Estimating Reserves and Resources in Russia New York Energy Forum May 15, 2008 Presented by Miller and Lents, Ltd. International Oil and Gas Consultants James C. Pearson, Chairman
Hydrocarbon Finding, Developing and Producing E&P Life Cycle Prospect Generation Wildcat Drilling Discovery, Appraisal, Development Field Optimization Enhanced Recovery Decline, Abandonment
Reserves and Resource Classifications Within the petroleum industry, there are three basic classification systems being used by oil and gas companies and financial institutions. –Hydrocarbon Reserves –Contingent Resources –Prospective Resources
Reserves and Resources Classification Framework
Key Reserve Definitions SECU.S. Stock Exchanges GAAP Reporting SPEOther Stock Exchanges (Modified Versions) Financial Institutions WPC, AAPG, SPEE OPEC RussianState Committee of Reserves
History of Reserve Definitions SEC1978Definitions Issued 2000Guidelines SPE1964Definitions Issued 1981Revised Definitions 1987Revised Definitions 1997Adopted by SPE and WPC 2000Resource Definitions 2007Combined Reserve and Resource Definitions RussianPre 1/1/09Soviet Era Definitions As of 1/1/09New Definitions
Scope of Definitions SECProved SPEProved, Probable, Possible, Resources RussianA, B, C1, C2, D1, D2, D3
Limitations of SEC Definition that Affect Russia License expiration date Only offset locations proved
TNK Proved Reserves Estimates January 1, 2003 Russian A + B + C115, 082 Million Barrels of Oil SPE Definition Proved 8,374 Million Barrels of Oil SEC Definition 3,048 Million Barrels of Oil
TNK Proved Reserve Categories Estimates January 1, 2003 Million Barrels of Oil Reserve Category SPE Definition SEC Definition Proved Developed Producing 3,4042,047 Proved Developed Nonproducing 2, Proved Undeveloped 2,
400 Meter Spacing (16 Hectares/Well) PD Reserves = 2 mm bbl (SPE) PUD Reserves = 62 mm bbl (SPE) Total Proved = 64 mm bbl (SPE) Case A – Discovery and Delineation of an Oil Field
PD Reserves = 2 mm bbl (SPE) PUD Reserves = 16 mm bbl (SPE) Total Proved = 18 mm bbl (SPE) Case B – SEC Proved Undeveloped Locations
Russian Upsides Infill drilling Improved waterfloods – Miscible flood Horizontal drilling Gas cycling Reservoir surveillance Dedicated work force
Means San Andres Unit Exxon Operated Waterflood Production History
Waterflood Patterns Oil Recoveries and Life of Production 20 to 1 Water-Oil Ratio Pattern Oil Recovery, MBO Recovery Factor, Percent Life of Production, Years Russian11, Western11, Model Original Oil in Place = 25 million barrels
Comparison of API Recovery Factors to Performance Derived Recovery Factors Cretaceous Reservoirs – Western Siberia, Russia
Russian Downsides Reserve uncertainty Political risk Nationalism High taxes 12/31/07 contract export price = $88.16/BBL Net oil price, before profit tax = $30.58/BBL