that production in the consumption phase of shale gas also
decreases rapidly. For example, the production of a shale gas well in the first year will decrease by
60% to 90% (Jia et. al., 2016). At this point, the challenge for the energy industry is to develop
appropriate geological models and optimize discovery and production for unconventional oil and gas
reserves. technologies to provide a certain stabilization. To research and produce unconventional oil and gas
resources more effectively, as well as to reduce the E&P economic risk, it is necessary to make the necessary
analyzes carefully, to choose the appropriate methods to be applied and to evaluate the potential of these
resources objectively. These evaluations; Re-examination of the concept of the conventional "oil system"
can be realized by understanding the fine-grained sedimentary system and tight reservoir sedimentology,
explaining the micro-nano pore system and liquid phase behavior in shale and tight reservoirs, making
unconventional oil and gas enrichment models and resource.
Strategic Status and Development Restriction Factor of Unconventionals. Although unconventional oil
and gas exploration and development activities have been very successful in the USA, the same success has
not been achieved in other countries and regions. The geological reserve conditions of the unconventional
oil and gas resources and the discovery and development environment are quite complex. For this reason,
it is necessary to take great care and effort in the researches on geology theories, resource evaluation and
other basic technologies related to unconventional oil and gas resources. To systematically examine regional
accumulation and distribution models, studies should be conducted on micro-nano pore structures, liquid
phase behavior and flow patterns. In addition to sound basic geological research, more attention should be
20 SPE-202577-MS

paid to the important basic theoretical issues that affect the development of nonconventional oil and gas
reserves and mentioned above.
As a result, the difficulties encountered in the evaluation processes of unconventional reserves can be in
quite different subjects and areas. Effective use of methods developed for the solution of many different
issues from reserve estimates to difficulties in determining oil and water saturation, from drilling and
stimulation to search and production issues, from artificial lift problems to data analysis problems, will help
solve technical and especially economic problems over unconventional sources. Also, because conventional
resources are gradually decreasing in the world, the existence of unconventional resources is important
for the future of the energy sector. For this reason, all studies and steps taken regarding the evaluation of
unconventional resources and reserves are of great importance.
At the point of reserve assessment, quite different and serious difficulties can be encountered. First
of all, the definition of the reservoir as conventional or unconventional should be determined and then
the possible challenges to be taken into consideration. Regardless of whether it is gas or oil, preliminary
evaluations in reservoirs should also cover the challenges encountered in all processes such as well drilling,
production, workover studies, improvement works, feasibility studies. Besides, it is very important to
evaluate these studies meticulously according to whether the reservoir is conventional or not. It is much more
complicated and difficult to predict unconventional resources during the reserve prediction phase. In terms
of economic difficulties, the challenges of unconventional reservoirs seem to be more, but the necessity of
the investments to be made when long-term gains are evaluated is an indisputable fact. The methods used to
reach unconventional reservoirs during good drilling are much more risky and challenging operations than
conventional drilling. The difference between the methods used, especially directional drilling operations,
are the most important challenges in the good drilling stage. The economic dimension must be also involved
in the business while evaluating the difficulties encountered in the improvement and development works of
the reserves. Besides, production from unconventional sources will be both more difficult and costly with
the needs and operations of artificial lifts. Methods such as pump, plunger, injection are applied by showing
differences from conventional reserves. Looking at all the mentioned issues, it is seen that unconventional
reserves have a much more challenge in a certain way.

PRMS and SEC Differences

It was expected that both the Securities and Exchange Commission (SEC) and the Petroleum Resources
Management System would be extensively consistent and regulated, yet obvious differences continue to
exist between PRMS standards and SEC regulations. The primary differences are as follows:

• The significant difference that results in the comparison of companies' SEC and PRMS reserves is
the price. The SEC reserves evaluation uses an average price based upon the first day of 12-month;
whereas the PRMS reserves evalution is based on forecasting economic circumstances. In order
to emphasize the reserves' commercial value and the company's return from the investment, the
prices can also be examined by evaluators in PRMS evaluation.
• Another main difference is in relation to liquids/gas and developed/undeveloped reserves that can
be justified. As highlighted in Table 13, it is crucial that the difference between the SEC and PRMS
proved reserves are larger in the gas reserves compared to the liquid reserves.
• In an attempt to identify the difference at developed/undeveloped reserves, Table 14 can be
illustrated below for two large companies.
• The oil-water contact or oil-gas contact is defined with %90 probability by high-quality pressure
data in PRMS evaluation. On the contrary, only the lower fluid contact is justified by certainty
technology in SEC reserves.
SPE-202577-MS 21

• The PRMS rules allow injected gas from nearby reservoirs, but they do not classify it as a re-
injected gas in the purpose of selling. On the other hand, the SEC rules point out that injected gas
returns to the reservoir and is produced from it.
• 5 years is a recommended timeframe for PRMS. SEC regulation has a strict five-year rule. Proved
undrilled locations have to be booked to be drilled in five years. If it is not drilled, it has to be
rescheduled again.
• SEC takes into account the company's ability in order to finance projects for reserves. It has to
exist or it will exist. In contrast, PRMS do not need confirmation of project financing for reserves.
• It is common that if 2P reserves exist, 1P and 3P should also be booked for PRMS. SEC has
different certainty for 1P, 2P, and 3P.
• Economic producibility is more important than commerciality for SEC, yet PRMS applies a
commerciality test.
• PRMS and SEC do not allow reserves for non-hydrocarbon, but the treatment of revenues from
sales of them is not the same.
• Proved reserves are much clear than unproved reserves on the SEC principles (Fig. 8).

Table 13—Differences between PRMS and SEC proved reserves for various companies (Morales & Lee, 2018)

Difference between PRMS and Difference between PRMS and

Company
SEC proved Liquid Reserves (%) SEC proved Gas Reserves (%)

BG (End of 2013) 0,60 11,50

Gasprom-Neft (End of 2015) 16,10 22,90

Gasprom-Neft (End of 2016) 15,20 21,20

Rosneft (End of 2016) 18,10 32,60

Geopark (End of 2016) 7,50 12,30

Petrobras (Brazil) (End of 2016) 28,50 37,40

Petrobras (International
10,00 3,20
Operations) (End of 2016)

Table 14—Differences between developed and undeveloped PRMS and SEC proved reserves (Morales & Lee, 2018)

Developed Proved Reserves Undeveloped Proved Reserves

Difference between Difference between Difference between Difference between

Company PRMS and SEC PRMS and SEC PRMS and SEC PRMS and SEC
Liquid Reserves (%) Gas Reserves (%) Liquid Reserves (%) Gas Reserves (%)

BG (End of 2013) 1,60 0,90 0,10 22,30

Gasprom-Neft
1,00 0,20 32,50 49,20
(End of 2015)
22 SPE-202577-MS

Table 15—Comparison table of PRMS and SEC proved reserves (Yi et al., 2019)

Item SEC PRMS

The lower fluid contact defined Pressure data with high quality define the
OWC or OGC Justification
by certainty technology fluid contact which meets 90% probability

If the fault displacement is greater than pay

If the fault displacement is greater than
thickness, possible reserves are defined.
Fault pay thickness, no reserves are defined.
Otherwise, probable and possible reserves are
Otherwise, possible reserves are justified.
justified based on the geological certainty.

Direct offsets for PUD locations. Fewer

No specified definition. Actually
offsets if geologic or engineering or plan
ultimately recoverable volumes are no
PUD Offsets uncertainty exists. Existing, approved, or
less than the predicted volumes with
technically justified development spacing
90% probability and high evidences.
area is used to assign acreage of each offset.

Specified definition on the analogy Specified definition and

Analogy Reservoir
reservoir consistent with PMRS listed the analogy parameters

Specified definition. Addressed the technology

Certainty Technology No definition on this term.
conducted repeatedly and successfully.

Five-year rule for proved PUD more than five years could not be Addressing reasonable development
undeveloped reserves (PUD) reported unless certain circumstances framework and five-year timetable.

Internal rate of return limit could

Economically Internal rate of return is greater than zero
be defined by various purposes

First-day of 12-month historically unweight Prices could be defined by

Prices
average price, or contractual prices evaluator due to various purposes

Forecasted based on cost data

Costs Forecasted with inflation
as of date without inflation.

Figure 8—SEC procedure for the estimation of proved reserves (Yi et. al, 2019)

Unlike conventional reservoirs, there are some points in regard to risk and uncertainty for the PRMS of
unconventional resource evaluation. To illustrate, classification should be done based on the commerciality
of the project. Haskett and Brown (2015) state that there are four primary stages in the resource evaluation
process of unconventional resources:
SPE-202577-MS 23

• Exploration

• Evaluation

• Delineation

• Development

Since the value of domestic and international companies comes from their oil and gas reserves, they are
the key parts of the oil industry (McMichael, 1997). There are different regulations for the countries to
certificate their oil reserves in the world. It was conducted that some countries have specific regulations for
reserve certification and some of them use the PRMS or SEC rules as a guideline to regulate reserves.

Norway

• The Norwegian Petroleum Directorate evolved a reserve classification system on the Norwegian
Continental shelf based on PRMS (Fig. 9). The classification is a project-based system which
is required for resource management, analyzing the policy of international energy, planning the
industrial activities, and financial analyses.

Figure 9—NPD's classification system (The Norwegian Petroleum Directorate, 2016)

Colombia

• The National Hydrocarbon Agency of Colombia (ANH) takes over the administiration and
regulation of local hydrocarbon resources. According to their statement, the reserves certification is
based on the Petroleum Resources Management System (PRMS). ANH checks the resolution about
the required reserves certification at the end of each year. The crucial parameter is the quantity of
the proved reserves of an oil company. If it is less then 1 million barrels per field, the proved oil
reserves can be certified and audited through an internal auditor by the operator. Contrarily, if it
24 SPE-202577-MS

is more than 1 million barrels per field, the company needs to certify the reserves by a specialized
external company.

Mexico

• A state-owned company, PEMEX, has certified to publish the volume of oil and gas reserves of
Mexico's 1P, 2P, and 3P reserves through internationally recognized external consultants. In order
to estimate the proven reserves, both U.S. Securities and Exchange Commission's (SEC) and the
Petroleum Reserves Management System's regulations are applied. The volume estimation cannot
be measured precisely. Thus, the accuracy of estimation depends on the information quality from
drilling, production, and testing data. The values reported by PEMEX are %10 different than the
independent reserves certification companies, a new reserve certification has to be reported.

Venezuela

• Petroleos de Venezuela S.A., a state-owned company, appraisal the reserves estimation under the
regulations of Ministry of the Popular Power of Oil and Mining.

Brasil

• Brasil has the PRMS methodology for the reserves certification and it is conducted by independent
consultancy firms whose certification is under the National Agency of Petroleum, Gas, and
Biofuels' (ANP) regulations (Fig. 10). The firms should provide the same data to the financial
market and the regulatory agency. To illustrate, the OGX company announced that 6.7 billion reais
in the financial market, yet smaller volumes were found after exploration (Aneclota, 2014). This
gap leads to a technical error in evaluation.

Figure 10—The resources classification system of PRMS (Wright, 2017)

SPE-202577-MS 25

The United States of America

• BOEM is charged with the development of reserves of the United States. BOEM has been used
PRMS definitions extensively for the estimates of potential reserves. As can be seen in Fig.
11; BOEM classification has 7 resources, including discovered resources, original recoverable
reserves, unproved reserves, undiscovered discovered resources, technically recoverable resources,
economically recoverable resources, and total resource endowment.

Figure 11—The resource classification of BOEM (Smith & Ojukwu, 2016)

China

• The reserves of the country estimated by the Ministry of Land and Resources. Each company has its
own methodology and submits a written declaration with accurate information such as geological
data.
26 SPE-202577-MS

Russia

• The Subsoil Law of the Russian Federation applies that the government examines the reserves
at first and then the state and oil companies can explore them. State Reserve Commission and
Central Reserve Commission make required evaluations and if they confirm the potential reserves,
a company has to prepare an annual report about the changes in the reserves each year. Besides,
Except PRMS and SEC, it has its own methodology.

Canada

• Canada Petroleum Resources states that a company has to inform its new reserve discovery to the
National Energy Board (NEB) in two ways: significant discovery and commercial discovery.
• Many companies disclose their reserves by using SEC rules, whereas the PRMS is a guide for
some companies'evaluation. To illustrate, Encana, Cenovus Energy, Canadian Natural Resource,
and Suncor Energy are big four companies that have price difference under the COGEH and SEC
regulations.
It is worth to pointing out that Iran, Qatar, United Arab Emirates, Iraq, Kuwait, Nigeria does not have specific
regulations for reserve estimations. Language barriers and political problems can be important reasons that
they do not share the reserve estimation in public.
The oil and gas reservoirs can be categorized into two groups: resources and reserves. Reserves mean
that it exists and feasible to recover. Furthermore, resources mean it is believed to exist and all of them have
not been produced yet. There are three scenarios based on their certainty in Fig. 12. The scenarios from
most to least certain are as follows:

• Proved (1P): Proved reserves are commercially recoverable oil from known reservoirs with more
than 90% certainty. The engineering and geological data are considered as critical parameters that
a reserve is defined proven under government regulations and economic circumstances.
• Probable (2P): Probable reserves are the sum of proved and probable reserves which should be
recovered with %50 probability.
• Possible (3P): Possible reserves are less likely to be recoverable reserves. They have a low
probability which is at least %10 to estimate.
SPE-202577-MS 27

Figure 12—Hierarchy of reserves (Satter and Iqbal, 2015)

According to maturity, resources are categorized into discovered and undiscovered resources in regards to
production and development. Undiscovered resources consist of two major parts: Speculative resources and
Hypothetical resources. Speculative resources are also called unmapped resources. They have inadequate
and poor quality data and no evaluation. On the other hand, Hypothetical resources which are be divided
into potential resources and reserves. Potential resources are recoverable but it is not always economically
producible due to economic, technical, and political reasons. Reserves can also be categorized as follows:

Undeveloped Reserves

• It can be new wells from the undrilled area.

• Existing wells can redrill again to be deeper into a different reservoir.

• Existing wells can recomplete.

• Production or transportation facilities can establish in order to apply recovery projects.

Developed Reserves

• There are production and transportation equipment installed and installation cost is negligible
before the enhanced recovery is applied.
• Non-producing and producing reserves are subcategories of developed reserves.
28 SPE-202577-MS

References
2016 Assessment of Oil and Gas Resources: Assessment of the Pacific Outer Continental Shelf Region. (2020).
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