2019 PRRMS Applications Manual Pt2 Technical Commercial Guidelines PDF

PRrMS Issue No: 1
APPLICATIONS MANUAL – part 2: Revision: 5

Technical / Commercial Guidelines Date: August 2019
PETRONAS RESERVES AND RESOURCES

MANAGEMENT SYSTEM
APPLICATIONS MANUAL – part 2:

Technical / Commercial Guidelines
August 2019
Petroliam Nasional Berhad
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PRrMS Issue No: 1
Table of Contents
1 TECHNICAL EVALUATION OF RESERVES AND RESOURCES ....................................... 8

1.1 Definition of a Project ............................................................................................................10
1.2 Resources Classification .......................................................................................................11
1.3 Reserves ...............................................................................................................................13
1.3.1 Reserves Sub-Class .................................................................................................. 15
1.3.2 Reserves Status......................................................................................................... 16
1.4 Contingent Resources...........................................................................................................20
1.4.1 Contingent Resources Sub-Class ............................................................................. 20
1.4.2 Reclassification of Volumes ....................................................................................... 24
1.4.2.1 Evidence to Support a Reasonable Timetable for Development................24
1.4.2.2 Future Economics Meeting Defined Investment and Operating Criteria ....24
1.4.2.3 A Reasonable Expectation that there will be Market ..................................25
1.4.2.4 Production and Transportation Facilities.....................................................26
1.4.2.5 Legal, Contractual, Environmental and Socio-economic Concerns ...........26
1.4.2.6 Approval of the FDP by the Regulator and FID taken ................................27
1.4.2.7 Separate Line Item (SLI) .............................................................................27
1.5 Prospective Resources .........................................................................................................28
1.5.1 Prospective Resources Sub-Class ............................................................................ 28
1.5.2 Discovery Criteria / Requirements for Movement to Contingent Resources ............. 30
1.5.3 Definition of Possibility of Success and Chance of Discovery ................................... 31
1.6 Determination of Range of Uncertainty (Categorisation) ......................................................32
1.6.1 Methodologies............................................................................................................ 33
1.6.2 Analytical Procedures ................................................................................................ 36
1.6.3 Reserves (1P, 2P, 3P) ............................................................................................... 39
1.6.3.1 Analogy .......................................................................................................39
1.6.3.2 Volumetric Estimation .................................................................................40
1.6.3.3 Performance-Based Estimates ...................................................................49
1.6.3.4 Re-categorisation vs. Re-classification .......................................................70
1.6.4 Contingent Resources (1C, 2C, 3C) .......................................................................... 74
1.6.4.1 Analogues ...................................................................................................75
1.6.5 Prospective Resources (1U, 2U, 3U) ........................................................................ 77
1.6.5.1 Analogues ...................................................................................................77
1.7 Aggregation ...........................................................................................................................77
1.7.1 Aggregation Methods................................................................................................. 78
1.7.2 Aggregating Resources Classes ............................................................................... 78
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1.7.3 Aggregation of Volumes for Multi Target Prospects .................................................. 78

2 COMMERCIAL EVALUATION / ECONOMICS....................................................................80
2.1 Determination of Commerciality ............................................................................................80
2.2 Economic Limit ......................................................................................................................82
2.3 “Royalty” ................................................................................................................................84
2.4 Petroleum Arrangement Contract (PAC) – Tax Treatments .................................................84
2.5 Reserves and Resources Recognition..................................................................................85
3 ARPR VOLUME CLASSIFICATION AND REPORTING .....................................................86
3.1 Reserves ...............................................................................................................................86
3.1.1 Crude Oil .................................................................................................................... 86
3.1.2 Natural Gas, Associated Gas, and Condensate........................................................ 89
3.2 Contingent Resources...........................................................................................................93
3.3 Prospective Resources .........................................................................................................94
4 UNCONVENTIONAL RESERVES AND RESOURCES ......................................................95
4.1 Introduction ............................................................................................................................95
4.1.1 Discovery Test ........................................................................................................... 97
4.1.2 Chance of Success for Unconventional Reservoirs .................................................. 99
4.1.3 Extent of Discovery / Reserves Area ....................................................................... 100
4.1.4 General Principles for Classification and Categorisation ......................................... 102
4.2 Shale Gas............................................................................................................................106
4.2.1 In Place Estimation .................................................................................................. 106
4.2.2 Dynamic Methods .................................................................................................... 107
4.2.3 Principles for Resource Estimation .......................................................................... 110
4.3 Coal Bed Methane...............................................................................................................113
4.3.1 In-Place Estimation .................................................................................................. 114
4.3.2 Principle of Resource Estimation ............................................................................. 118
4.4 Basement Reservoir............................................................................................................119
4.4.2 Dynamic Methods .................................................................................................... 123
4.4.3 Principles for Resources Estimation ........................................................................ 126
4.5 Tight Gas .............................................................................................................................127
4.5.2 Dynamic Methods .................................................................................................... 127
4.6 Shale Oil ..............................................................................................................................128
4.6.2 Dynamic Methods .................................................................................................... 130
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4.7 Extra Heavy Oil....................................................................................................................130
4.7.2 Dynamic Methods .................................................................................................... 130
4.8 Bitumen ...............................................................................................................................131
4.8.2 Dynamic Methods .................................................................................................... 131
4.9 Oil Shale ..............................................................................................................................132
4.9.2 Dynamic Methods .................................................................................................... 133
5 COMPARISON OF THE SPE PRMS WITH OTHER SYSTEMS ......................................134
6 RESERVES & RESOURCES EVALUATION – BEST PRACTICES CHECKLIST ...........137
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Tables
Table 1: Relationship between Reserves Status and Project Maturity Sub-Class ......................................... 19
Table 2: Contingent Resources SPE PRMS Sub-Class Definitions................................................................ 20
Table 3: Contingent Resources PRrMS Sub-Class Definitions ....................................................................... 21
Table 4: Definition of Low, Best and High Estimates........................................................................................ 32
Table 5: Typical Analytical Procedures in PETRONAS ................................................................................... 38
Table 6: Theoretical b Values ............................................................................................................................ 52
Table 7: Guidelines for Analogs......................................................................................................................... 75
Table 8: Differences between Conventional and Unconventional Resources ................................................ 96
Table 9: Assessment Criteria for CBM Discovery Test (Example) .................................................................. 98
Table 10: Geological Chance of Success Factors for CBM and Shale Gas................................................. 100
Figures
Figure 1: SPE PRMS Resources Classification and Categorisation ..................................................................8

Figure 2: SPE PRMS Resources Classification and Categorisation (in PRrMS colour scheme).....................9
Figure 3: SPE PRMS Project Maturity Sub-Classes ........................................................................................ 12
Figure 4: Comparison of SPE PRMS and PRrMS Project Maturity Sub-Classes .......................................... 13
Figure 5: Reserves Sub-Class under PRrMS ................................................................................................... 16
Figure 6: Developed Non-Producing ................................................................................................................. 18
Figure 7: Guidelines for Gas Projects................................................................................................................ 26
Figure 8: Classification, Categorisation and PETRONAS Decision Gates ..................................................... 33
Figure 9: Resources Estimation Methodologies in PETRONAS ..................................................................... 36
Figure 10: Change in Uncertainty and Applicable Assessment Procedures over Time................................. 37
Figure 11: Volume Estimation – Guidelines for Ranges .................................................................................. 41
Figure 12: Fluid Contact Estimation – Guidelines for Ranges ......................................................................... 43
Figure 13: Net-to-Gross Uncertainty.................................................................................................................. 45
Figure 14: Porosity – Guidelines for Ranges .................................................................................................... 46
Figure 15: Water Saturation – Guidelines for Ranges...................................................................................... 47
Figure 16: Permeability – Guidelines for Ranges ............................................................................................. 48
Figure 17: Flow Diagram for DCA ..................................................................................................................... 51
Figure 18: b Value – Guidelines for Ranges ..................................................................................................... 53
Figure 19: DCA – Overall Guidelines for Ranges ............................................................................................. 56
Figure 20: The Havlena Odeh Method for GIIP Determination in Water Drive Reservoirs ............................ 58
Figure 21: Gas Material Balance: Guidelines for Ranges (Depletion Drive) ................................................... 59
Figure 22: Gas Material Balance: Guidelines for Ranges (Water Drive)......................................................... 60
Figure 23: Oil Material Balance: Guidelines for Ranges (Gas Cap Drive) ...................................................... 62
Figure 24: Oil Material Balance: Guidelines for Ranges (Natural Water Drive) .............................................. 62
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Figure 25: Best Case DCA to Support Reservoir Simulation........................................................................... 64

Figure 26: Scenario 1 – When an Endorsed and Updated Dynamic Model Exists that Supports the Current
2P Estimate (for Brown Fields Only) .......................................................................................................... 65
Figure 27: Scenario 2 – When an Endorsed and Updated Dynamic Model Exists that Supports the Current
2P Estimate (for Green Fields and Brown Fields with Initial Production Data Only) ............................... 66
Figure 28: Guidelines – QC Validation for Scenarios 1 and 2 ......................................................................... 67
Figure 29: Scenario 3 – When Dynamic Model Is Not Available or Not Yet Endorsed (For Producing Fields
or Approved Projects Only) ......................................................................................................................... 68
Figure 30: Scenario 4 – When Dynamic Model Is Not Available or Not Yet Endorsed (For Projects in
Contingent Resources Sub-Class 3, 4 Or 5 Only)..................................................................................... 68
Figure 31: Guideline 1 – Poor Performance Compared to DCA ..................................................................... 71
Figure 32: Guideline 2 – Performance not as Forecast by MBal or Simulation Model................................... 72
Figure 33: Multi Target Examples ...................................................................................................................... 79
Figure 34: Economic Limit.................................................................................................................................. 83
Figure 35: Schematic of Common Unconventional Reservoirs ....................................................................... 95
Figure 36: Resources Triangle .......................................................................................................................... 96
Figure 37: Recovery Factors vs. Well Spacing for Different Permeabilities .................................................. 101
Figure 38: Incremental Categories beyond a Discovery Well ........................................................................ 102
Figure 39: Incremental Scenario Method for Unconventional Reservoirs..................................................... 103
Figure 40: Rubber-Banding.............................................................................................................................. 104
Figure 41: Example Reserves Classification Booked for Certain Number of Wells and Area Size............. 105
Figure 42: Unconventional Reserves Growth ................................................................................................. 106
Figure 43: Uncertainty in Shale Gas Well Performance................................................................................. 108
Figure 44: Determining Range of Uncertainty in Shale Gas Wells................................................................ 109
Figure 45: Incremental Scenario for Horizontal Wells .................................................................................... 110
Figure 46: Example of Shale Gas Estimation from PETRONAS Own Assets ............................................. 111
Figure 47: Comparison Cash Flow for Conventional and Unconventional Resources ................................ 112
Figure 48: CBM Flow Mechanisms ................................................................................................................. 113
Figure 49: Typical CBM Production Profile ..................................................................................................... 114
Figure 50: Permeability Range of Selected CBM Basins around the World ................................................. 115
Figure 51: Estimating Recovery Factor for Unconventional........................................................................... 118
Figure 52: Basement Play Concepts ............................................................................................................... 119
Figure 53: Main Concepts of the Halo Model ................................................................................................. 121
Figure 54: Use of Seismic to Characterise Fractures in Basement Reservoirs ............................................ 121
Figure 55: Example of the BASROC Method in Vietnam .............................................................................. 122
Figure 56: Use of Different Seismic Attributes to Characterise Fractures in Basement Reservoirs ............ 123
Figure 57: Example of Reconciliation of Different Methods ........................................................................... 125
Figure 58: Water Influx Model .......................................................................................................................... 126
Figure 59: Typical Tight Gas Well Performance ............................................................................................. 128
Figure 60: Oil Crossover Concept in Shale Oil ............................................................................................... 129
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Figure 61: Bitumen from Production to Refining ............................................................................................. 132
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1 TECHNICAL EVALUATION OF RESERVES AND RESOURCES
The PETRONAS Reserves and Resources Management System (PRrMS) – Definitions &
Guidelines for Classifications of Petroleum Resources is based on the same fundamental principles
and philosophy as the SPE PRMS. The SPE PRMS is a fully integrated system that provides the
basis for classification and categorisation of all Petroleum Reserves and Resources. In June 2018
a revised version of the SPE PRMS was issued, version 1.01, and this PRrMS Applications Manual
document has been updated to be in line with the PRrMS 2019 and SPE PRMS 2018. Although
the system encompasses the entire Resources base, it is focused primarily on estimated
recoverable sales quantities. Because no Petroleum quantities can be recovered and sold without
the installation of (or access to) the appropriate production, processing, and transportation facilities,
SPE PRMS is based on an explicit distinction between (1) the development Project that has been
(or will be) implemented to recover Petroleum from one or more accumulations and, in particular,
the chance of commerciality of that Project; and (2) the range of uncertainty in the Petroleum
quantities that are forecast to be produced and sold in the future from that development Project.
This two-axis SPE PRMS system is illustrated in Figure 1. The same SPE PRMS system is also
shown in Figure 2, as per the PRrMS colour scheme.
Figure 1: SPE PRMS Resources Classification and Categorisation
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Figure 2: SPE PRMS Resources Classification and Categorisation (in PRrMS colour
scheme)
The PRrMS is a Project-based system, where a Project
“Represents the link between the Petroleum accumulation and the decision-making
process, including budget allocation. A Project may, for example, constitute the
development of a single reservoir or field, or an incremental development in a
producing oil field, or the integrated development of a group of several fields and
associated facilities with a common ownership. In general, an individual Project will
represent a specific maturity level at which a decision is made on whether or not to
proceed (i.e. spend money), and there should be an associated range of estimated
recoverable Resources for that Project.”1
Each Project is classified according to its maturity or status (broadly corresponding to its
chance of commerciality) using three main Classes, with the option to subdivide further using
Sub-Classes. The three Classes are: Reserves, Contingent Resources, and Prospective
Resources, with Reserves and Contingent Resources both referring to discovered recoverable
volumes, while Prospective Resources is applied to undiscovered recoverable volumes. The
range of uncertainty in the estimated recoverable sales quantities from that specific Project is
categorised based on the principle of capturing at least three estimates of the potential
outcome: Low, Best, and High estimates.
1 “Defining a Project”, SPE PRMS Application Guidelines Nov 2011, Page 8

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Ownership: PETRONAS vs. PCSB

The Project-based system has to be supported by ownership or entitlement of the Resources
wherein the corporate entity has the contractual rights to extract, process and market a
defined portion of the Petroleum Resources.
In Malaysia, this concept of ownership is different between PETRONAS (through its role as
the Regulator, i.e. MPM) and PCSB. MPM’s entitlement, as the custodian of all Petroleum
Resources in Malaysia, is as follows:
MPM HC (Oil or Gas) Reserves entitlement = “Cash payment” HC + PCSB Cost HC share +
PCSB Profit HC share + MPM Profit HC share (as per Production Arrangement Contract
(PAC).
PETRONAS Carigali Sdn. Bhd. (PCSB), as Contractor in Malaysia, and also when
participating in International Ventures, is only entitled to its contract share as defined in the
operating agreement (e.g. PSC).
This key difference is important in correctly classifying the Resources associated with
a Project.
1.1 Definition of a Project
Defining a Project unambiguously can be difficult because its nature will vary with its level of
maturity. A Project may involve a comprehensive FDP with full details on the development
concept, encompassing the recovery scheme, the number of development wells and their
locations, and the associated processing and evacuation facilities and pipelines where
applicable. A Project may also be the drilling of an exploration Prospect that could become a
commercial development if the well is successful. The assessment of the economic viability of
the exploration Project will still require a view of the likely development plan, even if it is only
in very conceptual terms based on analogues.
Definition of a Project in PETRONAS

In PETRONAS, a Project is distinguished by having production and cost forecasts (Capex
and Opex) and has the potential to generate a positive cash flow if it is successful. To qualify
as a Project, it should also have the first production date and production duration/life.
A Project should be technically supported by at least an analogue, but a more mature Project
(e.g. during the development phase) should have an associated material balance or dynamic
simulation model.
For a brown field, a Project should add incremental volumes to the base forecast (without
the Project).
Examples of Projects:
 An exploration Prospect with a notional development plan based on analogue.
 A development Project governed by the Upstream Project Management System (UPMS).
 An infill implementation opportunity based on a Full Field Review.
 Perforation of a zone to access behind casing opportunity (BCO).
For any Discovered Recoverable volumes (Reserves and Contingent Resources), the
volumes must be supported by Projects.
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1.2 Resources Classification
Under the SPE PRMS, each Project must be classified individually so that the estimated
recoverable sales quantities associated with the Project can be correctly assigned to one of
the three main Classes. Resources (including Prospective Resources) should always be
linked to specific Projects (as defined in Section 1.1 above) though it is recognised that the
level of Project definition will vary with project maturity.
The three Classes of Resources are: Reserves, Contingent Resources and Prospective
Resources. The distinction between the three Classes is based on the definitions of discovery
and commerciality as will be discussed in the next Sections. Projects (and their associated
recoverable quantities) may be sub-classified according to project maturity levels.
The SPE PRMS allows evaluators to adopt alternative Sub-Classes and project maturity
modifiers to align with their own decision-making process, but the concept of increasing
chance of commerciality should be a key enabler in applying the overall classification system
and supporting portfolio management. Under the PRrMS, PETRONAS has adopted its own
system of Sub-Classes within the Reserves and Contingent Resources classifications.
The project maturity Sub-Classes defined under SPE PRMS are shown in Figure 3 and then
a comparison between SPE PRMS and PRrMS project maturity Sub-Classes is shown in
Figure 4 In this comparison it can be seen that whereas SPE PRMS has 3 Sub-Classes for
Reserves (“On Production”, “Approved for Development” and “Justified for Development”),
PRrMS only includes the first 2 of these Sub-Classes as Reserves, whilst “Justified for
Development” is classified as Contingent Resources.
Details of the PRrMS Sub-Classification system for Contingent Resources are presented in
Section 1.4 of this Manual.
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Figure 3: SPE PRMS Project Maturity Sub-Classes
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Figure 4: Comparison of SPE PRMS and PRrMS Project Maturity Sub-Classes
1.3 Reserves
Reserves are those quantities of Petroleum anticipated to be commercially recoverable by

application of development Projects to known accumulations from a given date forward under
defined conditions. The Reserves classification represents the highest level of project maturity
and must further satisfy four criteria, i.e. they must be:
 Discovered
 Recoverable
 Commercial, and
 Remaining (as of the evaluation date).
Reserves are further categorised in accordance with the level of certainty associated with the
estimates and may be sub-classified based on project maturity and/or characterised by
development status.
Discovered recoverable volumes (Contingent Resources) may be considered commercially

producible, and thus Reserves, if the entity claiming commerciality has demonstrated firm
intention to proceed with development and such intention is based upon ALL of the
following criteria:
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 Evidence to support a reasonable timetable for development.

 A reasonable assessment of the future economics of such development Projects meeting
defined investment and operating criteria.
 A reasonable expectation that there will be a market for all or at least the expected sales
quantities of production required justifying development.
 Evidence that the necessary production and transportation facilities are available or can
be made available.
 Evidence that legal, contractual, environmental and other social and economic concerns
will allow for the actual implementation of the recovery Project being evaluated.
 Additionally, it requires the approval of a Field Development Plan (FDP) by the Regulator
or Host Authority and that a Final Investment Decision (FID) has been taken.
A reasonable time frame for the initiation of development depends on the specific
circumstances and varies according to the scope of the Project. In PETRONAS reasonable is
taken to generally mean 5 years based on the planning cycle. A longer time frame could be
applied where, for example, development of economic Projects is deferred at the option of the
producer for, among other things, market-related reasons, or to meet contractual or strategic
objectives. The use of a longer time frame than 5 years requires approval from the Reserves
Authority.
Secondly, “a reasonable assessment of the future economics, etc.” requires that economic
analysis has been undertaken to justify the development Project. The criterion that the
recovery of volumes classified as Reserves has to be economic is a fundamental principle of
the PRrMS.
With specific reference to “Improved Recovery” Projects the following quote is taken directly
from the SPE PRMS guidelines:
“Improved recovery projects must meet the same Reserves technical and commercial maturity
criteria as primary recovery projects.” The judgment on commerciality is based on pilot
project results within the subject reservoir or by comparison to a reservoir with analogous
rock and fluid properties and where a similar established improved recovery Project has been
successfully applied.
In principle therefore, the existing PRrMS guidelines will allow classification of an improved
recovery Project as Reserves, without pilot testing, provided that a suitable analogue can be
found.
All Condensate In-Place (CIIP) volumes together with the subsequent Condensate Resources
must be captured in ARPR. The recoverable Condensate volumes should include plant liquid
dropouts that have been allocated to fields and not only those volumes which are based on
the field Condensate/Gas Ratio (CGR), i.e. the gas and condensate rates measured at the
platform, and reconciled using data at the onshore slug catcher system.
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Reserves Criteria for PETRONAS

In PETRONAS, firm intention to proceed with development is considered to have
occurred when FDP approval has been obtained and the FID has been taken, at
which point the Project Teams should have addressed all the criteria above, by
answering a few key questions:
 Is the Project economic? Does the Project generate a positive cumulative net
cash flow based on the appropriate economic model? If the Project is
uneconomic for PCSB, but is evaluated to be economic for PETRONAS (e.g.
some strategic Projects), the same technical volumes will be classified as
Contingent Resources for PCSB and Reserves for PETRONAS.
 Has a market been secured for the produced hydrocarbon? This is especially
important in the production of gas, i.e. is the GSA or HoA in place? Is the
construction of production and hydrocarbon transport facilities due to begin?
 Is there reasonable expectation that all approvals will be in place? If there
are any identifiable areas of concern regarding receipt of all the necessary
approvals (e.g. regulatory, environmental) for a new development, the Project
should remain as Contingent Resources until such a time that the concern has
been addressed.
 Low, Best and High (or P90, P50 and P10) estimates characterised level of
certainty
1.3.1 Reserves Sub-Class
The SPE PRMS suggests 3 main Sub-Classes for Reserves classification: 1) On Production;
2) Approved for Development; and 3) Justified for Development. As shown in Figure 5, the
PRrMS only uses the first two of these Sub-Classes which are defined as follows:
On Production
This Sub-Class is self-evident in that the Project must be producing and selling Petroleum to
market as at the effective date of the evaluation.
However, if a field is on production but not economic, the volumes cannot be classified as
Reserves and must remain as Contingent Resources.
Approved for Development
For Projects within this Sub-Class all approvals/contracts should be in place, and capital funds
committed. Construction and installation of project facilities should be underway or due to start
imminently. Only a completely unforeseeable change in circumstances that is beyond the
control of the developers would be an acceptable reason for failure of the Project to be
developed within a reasonable time frame.
Justified for Development
In the SPE PRMS the “Justified for Development” Reserves Sub-Class sits just above the
threshold between Reserves and Contingent Resources. Reserves within this Sub-Class are
Projects where the development is justified on the basis of reasonable forecast commercial
conditions at the time of reporting, and there is a reasonable expectation that all necessary
approvals/contracts will be obtained. Although the SPE PRMS may consider that an FDP
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approval could be the necessary justification that all approvals will be obtained in a reasonable
timeframe, the PETRONAS PRrMS states that both FDP approval and an FID are required for
volumes to be classified as Reserves, and therefore the PRrMS classifies the volumes
classified under “Justified for Development” as Contingent Resources, i.e. similar to the
volumes under “Development Pending”.
Figure 5: Reserves Sub-Class under PRrMS
Reserves –
On Production
First Oil/Gas
Development Commences
Reserves –
Approved for
5 years
Development
Both FDP and FID approvals

have been obtained – submit
a RAM to PRG using the In-
Year Assurance template
Contingent
Resources
Sub-Class 1
1.3.2 Reserves Status
Estimated recoverable quantities associated with Projects that fully satisfy the requirements
for Reserves can also be subdivided according to their operational and funding status.
Subdivision by Reserves status includes the following status levels – Developed Producing,
Developed Non-Producing, and Undeveloped.
Developed Producing
Developed Producing Reserves are those Reserves expected to be recovered from

completion intervals which are open and producing at the time of the estimate.
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Developed Non-Producing
Developed Non-Producing Reserves includes both shut-in and behind-pipe Reserves. There
may be various reasons why Reserves may be Non-Producing but in all cases, the assumption
is made that production can be restored or initiated with relatively low expenditure compared
to the cost of drilling a new well (see Figure 6 for guidelines on the use of Developed Non-
Producing in PETRONAS).
Examples of Developed Non-Producing Reserves are volumes from:
1. Completion intervals penetrated at the time of the estimate but have not yet started
producing e.g. as a result of selective perforation.
2. Wells shut-in due to market (e.g. low price) or facilities (e.g. ullage conditions).
3. Wells not capable of production for mechanical reasons (e.g. retrievable safety valve
failure, gas lift availability).
Behind Casing (also known as Behind Pipe) Reserves are expected to be recovered from zones
in existing wells, which will require additional completion work or future recompletion prior to the
start of production. Behind Casing Opportunities (BCO) and production enhancement jobs that are
technically justifiable can be booked either under Reserves or Contingent Resources following this
5-year guideline:
 If the activity planned to recover the BCO volumes is to be executed within 5 years of the
booking, then the volumes should be captured under Reserves.
 If the activity is planned to be executed after 5 years, then the volumes should be captured
under Contingent Resources, either in Sub-Class 3 (CR3) or Sub-Class 5 (CR5),
depending on the economics and feasibility of the volumes.
The purpose of this guideline is to ensure that all potential opportunities are captured and to reflect
the effort that will be required to mature these volumes in the future.
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Figure 6: Developed Non-Producing
Behind Casing Reserves (Developed Non-Producing)
Perform studies on the

Have the reservoirs
reservoir to determine
been proven to be
No productivity. De-book
commercially
volumes if not productive.
productive?
Yes
Perform studies on how to

Is the workover No technically access the
technically feasible? reservoirs. De-book volumes
if not technically feasible.
Yes
Does the workover

When will the activities
cost more than 60% of
No be executed?
the cost for a new
well?
Locked in the More than

next 5 years 5 years
Yes
Create FDP or equivalent

technical proposal. Book volumes Book volumes
Book volumes as CR. as Reserves – as CR.
Project requires FDP & FID Developed Non-
approval before volumes can Producing.
be booked as Undeveloped
Reserves.
Developed Non-Producing Reserves are “Opex” Projects, while Contingent Resources

Projects require additional Capex spending.
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Undeveloped Reserves
In general, Undeveloped Reserves are quantities expected to be recovered through future

investments, which have been sanctioned.
Examples of Undeveloped Reserves are volumes from:
1. Undrilled new wells (approved and sanctioned, i.e. post FDP approval and FID) in known
accumulations.
2. Deepening of existing wells to a different (but known) reservoir.
3. Infill wells that will increase recovery.
4. Wells where there is a large expenditure (more than 60% of the drilling of a new well) to
re-complete the well or install facilities for primary and/or improved recovery Projects.
Undeveloped Reserves in PETRONAS

In PETRONAS, as soon as the FDP has been approved and FID has been taken, volumes
will be reclassified as Reserves – Approved for Development. The status will be Undeveloped
Reserves.
As the drilling program is executed, the status of the drilled and completed well(s) will change
from Undeveloped to Developed Non-Producing. Volumes associated with undrilled wells
within the same FDP will remain under the Undeveloped Reserves status until they are drilled
and completed.
The sub-division of Reserves by status and project maturity can be applied together, but they
are, to some degree independent of each other. The project maturity Sub-Classes are linked
to the status of the Project as a whole, whereas Reserves status considers the level of
implementation of the Project, essentially on a well-by-well basis. The relationship between
the two sub-divisions may be best understood by considering all the possible combinations,
as shown in Table 1 below.
Table 1: Relationship between Reserves Status and Project Maturity Sub-Class
Reserves Status
Project Maturity
Sub-Class Developed Developed
Undeveloped
Producing Non-Producing
On Production
Approved for Development
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1.4 Contingent Resources
As mentioned above, the Contingent Resources definition shares three of the four main criteria
which define Reserves, the exception being commerciality, i.e. they must be:
 Discovered
 Recoverable, and
 Remaining (as of the evaluation date).
1.4.1 Contingent Resources Sub-Class
The SPE PRMS suggests 4 main Sub-Classes for Contingent Resources – Development
Pending, Development On Hold, Development Unclarified and Development not Viable, as
defined in Table 2 below and shown in Figure 3.
Table 2: Contingent Resources SPE PRMS Sub-Class Definitions
Development Pending
A discovered accumulation where Project activities are on-going to justify commercial
development in the foreseeable future and to resolve contingencies and to improve
chance of commerciality.
Development On Hold
A discovered accumulation where Project activities are on hold and/or where justification
as a commercial development may be subject to significant delay with major non-
technical contingencies and reasonable chance of commerciality.
Development Unclarified
A discovered accumulation where Project activities are under evaluation and where
justification as a commercial development is unknown based on available information.
Development Not Viable

A discovered accumulation for which there are no current plans to develop or warrant
any further appraisal activities to acquire additional data at the time because of limited
production potential and have low chance of commerciality.
The PRrMS, while following the SPE PRMS concept of increasing chance of commerciality,
provides greater granularity by defining five Sub-Classes which replace the four suggested by
SPE PRMS. Also, as mentioned in Section 1.3.1, the SPE PRMS Reserves Sub-Class of
“Justified for Development” is included under Contingent Resources in the PRrMS. Figure 4
shows the mapping comparison between the SPE PRMS and the PRrMS. It should be noted
that PRrMS Sub-Class 3 includes projects that can be considered as “Development On Hold”
and “Development Unclarified”, and therefore to show the correct mapping between the two
systems, the SPE PRMS “Development Unclarified” Sub-Class has been moved above the
“Development On Hold” Sub-Class in Figure 4.
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In general, it should be reiterated that the PRrMS is a “Project-based” system and as such all
Contingent Resources should be linked to a specific Project. As discussed in Section 1.1, this
requires there to be production, Capex and Opex forecasts associated with all Contingent
Resources volumes which can be sub-classified in Table 3.
Table 3: Contingent Resources PRrMS Sub-Class Definitions
Sub-Class 1 (CR1)
Discovered Resources associated with a project for which an active FDP Team is in
place and work has started, or is ongoing, but that is yet to achieve both FDP approval
and FID for Malaysia and International. A project can be considered as “Justified for
Development” following FDP approval, but the associated volumes will remain as
Contingent Resources until the FID has also been taken.
The volumes may come from the Reserves which cannot be produced and/or approved
Projects that cannot be executed within the reasonable period of 5 years due to for
example security threats. Refer to Section 1.4.2.1.
Sub-Class 2 (CR2) This is only applicable to PCSB.

The Discovered Resources (Reserves and Contingent Resources) associated with the
extension of an existing PAC/GSA/HOA or other contractual arrangement. These
Resources should have economic potential for production and/or development with
extension of existing PAC.
There should be a reasonable expectation based on historical precedent that the
PAC/licence will be extended (see Guidelines on definition of “reasonable expectation”
and treatment of Resources beyond production licence expiry).
Sub-Class 3 (CR3)
These are volumes where development of Discovered Resources with economic
potential are on-hold due to any of the following reasons:
 Potential improved recovery project of existing reservoirs within developed or
producing fields which may be on hold due to a lack of resources (human, funds,
facilities etc.) and which requires separate sanction to be developed.
 Potential improved recovery project in producing reservoirs or fields where a Pilot
test has not been successfully demonstrated, or in the absence of analogues for
similar rock and fluid properties, or it is not reasonably certain that the project will
proceed for a particular reason, e.g. a short remaining PAC/PSA period.
 Undeveloped reservoirs within developed or producing fields which may be on hold
due to a lack of resources (human, funds, facilities etc.) and which require separate
project sanction to be developed. Examples are an infill well, or development of
deeper gas reservoir in a producing oil field or shallower heavy oil reservoir in an oil
or gas field, or behind casing opportunities (BCO). For BCO guidelines refer to
Section 1.3.2.
 Non-associated Gas Resources (including expected recoverable condensate) that
are yet to have a GSA/HOA in place, e.g. green fields in a gas cluster development.
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 Discovered Resources which require further evaluation and/or appraisal, and for
which no activity is in place to firm up the development due to various reasons, e.g.
lack of resources (human, funds etc.).
These are volumes where development of Discovered Resources with economic potential is
being evaluated but is unclarified at this time:
 A project seen to have potential for eventual commercial development following a
discovery, but for which further appraisal/evaluation activities (e.g. drilling, seismic
etc.) are ongoing to clarify the potential for eventual commercial development.
NOTE: Volumes in the CR3 Sub-Class should only remain in this category for 5 years from
the date that they were registered. If no effort has been made to mature these volumes during
this time, then they should be downgraded to a lower classification or de-booked.
Sub-Class 4 (CR4)
Flare or vent gas where there is an identified project to capture those gas volumes in
the future for sales, and the volumes that are booked should be those forecast to be
recovered after implementation of the said project.
Associated Gas Resources that are re-injected into the reservoir for which there is a
future plan for monetisation.
A future “gas cap blowdown” project that includes a notional plan to monetise that gas.
Once these projects mature and have an active team working towards obtaining FDP
and FID approval, it is expected the volumes will be upgraded to Sub-Class 1, reflecting
their maturity.
All future flare and vent gas volumes without any gas gathering projects identified should be
reported as a Separate Line Item (SLI) and must not be included in the reported Contingent
Resources. See Section 1.4.2.7 for details on what should be captured as a Separate Line
Item (SLI).
In the event that there is Zero Flaring, or a venting policy is enforced and a gas gathering
project is identified, then all the said gas volumes are to be reported under this Sub-
Class.
Sub-Class 5 (CR5)
Volume of Discovered Resources associated with a project that is uneconomical at the
time of reporting:
a. Volume of Reserves based on the year end (ARPR) economic evaluation, which
is beyond the PETRONAS Group (EP) or PCSB economic limit at the point of the
evaluation However, with further optimization on cost, i.e. OPEX reduction, the
Economic Limit could be extended, which will bring the volume back to Reserves.
b. New Discovery or Existing Discovered Resources projects that are deemed to be
non-commercial, or not viable, unless there are major changes in technological
and/or economic conditions taking place, and for which there are no plans to
acquire additional data for further evaluation, i.e. projects that require USD200
per barrel or a reduction in cost by 50% to make them economic.
See Section 3 for the definition of “uneconomical” and the treatment of volumes beyond
the economic limit.
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Guidelines on “reasonable expectation”

This applies to PCSB only. For Contingent Resources to be classified in Sub-Class 2,
Project Teams should be able to demonstrate reasonable expectation that the production
licence (e.g. PAC) will be extended.
1. Reasonable expectation can be demonstrated through historical precedent, where there
is a high chance that the Regulator extends licences with Operators towards licence
expiry. An example for this is in Malaysia where historically the Regulator (MPM) has a
consistent track record of extending PCSB production licences. Current outlook as
examples of possible PAC/PSA extension for PCSB International operations are as
below. However, the status has to be reviewed on an annual basis for the purpose of
booking the volumes beyond PAC/PSA:
 Indonesia – extension by the Regulator, SKK Migas, is provided on a case by case
basis, but historically PACs are not extended to Operators.
 Myanmar – only recently opened up its oil and gas industry. No historical cases of
production licence extension by the Regulator, Myanmar Oil and Gas Enterprise.
 Australia – the State and/or Commonwealth government regulatory bodies have a
consistent record of extending production licences.
 Turkmenistan – although there are cases of PACs being extended recently by the
State Agency (State Agency for the Management and Use of Hydrocarbon
Resources), the situation is highly unpredictable.
 Sudan – PSA extension is potentially possible.
 South Sudan – there are cases of PSA extension recently despite volatile political
climate.
 Canada – the Provincial and Federal regulatory bodies have a consistent record of
extending production licences.
2. For the PAC/PSA with the Extension Clauses, it should be demonstrated that the process
that eventually lead to the licence extension such as discussion or negotiation with Host
Authority is on-going and/or application letter submitted to the Host Authority, with
reasonable expectation that the outcome will be successful as condition for the volume
post PAC/PSA to be booked as Contingent Resources Sub-Class 2. Such process
normally starts when it is near or approaching PAC/PSA expiry.
3. Signed agreements that will eventually lead to a PAC/PSA licence extension e.g. Heads
of Agreement (HoA) or Letter of Intent (LoI) from Regulator can also be used to
demonstrate reasonable expectation. In such instances the volumes may be classified
as Reserves provided that they fulfil the other commercial criteria.
In the case of (2) and (3) guidance should be sought from the PRG or the authorized
personnel if the Resources Estimator believes that the volumes should be classified as
Contingent Resources or Reserves respectively.
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1.4.2 Reclassification of Volumes
As described above, the difference between Reserves and Contingent Resources is only in
terms of commerciality, with the latter being non-commercial for a number of possible reasons.
The movement of volumes between these two Classes, therefore, must be based on reasons
of commerciality only as per the following criteria.
 Evidence to support a reasonable timetable for development.
 A reasonable assessment of the future economics of such development Projects meeting
defined investment and operating criteria.
 A reasonable expectation that there will be a market for all or at least the expected sales
quantities of production required justifying development.
 Evidence that the necessary production and transportation facilities are available or can
be made available.
 Evidence that legal, contractual, environmental and other social and economic concerns
will allow for the actual implementation of the recovery Project being evaluated.
 Additionally PCSB and PETRONAS require the approval of an FDP by a Regulator and
an FID to have been taken (exception for Committed Gas Fields with a signed GSA/HoA
– refer Section 1.4.2.3).
1.4.2.1 Evidence to Support a Reasonable Timetable for Development
A reasonable time frame for the initiation of development depends on the specific
circumstances and varies according to the scope of the Project. In PETRONAS reasonable is
taken to generally mean 5 years based on the planning cycle. A longer time frame could be
applied where, for example, development of economic Projects is deferred at the option of the
producer for, among other things, market-related reasons, or to meet contractual or strategic
objectives.
In all cases, the justification for classification as Reserves should be clearly documented. The
use of a longer time frame than 5 years requires approval from the Reserves Authority.
Reserves should be reclassified to Contingent Resources CR1 when it cannot be produced or
approved Projects cannot be executed within reasonable period of 5 years due to for example
security threats. Refer to Section 1.4.1.
1.4.2.2 Future Economics Meeting Defined Investment and Operating Criteria
A Project has to be economic to be classified as Reserves.
The economic criteria may be different between one Project to another and between one
corporate entity to another e.g. PCSB vs. MPM.
If the Project is uneconomic for PCSB, but is evaluated to be economic for PETRONAS (e.g.
some strategic projects) the volumes can be classified as Reserves for PETRONAS only –
and provided that the other criteria are met.
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1.4.2.3 A Reasonable Expectation that there will be Market
For Contingent Resources to be reclassified as Reserves, the key conditions, or

contingencies, that prevented commercial development must be clarified and removed as
discussed in Section 1.3, and repeated above.
As oil is a replaceable commodity, Market is assumed to be in place, unless there are specific
sanctions, quotas or curtailments that restrict access to the Market.
For gas Projects in the PETRONAS portfolio a Gas Sales Agreement (GSA) or Head of
Agreement (HoA) that leads to a signed GSA is required in order to demonstrate that there is
a reasonable expectation of Market. Only volumes contracted in the GSA or HoA can be
classified as Reserves, with the remaining volumes classified as Contingent Resources.
However, in the event that PETRONAS is obligated to provide the energy security to the
country, PETRONAS Group (EP) through MPM as the resource owner for Malaysia can still
book the volume beyond GSA or HoA as Reserves.
The gas fields to be developed for the GSA or HoA can be divided into two – committed and
uncommitted fields. The classification of volumes from the two types of fields is different.
1. Committed fields are those named in the GSA or HoA and the gas Seller (i.e. Operator) is
obliged to supply the gas from the identified fields.
Once the GSA or HoA is signed, the PRrMS allows sales volumes from the committed gas
fields to be booked as Reserves, even without FDP approval and FID.
2. Non-committed fields are either (i) those named in the GSA or HoA, but are not currently
required to meet the total GSA or HoA volumes (in the future these named fields could
become committed fields), or (ii) those not named in the GSA or HoA and included at a
later date.
Volumes from non-committed fields shall not be included under Reserves until such field
is included under GSA or HoA and/or FDP approval and FID is received.
In all cases, the booked Reserves volumes should never exceed the contracted amounts
(ACQ), unless historical precedence is there to support volumes consistently being sold
above the ACQ.
The same principle applies to swing fields. Only that portion of the swing field sales volumes
required to meet total GSA or HoA can be included as Reserves. All other volumes associated
with that field should be captured as Contingent Resources.
For GSAs which include no penalty for a shortfall in production, any shortfall in volumes that occurs
below the GSA must be booked as Contingent Resources because there is no obligation for the
operator to cover this shortfall. However, if there is a commitment in the PAC then the volumes can
be booked as Reserves because the operator is then obliged to source any shortfall from
elsewhere.
Refer to the Guidelines shown in Figure 7 for gas projects.
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Figure 7: Guidelines for Gas Projects
No Book volumes from the

Has the GSA
committed and non-committed
been signed?
fields as Contingent Resources
Yes
Separate the gas volumes based

Committed
on its source – i.e. committed
and non-committed fields
Non- Book associated volumes as

Committed Reserves
Has FDP been Yes

approved and
FID taken?
No
Book associated volumes as
Contingent Resources
1.4.2.4 Production and Transportation Facilities
There should be evidence that the necessary production and transportation facilities are
available or can be made available. It should be demonstrated that:
i. Existing facilities have the ullage or the capacity to handle the expected production.
ii. New or upgraded facilities are approved or will be approved for implementation of the
project.
iii. It should be noted that all Reserves estimates must be constrained by the technical
limits of surface facilities, e.g. pipeline turn down rate, minimum compressor intake,
facility design life, hub limit etc.
1.4.2.5 Legal, Contractual, Environmental and Socio-economic Concerns
There should be evidence that the legal, contractual, environmental or other social-economic
concerns which will allow for the actual implementation of the recovery project are being
addressed and that all required internal and external approvals are forthcoming.
On the legal and contractual for example, once the contract extension or new contract is
approved by the Regulator, the volume can be booked as Reserves.
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For the environmental aspect, approval from regulatory body or authority is mandatory before
the volume can be booked as Reserves.
1.4.2.6 Approval of the FDP by the Regulator and FID taken
To be included in the Reserves class, a Project must be sufficiently defined to meet the
commerciality criteria. All required internal and external approvals must have been obtained,
and there is evidence of firm intention to proceed with development within a reasonable
time frame of generally 5 years. PETRONAS considers that FDP approval, or any equivalent
techno-commercial proposal approved by the Regulator, and that an FID has been taken are
the necessary justifications that these requirements have been met. Any exceptional project
for which an FID has been taken, but the FDP has been replaced by an equivalent techno-
commercial proposal, will require approval by the Reserves Authority before the
corresponding volumes can be classified as Reserves.
1.4.2.7 Separate Line Item (SLI)
Represent a forward looking forecast for some Resource volumes which are categorised as a
Separate Line Item (SLI) to indicate that the molecules are not able to be monetised based on an
“as of a given date” reporting, but rather will be used for other purposes such as:
i. Flare/Vent: Gas volumes forecasted to be flared and vented from existing, and new
projects.
ii. Fuel, also known as Consumed in Operations (CiO) in SPE PRMS June 2018, version
1.01: Oil and Gas volumes forecasted to be used as fuel for petroleum operations
which substitutes normal fuel that Operators would otherwise have to purchase, e.g.
diesel.
iii. Re-injection: Gas volumes used for re-injection for pressure maintenance or to recover
oil, e.g. an EOR scheme, where there is no current plan for the gas to be monetised in
the near future.
iv. Post PAC/GSA: Applicable for International assets where there is no historical
precedence and evidence to show that a PAC/GSA will be extended, these volumes
can be captured under SLI. This is to provide support for any future contract
negotiations and to strategise for production acceleration.
v. Oil and Gas volumes below the minimum facilities operating rate, i.e. Turn Down Rate
(TDR) or Minimum Compressor Limit (MCL), for which there is no current project, are
to be recorded under SLI.
vi. Potential Recovery Factor (RF) improvement opportunities: additional volumes that
have been identified as recoverable through the use of Improved Oil Recovery (IOR)
techniques such as waterflood, gas injection etc. It is expected that these volumes will
be matured rapidly into Contingent Resources. They will be monitored regularly, and
removed from SLI if no progress has been made within a 2-year period.
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1.5 Prospective Resources
Prospective Resources are those quantities of Petroleum estimated, as of a given date, to be

potentially recoverable from undiscovered accumulations by application of future development
Projects.
 The estimated quantities are categorised into Low Estimate, Best Estimate and High
Estimate according to the level of confidence associated with the estimates. If determined
probabilistically, these estimates are equivalent to a probability of at least 90%, 50% and
10% respectively, that the estimated quantities will be recovered.
 Prospective Resources volumes can be associated with the possibility of geological
success (Possibility of Success – PoS) which is the chance of finding that quantity of
recoverable hydrocarbon between the maximum and minimum (defined as P1 and P99)
values. The Possibility of Success is established based on technical assessment of key
geological variables (e.g. trap, reservoir, and source). The term “Prospective Resources”
should be reported as an unrisked estimate; the assigned risk factor, i.e. the Possibility
of Success, should be reported alongside each estimate.
 In principle, the technical definitions for these categories are the same as for Reserves in
terms of reflecting a range of uncertainty. The guiding principle still remains the same; the
Low Estimate should be derived using the highest confidence data and vice versa, the
High Estimate derived from the least confidence data.
 Prospective Resources are Project based and as such should be accompanied by a cost
and production forecast, based on a notional development plan. It is understood that this
plan will be immature, and could be based on analogues.
1.5.1 Prospective Resources Sub-Class
Prospective Resources have three Sub-Classes: 1) Play Concept; 2) Lead; and 3) Prospect,
in increasing order of maturity. These are defined as follows:
Play Concept
A concept or idea based on structural trend/feature, or play based on a geological model associated
with possible trapping of hydrocarbon, which is not (yet) supported by any specific Prospect or
Lead.
A Play Concept should include key elements of a postulated petroleum system such as petroleum
charge system, reservoir-seal formation pairs and trap type and be related to geodynamic,
sedimentary and tectonic events that allow it to be placed in its geological context.
Note that a Play Concept is conceptual in nature, it may be matured through further study, data
acquisition and drilling into a known Play which is defined by the United States Geological Survey
(USGS) as:
“A Play is defined as a set of known or postulated oil and or gas accumulations sharing similar
geologic, geographic, and temporal properties such as source rock, migration pathways, timing,
trapping mechanism, and hydrocarbon type”.
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PETRONAS’ Play-based Exploration (PBE), March 2016 defined Play as:
“A Play is a stratigraphic interval containing a number of prospect objectives and discovered pools
of one or more trapping configurations all of which share a common geological history in terms of
charge (Source, timing, migration). The Play is separated from younger and older plays by regional
seals and the geographic extent of the play is defined by mappable areal extent of the defined
stratigraphic interval within which the juxtaposition of a primary reservoir-seal pair is known at some
degree of certainty”
A known Play may therefore contain petroleum accumulations at different stages of maturity e.g.
discovered accumulations and producing fields as well as Prospects and Leads.
Volumes associated with Play Concept are not reported in the ARPR.
Lead
“A Project associated with a potential accumulation that is currently poorly defined and
requires more data acquisition and/or evaluation in order to be classified as a Prospect.”2
A Lead is a potential accumulation or possible hydrocarbon trap that is poorly defined due to limited
data or poor coverage of 2D or 3D seismic and requires data acquisition and further evaluation
before it could be mature into a Prospect. It should include the following criteria:
 Structure map exists.

 Key risks identified.
 Volumetric range estimated as per Hydrocarbon Resources Assessment (HRA) Guidelines –
July 2011. However, volumetric estimates for Lead are only indicative of relative size (wide
range).
Note that not all Leads will become Prospects for various reasons including technical disapproval,
timing issues, insufficient data or resources etc. The distinction between a Lead and Prospect is
based on project maturity, hence, a Lead is not a poor or high risk Prospect.
Prospect
“A Project associated with an undrilled potential accumulation that is sufficiently well defined
to represent a viable drilling target”3
A Prospect is a potential accumulation that is well defined and has a mappable rock volume on the
basis of sufficient geological and geophysical data. It should include the following criteria:
 Well-defined structure map.

 Full risk assessment and petroleum system analysis.
 Volumetric range estimated as per the Hydrocarbon Resources Assessment (HRA) Guidelines
– July 2011, with key uncertainties quantified and documented.
2 “Reference Terms”, SPE PRMS June 2018, Version 1.01, Page 33

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 Must meet acceptable commercial criteria, i.e. Minimum Economic Field Size (MEFS), which
refers to the minimum required recoverable hydrocarbon volume necessary to make the project
an economic success taking into consideration the most likely development scenario and the
full project life cycle. Important variables in MEFS estimation include the commodity price (oil,
gas, condensate, LNG), Capex & Opex, production forecast, existing infrastructure, recovery
by well and the fiscal terms. MEFS estimation could be based on a recent field development
as an analogue or a conceptual development plan, i.e. a graphical method.
Prospective Resources in the ARPR

To be consistent with the definition of a Project discussed in Section 1.1, all Prospective
Resources bookings in the ARPR must be supported by production and cost (Capex and
Opex) forecasts. The development plan may be notional, based on analogues.
1.5.2 Discovery Criteria / Requirements for Movement to Contingent Resources
A discovery is defined as follows:
“A discovered petroleum accumulation is determined to exist when one or more exploratory

wells have established through testing, sampling, and/or logging the existence of a significant
quantity of potentially recoverable hydrocarbons and thus have established a known
accumulation. In the absence of a flow test or sampling, the discovery determination requires
confidence in the presence of hydrocarbons and evidence of producibility, which may be
supported by suitable producing analogues. In this context, “significant” implies that there is
evidence of a sufficient quantity of petroleum to justify estimating the in-place quantity
demonstrated by the well(s) and for evaluating the potential for commercial recovery.”4
There are several key points of note included in this definition:
 This definition intentionally does not require a flow test in order to establish a discovery.
Although a flow test is preferred and will often be the key data for the definition of a
discovery, it is possible to use a good analogy.
An analog in this situation might include the same reservoir formation from a nearby tested
or producing field. Another example might be a series of stacked reservoirs with the same
reservoir characteristics which are not all tested individually.
Key characteristics that allow an analogue to be used in these circumstances, which would
usually only include reservoirs of the same age and close geographical proximity are:
- Structural Configuration
- Lithology/Depositional Environment
- Nature and degree of heterogeneity
- Net thickness and net-to-gross ratio
- Petrophysics of the rock-fluid system
- Initial pressure and temperature
- Reservoir fluid properties and drive mechanism
- Spatial relationship between free gas, oil and aquifer at initial conditions

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 In some instances, it may nevertheless be considered that logging alone would not be
considered sufficient to identify a discovery since some indication of fluid type and
producibility will normally be required to define the existence of a “significant quantity of
potentially recoverable hydrocarbons”.
 In this context, “significant” implies that there is evidence of a sufficient quantity of

Petroleum to justify estimating the in-place volume demonstrated by the well(s) and for
evaluating the potential for economic recovery. There is therefore a subjective and variable
element to the definition of a discovery. What is considered “sufficient quantity of
Petroleum” and therefore “significant” may vary by location e.g. onshore vs. deep water
and also by company.
A discovery is supported if:

 There is a documented plan with supporting evidence of future work to study the
accumulation, further asses the volumetric range and potential appraisal.
 If additional study is planned, with appropriate supporting evidence, such as timing,
resources and deliverables, an accumulation can be called a discovery and volumes
associated with it classified as Contingent Resources and assigned an appropriate Sub-
Class.
 Volumes can be classified as Contingent Resources in an appropriate sub-class.
A discovery is not supported if:

 No further study is planned, especially if the acreage is of no further commercial interest
such that it would be relinquished.
If the drilled accumulation is small and clearly sub-commercial at the time of the assessment,
such that no further work is planned at the time, it does not necessarily mean that it is not a
discovery. If the accumulation has potential to be commercialised at some time in the future
due to changes in conditions (technology, subsurface interpretation, prices, costs, market,
aggregated developments etc.), it can be classified in the appropriate Contingent Resources
Sub-Class, e.g. CR5b, and retained within the ARPR for potential future development.
1.5.3 Definition of Possibility of Success and Chance of Discovery
Both of the following terms are used in the industry: Possibility of Success (PoS) and Chance
of Discovery (CoD). However, the concepts and definitions related to them are different, as
defined below:
 Possibility of Success is the chance of finding volumes within the pre-drill volumetric range,
defined as the P99 to P1 range. The purpose of PoS is to assess how good the pre-drill
estimates were.
 Chance of Discovery is defined as the chance of encountering “a significant quantity of
potentially recoverable hydrocarbons”. The purpose of CoD is to assess whether an
accumulation has any potential for commercial development.
In most situations, PoS and CoD will be the same and most accumulations will likely meet
both sets of criteria. There may also be situations that satisfy either one, but not the other. In
PETRONAS only the term Possibility of Success is used by Exploration to determine whether
or not the post-drill outcome falls within the range from the P99 to the P1 of the pre-drill
estimate. Commerciality is defined through use of the Minimum Economic Field Size (MEFS)
as described previously in Section 1.5.1.
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1.6 Determination of Range of Uncertainty (Categorisation)
The horizontal axis in the Resources Classification System shown in Figure 1: defines the
range of uncertainty in estimates of the quantities of recoverable, or potentially recoverable,
Petroleum associated with a Project. Uncertainty in Resources estimates is best
communicated by reporting a range of potential results. This range is characterised by three
specific scenarios reflecting Low, Best, and High Case outcomes from the Project which define
the three specific categories associated with the Project. The terminology (category names)
is different depending on which class is appropriate for the Project, but the underlying principle
is the same regardless of the level of maturity. The definitions of Low, Best and High estimates
are presented in Table 4 below.
Table 4: Definition of Low, Best and High Estimates
This is considered to be a conservative estimate of the quantity that will

actually be recovered from the accumulation by the Project.
Low
Estimate If probabilistic methods are used, there should be at least a 90% probability
(P90) that the quantities actually recovered will equal or exceed the Low
estimate.
This is considered to be the best estimate of the quantity that will actually
be recovered from the accumulation by the Project. It is the most realistic
Best assessment of recoverable quantities if only a single result were reported.
(P50) that the quantities actually recovered will equal or exceed the Best
estimate.
This is considered to be an optimistic estimate of the quantity that will

actually be recovered from the accumulation by the Project.
High
(P10) that the quantities actually recovered will equal or exceed the High
estimate.
As shown in Figure 1, the Low, Best and High estimates for Reserves are designated as
Proved (1P), Proved plus Probable (2P), and Proved plus Probable plus Possible (3P),
respectively. The equivalent terms for Contingent Resources are 1C, 2C, and 3C, while the
terms 1U, 2U, and 3U are used for Prospective Resources in the PRrMS.5
The critical point in understanding the application of the PRrMS is that the designation of
estimated recoverable quantities as Reserves (of any category), or as Contingent Resources
or Prospective Resources, is based solely on an assessment of the maturity (or commerciality)
of an identified Project.
In contrast, the subdivision of Reserves into 1P, 2P, and 3P (or the equivalent incremental
quantities) is based solely on considerations of uncertainty in the recovery from that specific
Project (and similarly for Contingent/Prospective Resources). The difference between
classification and categorisation, and their relationship with the various decision gates in
PETRONAS, is summarised in Figure 8 below.
5
In the SPE PRMS June 2018, Version 1.01, 1U, 2U and 3U are defined as P90, P50, P10 respectively.
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It should be noted that the level of uncertainty associated with each category is the same
across all 3 Classes, so that, for instance, a 2C estimate carries the same level of confidence,
from a technical recovery perspective, as a 2P estimate.
Figure 8: Classification, Categorisation and PETRONAS Decision Gates
1.6.1 Methodologies
There are several different approaches to estimating the range of uncertainty in recoverable
quantities for a Project but they fall broadly under three categories – deterministic,
geostatistical and probabilistic. The SPE PRMS 2018 added geostatistical as another method
which can be applied in combination to ensure that results of the methods are reasonable.
Although frequently viewed as being different methodologies, there is a relationship between
the different approaches in that a deterministic estimate is a single discrete scenario and/or
realization within a range of outcomes that could be derived by geostatistical and probabilistic
analysis.
In principle, the range of uncertainty defined by the different methodologies should be a

function of the project maturity level and the existing state of knowledge, influenced mainly by
the quality and quantity of the data available and consequently, close correspondence of
results should be expected even if different methodologies are applied to the same dataset.
In practice, this often does not occur due to misunderstanding or misapplication of the
methodology employed and it is always good practice to benchmark the different approaches
against each other.
Note: In the SPE PRMS June 2018, Version 1.01, document the “Resources Assessment
Methods” chapter has been updated. SPE is now preparing a new version of the “Guidelines
for Application of the Petroleum Resources Management System”, which may be issued in
near future. Until those guidelines have been issued the “Methodologies” section in this
PRrMS Applications Manual remains aligned with the current SPE PRMS document
“Guidelines for Application of the Petroleum Resources Management System”, published in
November 2011.
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Summary descriptions of the various methods from each category are presented as follows:
Deterministic
In the deterministic method, quantities are estimated by taking a discrete value or array of
values for each input parameter to produce a discrete result. For the low-, best- and high-case
estimates, the internally consistent deterministic inputs are selected to reflect the resultant
confidence of the project scenario and the constraints applied for the Resources category and
Resources class. A single outcome of recoverable quantities is derived for each deterministic
increment or scenario. Two approaches are included in the deterministic method—the
scenario (or cumulative) method and the incremental method—and should yield similar
results.
Deterministic (scenario)
In the deterministic scenario method, the evaluator provides three estimates of the quantities
that reflect a Low, Best and High estimate to be recovered from the project being applied to
the accumulation. Estimates consider the full range of values for each input parameter (e.g.
average porosity) based on available engineering and geoscience data, but one set is selected
that is most appropriate for the corresponding Resources confidence category. A single
outcome of recoverable quantities is derived for each category. Thus, low, best and high
estimates for the total project reflect uncertainty and consider confidence constraints of the
categories. The low case should take into account specific choices for some variables (e.g.
contact assumptions).
This methodology is most commonly applied to Projects at higher project maturity levels as
the focus then tends to be on specific scenarios, however, the methodology can equally be
applied to Prospective Resources. It is currently the methodology most frequently used by
PETRONAS for Reserves Projects.
Deterministic (incremental)
The deterministic incremental method is based on defining discrete parts or segments of the
accumulation that reflect high, best, and low confidence regarding the estimates of
recoverable quantities under the defined development plan. Typically, this approach is applied
to different segments of the accumulation based on considerations of well spacing and/or
geological knowledge (i.e. the different degrees of confidence are governed by distance from
known data). The individual segment estimates reflect realistic combinations of parameters,
and care is required to ensure that a reasonable range is used for the uncertainty in reservoir
property averages (e.g. average porosity) and that interdependencies are accounted for (e.g.
a high gross rock volume estimate may have a low average porosity).
This method is widely used in mature onshore environments and most commonly used in
North America and not used by PETRONAS other than in Unconventional Resources.
Geostatistical
Geostatistical methods are a variety of mathematical techniques and processes dealing with
the collection, methods, analysis, interpretation, and presentation of large quantities of
geoscience and engineering data to (mathematically) describe the variability and
uncertainties within any reservoir unit or pool. Geostatistical methods can be used to
preserve spatial distribution information in the static reservoir model and to incorporate it in
subsequent reservoir simulation applications. Such processes may yield improved estimates
of the range of recoverable quantities. For example, incorporating seismic analyses typically
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improves the understanding of reservoir models and can contribute to more reliable
Resources estimates.
Where large amounts of well production data and associated EUR estimates are available,
statistical methods can be applied to yield distributions that underpin Reserves categorization.
When this is done, the comparability of the wells and reservoirs in the historically developed
area with the target area should be considered before accepting such data as appropriate.
Probabilistic
In the probabilistic method, the evaluator defines a distribution representing the full range of
possible values for each input parameter. This includes dependencies between parameters
that must also be defined and applied. These distributions are randomly sampled (e.g. using
stochastic geological modelling or Monte Carlo simulation) to compute a full distribution of
potential in-place or recoverable quantities. Because the outcome of the Resources
estimates is directly linked to the input parameter distributions (both type of distribution and
range), it is critically important that the evidence for each of the input distributions is properly
justified and fully documented.
This approach is most often applied to volumetric Resources calculations in the early phases
of exploration, appraisal and development projects. The Resources categorization includes
confidence criteria that provide limits to parameters associated with each category.
Moreover, the Resources analysis must consider commercial uncertainties. Accordingly,
when probabilistic methods are used, constraints on parameters may be required to ensure
that results are not outside the range imposed by the deterministic guidelines and
commercial uncertainties. Likewise, tests on alternative parameter distributions should be
performed to fully consider the uncertainties.
When using the probabilistic approach, the resultant P90, P50, and P10 scenarios should
reconcile with the deterministically derived quantities for the low-, best-, and high-estimate
cases, respectively. Among the key comparative inputs to the probabilistic results are the
contacts, specifically for the LKH, and the areal extent.
Multi-scenario
The multi-scenario methodology is a combination of the deterministic (scenario) method and

the probabilistic method. In this case, a significant number of discrete deterministic scenarios
are developed by the user (perhaps 100 or more) and probabilities are assigned to each
possible discrete input assumption. For example, three depth conversion models may be
considered possible, and each one is assigned a probability based on the user’s assessment
of the relative likelihood of each of the models. Each scenario leads to a single deterministic
outcome, and the probabilities for each of the input parameters are combined to give a
probability for that scenario/outcome. Given sufficient scenarios (which may be supplemented
through the use of experimental design techniques), it is possible to develop a full probability
distribution from which the three specific deterministic scenarios that lie closest to P90, P50
and P10 (for example) may be selected.
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Figure 9: Resources Estimation Methodologies in PETRONAS
The HRA Guidelines – July 2011 specify that there should be at least one deterministic
(scenario) approach at all stages of a Project.
Note: The above does not apply in Unconventional Resources.
1.6.2 Analytical Procedures
Within the framework of the different methodologies outlined above, various analytical
procedures are employed for the technical assessment of the range of uncertainty. The
analytical procedures for estimating recoverable quantities fall into three broad categories: (a)
analogy, (b) volumetric estimates, and (c) performance-based estimates, which include
material balance, reservoir simulation, decline curve analysis, and other production
performance analyses. Material balance and reservoir simulation results may also be used to
support volumetric analyses.
Pre- and early post-discovery assessments are typically made with analogue field/project data
and volumetric estimation. After production commences and production rates and pressure
information become available, performance-based methods can be applied. Generally, the
range of EUR estimates is expected to decrease as more information becomes available, but
this is not always the case. This concept is illustrated in Figure 10 below.
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Figure 10: Change in Uncertainty and Applicable Assessment Procedures over Time
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The Typical Analytical Procedures in PETRONAS are summarized in Table 5 below.
Table 5: Typical Analytical Procedures in PETRONAS
Period: Exploration, Appraisal and Development

Exploration
Appraisal Initial Development
Pre-Discovery Post-Discovery
Analogy and Volumetric Procedures
Contingent Resources/
Prospective Resources Contingent Resources Contingent Resources
Reserves
 Volumetric  Volumetric  Volumetric  Volumetric
methodology for in- methodology for in- methodology for in- methodology for in-
place and recoverable place and recoverable place and recoverable place and recoverable
volumes. volumes. volumes. volumes.
 Analogues for fluid  Analogues used to  Analogues used to  Analogues used to
limit/contacts, supplement seismic supplement well data, supplement well data,
reservoir parameters and well data, e.g. e.g. drainage area for e.g. primary and
and distribution, fluid fluid contacts if not well recovery. secondary recovery
properties and encountered in well, efficiencies.
recovery efficiency reservoir property  Note: Material balance
(based on conceptual distribution away from and reservoir
development plan). well control and simulation can also be
recovery efficiency. used here, but the
results can be used
with increased
confidence as the
amount of dynamic
reservoir performance
data increases.
Period: Production
Early Time Production Middle Time Production Late Time Production Decline
Volumetric
Reservoir Simulation
Analogy and Volumetric and
and Performance-based
Procedures Material Balance
Material Balance
(Performance-based)
(Performance-based)
Reserves and Contingent Resources
 Volumetric  Volumetric  Material balance to  Reservoir simulation
methodology for in- methodology for in- estimate PIIP, gas models to estimate
place and recoverable place and recoverable cap size and water PIIP and recoverable
volumes. volumes. influx. volumes under any
 Analogues used to  Material balance to  Note: Material recovery method.
supplement well data, estimate PIIP, gas balance more valid if  Other production
e.g. primary and cap size and water production exceeds performance methods,
secondary recovery influx. 10% of PIIP. including Material
efficiencies.  Note: Material  Reservoir simulation Balance and Decline
 Note: Material balance more valid if models to estimate Curve Analysis (DCA),
balance and reservoir production exceeds PIIP and recoverable for EUR estimates.
simulation can also be 10% of PIIP. volumes under any
used here, but the  Reservoir simulation recovery method.
results can be used models to estimate
with increased PIIP and recoverable
confidence as the volumes under any
amount of dynamic recovery method.
reservoir performance
data increases.
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1.6.3 Reserves (1P, 2P, 3P)
The range of uncertainty for a project is defined by Low, Best, and High estimates for a project
classified as Reserves – Proved (1P), Proved plus Probable (2P) and Proved plus Probable
plus Possible (3P), respectively. As shown in Table 5, all three types of analytical procedures
may play some part in establishing the range of uncertainty, depending on project maturity.
1.6.3.1 Analogy
Analogues are used when there is insufficient information or time to perform a more detailed
study. For Reserves Projects, the use of analogues may still be applicable to consideration of
recovery efficiencies. Reserves can be estimated assuming similar characteristics to another
reservoir with production data to establish a trend. This is based on the assumption that the
subject reservoir is equal to or has better reservoir and fluid properties when compared to the
analogous reservoir as well as a comparable development plan that determines the ultimate
recovery of Petroleum. Such assumptions should subsequently be validated/re-calibrated,
including through the use of performance based analyses.
In a Reserves Project, it is likely that dynamic models would have been established, however,
where these are only based on the geological model associated with the Best estimate,
analogues may be useful in defining downside and upside recovery factors.
Analogues for Recovery Factors

The HRA Guidelines – July 2011 specify that recovery factor analogue fields should be
similar in geological and fluid characteristics with proven/piloted development. The following
characteristics should be comparable:
 Depositional environment
 Geological processes
 Aquifer presence and size
 Reservoir homogeneity and extent
 Source rock
 Fluid type
The drive mechanism should play a major role in determining the range of possible recovery
factors for oil and gas reservoirs. Typical recovery efficiencies from literature are tabulated
below.
Expected Recovery (%)
Drive Mechanism Comments
Oil Gas
Oil expansion 2–5 - Higher recoveries may be possible.
Lower recovery potential to be captured in
Gas expansion - 70 – 95
low permeability (tight) gas reservoirs.
To consider proximity of oil’s bubble point
Solution gas 10 – 30
pressure to initial reservoir pressure.
Higher recovery potential to be captured if
Gas cap 20 – 50
effective gravity segregation is expected.
Lower recovery potential to be captured in
Water drive 25 – 50 45 – 70
thin oil columns.
Gravity segregation 30 – 70
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1.6.3.2 Volumetric Estimation
Volumetric estimation should include both static PIIP estimates and Recovery Factors
appropriate to the development plan(s) being considered. The HRA Guidelines – July 2011
provides detailed guidance for the assessment of hydrocarbon Resources with an emphasis
on Contingent Resources, i.e. before any dynamic production data is available, but can also
be applied to volumetric and Recovery Factor estimates for Reserves Projects. The HRA
Guidelines – July 2011 outline the key input parameters and how they should be assessed in
terms of: input data, discipline responsibilities, uncertainty ranges, analogue usage and other
remarks.
All input parameters should be represented by a range of values. However, the way in which
that range of values is represented will vary, typically according to the amount of data
available, the maturity of the Project and the nature of the accumulation. The main methods
for representing uncertainty ranges together with typical uses for each are summarised below:
 Probability Distribution Functions (PDF) are typically used during the exploration phases
e.g. in the GeoX software, but can also be used in the early appraisal stage. A PDF
represents a full probabilistic range of estimates for a parameter.
 2D maps can be used at all stages of asset life and can also be used together with PDFs
and 3D geological models. At the exploration stage, 2D maps are commonly used for
structure mapping and possibly also for reservoir properties.
 3D models are typically used during appraisal and development planning, but can be used
at all stages of asset lifecycle. The nature of geological models can vary widely from simple
deterministic models to multi-scenario or fully probabilistic models.
Note that this is a guide only and specific situations may require alternative approaches. For
example, it may be desirable to build geological models, perhaps supported by seismic
attribute data, if available, even for a Prospect, if the well is expensive and the increased
understanding of the reservoir can be justified.
Key points to consider when performing volumetric resources estimation are that a range of
values should always be considered for each parameter, and that both static (PIIP), and
dynamic (Recovery Factor), elements should be included in the assessment. The HRA
Guidelines – July 2011 outline the parameters to be used in hydrocarbon volumes estimation,
highlighting what to look for and use in attempting to derive Low, Best and High estimates by
applying the range of each input parameter. A summary is provided in Figure 11 below.
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Figure 11: Volume Estimation – Guidelines for Ranges
The input values (Low, Best and High) represent the averages of the reservoir. As a general
principle, the less information, the wider the range. Care should be taken to differentiate
between the average of the parameter and the value of the parameter in the reservoir.
The objective is to define the uncertainty in the estimate of the average parameter, not its
actual (sample) distribution, as shown below.
Probability
Porosity
Some typical ranges of uncertainty in the most common reservoir parameters for
Conventional Resources are provided below.
Typical Range of
Parameter Source of data
Uncertainty
GRV, fluid contacts +/- 30% Seismic (2D, 3D), well logs, RFT
Well logs – conventional and image.

Net-to-Gross +/- 20%
Core
Well logs (lower uncertainty expected
Porosity +/- 10 to 15%
when calibrated to core)
Hydrocarbon saturation +/- 20% Well logs. Cores
Formation volume factor +/- 5% PVT Analysis
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GRV – Depth Structure, Area and Gross Thickness
The generation of Low and High structure maps is derived through the input of a number of
variables for which each has a range of uncertainty associated with it. Seismic horizon and
fault pick interpretations will depend on the quality of the seismic and well data available. If
there are picking issues such as: uncertainty in the well to seismic tie, poor horizon continuity,
tuning effects etc., then it may be appropriate to consider alternative picking strategies as part
of uncertainty assessment. Alternative picking strategies can be time-consuming, but can also
have a big impact on uncertainty ranges, so it is important to perform such additional work if
justified e.g. for large, capital-intensive Projects, or even small, high-risk Projects. If available,
analogues can be used to assess whether picking is likely to be an uncertainty in any particular
field.
The presence, location, and dip of faults may be a critical uncertainty in some fields. In such
cases it may be necessary to consider alternative fault interpretations and build alternative
geological models. Again, this can be a time-consuming task and should be undertaken where
appropriate e.g. for large, capital-intensive Projects, or even small, high-risk Projects.
Depth conversion requires the application of a representative range of velocity models which
will be influenced by the number of seismic-to-well ties available. High and Low case velocity
models may have a major effect on area in dip-closed structures as the flanks of the structure
become flatter and steeper, respectively. Depth conversion should also consider regional
velocity models and analogue fields.
Where a seismic Pre-Stack Depth Migration (PSDM) is available it is not possible to account
for potential depth conversion variances; in this case it is recommended to revert to the related
time seismic volume Pre-Stack Time Migration (PSTM) and derive High and Low structure
maps and fault positions from this.
Gross reservoir thickness estimation should consider well data and offset field analogues as
well as seismic data within the subject field. The range between the High and Low case gross
thickness scenarios has to take into account uncertainties in the well horizon picks, the
conversion of these to true vertical depth (TVD) and the accuracy in the bed dip measurements
to arrive at a range in the true sedimentary thickness of the reservoir.
GRV – Fluid Contact Level(s)
The fourth main parameter that impacts the GRV determination is the range of possibilities in
fluid contact level(s). The magnitude in the range between a High and Low case will be
governed by how many wells have penetrated the hydrocarbon column and whether they have
encountered any sort of hydrocarbon contact.
However, in a Project that is mature enough to have volumes classified as Reserves, the
uncertainty in fluid levels should generally be considerably lower than for Contingent and
Prospective Resources.
The key principle for fluid contact estimation, as for all parameters, is that ranges should be
estimated based on confidence levels. Likewise, different types of data can be used to better
define reasonable ranges as well as provide greater confidence in existing estimates. Refer
to Figure 12.
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In the case of estimating the remaining recoverable volumes for a field that has good seismic
attributes and AVO responses, the use of 4D seismic would potentially support the movement
of any hydrocarbon contact(s) as well as providing potential insight for optimising the recovery
efficiency.
Figure 12: Fluid Contact Estimation – Guidelines for Ranges
The HRA Guidelines – July 2011 outline the possible approaches to Free Water Level (FWL)
and Gas Oil Contact (GOC) as follows:
Category FWL GOC
1) OUT (i.e. fluid samples with highly under-saturated
oil) – need to consider analogue
Min 1) ODT
2) GDT
3) GOC
Possible Events ML Determination
1) Pressure plot
1) Pressure plot (ML
2) GOC
Case) 1) Pressure plot
3) ML saturation height function
Most Likely 2) ML saturation height 2) GOC
(gas/water case only) – need to
(ML) function 3) GDT
consider oil potential based on
3) Direct Hydrocarbon 4) OUT
fluid sample and analogue
Indicator 5) OUT and GDT
4) Halfway to crest
5) Halfway OUT to GDT
Possible Events Max Determination
1) Pressure plot (Max
1) GOC
case)
1) GOC 2) Spill point and/or max saturation
2) Max saturation
2) GDT height function (gas/water case
Max height function –
3) OUT and fluid only) – need to consider oil
cross check with spill
samples potential based on fluid sample
point and hydrostatic
(saturated) and analogue
line intersection
3) OUT
The example below shows a discovery well that has been drilled on a strong seismic
amplitude anomaly. A forward modelling study (summary results shown on the right of the
figure) indicates that such a response is from oil-filled sands. Other fields nearby show a
strong relationship between such anomalies and hydrocarbon filled sands. Although there
may be closing contours and a potential fill-to-spill far below the edge of the amplitude
anomaly, it is appropriate in this case to use the amplitude anomaly, blue line, as the basis
for the best estimate.
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Net-to-Gross
Net-to-Gross (NTG) should consider: well data, offset fields, well tops and correlation, clay
volume (VClay) estimation and seismic data. NTG is commonly the second biggest volumetric
uncertainty (after GRV) so care should be taken to understand appropriate uncertainty ranges.
Petrophysical analysis of wireline log data and determination of VClay cut-offs will commonly
be used to estimate NTG at wells. Even at the wells, there may be uncertainties in cut-off
values, thin beds, low resistivity pay or other issues that provide uncertainty ranges.
It is also important to ensure that the geologist, petrophysicist (and geophysicist, if appropriate)
have integrated their analyses and are using common interpretations of well tops, zonation
schemes, etc. Estimation of areal distribution of NTG may be done using various methods as
appropriate to the field and will depend on interpretation of: depositional model, correlation
scheme, seismic attributes, analogue fields, etc. If the depositional model is uncertain,
alternative models can be considered as part of the uncertainty range estimation and used to
drive geological mapping and provide modelling inputs to volumetric estimates. As assets
mature, the depositional model is generally better understood and a single depositional model
can be used.
Net-to-Gross: Guidelines for Ranges

In PETRONAS, only a VClay cut-off is applied in estimating average reservoir
properties. Reservoir average NTG should be estimated using a volumetric-
weighted average from the logged wells taking into consideration the conceptual
geological model.
Low and High Case NTG for volumetric purposes can be estimated by applying
different VClay cut-offs or alternative geological models. These may represent
significantly different NTG distribution within the field compared to the Best Case
scenario. The range of NTG based on analogous fields should also be
considered.
Porosity
At the wells, porosity is also derived from the petrophysical evaluation from well logs as
averages across specified intervals of the reservoir. Where possible it is recommended to
zone the reservoir bearing interval based on a single VClay cut-off used in determining Net-
to-Gross.
If alternative cut-offs have been used, a further set of averages should be determined across
intervals where the High and Low Case cut-offs have been applied. In these cases the user
needs to be aware that the average porosity and water saturation may decrease in the High
Case volume (as a lower cut-off parameter introduces greater net reservoir volume by adding
poorer rock quality volume incrementally) and vice versa in the Low Case volume, as shown
in Figure 13 below.
Areal variations in porosity should also be considered, as appropriate, for the depositional
model, analogue fields, seismic attributes, etc. Stratigraphic or depth-related variations, for
example porosity degradation due to diagenesis, should also be taken into consideration
as/where appropriate.
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Similarly, where well data is limited, reference to analogue data such as a porosity versus
depth plot should be used as a reality check on the ranges. A plot of analogous saturation-
height functions, weighted by area-depth, may provide a similar reality check for water
saturation ranges.
The guidelines for porosity range is shown in Figure 14.
Figure 13: Net-to-Gross Uncertainty
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Figure 14: Porosity – Guidelines for Ranges
Different sources of wireline data can be used to help estimate the uncertainty range,
particularly if there is limited core sample information to calibrate the wireline logs.
Examples of this are: using the density log as the basis of Best Case porosity; and the porosity
from the sonic log to provide the Low or High Case.
Care should be taken to ensure that the difference in porosity derived from the different tools
(e.g. density vs. sonic) is due to log measurement uncertainty, and not the presence of
secondary porosity (or the effect of poor or rugose hole).
VClay cut-offs can be varied to evaluate its effect on average porosity. The range of porosity
based on analogous fields should also be considered.
Different porosity variations with depth should also be used to generate different porosity scenarios.
Water Saturation (Sw)
All available data should be integrated to determine appropriate representations of water

saturation. Typical data used would include: wireline log data, core data, formation tester, fluid
samples and well test data. Refer to Figure 15.
Saturation-height functions are a common way to represent water saturation. These can be
derived in various ways from log data, capillary pressure data, and ideally from a combination
of data sources. It is usually possible to fit a range of saturation-height functions which can
form the basis for the uncertainty ranges. Note also that saturation-height functions may also
include rock quality indices (e.g. porosity/permeability).
A common quality control check, when using saturation height functions within geological
models, is to extract a 2D map and compare the hydrocarbon thickness from the map at the
well location with that derived from petrophysical analysis. Any discrepancies should be
investigated and reconciled.
Analogues should be used as appropriate. As with all analogue usage, care should be taken
to ensure that the analogues are appropriate, with similar geological and fluid characteristics,
ideally from the same formation and in close proximity to the subject accumulation.
The HRA Guidelines – July 2011 require the following when assessing water saturation:
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 The use of volumetric intervals within each area-depth plot to determine reservoir average
Sw. The most common way to do this is to use a saturation-height function within a
geological/simulation model.
 Consistency between fluid contacts used for GRV estimation and saturation-height
functions.
 Consideration of zonation and layering within the reservoir to avoid “over-averaging” of
reservoir parameters.
Figure 15: Water Saturation – Guidelines for Ranges
Different saturation-height curves can be used to capture the uncertainty in water

saturation. However, care has to be taken to ensure that the log to core calibration is still
honoured.
Permeability
Permeability is not an explicit input parameter in the equation for volumetric estimation of PIIP.
However, reservoir quality and heterogeneity inherently affects the estimation of ranges of
other parameters which are directly employed in this and associated Resources estimation
e.g. average water saturation, recovery factor, etc.
The uncertainty range for permeability will depend on the amount of field related core sample
and pressure build-up data that are available; otherwise the use of analogue relationships will
have to be employed as the basis of the High and Low Cases. Data available to estimate
permeability may include density/neutron logs, sonic logs, core data, thin sections (e.g. to
estimate micro-porosity), modular dynamic tester (MDT), well test, diagenetic analysis and
“kick” data from drilling. Refer to Figure 16.
HRA Guidelines – July 2011 recommend that permeability estimates are performed on a zone
or facies basis and appropriately weighted, and distributed throughout the field. This should
be done typically as part of the geological modelling process and should be consistent with
depositional and reservoir characterisation used for other properties.
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Analogues can be used as appropriate with relevant geological knowledge, e.g. depositional
or diagenetic effects, taken into to account. Analogues can often be used to constrain
permeability ranges where there is little field-specific data.
Consider the effect of scale; relationships derived at a core/log scale may not be appropriate
when applied at a geological/simulation model scale.
Figure 16: Permeability – Guidelines for Ranges
In PETRONAS, log-derived permeability is generally estimated using the Choo (2010) model
with calibration to core data. Permeability ranges can then be derived using different
relationships between porosity and permeability to capture the range of uncertainty in
permeability estimations.
As water saturation is a function of permeability in saturation-height functions typically used
in PETRONAS, care should be taken to ensure that the model-to-log match is still honoured
when using the Low and High Case permeability estimates.
As noted in Figure 11 (Volumetric Estimation: Guidelines for Ranges) above, the objective
is to define the uncertainty in the estimate of the average parameter, not its actual (sample)
distribution. Up-scaling effects may also be relevant to this objective for permeability
estimation.
Formation Volume Factor (FVF)
A range of Formation Volume Factor (FVF) comprising the estimation of High, Best and Low
Case input parameters will depend on the property variations measured from reservoir fluid
samples. This will include an assessment of whether oil is saturated or under-saturated at
initial reservoir conditions. In gas reservoirs, the Gas Expansion Factor, E, which is the
reciprocal of the gas FVF, is more commonly used for volumetric estimation.
In cases where the hydrocarbon column is thick, different pressure/temperature-depth profiles

(e.g. from RFT/MDT or DST data interpretation) can also be used to reconcile estimates of
the possible ranges of FVF values.
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Recovery Factor (RF)
The appropriate range in Recovery Factors will be determined by the type and variability in
the drive mechanism (large and active aquifer or not), the fluid properties and the reservoir’s
quality, heterogeneity, and continuity. Section 1.6.3.1 provides a more detailed discussion of
recovery factor estimate ranges and the use of analogues.
Well Production Rate Cut-off
A general guideline for production cut-off is 50 stb/day and 0.5 MMscf/day per string for oil and gas
respectively. The cut-off rate can be lower than above depending on actual well/string performance as
long as the well/string is able to flow to sales point. The cut-off rate of 50 stb/day or 0.5 MMscf/day per
string is just a guidance for the forecast and it is not a hard rule.
Regardless, staff must be prepared to justify and demonstrate the cut-off rate taken.
For ARPR submission, the requirement is always to submit Technical Life production profile for each
project.
Turndown Rate (TDR)
The turndown rate need to be specified in the basis and assumption during the resources estimation.
Summary
The range of the volumetric input parameters will be used to determine the High and Low
Case volumetric estimates; the normal industry practice would be to do this probabilistically
using some form of random sampling technique (e.g. Monte Carlo analysis), and a method
that would capture the full range of uncertainty, taking into account the different types of
distributions for each parameter. Any dependencies can also be included (e.g. porosity-
permeability relationships). By doing this, the user avoids the potential situation of taking all
the Low/Low and High/High Cases and ending up with a minimum (P99) and maximum (P1)
instead of a Low (P90) and High (P10) estimate. Note that the minimum and Low, and the
maximum and High, values are not the same.
An alternative is to follow the deterministic (scenario) method where the input ranges may be
different than those for the probabilistic case. The potential outcome in using this method is
that the Low Case is too low and the High Case becomes too high. However, it is
recommended that deterministic scenarios are used to benchmark the outcome of probabilistic
estimates.
Another alternative is to apply a multi-scenario method where a series of multiple deterministic

scenarios are run and a probability to each outcome is assigned as well as geostatistical
approach especially for geological modelling. This combines the strengths of the Probabilistic
and Deterministic methods.
The different methodologies used in PETRONAS are discussed in Section 1.6.1.
1.6.3.3 Performance-Based Estimates
Once a Project is on production then a more direct assessment of the range of recoverable
volumes can be undertaken using production performance analysis on dynamic data obtained
from well, reservoir and field performance. As the Project matures and more data becomes
available it is expected that the range of uncertainty will narrow.
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The three main performance-based methods in use are

 Decline Curve Analysis,
 Material Balance, and
 Reservoir Simulation.
All of these methods are better suited and are more typically used following a deterministic
scenario approach, as three separate analyses are prepared to bracket the uncertainty
through sensitivity analysis. In a multi-scenario approach, however, a probabilistic analysis
may be applied to the deterministic scenario results.
Depending on the amount and quality of historical pressure, production and other reservoir
performance data available, a combination of reservoir simulation, material balance, and
decline curve analysis can be used to estimate the recoverable Petroleum. In addition, the
PIIP quantity may be estimated (by the first two methods only), and thereby provide a useful
validation of PIIP estimates obtained earlier by volumetric methods.
Decline Curve Analysis (DCA)
Decline Curve Analysis (DCA) is sometimes also referred to by the broader term of Production
Performance Trend analysis. Analysis of the change in production rates and production fluids
ratios, vs. time and vs. cumulative production, as reservoir fluids are withdrawn provides
valuable information to predict ultimate recoverable quantities.
This section of the Manual provides a summary of the methodology to estimate Low, Best and
High Case of Reserves estimates using DCA, as summarised in Figure 17 below.
A detailed discussion on the technical principles behind DCA is provided in the DCA
Guidelines – August 2014.
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Figure 17: Flow Diagram for DCA
i) The “b” Value
The general equation for all conventional DCA provides an explicit relationship between
instantaneous production rate and time, as shown below, where qt is the oil production rate at
time t, qi is the initial oil production rate, di is the initial nominal decline factor and b is the
hyperbolic exponent.
𝑞𝑖
𝑞𝑡 = 1
(1 + 𝑏𝑑𝑖 𝑡)𝑏
The parameter b is generally regarded to be between 0 and 1, with b = 0 representing an
exponential decline and b =1 harmonic decline. The value for b is normally obtained by fitting
the DCA equation above to real data using curve fitting algorithms like the least squares
method. The effect of b on the shape of the curve when the time interval is short is not obvious,
so it is important to ensure that a wide range of b values are tested on the same dataset. In
reality, there are many theoretical considerations that support the selection of a particular
value of b, as summarised in Table 6 below.
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Table 6: Theoretical b Values
b Value Reservoir Type, Characteristics and Drive Mechanism

Oil reservoirs
 Above the bubble point
 Downdip wells with gravity drainage (wells located far away from fluid
contacts)
 Solution gas drive with unfavourable gas-to-oil relative permeability
 Fractured reservoirs where only the fracture (and not matrix) contributes to
flow
 Wells with high backpressure ratio of about 1
Gas reservoirs
 High pressure reservoirs (liquid-like compressibility)
0  Wells with liquid loading problems
 Low pressure gas reservoirs with wellhead backpressure exponent of
approximately 0.5
Both oil and gas reservoirs
 Produced with small drawdown relative to reservoir pressure
 Tubing-limited wells
Waterflood reservoirs
 Mature waterflood having wells with thin oil column
 Wells experiencing water breakthrough through natural fracture, induced
fracture or high permeability streak
 Poor waterflood performance (inefficient pressure maintenance)
 Typical for solution gas drive
0.3  Oil reservoirs with small gas cap
 Depletion or solution gas drive with favourable gas-to-oil relative permeability
 Gas wells with low backpressure ratios of 0 to 0.1
0.4 to 0.5
 Oil reservoirs with large gas cap
 Gravity drainage with free surface
0.5
 Oil reservoirs under waterflood or if oil viscosity is low to medium
0.6 to 0.7  Oil reservoirs with indication of laminar flow
0.7 to 0.8  Layered reservoirs with no crossflow behaviour
 Oil reservoirs under very efficient waterflood (stable reservoir pressure) or if
1
oil viscosity is high
 Tight gas reservoirs
>1
 Transient phase production (no boundary effects)
The summary above is a practical guideline assembled through extensive field analysis and
provides suggested b values for any specific reservoir. These are, however, only a guideline
and the actual value to be used has to be supported by actual data.
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Figure 18: b Value – Guidelines for Ranges
The following approach is suggested to identify the range of b values:

 Using the same di value, fit the historical data to a range of b values.
 Select the Low, Best and High Cases, bearing in mind that the absolute minimums or
maximums will more likely reflect P99 and P1 cases rather than P90 and P10.
Analysis performed at the well level often allows trends to be better identified. Older wells
could provide longer historical periods over which the true nature of the decline could be
recognised. The b value from the older well can then be applied to other wells.
The uncertainty in the b value is expected to diminish with more data; mature fields should
have a narrower range or even fixed b value.
ii) Performing the Analysis
In analysing production trends, it is important that the historical interval for analysis is carefully
selected such that the circumstances that developed the trend in the first place continue
unchanged unto the future. The Resources Estimator should be aware of the operational
activities that have the potential of masking the true reservoir performance trend.
The DCA can be carried out on single wells, a group of wells or pattern, by reservoir or entire
field. The generic term “high-level” refers to analysis at say reservoir, or field level, while “low-
level” refers to analysis at well level, or possibly even at completion level if multiple zones
have been completed.
Although the DCA Guidelines – August 2014 recommend the analysis be conducted at the
lowest possible level, it is also often the case that this is problematic due to unreliable
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production allocation. Other factors that can compromise a low-level analysis are interference
effects between wells in a tight infill drilling scenario and changing allocation of gas-lift
quantities between wells. A high level aggregation may also be required to account for field
level production constraints (water/gas handling, capacity limits). In general, and once the
available data allows it, analysis should be conducted at all levels considered to be
appropriate.
If a low level analysis is not possible, the DCA Guidelines – August 2014 recommend
identifying the trends over periods of low activity levels. Activities that could mask the decline
trend include changes to choke settings, separator pressure, gas lift allocation, ESP settings,
workovers, gas demand, reservoir management strategies, etc. If the analysis is done at a
higher level (reservoir, pattern or field), intervals of constant well count should be selected.
This, however, ignores the impact of the finite life span of individual wells on overall decline.
In reality, it is always good practice to review the data at the different levels and investigate
the differences between the different approaches.
A number of different plots can be used to perform DCA. Guidance on the merits and pitfalls
of each plot is discussed in detail in the DCA Guidelines – August 2014, but summarised
below. The DCA Guidelines – August 2014 recommend a number of plots (as shown in Figure
18 above) to be tested, but this does not preclude the use of any other plots in the analysis.
 The rate vs. time (linear-linear) plot – DCA is not generally performed using this plot, but
the plot allows QC to be performed on the results of the analysis, e.g. checks on continuity
between historical data and forecast. The plot also allows the Estimator to apply technical
or commercial limits on the forecast (e.g. PAC expiry, facilities limit, economic limit).
 The rate vs. time (logarithmic-linear) plot – a common plot in DCA, but can be severely
affected by production downtime. The plot should not be used as the sole analytical tool
in DCA, but should be accompanied by other plots.
 The rate vs. cumulative production (linear-linear) plot – the most useful plot in DCA as it
does not suffer the effect of production downtime. The plot is useful in understanding the
sensitivity of the b value (see discussion above).
 The rate vs. cumulative production (logarithmic-linear) plot – the plot does not offer any
additional advantage over its linear-linear variety. The harmonic function plots as a straight
line, and as such, the plot is more commonly used to identify harmonic behaviour.
 The oil (or water) cut vs. cumulative production (linear-linear) plot – the plot is used when
oil production is declining due to increasing water cut. Trends are generally unreliable at
low water cuts; the plot should only be used in high water cut wells. In general, a water cut
of more than 50% is recommended, but is up to the Estimator to make a judgment on this
cut-off value.
 The oil (or water) cut vs. cumulative production (logarithmic-linear) plot – the oil cut plot is
recommended when water cut is high (low oil cut) due to the fact that the stretched
logarithmic scale (at low oil cut values) allows the Estimator to observe a more detailed
view of the behaviour of the dataset to establish a trend.
 The water/oil ratio (WOR) vs. cumulative production (logarithmic-linear) plot – the plot is
recommended at very high values of WOR. There is no limit to WOR (i.e. very large at
high water cut) and this allows the Estimator to observe a more detailed view of the
behaviour of the dataset to establish a trend.
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Performing the Analysis: Guidelines for Ranges

DCA performed using different plots often provides a range of possible EUR volumes. The
Low, Best and High Case estimates may be based on the plausible scenarios of production
performance analysed above, bearing in mind that the Low Case estimate, by definition, must
be known to a high degree of confidence.
The last historical data point also introduces uncertainty in the analysis as the fitted curve
seldom passes through this last point. If the increase (or decrease) in the rate towards the
end of the historical data is due to valid operational factors (e.g. improved gas lift or pump
breakdown), it is justified to use a range of rates from which to transition from history to
forecast.
It is often useful to tabulate the recoverable volumes generated using the different plots. The
Low, Best and High Case estimates can then be selected once all possibilities have been
investigated.
iii) Top-down vs. bottom-up
As discussed above, it is always good practice to review the production data at the different
levels – completion, well, reservoir, pattern and field. The Estimator should start with the
lowest possible level and move up to the next level to observe its effect on the analysis,
bearing in mind the influence of operational activities, downtime and individual well life span
on higher level analysis. The aggregated low level forecasts should be compared to high level
analysis; large differences (more than 10%, as recommended in the DCA Guidelines – August
2014) should be technically justified.
The differences between low and high level analysis may also be captured as a range of
possible EUR estimates. The range of estimates may be a result of uncertainty in production
allocation, well interference or production downtime and should be captured in the Low, Best
and High Cases.
iv) DCA vs. Reservoir Simulation
It is a requirement in PETRONAS that reservoir simulation output associated with the “NFA –
no further action” scenario should be consistent with the Best Case DCA analysis. This
provides confidence in the use of the dynamic model for Resources estimation. Any difference
must be technically justified and documented.
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Figure 19: DCA – Overall Guidelines for Ranges
The overall guidelines for estimating Low, Best and High Cases from DCA is summarised in
the flowchart below. The final step in the flowchart (orange box) only applies when an
endorsed Best Case simulation model is available.
In the event that there is no clear production or pressure trend visible due to the scarcity of
data points, a Material Balance approach to Resources estimation is recommended (see
discussion on Material Balance in next section).
Material Balance
Material balance methods are part of performance-based dynamic analyses. The performance
data include production and injection profiles, volume-weighted average reservoir pressures,
and reservoir-specific relevant fluid and rock properties (all as a function of reservoir pressure
and temperature). Independent of the volumetric methods, the material balance methods can
be used to directly and simultaneously estimate PIIP, the size of any gas-cap and/or the
size/strength of aquifer influx (We), etc.
The results of material balance analysis are considered more reliable with longer performance
histories and high-quality production data, both measured and interpreted. Uncertainty in the
estimates is expected to decrease over time.
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In ideal situations, such as depletion-drive gas reservoirs in homogeneous, high-permeability

reservoir and where sufficient and high quality pressure data is available, estimation based on
material balance may provide very reliable estimates of ultimate recovery at various
abandonment pressures.
In complex situations, such as those involving water influx, compartmentalisation, multiphase

behaviour, and multi-layered or low-permeability reservoirs, material balance estimates alone
may provide erroneous results. Material balance for oil reservoirs are complex, requiring a lot
of information; however, in some gas reservoirs that behave like tank-type models (i.e. when
there is no or very low aquifer influx), the approach may be relatively simple and very reliable.
The complex equations are built into modern software packages which allow different
techniques to be applied to the available data.
Material Balance: General Guidelines

Material balance models are often used together with the DCA to provide the full range of
uncertainty inherent in Resources estimates. The list below provides some general
guidelines:
 It is good practice to compare the full range of in-place volume estimates against those
derived using volumetric methods.
 When more historical data is available, material balance can be used to identify any
extremes of in-place volume estimates where a history match may not be achievable,
bearing in mind that a unique solution may not be possible.
 A lower in-place volume from material balance compared to volumetric may suggest
unconnected volumes. Such isolated volumes could potentially be captured by defining
additional recovery Projects. A higher material balance volume estimate, on the other
hand, may suggest communication between reservoirs previously interpreted to be
separate.
 Material balance models can be used to reconcile a range of uncertainty based on other
analytical techniques, even during pre-production phase. Used together with reservoir
simulation, results from material balance models can be used to capture plausible
outcome(s) against a range of development scenarios. However, the emphasis should
be on volumetric estimates and use of relevant analogues in the pre-production phase.
This is because dynamic data is not yet available to calibrate multiple assumptions that
would be required in material balance and simulation models at such an early stage in a
project’s life-cycle.
i) Gas Material Balance
In gas reservoirs where there is no or very low water influx, i.e. depletion drive, the gas material
balance can be adequately represented by the following equation, where p is reservoir
pressure, Z is the gas compressibility factor, Gp is the produced gas and G is the GIIP. The
subscript i for p and Z denotes initial conditions.
𝑝 𝑝𝑖 𝐺𝑝
= (1 − )
𝑍 𝑍𝑖 𝐺
The equation above can be presented graphically using a so-called P/Z plot, where pressure
and gas property data over the production history period can be used to estimate the GIIP and
the associated gas recovery factor at any abandonment pressure (see example in Guidelines
for depletion drive reservoirs).
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If water influx is a potential occurrence, i.e. water drive, it can be accounted for as described
in the equation below. We is the cumulative amount of water influx resulting from the pressure
drop caused by gas production. Ei is initial expansion factor of the gas.
𝑝 𝑝𝑖 𝐺𝑝 𝑊𝑒 𝐸𝑖
= (1 − ) / (1 − )
𝑍 𝑍𝑖 𝐺 𝐺
The effect of water influx is to maintain the reservoir at higher pressures for a given cumulative
gas production. Unlike the equation for depletion drive that can be represented on the P/Z plot
by a straight line, the additional terms on the right hand side of the equation for water drive
creates a non-linear behaviour in the P/Z plot.
It is possible to make an estimate of GIIP in water drive reservoirs using a number of analytical
methods, e.g. the Havlena Odeh or Cole plots. In the former, the apparent GIIP, Ga, is
calculated using the equation below.
𝐺𝑝
𝐺𝑎 =
𝐸
1−
𝐸𝑖
If the calculated values of Ga are plotted against We E/(1-E/Ei), the result should be a straight
line, provided the correct aquifer model has been selected. Selecting the correct aquifer model
(aquifer fitting) is by trial and error until a straight line is obtained. We can be calculated using
various aquifer models. The appropriate value of G can be determined by linear extrapolation
of the straight line (see Figure 20). This technique is available in most material balance
software packages.
Figure 20: The Havlena Odeh Method for GIIP Determination in Water Drive Reservoirs
EUR estimates for gas are a function of the degree of pressure maintenance provided by the
aquifer and the abandonment pressure. In terms of aquifer support, more responsive aquifers
result in lower gas recovery due to the fact that the advancing water traps gas behind the front
(i.e. residual gas).
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It is often useful to compare GIIP estimates from material balance with those derived using a
volumetric methodology. Volumetric estimates are based on cores, well logs, fluid analyses,
and geological estimates of reservoir size, while material balance are performance-based.
These two estimation approaches are essentially independent.
Differences between plausible model scenarios (input parameters, drive mechanisms, etc.)
and associated material balance GIIPs can be valuable in managing a reservoir and optimising
incremental development opportunities.
For example, a higher volumetric estimate compared to material balance may indicate the
presence of additional gas that is not connected to the common reservoir. A separate Project
may need to be created to exploit potentially untapped Resources. A lower volumetric
estimate, on the other hand, may be an indication of communication between accumulations
previously interpreted to be separate (e.g. separate fault block). The latter may negate the
need for previously anticipated further infill drilling investment.
A large difference between material balance analysis (depletion assumption) and volumetric
GIIP estimates may also provide indications of aquifer support, as discussed in the Guidelines
below.
Figure 21: Gas Material Balance: Guidelines for Ranges (Depletion Drive)
Low, Best and High Case GIIP can be estimated using a simple P/Z plot.
During the initial stages of production, a delay in aquifer response often results in material
balance plots that appear to be linear. If there is insufficient production and pressure history
to show deviation from linearity, the Estimator may be tempted to extrapolate the early trends,
assuming a depletion drive reservoir, resulting in GIIP estimates that are too optimistic.
In this case, a large difference between volumetric estimates and material balance may be
diagnostic in deciding whether there is any aquifer support. It is recommended that a Low
Case GIIP, based on a scenario with aquifer support, is maintained in the Estimator’s range
of estimates during the initial phases of production.
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Figure 22: Gas Material Balance: Guidelines for Ranges (Water Drive)
To ensure that the uncertainty in GIIP range is adequately captured, it is recommended that
the Havlena Odeh or Cole plot be generated to supplement the analysis using the P/Z plot.
This is true especially when the aquifer is relatively small and the P/Z plot does not
significantly deviate from the depletion line as shown below.
An analysis using the Havlena Odeh method may indicate support by an active aquifer. GIIP
estimates derived assuming depletion drive will therefore be too optimistic.
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Gas Material Balance: Guidelines for Green Field

It is important that adequate sensitivity studies are performed on fields with limited or no
production data. The following parameters should be studied to capture a wide range of
possible EUR estimates:
 Low, Best and High GIIP based on volumetrics.
 Aquifer support based on geological interpretation of the aquifer size and configuration.
 Abandonment pressure, including potential installation of a compressor.
 The number of producing wells and their performance (i.e. various inflow and outflow
equation ranges).
Low, Best and High Case scoping forecasts can be generated based on the results of a
complete investigation of development options, potential reservoir drive mechanisms, and
reconciliation with volumetric GIIP estimates, etc.
ii) Oil Material Balance
Material balance for oil reservoirs is complex, requiring a lot of information and/or
assumptions. In oil reservoirs, the material balance equation is often solved using the Havlena
Odeh technique to gain an understanding of reservoir drive mechanisms under primary
recovery conditions. The pressure and production data may plot differently depending on the
drive mechanisms. Diagnostic plots are used to help identify the mechanism and provide an
estimate of STOIIP volumes. Details of the technical principles behind each proposed
analytical solution is provided in the PETRONAS Practices of Reservoir Engineering Course.
For oil reservoirs with gas cap drive, a plot of F against (E0 + mEg), is helpful in either
estimating STOIIP, N, or the ratio of the initial volume of the gas cap to that of the oil, m. In
this plot, F is the total underground withdrawal, E0 is the expansion of the oil and its originally
dissolved gas and Eg is the expansion of the gas cap.
As is often the case, m is the most uncertain parameter in the plot. As such, F is often plotted
against (E0 + mEg) using an assumed m value. Once a correct m value is used, the dataset
should fall onto a straight line passing through the origin with slope N. Alternatively, if N is the
more uncertain parameter, then STOIIP can be estimated from the slope of the straight line
using a known m value (see example in Guideline for gas cap drive reservoirs).
For natural drive oil reservoirs, the most appropriate way to solve the material balance with
aquifer influx is by plotting F/E0 against We/E0. We is the cumulative amount of water influx
resulting from the pressure drop caused by fluid production and can be calculated using
various aquifer models (not discussed in this Manual). A correctly selected We model will result
in a dataset falling onto a straight line with a 45° slope and intercept N when We/E0 = 0. It is
important to highlight that there are many uncertainties involved in the various aquifer models
provided in literature such that the solution to the material balance may not be unique. The
material balance should be continuously checked once more production and pressure data
become available.
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Figure 23: Oil Material Balance: Guidelines for Ranges (Gas Cap Drive)
In this scenario, fix the value of m and fit different straight lines through the historical dataset.
Alternative m values can also be tested and a range of STOIIP outcome (Low, Best and
High STOIIP for each m value) derived from a complete investigation.
Figure 24: Oil Material Balance: Guidelines for Ranges (Natural Water Drive)
In this scenario, test a number of aquifer models and generate an array of STOIIP volumes
for each We model. Select the Low, Best and High Case STOIIP from a complete
investigation.
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Oil Material Balance: Guidelines for Green Fields

It is important that adequate sensitivity studies are performed on fields with limited or no
production data. The following parameters should be studied to capture a wide range of
possible EUR estimates:
 Low, Best and High STOIIP based on volumetrics.
 Aquifer support based on geological interpretation of the aquifer size and configuration.
 The number of producing wells and their performance (i.e. various inflow and outflow
equation ranges).
Low, Best and High Case scoping forecasts can be generated based on the results of a
complete investigation of development options, potential reservoir drive mechanisms, and
reconciliation with volumetric STOIIP estimates, etc.
Numerical reservoir simulation can be thought of as complex (spatially distributed and inter-
connected) material balance calculations. A static geological model of the reservoir, which is
divided into many grid blocks, is often the basis for input into an appropriate dynamic reservoir
simulation model. Rock and fluid property assumptions are input for each grid block. After
initialisation of the model to match initial reservoir conditions and to calibrate in-place volumes,
a network of simultaneous equations solves for conservation of matter (material balance) as
historical production is withdrawn from specified grid blocks (wellbores) in the model.
With limited data (geoscience and engineering), the model is best suited to investigate
sensitivity scenario projections to bracket what is possible around the Best Case estimate. In
the early stages of a Project, a wide range of uncertainty is to be expected. This range should
narrow as more data becomes available and the reliability of the simulation model history
matching has been demonstrated. As the amount and quality of data increases, the range of
estimates of in-place and recoverable volumes obtained using these integrated reservoir
simulation models (matched using long observed production performance data) should
generally decrease.
When more production data becomes available, it is a best practice, to ensure that the
simulation model predictions are in line with Best Case estimates derived from the DCA. A “no
further action” (NFA) case from the model should be supported by the production performance
trend extrapolations assessed from DCA of the production data, as shown in the example in
Figure 25.
Any simulation model should be consistently updated with production and pressure data to
ensure its consistency and reliability as a predicting tool. The accuracy in predicting the
occurrence of specific events, such as water or gas breakthrough in specific wells, should also
be used to benchmark or adjust the model. Reservoir simulation results should be compared
with results obtained from other assessment methods and the reasons for any major
differences rationalised. For example, if deviations in prediction against actual production are
observed, it is important that the reason behind the differences are understood and justified.
Additional recovery Projects may have to be defined to capture the identified Resources.
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Figure 25: Best Case DCA to Support Reservoir Simulation
Ideally, three different geological realisations should be developed (representing the Low,
Best, and High Cases). Associated reservoir simulation models can be used to directly
estimate the respective in-place volumes, EURs, and remaining Resources.
In addressing the objective of improving the range of uncertainty for Resources and Reserves
for existing Projects, four potential situations are considered and guidelines are presented
below to deal with each particular situation. They are as follows:
Scenario 1: An endorsed and updated dynamic model exists that is consistent with both
DCA and Material Balance and is the basis of the 2P estimate (for brown fields
only).
Scenario 2: An endorsed and updated dynamic model exists that is consistent with all the
data acquired and is the basis of the 2P estimate (for green fields and brown
fields with initial production data only).
Scenario 3: A dynamic model is not available, or not yet endorsed (for producing fields or
approved Projects only). Or a dynamic model is available but is not consistent
with current data sets (e.g. DCA and/or results from wells etc.).
Scenario 4: The dynamic model is not available or not yet endorsed (for Projects in
Contingent Resources Sub-Class 3, 4 or 5). Or a dynamic model is available
but is not consistent with current data sets (e.g. DCA and/or results from wells
etc.).
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Figure 26: Scenario 1 – When an Endorsed and Updated Dynamic Model Exists that
Supports the Current 2P Estimate (for Brown Fields Only)
Guidelines for Scenario 1 – When an Endorsed and Updated Dynamic Model Exists that
Supports the Current 2P Estimate (for Brown Fields Only)
The flowchart for Scenario 1 is designed specifically for brown fields. In fields where the geology is
complex, or where a large range in PIIP volumes exists, the development of three simulation
models representing the Low, Best and High Case outcomes is ideal.
As an alternative, the history match process could be used to define the Low and High Cases. It
should be borne in mind that these Low and High Cases must still represent valid outcomes and
should provide an adequate history match.
The results of any prior history match sensitivity analyses can be used to identify key parameters
which may be adjusted to test the boundaries of an acceptable history match and provide valid Low
and High Cases. A number of parameters (e.g. fluid contact, acquifer strength and size, drive
mechanism, reservoir parameters such as porosity and Sw) can be used to test these uncertainties
and study their effects on PIIP and EUR estimates.
In the event that a history-matched solution is not possible within the requested timeframe, Project
Teams are advised to generate Low, Best and High Case forecasts using either the DCA and/or
Material Balance.
This approach, is however not suitable where the Low and/or High Cases may be represented by
different geological models to the Best Case. In such situations, explicit Low and High Case
dynamic models should be generated to respresent the fundamentally different geolocial
realisations. Low and High Case production forecasts should be generated based on these discrete
realisations.
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Figure 27: Scenario 2 – When an Endorsed and Updated Dynamic Model Exists that
Supports the Current 2P Estimate (for Green Fields and Brown Fields with Initial
Production Data Only)
Guidelines for Scenario 2 – When an Endorsed and Updated Dynamic Model Exists that
Supports the Current 2P Estimate (for Green Fields and Brown Fields with Initial Production
Data Only)
The flowchart for Scenario 2 is designed specifically for green fields. In fields where the geology is
complex, or where a large range in PIIP volumes exists, the development of three simulation models
representing the Low, Best and High Case outcomes is ideal.
As an alternative, the history match process could be used to define the Low and High Cases. It
should be borne in mind that these Low and High Cases must still represent valid outcomes and
should provide an adequate history match to the limited production and DST data. A number of
parameters (e.g. fluid contact, acquifer strength and size, drive mechanism, reservoir parameters
such as porosity and Sw) can be used to test these uncertainties and study their effects on PIIP and
EUR estimates.
In the event that a history-matched solution is not possible within the requested timeframe, Project
Teams are advised to generate Low, Best and High Case forecasts using Material Balance as
described earlier.
This approach is however not suitable where the Low and/or High Cases may be represented by
different geological models to the Best Case. In such situations, explicit Low and High Case
dynamic models should be generated to represent the fundamentally different geolocial
realisations. Low and High Case production forecasts should be generated based on these discrete
realisations.
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Figure 28: Guidelines – QC Validation for Scenarios 1 and 2
The flowchart above seeks to provide a guideline to perform a quality check on the
profiles generated from Scenarios 1 and 2.
In this workflow, the results from different analytical techniques, i.e. analogues, DCA,
material balance and reservoir simulation are integrated to provide profiles that honour
the uncertainty ranges for the analysis of Reserves volumes.
Guidelines – Parameters to Vary

Create a tornado chart to rank the parameters based on the impact of the uncertainties on
In-place volumes. The parameters may include (but are not limited to):
 Fluid contact
 Aquifer strength and size
 Reservoir parameters (e.g. porosity, Sw)
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Figure 29: Scenario 3 – When Dynamic Model Is Not Available or Not Yet Endorsed
(For Producing Fields or Approved Projects Only)
Guidelines for Scenario 3 – When the Dynamic Model Is Not Available or Not Yet
Endorsed (for Producing Fields or Approved Projects Only)
Figure 30: Scenario 4 – When Dynamic Model Is Not Available or Not Yet Endorsed
(For Projects in Contingent Resources Sub-Class 3, 4 Or 5 Only)
Guidelines for Scenario 4 – When the Dynamic Model Is Not Available or Not Yet
Endorsed (for Projects in Contingent Resources Sub-Class 3, 4 or 5)
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Summary
This Section of the Manual describes the various methods that can be used to estimate
Resources volume ranges – analogues, volumetric estimation and performance-based
techniques, i.e. DCA, material balance and reservoir simulation.
It is recommended that the estimates obtained using several different methods be compared
to ensure that the entire range of uncertainties is captured. The different techniques can also
be used to bracket the range of volumes. For example, with more production data, the material
balance or reservoir simulation can be used to narrow the range by eliminating the extreme
ends of these estimates that do not provide a good history match. It is, therefore, important
that the models are continuously updated.
General Guidelines for Ranges

 There is no single right answer – always use a range of estimates when discussing
volumes.
 Use all available methods to provide independent assessments of the volumes – the final
range of Low, Best and High estimates may be derived using different techniques.
 Analogues and volumetrics are important at the early development stage, but
performance-based techniques are more relevant once more production data is
available.
 Any differences in estimates should be understood, rationalised and justified.
 Continuously update the models with performance data – the range of uncertainty should
narrow as more data becomes available.
Minimum Requirement for FID

Historically, PETRONAS has generated volumetric Low, Best and High Case estimates from
the static model. However, only the Base Case static model is typically carried into dynamic
modelling to generate production forecasts and recoverable volumes estimates.
In the future, it will a requirement that certain new major capital-intensive or complex sub-
surface or high risk Projects be evaluated at FID using the full range of subsurface uncertainty
as follows:
 For green fields: develop Low, Best and High Case forecasts using Material Balance
and/or reservoir simulation models.
 For brown fields:
o If the PIIP volume range (Low to Best and/or Best to High) from the static model is
small (i.e. less than 50 MMboe or 10%, whichever is higher), the Low and High
Case can be estimated from the history-matched Best Case model (see Scenario
1 above). If the dynamic model is not available, use Material Balance, DCA or
analogue (see Scenario 3 above).
o If the PIIP volume range from the static model is large (i.e. larger than 50 MMboe
or 10%, whichever is higher), generate the Low Case forecast (as a minimum) from
a Low Case model, in addition to the Best Case model forecast.
 DCA can be used to estimate Low, Best and High volume for NFA case to validate the
dynamic model derived forecasts.
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1.6.3.4 Re-categorisation vs. Re-classification
There is often confusion when the actual performance of a well, reservoir or field does not
meet the forecast or estimates generated. The lower (or higher) than predicted production
could be due to a number of possible reasons. This may result in the need for a re-
categorisation or even re-classification of a project’s revised production forecasts.
This section provides several worked examples where the well, reservoir or field does not
perform as forecasted and the steps that may need to be taken by the Estimator in properly
categorising or classifying the difference in volumes. A few points should be borne in mind.
 The actual performance of the well, reservoir or field should be compared to the entire
range of forecasts (Low, Best and High estimates) to help understand the reason behind
the difference. It is possible that the difference is purely related to subsurface uncertainty,
which should already be captured in the existing forecast range.
 If it can be justified that the volume difference be reclassified (i.e. from Reserves to
Contingent Resources), a new Project (with associated production and cost profiles) has
to be created to provide a plan to develop and produce the hydrocarbons associated with
the volume difference.
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Figure 31: Guideline 1 – Poor Performance Compared to DCA
Low, Best and High forecasts were generated using DCA (top) and the volumes were
captured in the ARPR. The following year, the production decline is greater than that
predicted by the DCA. The drop could be due to several possible reasons:
 Scenario 1: Well or reservoir damage that can be remedied by well intervention
- Update the DCA to incorporate the new production data and update Best (and Low)
Case in the ARPR. Perform a study on the well/reservoir.
- If the study indicates that production can be returned to the original Best Case with
minor remedial works (see Guidelines on Behind Casing Reserves for definition of
“minor”), capture original Best Case as new High Case.
- If major intervention is required, create a Project (FDP) and assign the volume
difference as Contingent Resources. Only move volume difference back to Reserves
once FDP is approved.
 Scenario 2: The higher decline is real and reflects original forecast over-estimation
- Update the DCA to incorporate the new production data and update Best (and Low)
Case in the ARPR.
- If technically justified, book the original Best Case as a new High Case. If the old Best
Case cannot be supported by data, de-book the volume difference.
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Figure 32: Guideline 2 – Performance not as Forecast by MBal or Simulation Model
A new well, reservoir or field does not perform as forecasted by a Material Balance or
reservoir simulation model. The new data interpretation and reconciliation suggests a new
forecast with lower EURs than previously estimated.
 Scenario 1: If the drop in performance is believed to be due to lower in-place volumes
than initially estimated e.g. shallower fluid contact, poorer reservoir properties, deeper
structure above the hydrocarbon-water contact, etc.
If this scenario is encountered, re-estimate PIIP and recoverable volumes and update the
ARPR i.e. de-book the difference between old and new estimates. If there is a technical
valid alternative i.e. a separate compartment, or a saddle, create a Project and generate
production, cost forecasts and conceptual development plan to recover the volumes.
These volumes will be captured as Prospective or Contingent Resources under a separate
Project.
An example is provided below:
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Guideline 2: Performance not as Forecast by MBal or Simulation Model (continued)

 Scenario 2: If the drop is due to compartmentalisation (due to faulting or stratigraphy)
and a separate Project is required to recover the unconnected volumes.
- If this scenario is encountered, estimate PIIP in the two fault blocks separately.
- Re-classify Resources associated with the PIIP in the unpenetrated fault block as
Prospective Resources. Create a Project and generate production, cost forecasts
and conceptual development plan to recover the volumes.
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Guideline 2: Performance not as Forecast by MBal or Simulation Model (continued)

 Scenario 3:
If there is believed to be reasonable certainty in the geological interpretation i.e. contacts
and structure are well understood. The drop in production reflects the large uncertainty
in recoverable volumes, potentially due to drive mechanism, reservoir parameters or fluid
properties uncertainty.
- If this scenario is encountered, update the material balance and/or simulation model
with the latest production data.
- Generate new Low, Best and High Case estimates that honour the latest production
data (see Guidelines on DCA, material balance and reservoir simulation).
The volume difference to be de-booked. In addition to the three scenarios listed above, there
are other possibilities that must be considered by the Estimator.
In general, if the Estimator believes that the recoverable volumes still exist and their
recovery is technically justifiable, a Project should be created to recover the volumes.
The list below offers some other possible scenarios, but is not exhaustive.
 Weaker aquifer support than expected – create a pressure maintenance Project and
capture the additional volumes as Contingent Resources.
 Smaller drainage area than initially interpreted – create infill well drilling Projects and
capture the additional volumes as Contingent Resources.
 Well performance and reserves drop due to well integrity issues.
1.6.4 Contingent Resources (1C, 2C, 3C)
The range of uncertainty for a Contingent Resources Project is defined by Low, Best, and High
estimates of the defined project’s recoverable volumes – 1C, 2C and 3C. If determined
probabilistically, these estimates represent a probability of at least 90%, 50% and 10%,
respectively, that the quantities recovered will equal or exceed the estimates.
The technical definitions for these categories are the same as for Reserves, except that they
are not currently producible for commercial reasons. In this regard, the 1C estimate should be
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based on the same technical guidelines as for Proved Reserves, while the 2C and 3C
estimates should follow the same guidelines as for the estimation of 2P and 3P Reserves.
The analytical procedures employed in establishing the range of uncertainty will be mainly
Analogues and Volumetric Estimation. Material Balance and Reservoir Simulation models
may be used in a complementary fashion (e.g. sensitivity and scoping studies) whilst
recognising reliance on largely unsubstantiated assumptions in the absence of dynamic
calibration data.
1.6.4.1 Analogues
For Contingent Resources Projects, analogues can play a major role in defining the range of
uncertainty, particularly in the early appraisal stages of a Discovery. Analogues can be used
to provide a wide range of parameters from reservoir and fluid properties to recovery
efficiencies. In all cases, the similarities and differences between the analogue and the subject
reservoir or Project should be well documented.
Table 7: Guidelines for Analogs
Guidelines for Analogues

As we move from Reserves to CR and then to PR, the lack of data emphasises the need
for analogues. The HRA Guidelines – July 2011 provide the following principles in
applying analogues for Resources Estimation.
Parameter Criteria
Similar geological model, i.e. similar overburden, uplift and
GRV subsidence history, depositional environment, geological processes
and log pattern to determine facies.
Fluid Level Similar source rock, temperature and pressure range and wettability.
Similar geological model, i.e. similar depositional environment,
NTG
geological processes and log pattern to determine facies.
Similar geological model, i.e. similar uplift and subsidence history,
Porosity depositional environment, geological processes and log pattern to
determine facies.
Water depositional environment, geological processes, diagenesis history,
saturation seal, fluid property, fluid type (density and wettability), dependence
on wettability and log pattern to determine facies.
Permeability depositional environment, geological processes and log pattern to
determine facies.
Formation
Similar source rock, pressure, temperature and depth ranges.
Volume Factor
Similar geological and fluid characteristics, with proven (or pilot)
development plan from a mature field (if possible). Similar
Recovery
depositional environment, geological processes, aquifer processes
Factor
and size, homogeneity of the reservoir, source rock fluid type and
reservoir extent.
The priority for analogue (in increasing order of relevance) should be from global to
regional and then to basin scale.
The source of the analogue should be clearly defined and quoted for reference.
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The volumetric estimation for Contingent Resources should follow the same principles as
Reserves. There will generally be less data available to constrain the reservoir geometry,
properties, their distributions and uncertainty ranges.
As discussed above, the uncertainty range between the High and Low Cases will be influenced
by the number of wells that have penetrated the hydrocarbon column and whether these have
established hydrocarbon contact(s). Clearly there is less uncertainty than in the case for
Prospective Resources; however, as many discovery wells penetrate the reservoir close to
the crest of a structure, there still remains the uncertainty in the down dip location of the Free
Water Level (FWL). A combination of data should be used, with the fluid contact assumptions
based on confidence levels
One pitfall that commonly occurs is in situations where no Free Water Level has been
established and large hydrocarbon columns can be interpreted as determining the High case;
cap-rock integrity and strength also need to be taken into consideration in such cases to
ascertain that the hydrocarbons are retained in the structure. The “half-way” concept is not a
rule to be blindly followed in all circumstances as inappropriate use, or too-rigid a use of the
half-way concept is one of the most common reasons for volumetric estimates being too high
and requiring downgrading post-drilling (discovery or appraisal). Such assumption on the fill
to spill may lead to higher volume estimates associated with higher uncertainties. The
Guidelines on the fluid level ranges in the Reserves Section provides a useful reference
summary.
Additional control that will increase the confidence in determining the fluid contact limits is the
use of seismic attributes and AVO responses, particularly where these are supported by some
element of conformity with the reservoir structure; the Estimator though still needs to be aware
that residual gas saturations of around 5% also provide a significant seismic amplitude effect.
However, there may also be situations e.g. stratigraphic traps where conformity with structural
contours would not be expected. In such cases, conformity with the depositional model and
geological understanding of the reservoir should be considered.
A new discovery will have changed the whole view of risks and uncertainties that were
attached to a Prospect. Well results with all the associated hard data gathered can be used to
calibrate the seismic dataset, establish a Best Case set of measured reservoir parameters
and fluid properties and pore-fill. The fact that a discovery has been made will prove the play
concept as reservoir, trap, seal and charge have all been established.
A key issue when assessing uncertainty ranges is that the Low and High estimates represent
realistic cases based on data, geological understanding, analogues etc., and do not represent
unrealistic minimum or maximum cases that are not supported by data, analysis or analogues.
A high estimate (3C) should still honour data, geological understanding and analogues. For
example, if geological interpretations, seismic attributes, analogues and existing data suggest
that a reservoir is not continuous, it may not be appropriate to assume in a high case that a
reservoir is continuous across the structure. Resources (e.g. drilling wells, acquiring data,
performing studies) may be employed inappropriately while trying to chase unrealistic High
Cases.
It is at this point that the well data is used to condition the seismic and realign the reservoir
parameters and conceptual model prior to updating the volumetrics, based on the discussion
above, in preparation for booking discovered Contingent Resources. As part of ensuring the
robustness of the resources estimation, Exploration have prepared the workflow and
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assurance processes explained in the PETRONAS Exploration Management System (PEMS)

through Assurance Reviews. The subsurface input parameters and ranges would be
simultaneously worked to generate a jointly agreed hydrocarbon volume with representative
Low, Best and High cases in preparation for handover from Exploration to Development.
1.6.5 Prospective Resources (1U, 2U, 3U)
The range of uncertainty for a Prospective Resources Project is defined by Low, Best and
High estimates of the defined project’s recoverable volumes – 1U, 2U and 3U. If determined
probabilistically, these estimates represent a probability of at least 90%, 50% and 10%,
respectively, that the quantities actually recovered will equal or exceed the estimate.
1.6.5.1 Analogues
The use of analogues is most important in defining and determining the potential Resources
in the exploration and early development phases of a Project, when direct measurement
information is limited. The identification of a suitable analogue or better, a set of analogues in
this exploratory phase, is highly dependent on the conceptual geological model. The Estimator
should consider applying realistic variations in the conceptual model that will enable
comparison across a range of analogues to be used, hence providing better estimation of the
range of uncertainty and determining the Low, Best and High Cases. The criteria for the
selection of a proper analogue, as recommended in the HRA Guidelines – July 2011, is
summarised in the Contingent Resources Section above.
The volumetric determination for Prospective Resources should follow the same principles as
outlined for Reserves and Contingent Resources. However, there will be considerably less
data available to constrain the reservoir geometry, properties and distribution; hence the
ranges of the values of each parameter are expected to be larger. The seismic may be limited
to 2D only, with limited amplitude support; well data will be non-existent or potential reference
may be made to wells outside the area under investigation, there will be no fluid information
and only a notional drainage plan to recover any hydrocarbon volumes discovered.
The use of analogues together with the documentation and reasoning behind which are used
will be key in providing a realistic volumetric determination. As discussed in the analogue
discussion above, the conceptual subsurface model used to identify suitable analogues is
critical. In the absence of any well data, estimates of the Low, Best and High Cases should be
derived from analogue data from nearby fields.
The volumetric determination for Prospects is performed using the GeoX software and as with
all undiscovered Resources, an associated Chance of Discovery (CoD) will be reported
together with the recoverable volumes to take into account the added risks associated with
the presence of a structure with reservoir that is sealed and charged with hydrocarbon.
1.7 Aggregation
The volumes described above are generally estimated and categorised according to certainty
of recovery within individual reservoirs or portions of reservoirs. These estimates are summed
to arrive at estimates for fields or Projects. Further summation is applied to yield totals for
areas, countries, and companies. The uncertainty distribution of the individual estimates at
each of these levels may differ widely, depending on the geological settings and the maturity
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of the Resources. This cumulative summation process is generally referred to as

“aggregation.”
1.7.1 Aggregation Methods
Two general methods of aggregation may be applied: arithmetic summation of estimates by

category and statistical aggregation of uncertainty distributions. There is typically significant
divergence in results from applying these alternative methods. In statistical aggregation,
except in the rare situation when all the reservoirs being aggregated are totally dependent,
the P90 (high degree of certainty) quantities from the aggregate are always greater than the
arithmetic sum of the reservoir level P90 quantities, and the P10 (low degree of certainty) of
the aggregate is always less than the arithmetic sum P10 quantities assessed at the reservoir
level.
In practice, there is likely to be a large degree of dependence between reservoirs in the same
field, and such dependencies must be incorporated in the probabilistic calculation. When
dependency is present and not accounted for, probabilistic aggregation will overestimate the
low estimate result and underestimate the high estimate result.
The aggregation method utilised depends on the business purpose. For reporting purpose,
assessment results should not incorporate statistical aggregation beyond the field, property,
or Project level. Results reporting beyond this level should use arithmetic summation.
1.7.2 Aggregating Resources Classes
Petroleum quantities classified as Reserves, Contingent Resources, or Prospective

Resources should not be aggregated with each other without due consideration of the
significant differences in the criteria associated with their classification. In particular, there may
be a significant risk that accumulations containing Contingent Resources and/or Prospective
Resources will not achieve commercial production. Furthermore, there is a significant risk that
Prospective Resources may not realise a discovery if/when drilled.
1.7.3 Aggregation of Volumes for Multi Target Prospects
A distinction must first be made between multi-target Prospects and stacked sands within the
same reservoir. This is illustrated in Figure 33. Wildcat wells may have more than one primary
play target, but will rarely have more than two or three. Where more than one play type is
targeted by a single exploration well it may be necessary to consolidate the risk and resource
assessments into an overall Prospect assessment. A true multi-target Prospect (left hand side
of Figure 33) has multiple targets in different reservoirs with different characteristics and
different play system elements. This might include:
 Different geological sequences e.g. major regional seal or unconformity between the two
targets.
 Closures/traps may have different geometry or sealing mechanism.
 Hydrocarbon source or migration pathway or timing may be very different.
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Figure 33: Multi Target Examples
The main interpretation input to such models is the dependency between the various
petroleum system elements. Dependent geological factors often include trap (structure) and
timing/migration whereas reservoir and seal may often be independent factors. The
mathematical handling of combining the risk factors and aggregation of the volumes is
performed within software tools such as GeoX as used by PCSB.
It is also important not to over-complicate the assessment. Where possible, the assessment
should be kept as simple as required. It should only be on an occasional basis that multi-target
assessments are required.
Increasing the number of targets within a Prospect, assuming at least some independent risk
factors, will generally increase the chance of success for that Prospect. However, it is
important to realise that if there are multiple targets, there is also increased chance of only
one or two targets being hydrocarbon bearing resulting in a wide range of volumes and lower
volumes in general. A higher Geological Chance of Success (GCoS) will typically be combined
with lower volumes if additional targets are introduced to an assessment.
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2 COMMERCIAL EVALUATION / ECONOMICS
Commercial evaluation of Petroleum Reserves and Resources is a process by which the value
in existing and planned recovery Projects is determined. A commercial evaluation will require
production profile, associated costs profile, price forecasts and fiscal terms, resulting in cash
flow profile. The evaluation is not only subject to the inherent subsurface uncertainties, but
also to commercial uncertainties such as oil and gas prices, actual Capex and Opex and
Project implementation and timing.
Economic Evaluation in PETRONAS

There are two (2) economic evaluations performed in PETRONAS, namely the in-year and year-
end evaluations. The key difference is that for in-year economics, the evaluation is for project
sanctioning governed by the UPMS processes, and it can be on a project by project basis or
incremental. Profit Investment Ratio (PIR), Net Present Values (NPV), and Rate of Return are some
of the economic indicators used to evaluate the projects.
For year-end economics, it is for the Annual Review of Petroleum Resources (ARPR) evaluation
where the economics is done at the contract level and on an incremental basis where the output is
used to categorize the volumes according to the PRrMS classification based on the economic limit,
contract expiry and entitlement take for PETRONAS Group (EP), MPM, and PCSB.
In principal, the economics for any project should reflect PETRONAS’ role as the Regulator (MPM)
and Contractor (PCSB). For Malaysia Projects, MPM will generate different economics due to the
impact of differing entitlement, license limits and revenue apportionment. For International Projects,
only one economic run will be performed as PCSB represents PETRONAS entity in International.
ARPR Economics
For economic limit determination on Reserves, only Developed and Undeveloped projects are
considered in the evaluation as the projects have obtained FID and have been sanctioned by the
management. If the Projects are evaluated to be uneconomic for PCSB, but economic for MPM,
then volumes can only be classified as Reserves for MPM and Contingent Resources Sub-Class
5a for PCSB.
If Projects are evaluated to be uneconomic for both entities, but there is a need to develop the
Project (e.g. for domestic energy security), then the volumes associated with the Project should be
classified as Contingent Resources Sub-Class 5 for both PCSB and MPM. Uneconomic volumes
are not Reserves despite production.
For entitlement calculation, this is done on an incremental basis at the contract level starting with
Developed, Undeveloped, and subsequently all the CR projects (CR1, CR3, CR4, and CR5b)
according to the maturity. Each incremental cash flow will reflect different entitlement for various
parties. See Section 3 for the volume classification post economic evaluation.
2.1 Determination of Commerciality
Contingent Resources can only be matured to Reserves when the discovered hydrocarbon
volumes are demonstrated to be commercially recoverable (see Section 1.3). One of the key
requirements of commerciality is that the “assessment of the future economics of such
development Projects meet defined investment and operating criteria”.
For a Project to be considered commercial it is required that the Project provides a positive
Net Present Value (NPV) on its investment to the company (PCSB or MPM) at the discount
rate used for internal decision making, on a look forward basis of the year under review.
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A Project is deemed to be “economic” when the cumulative net discounted pre-tax cash flow
(NPV) of the Best Case (2P or 2C) is positive. It is, therefore, important that the volumes
reported are accompanied by the following notes:
 Effective date of the evaluation (e.g. 1st January, 201x).

 Economic assumption used (e.g. price, escalation, inflation, foreign exchange rate, etc.).
 Basis of the volumes (e.g. gross, net working interest or entitlement) and associated costs
to economic limit, petroleum arrangement expiry or technical limit.
In PETRONAS, the “defined investment and operating criteria” are the economic assumptions
that are in line with the official annual PETRONAS key assumptions (Best Case) i.e. Key
Planning and Budget Inputs (KPBI) at a certain “as of” date. These economic assumptions
include, but are not limited to, the following:
 Hydrocarbon product prices (oil, gas, condensate, NGL, etc.).

 Foreign exchange rates.
 Corporate Discount Rate.
The same criteria are used by MPM (i.e. EP Economics) and PCSB (i.e. Contractor
Economics), but with different entitlement, licence limits and revenue apportionment, thus
leading to different dates for the Economic Limit (EL) and dissimilar entitlement volumes,
particularly for PACs.
The 2P Reserves cash flow analysis will comprise of the inputs listed below. The methodology
and required inputs for the estimation of 1P and 3P Reserves (or 1C, 2C, 3C Contingent
Resources) are the same as for the estimation of 2P Reserves.
 Best Estimate Project production forecast to the technical limit – this will then be the basis
of the 2P Reserves once the economic limit (EL) has been reached.
 Best Estimate Project capital cost (Capex) forecast to the technical limit (including
abandonment costs/CESS if applicable under the terms of the contract).
 Best Estimate Project operating cost (Opex) forecast, ideally split into fixed and variable
components, to the technical limit.
Due to the different roles played by PCSB and MPM in Malaysia, Reserves (Developed &
Undeveloped) for PCSB are predicated on which event comes earliest between the Economic
Limit (EL) and the contract limit.
 For MPM, the volumes are limited by the EP (PETRONAS Group) Economic Limit, even if
it is past the Contractor’s licence expiry date.
 For PCSB, if the production licence allows for an extension to be granted (see Guidelines
on definition of “reasonable expectation” in Section 1.4), the Project extension can be
taken into account in limiting the EL.
 Volumes post-EL are considered as Contingent Resources (Sub-Class 5a) for both PCSB
and MPM. For PCSB, volumes post-production licence expiry (with reasonable
expectation of an extension) are considered Contingent Resources Sub-Class 2. A
detailed discussion on the effect of EL and licence expiry (and potential extension) on
Resources classification is provided in Section 3.
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For gas Projects, in addition to the above, the Reserves volumes should be limited to the
expiry of the GSA, or when the total gas contract volume is produced (whichever comes first).
The non-economic gas volume within GSA to be reclassified as CR instead of Reserves;
consistent with approach taken for oil.
Economic and Production Licence Limit in PETRONAS for ARPR

For economic limit determination on Reserves, only Developed and Undeveloped projects
are considered in the evaluation as the projects have obtained FID and have been sanctioned
by the management. If the Projects are evaluated to be uneconomic for PCSB, but economic
for MPM, then volumes can only be classified as Reserves for MPM and Contingent
Resources Sub-Class 5a for PCSB. For International, it is based solely on the PCSB
economic limit.
Unique to Malaysia, if Projects are evaluated to be uneconomic for both entities, but there is
a need to develop the Project (e.g. for domestic energy security), then the volumes
associated with the Project should be classified as Contingent Resources Sub-Class 5a for
both PCSB and MPM. Uneconomic volumes are not Reserves despite production.
For Contingent Resources in Sub-Classes 1, 3, 4, and 5b the volumes will be booked in the
ARPR to the technical limit for Malaysia. For International, it is up to the contract expiry.
For entitlement calculation, it is done on an incremental basis at the contract level starting
with Developed, Undeveloped, and subsequently all the CR projects (CR1, CR3, CR4 and
CR5b) according to the maturity. Each incremental cash flow will reflect different entitlement
for the various parties.
As economics are performed only after the technical volumes have been endorsed by the
relevant committees, Project Teams are expected to submit profiles (production, Capex,
Opex and abandonment costs) for all Projects to be captured in the ARPR to technical limit.
The technical limit should include the field life volume and its associated costs to exploit the
said volume. The Petroleum Arrangement expiry or Economic Limit will be applied by the
relevant group.
2.2 Economic Limit
Economic Limit (EL) is defined as the production rate beyond which the forecast net operating
cash flows from a Project, which may be an individual well, lease, or entire field, become
negative (and remain negative thereafter in the future), the point in time that defines the
Project’s economic life (see Figure 34).
Industry standard practice for PACs is to conduct the Economic Limit Test (ELT) on the full
(ring-fenced) Petroleum Arrangement, as opposed to on a well/platform/Project/field basis.
This is predominantly due to the fact of how the Petroleum Arrangement mechanism works,
and so to run the ELT at a “lower level” does not reflect the future Project cash flows (i.e. costs
incurred on one field under the Petroleum Arrangement may be recovered through the
production of another in the same Petroleum Arrangement). Further, the ability to allocate the
Cost Pool at anything less than at the full PAC level is virtually impossible; any entitlement
volumes at lower than the Petroleum Arrangement level are unlikely to be correct.
Operating costs (Opex) should exclude depreciation and reclamation costs, and income tax,
as well as any overhead above that required to operate the subject property itself. However,
where the accrual of an Abandonment Fund is liable to Cost Recovery under the terms of the
Petroleum Arrangement, then it can be included in the Opex profile.
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Operating costs may be reduced, and thus Project life extended, by various cost-reduction
and revenue-enhancement approaches, such as sharing of production facilities, pooling
maintenance contracts, or marketing of associated non-hydrocarbons. Such cost saving
approaches should be identified separately and justified.
Figure 34: Economic Limit
Guidelines on Low, Best and High Case Economics

It is industry practice to perform economic runs for all three categories of Resources.
Economics are run using Low, Best and High Case production forecasts, each likely
resulting in different ELs.
Judgment is needed during a Project’s development stage when the Project was approved
based on the Best Case and Capex would be spent regardless of the volume outcome.
The following guidelines are recommended:
 Any committed CAPEX must be used for all three Cases of economics.
 Any discretionary spending (e.g. number of wells in each Case) should match the
respective scenarios.
 The variable component of the OPEX will depend on the forecasts used.
In the case where the evaluation reveals the Project to be uneconomic for the Low Case,
but economic for the Best and High Cases, there will be zero Reserves ascribed to the
Low Case.
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2.3 “Royalty”
“Royalty” refers to payments that are due to the host government or mineral owner (lessor) in
return for depletion of the reservoirs by the producer (lessee/contractor) having access to the
Petroleum Resources. Conversely, if a company owns a “Royalty” or equivalent interest of any
type in a Project, the related quantities can be included in Resources entitlements.
The general guidelines for “Royalty” are:
 The production licence/contract will normally state whether any “Royalty” is to be taken in
cash or kind. If the method of “Royalty” payment is not stipulated, it is generally assumed
that payment is made in cash – thus, the Petroleum Resources volume is not reduced. A
note associated with the Reserves of the asset/Project should note this assumption.
 If “Royalty” is payable only in cash, it might be treated like a tax and there is no deduction
to Petroleum Resources volumes, since the volumes are still available to the Contractor.
 If “Royalty” may be taken in kind, the “Royalty” volumes are excluded from Petroleum
Resources, since the volumes are no longer available to the Contractor. The volumes have
been “taken off the top”, and provided to the Resources Owner/host government.
 Besides the “standard” “Royalty”, some Projects may attract an Overriding “Royalty”
Interest (ORRI). Royalties payable to non-government entities (e.g. ORRI) are treated as
volume deductions. An ORRI is limited to the life of the lease/contract under which it was
created, and gives the ORRI Owner a proportion of the revenues generated from the sale
of produced hydrocarbons, and not the hydrocarbons themselves – thus Contractor
economic entitlement is unaffected. ORRIs are not subject to any development (Capex) or
operating (Opex) costs associated with the asset/Project.
2.4 Petroleum Arrangement Contract (PAC) – Tax Treatments
Under the terms of a standard PAC, the Contractor’s economic entitlements are based on the
sum of Cost Recovery and Profit Share payments to the economic limit of the Project. The
associated Resources are then back-calculated using the prices in the cash flow. The
Contractor may be required to pay Profit Tax out of its share of the Profit Share.
Under some PACs, however, the host government or national oil company (NOC) pays the
Contractor’s Profit Tax on its behalf. Depending upon the wording of the PAC, there are 2
possible effects on the Contractor’s Resources entitlement:
 If the Contractor derives benefit from/has an economic interest in the host nation’s share
of hydrocarbons used to cover the tax payments, said volumes could be attributed to the
Contractor as part of its entitlement under the PAC. Further checks would be required in
this instance to ensure that this treatment was compatible with the local Tax Law as well
as what was stated in the PAC. This “Reserves tax treatment” does not apply to any
Malaysian PACs.
 Otherwise, when the tax payment is strictly a financial arrangement that cannot be
attributed to the host nation’s share of profits from the Project. Thus, an economic interest
linked to the PAC would not exist and no additional Resources entitlement could be
attributed to the Contractor.
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2.5 Reserves and Resources Recognition
For Reserves and Resources to be booked, the Contractor must demonstrate the following:
 A direct economic interest in the volumes of oil or gas produced as a result of the activities
contemplated under the contract.
 The compensation should be tied to the production that they achieve.
 The Contractor should be exposed to market or subsurface risks.
The right to take volumes in kind does not of itself provide any meaningful guidance as there
are cases (for instance, some risk service contracts) where there is no such right, but Reserves
and Resources are still booked on the basis of the other criteria being satisfied. Equally, some
contracts provide for payment in crude oil, but this of itself is not sufficient for the booking of
Reserves and Resources.
As a general rule, Reserves and Resources can be booked under concession and PAC
Petroleum licences (noting that net entitlement should be booked for PSC). Some Risk Service
Contracts provide a basis for booking but many do not, and Service Contracts rarely (if ever)
provide the basis for Reserves and Resources booking.
Guidelines on Risk Service Contracts

The following are examples of where Reserves and Resources may or may not be booked
under Risk Service contracts.
 Contracts where the Contractor has the right to extract hydrocarbons and to take the
volumes in kind; has a clear mineral interest through control of the production of
hydrocarbons from reservoir to the sales/transfer point, and is not necessarily under a
purchase agreement, and; is exposed to both technical and commercial risk and potential
reward. These criteria have been used by a number of companies in justifying their SEC
Proved Reserves for their Iraqi assets.
 Under the Malaysian Small Fields Risk Service Contract (SFRSC) there is a clause that
clearly states that PETRONAS is the owner of all hydrocarbons produced under the
contract, per the Petroleum Development Act 1974, and that the Contractor has no share
of the proceeds of hydrocarbons produced.
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3 ARPR VOLUME CLASSIFICATION AND REPORTING
3.1 Reserves
For ARPR volume classification, complete Developed and Undeveloped technical field life
volumes must be submitted to PRG. These technical field life volumes are defined in the SPE
PRMS June 2018, version 1.01, document as Technically Recoverable Resources (TRR) and
they are subjected to the year-end economics evaluation (See Section 2) after submission.
From the economic evaluation, the output will be Entitlement, a set of economic limits (1P, 2P,
and 3P) and the commercial cut-offs (PAC or GSA expiry) based on the PETRONAS corporate
or PCSB economics assumptions at the contract level. In the case of a production license
having all hydrocarbon types, the economic limit will be generated based on the consolidated
cash flow (barrel oil equivalent, BOE) for truncation purposes. After the economic evaluation
the final classification of Contingent Resources Sub-Classes CR2 (or SLI) and CR5a will be
performed by PRG. The following scenarios for Crude Oil, Natural Gas, Associated Gas and
Condensate are provided to demonstrate the criteria that will be used by PRG to carry out this
task.
3.1.1 Crude Oil
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Note: For Malaysia, if Projects are evaluated to be uneconomic for both PCSB and MPM, but
there is a need to develop the Project (e.g. energy security), the volumes should be booked
as Contingent Resources under Sub-Class 5 for both MPM and PCSB.
Uneconomic volumes are not Reserves despite production. The production should be
accounted for as Np or Gp, and the CR volume should be reduced accordingly every year to
account for the production.
Since crude oil is a readily traded commodity, Market is assumed to be in place, unless there
are specific sanctions, quotas or curtailments that restrict access to the Market and can be
lifted anytime once it is separated (offshore and onshore separator) at the receiving terminal.
Hence from the EP point of view, the Reserves booking is subject to the Economic Limit, and
it is not subject to any contract expiry. For PCSB however, from the Operator’s point of view,
production license expiry will govern the booking.
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For PCSB, volumes post contract expiry should be captured as CR2. However, in the special
case where a decision is taken not to extend the contract, either due to commercial or strategic
reasons, these volumes shall then be reported as a Separate Line Item (SLI).
Note: The classification of volumes should be limited to the end of life of the production
facilities (if this occurs prior to the economic limit or PAC expiry). If the facilities life is limited
by contract expiry (e.g. Chinguetti MOPU contract expiry) and there is no plan to extend the
contract, no Reserves and/or Contingent Resources should be booked post contract expiry,
but rather they should be reported under a Separate Line Item (SLI).
Since crude oil is a readily traded commodity, Market is assumed to be in place, unless there
are specific sanctions, quotas or curtailments that restrict access to the Market and can be
lifted anytime once it’s separated (offshore and onshore separator) at the receiving terminal.
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Hence it is not subject to any specific GSA or HoA but only to the production contract expiry,
i.e. PSC, RSC, or other similar agreements.
3.1.2 Natural Gas, Associated Gas, and Condensate
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Note: Unique to Malaysia, where though the GSA/HoA is a key requirement as it prescribes
the gas pricing and specification, contractual amount and buyers; this may not be applicable
to EP. Should there be an obligation for PETRONAS to provide energy security especially to
domestic utilisation, EP can book Reserves up to the economic limit regardless of the
production license or GSA/HoA expiry (See Section 1.4.2.3). If there is no historical evidence
or firm intention to supply, then this volume can be captured as CR3. Volumes above ACQ or
GSA/HoA commitment can also be booked as Reserves, provided there is historical
precedence to support such scenarios, e.g. domestic market and local industry consumptions.
For PCSB, volumes post contract expiry should be captured as CR2. However, in the special
case where a decision is taken not to extend the contract, either due to commercial or strategic
reasons, these volumes shall then be reported as a Separate Line Item (SLI).
The above illustration is for when GSA/HoA is earlier than production license expiry. If the
GSA/HoA year is the same as the production license expiry, then the volume classification will
follow the crude oil approach as described earlier for Malaysia (See Section 3.1.1 Scenarios
1, 2, and 3).
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Note: In a unique scenario for International where the gas sales take is consistently lower
(more than a 5-year trend) than ACQ, e.g. Turkmenistan, Reserves booking should be capped
at the actual gas sales take rather than the contractual commitment to be more conservative
and thus maintain a reasonable outlook.
The above Illustration is for when GSA/HoA is earlier than production license expiry. If the
GSA/HoA year is the same as production license expiry, then the volume classification will
follow the crude oil approach as described earlier for International (See Section 3.1.1
Scenarios 4 and 5).
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3.2 Contingent Resources
For ARPR volume classification, Contingent Resources volumes submitted at the technical
field life are subjected to the year-end economics evaluation (See Section 2). The key output
is to obtain the Net Entitlement for each of the incremental projects and to classify the volumes
according to the production license expiry for PCSB. PETRONAS Group (EP) CR booking for
Malaysia is up to the technical field life, and is not subject to any license expiry.
Note: CR profiles are not subjected to any economic limits truncation for ARPR purposes, as
these projects are yet to be sanctioned and remain contingent on proving their commerciality
through FDP and FID.
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3.3 Prospective Resources
For ARPR volume classification, Prospective Resources volumes submitted are subjected to
commercial viability criteria, i.e. the Minimum Economic Field Size (MEFS), which refers to the
minimum required recoverable Hydrocarbon volume necessary to make the project an economic
success. In principle, MEFS is the minimum required recoverable Hydrocarbon resources which
provide discounted Net Present Value (NPV) equal to zero by taking into consideration the most
likely development scenario and full project life cycle. Therefore, MEFS estimations are either
based on a recent field development plan as an analogue in a matured basin or a conceptual
development plan (graphical method) in a frontier area, which will be updated annually.
The key output is to incorporate and reflect the definition and criteria of the Prospective Resources
based on level of maturity (see Section 1.5), i.e. Prospect and Lead while Play is not reported.
Prospect and Lead should be reported as an unrisked estimate with the assigned risk factor, i.e.
Possibility of Success (PoS), and they must meet the commercial viability criteria.
Note: the economic viability criteria applied to Prospective Resources is only for commercial
screening for ARPR purposes and the overall Prospective Resources volumes will be reported as
risked recoverable.
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4 UNCONVENTIONAL RESERVES AND RESOURCES
The PRrMS (and the SPE PRMS) defines Unconventional Resources to exist in Petroleum
accumulations that are pervasive throughout a large area and that are not significantly affected
by hydrodynamic influences. Such accumulations, typically, require specialised extraction
technology or even significant processing prior to sale (e.g. bitumen upgraders).
The PRrMS classification and categorisation described in the preceding Sections are intended
to be appropriate for all types of Petroleum accumulations regardless of the in-place
characteristics, extraction method applied or the degree of processing required. However,
specialised techniques are often used to assess in-place volumes and evaluate Reserves and
Resources based on development and production plans that are specific to the unconventional
accumulation, as will be discussed in this Section of the Manual.
4.1 Introduction
A schematic of several common types of unconventional reservoirs and how they exist in
different habitats from conventional hydrocarbons are shown in Figure 35.The most common
Unconventional Resources come from Coal Bed Methane (CBM), Shale Gas and Tight Gas
reservoirs.
Figure 35: Schematic of Common Unconventional Reservoirs
Modified from US EIA
The relationship between Conventional and Unconventional Resources can be illustrated by

a Resources triangle shown in Figure 36. Heavy Oil and Tight Gas formations straddle the
boundary, but both present challenges in applying the assessment methods typically used in
conventional accumulations. The key differences between the two types of Resources are
summarised in Table 8 below.
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Figure 36: Resources Triangle
Modified from Holditch, 2003
Table 8: Differences between Conventional and Unconventional Resources
Conventional Unconventional
Localised structural trap with well-defined limits “Continuous-type” deposit with poorly defined
(e.g. seal and fluid contact), discrete fields limits
External hydrocarbon sourcing Often self-sourced
Hydrodynamic emplacement and trapping Trapping not hydrodynamic
Porosity is critical for reservoir rock quality Porosity less critical and often at smaller scale
characterization
Often permeability are very low << 0.1 mD,
Permeability > 0.1 mD exception to coal that may have reasonable
permeability
Matrix and induced permeability from
Matrix permeability
stimulation
Very minimal stimulated production Requires stimulation/de-watering
Traditional to complex phase behaviour (oil
Traditional phase behaviour (PVT)
sand and oil shale)
Minimal extraction effort Significant extraction effort
Significant production history Limited production history
Few wells required for commerciality Many wells required for commerciality
Reserves and Resources can be based on Reserves and Resources more often based on
volumetric analogues than volumetrics
Entire accumulation can be assessed before
Accumulation is defined as drilling progresses
drilling
Short boundary-dominated flow - after a few
Long boundary-dominated flow – after few years
months
It should be noted that the above table is generalised and each type of unconventional
reservoir has its own characteristics as will be outlined in the following Sections.
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These differences impact all aspects of how such reservoirs are evaluated and developed,
including how Reserves and Resources are assessed. The concept of a Prospect is hard to
define for unconventional. It is common for the existence of hydrocarbons to be known, but
the main difficulty relates to the commerciality of production and the scale of development.
Burkholder et al (2012) describe the boundaries between exploration, appraisal and
development often being blurred for unconventional accumulations. It is often stated that
unconventional Resources have a relatively high chance of discovery but relatively low chance
of commercial development. The difficulty is, typically, not in making a discovery, but in
commercially developing it.
The concepts of risk and uncertainty as defined in the PRrMS classification can also become
blurred as development can continue until it ceases to be commercial. The concept of a Project
for the purposes of Reserves assessment also becomes problematic. Projects may exist at
different scales from a single well to a mega-project involving LNG export, thousands of wells
and a multi-decade drilling program. Judgement needs to be made for an appropriate definition
of an unconventional Project for the purpose of Reserves and Resources bookings. This will
be discussed in more detail in Section 4.1.4, but readers are advised to also refer to the
discussion on the definition of Project in conventional reservoirs in Section 1.1.
4.1.1 Discovery Test
The criteria for a discovery are generally more problematic for unconventional reservoirs. With
many unconventional reservoirs requiring some form of stimulation or specialized extraction
technology in order to flow hydrocarbons to the surface, different factors need to be
considered. This may include hydraulic fracturing (for Shale Gas or Tight Gas), dewatering
(for CBM) and thermal recovery (for Heavy Oil).
The definition of a discovery (see Section 1.5.2) deliberately refers to “potentially recoverable”
hydrocarbons. For example, tar sands could be discovered as the hydrocarbons can be made
moveable by the application of certain extraction techniques. Thus, accumulations can be
discovered without necessarily flowing hydrocarbons to surface (although flow to surface
would be a common way of making a discovery).
Overall guidance is that several criteria should be considered for a discovery test and the
overall weighting of all factors reviewed. This guidance is mentioned in the context of Shale
Gas but has general application to Unconventional Resources. For Shale Gas, three criteria
should be considered:
 Well test data and hydrocarbon flow to surface;

 Core and log data providing convincing evidence of a significant volume of potentially
moveable hydrocarbons; and
 Identification of a productive analogue with sufficient similarity to the subject reservoir that
it should be able to produce at similar rates and recoveries.
It is the combined weight of these three criteria that is important. For example, a good well test
may be a strong indication of a discovery. Without a good well test, evidence from core/log
and analogues would need to be more compelling. The above criteria are a useful guide for
all types of unconventional reservoirs, especially CBM and Tight Gas.
Generally, a flow test is preferred and is the most common way of making a discovery in a
Shale Gas reservoir. However, there may be cases, for example in a well understood
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reservoir, where wells are producing gas nearby and a good case can be made on the basis
of analogue and other data.
A similar multi-criteria approach can be applied to other types of unconventional reservoirs

although the relevant criteria may vary between Resources types.
For CBM, factors to consider might include thickness and quality of coal, permeability, gas
saturation and isotherms as well as well test data. It is also possible to prepare a more detailed
set of assessment criteria such as those shown below proposed by Horton (2013) for CBM.
Table 9: Assessment Criteria for CBM Discovery Test (Example)
Category Importance Data Score Supporting Comments

Natural or stimulated
Most definitive criteria; flow must
flow of hydrocarbons to 5 5 25
come from the reservoir interval.
surface
Need to have some idea what the
lithology is (mud log) and some type
Significant thickness
4 4 16 of core data (sidewall core, whole
from log and core data
core) to calibrate a log
interpretation.
Difficult to collect enough evidence
Analogue (commercial,
in the discovery well to achieve this
nearby, geologically 3 0 0
unless the target interval is being
comparable)
developed in an offset area.
Data score of 5 would be hundreds
of scf/ton, desorb quickly, and come
Core desorption (gas
3 0 0 from an interval that is gas-saturated
content)
(or nearly so) with respect to the
isotherm.
Well test (DFIT, MDT) Very important in CBM if coals have
2 0 0
indicating permeability not yet been dewatered.
Must be gas moving through matrix
Mud log shows, gas into the well bore – not from a few
kicks, composition of 2 0 0 fractures, or by destruction of well
gas bore rock by drilling, or from other
intervals.
Measurements are difficult to make
Favourable core
in these tight rocks and there is
properties (permeability, 1 4 4
significant variability from well to
porosity, Sw)
well.
TOTAL SCORE of 42 required to
45
pass the Discovery Test
Note:
 The “Importance” column ranks the relative importance of a given category from 1 to 5.
 The “Data” column is a user input that ranks the strength of the well data on a scale of 0 to 5.
 The “Score” column is the product of the “Importance” and “Data” columns.
 The example input above assumes a strong flow of hydrocarbons to surface and significant thickness.
It is a useful exercise to consider all of the above factors, but it is not recommended that a
specific score (e.g. 42 from the above example) is used as a definitive cut-off to define a
discovery. A subjective decision should still be used, but a technical assessment as shown
above can be used to support such a decision and to provide consistency across different
assets.
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A particular issue with CBM is related to dewatering. Typically, a CBM well will initially produce
mostly water; with time the water rate will decrease and the gas rate will increase. Judgement
should be made as to how much dewatering is required before a discovery has been made.
A high initial water flow rate is indicative of good permeability, but is not necessarily a
precursor to high gas flow rates. Some wells may produce dry gas initially, while others e.g.
if connected to a major aquifer may produce water for years and never produce significant
quantities of gas. A CBM discovery has been made when there is sufficient confidence
that the gas flow rate is significant and continuous. This may require a longer dewatering
period in a frontier area and a shorter period in a well-known area where wells have a similar
and predictable performance. Pilot program is critical to demonstrate the dewatering
success of the coal seams project prior to full development wells program.
For Heavy Oil and bitumen, pilot testing and analogues are the most important criteria. In
these situations, it is likely that there is little doubt that the hydrocarbons are present, but
uncertainty on how they can be produced. Pilot tests would usually be required within the
subject reservoir in order to provide confidence that a significant quantity of hydrocarbons can
be produced. It may also be possible to use analogues to allow classification of accumulations
as Contingent Resources i.e. discovered.
Note that the use of pilot test and analogues for discovery purposes (“a significant quantity of
potentially moveable hydrocarbons” and “evaluating the potential for economic recovery”) is
not as strict as required for classification of Reserves.
4.1.2 Chance of Success for Unconventional Reservoirs
The evaluation of Chance of Success for unconventional accumulations (see also Section
1.5.3 on discussion of Chance of Discovery in conventional reservoirs) has several issues
which need to be considered:
 Unconventional accumulations usually have not undergone a typical source-migration-trap

geological history, so conventional risk assessment (e.g. estimate risk factors for source,
reservoir, trap etc. and combine into a single GCoS factor) does not apply.
- Some unconventional reservoirs (e.g. Tight Gas, Heavy Oil) have gone through such
a geological history and may be trapped hydrodynamically. However, even in these
cases, there are additional factors to consider.
 The SPE PRMS deliberately does not provide detailed guidance on risk assessment, even
for conventional reservoirs.
- Different companies use different methods (e.g. number of risk factors) to assess
chance of success, even in conventional reservoirs. However, the technical basis of
all such assessments for conventional reservoirs is based on well understood and
commonly applied technical principles.
 Risk factors vary between different types of unconventional Resources.
However, even considering the above, it is still possible to estimate the Chance of Success
for unconventional reservoirs. The evaluation of Chance of Success is inextricably linked to
the definition of a discovery described in Section 1.5.3 and can be evaluated using this as a
basis.
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Whilst the generic three principles described above (flow testing, log and core data, and
analogues) can be used for all Unconventional Resources types, specific factors can be used
for each main Resources type. Factors for consideration for CBM and Shale Gas are shown
in Table 10.
Table 10: Geological Chance of Success Factors for CBM and Shale Gas
Coal Bed Methane Shale Gas

Coal thickness (coals present with sufficient Basin character (stable deposition with suitable
thickness) depth, thickness, continuity)
Gas generation (has gas been generated that Burial history (hydrocarbon generation likely to
is stored in the coals?) have occurred)
Permeability (sufficient permeability in the
Organic content (sufficient TOC in basin)
play)
Is the coal sufficiently gas saturated that Geochemical (kerogen type, TOC,
dewatering will produce significant amounts of hydrocarbon index)
gas?
Fractures/cleating (is there sufficient fracturing Mechanical (is there sufficient brittleness to
to allow gas flow?) allow effective hydraulic fracturing?)
Continuity (is there sufficient continuity and
Stress regime (is the local stress regime
thickness to allow a potential development,
favourably oriented?)
horizontal well?)
Development suitability (is the coal suitable for
a particular type of development?)
Note: The grey rows at the top of the table can be considered as play factors that apply to a large
area; the other factors apply to a specific prospect area.
4.1.3 Extent of Discovery / Reserves Area
Unconventional Resources plays do not have well-defined limits of field extents. An

accumulation can extend over a large area and not have a well-defined boundary. One of the
key issues when evaluating an Unconventional Resources play is the lateral extents of all
Resources Classes. This includes, during the exploration phase, the boundaries of a Prospect,
the extent of the Contingent Resources area, and once Reserves have been classified, the
extent of the Reserves area.
Multiple factors should be considered when assessing the extent of a Resources class; these
include:
Licence Block / Permit
Licensing boundaries are important because they are, typically, the level at which
development decisions are made and how regulatory approvals are granted. Volumes should
only be classified as Reserves within a licence block that has a planned, budgeted and
approved development plan. This is especially important when an incremental scenario
method is used. Such licencing considerations override whatever concentric rings may have
been drawn on a map i.e. a discovery should not extend beyond a licence block if a separate
licensing agreement and development plan is required in the neighbouring block.
Geological Factors
Geological factors influencing production characteristics are often referred to as geological

“domains”. Such domains can be defined based on various subsurface factors which may
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include: depth, thickness, thermal maturity, organic content, mineralogy, facies, structural
style, stress regime etc. A favourable combination of factors may define a domain that
represents a sweet spot that is or could become the basis of a development. This sweet spot
therefore becomes the extent of a Prospect and also of the discovery, should it pass the
appropriate discovery test. Such factors could be derived from well data and/or remote
techniques such as seismic.
Well Spacing Factors
Reserves for unconventional reservoirs are commonly assessed using the incremental
scenario method. In such an assessment, well spacing or drilling spacing units (DSU) are used
around a discovery well. By considering how such DSUs would be classified in the event of a
successful development, it is possible to consider any future Reserves categorisation and
ensure consistency as volumes mature through each Resources class. The figure below
shows an example for CBM.
Figure 37: Recovery Factors vs. Well Spacing for Different Permeabilities
Data from Baker et al 2012
The above example shows that high permeability coals can have a wide spacing and still
recover a significant proportion of the gas, whereas low permeability coals will require a large
number of wells to recover a significant proportion of the gas. The optimal spacing will depend
on multiple factors, including commercial considerations. Recovery Factors are therefore a
function of both coal properties (e.g. gas content, permeability) and development plan (e.g.
well spacing, compression, etc.).
Combinations of the above factors should be considered. In different areas or basins, factors
will have a different emphasis. In some basins, or as plays become better understood, it may
be possible to develop “rules of thumb” that relate to a specific distance e.g. in the Montney
Play in Canada, a rule of thumb has been adopted such that a discovery does extend more
than 3 miles from a discovery well. Such distances should be used as maximum values and
can still be reduced due to the factors described above. The overall principle of assigning
confidence levels to commercial producibility (for Reserves) is still the main goal.
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For Prospective Resources at the exploration stage, it is not appropriate to define an entire
basin or a very extensive area as a single Prospect. Estimates can be made of “Basin
Resources Potential” or “Technically Recoverable Resources” by simply multiplying an in-
place volume by a theoretical Recovery Factor. However, such estimates should be clearly
identified as such and typically classified as within the “Play” Sub-Class within Prospective
Resources. Without clearly defined boundaries such as structural closures and fluid contacts,
it is difficult to assess the areal extent of an unconventional “Prospect”. Whenever the terms
Lead or Prospect are used, a level of granularity is assumed which can be assessed using the
criteria described previously.
For Contingent Resources, the extent of area around a discovery well represents the
discovered area. The extent of the discovery should still consider the factors above and should
not extend beyond an area where there is high confidence of the discovery extending. It may
also be possible to apply the incremental scenario method at this stage using 1C, 2C and 3C
areas to define ranges as shown below.
Figure 38: Incremental Categories beyond a Discovery Well
For Reserves, the situation is more complex as the limits of Reserves areas are closely linked
to the development project. This is described in more detail in the following Section.
4.1.4 General Principles for Classification and Categorisation
Although the same principles of Reserves and Resources estimation apply to unconventional
accumulations, the issues described above make the assessment of Unconventional
Resources challenging.
Project definition is often a critical issue when evaluating Unconventional Resources plays. A
“Project” within the context of the PRrMS i.e. at the level at which a development commitment
is made, may often be part of a much larger “mega-project”, for example a LNG export Project.
Such a mega-project may consist of several sub-projects each with its own commitment.
Statistical methods are often appropriate for evaluation of Unconventional Resources plays.
Offset well performance is often not a reliable predictor of undeveloped location performance.
A good description of the use of statistical methods in the evaluation of Resources plays can
be found in the Society of Petroleum Evaluation Engineers (SPEE) Monograph 3 (SPE 2001).
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Proved developed wells also still have their issues due to a lack of understanding about the
long term behaviour of wells, and their flow regimes.
Figure 39: Incremental Scenario Method for Unconventional Reservoirs
Guideline: Incremental Scenario Method for Unconventional Reservoirs

The incremental scenario method described in this section often used for unconventional
reservoirs, especially in North America and also in Queensland, Australia for CBM and has
been used by NSAI for PETRONAS assets in GLNG. A typical example of this method is
shown below.
Once the usual requirements for classification of Reserves have been met, the categorisation
of Proved, Probable and Possible volumes is required. The incremental scenario method
typically uses an “areal” method as shown above.
 Proved Developed area applies to the nominal drainage area for producing or non-
producing wells that are proven to have commercial quantities of recoverable
hydrocarbons. Well spacing will vary depending on the region but may range from ~100
to ~500 acres (0.4 – 2.0 square km).
 Proved Undeveloped can typically be assigned one-well spacing from Proved Developed
locations. In some instances, this may increase to a two-well spacing, if permeability is
high and regional experience justifies good lateral continuity.
 Probable area would typically be assigned a two-well spacing from the Proved locations.
 Possible area would typically be assigned a further two-well spacing from the Probable
locations.
The generic guidelines above can be modified based on technical, commercial or licence
limitations. These guidelines could lead to larger or smaller areas being assigned. A common
practice known as “rubber-banding” can also be applied (see next Guideline) if there is
sufficient confidence of commercial producibility between different areas such that they can
become joined up into a contiguous area. For example, there is sufficient certainty in the
continuity of the reservoir and its properties between known areas. However, on the
downside, if there is less confidence or if a known poorer area is in a particular direction,
these areas could be reduced or limited.
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Figure 40: Rubber-Banding
Guideline: Rubber-Banding
An example of rubber-banding is shown below where two separate areas of 2P Reserves
have been joined due to the high level of confidence of the continuity of the productive
interval.
There are several implications of using the incremental scenario method:

 Typically, based on a Best estimate outcome for wells in all Reserves categories such that
the areas define the uncertainty in outcome.
 Commitment is still required to develop the Project. There may be large differences
between the numbers of wells required to develop the 1P, 2P and 3P areas. There still
needs to be the necessary level of commitment to develop potentially large areas.
 This approach does not clearly separate risk from uncertainty. The “commitment” to drilling
large numbers of wells in the Probable or Possible areas, perhaps many years into the
future, may be uncertain. The general principle is that if the results are good (i.e.
commercial production is achieved), then wells will continue to be drilled. If results are
poor, then fewer wells may be drilled.
 Areas beyond the Reserves area also need critical assessment. It is not appropriate to
use additional concentric rings for 1C, 2C and 3C. Firstly, assess whether the discovered
area extends beyond the Reserves area or if the entire discovered area is planned for
development. If the discovered area does extend beyond the Reserves area, then the
entire area could be assessed for Low, Best and High outcomes. If the entire discovered
area is classified as Reserves, then the area beyond the Reserves area will remain as
Prospective Resources.
Most Unconventional Resources have “sweet spots” with better than average production
characteristics. Early developments are often clustered around such sweet spots. Areas that
produce well tend to have additional development around them, whereas areas that don’t
produce well do not. Thus, the better areas, or sweet spots, may be developed first and poorer
areas may be developed later.
It is also possible to evaluate Unconventional Resources using an uncertainty based

cumulative approach. Such an approach may assume a more fixed definition of a Project,
while the uncertainty reflects the volumes which might be produced from that development
Project. Additional Projects may be added as they are firmed up and committed for
development.
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Figure 41: Example Reserves Classification Booked for Certain Number of Wells and
Area Size
Grid Area Reserves

No of well locations Sq Km PJ
Possibles 771 434 1542
Probables 524 295 1048
PDP 38 21 76
PUD 10 6 20
1P 48 27 96
2P 572 322 1144
3P 1343 755 2686
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The Grid methodology does not fit well with the PRMS. Plot below shows Reserves growth
with drilling (time). 3P Reserves (10% of being exceed) should have a low probability of being
realised. The grid methodology for 3P is not a low probability which means the Reserves
distribution do not reflect P10, P50 and P90 (log normal) distribution.
Figure 42: Unconventional Reserves Growth
The deterministic grid method does confuse risk and uncertainty. Risk is the chance of
commercial production and Uncertainty relates to the probability distribution of Reserves.
The grid methodology may not comply with PRMS as there is not relationship between a firm
project and stated Reserves. In the early stages of the CBM development allocated Reserves
assume project has approval or a very high confidence that approval is imminent. This issue
has to be understood prior to farm-in or investment.
4.2 Shale Gas
Shale Gas reservoirs are typically organic-rich, fine-grained rocks. They contain both
adsorbed and free gas, which complicates any analysis. They are low permeability and require
hydraulic fracturing to produce hydrocarbons.
Many factors may control the producibility of Shale Gas reservoirs including organic content,
thermal maturity, micro-porosity, brittleness, stress regime and local the lithological
characteristics.
4.2.1 In Place Estimation
Calculations of in-place volumes can be made by estimating the volumes of gas present in
both the adsorbed and free gas states using standard equations for each. However, as in
many unconventional reservoirs, the amount of recovery is more important than the amount
of in-place hydrocarbon.
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In Shale Gas, total gas storage is generally considered in terms of the following equation:
𝑻𝒐𝒕𝒂𝒍 𝑮𝒂𝒔 𝑰𝒏 𝑷𝒍𝒂𝒄𝒆 = 𝑭𝒓𝒆𝒆 𝑮𝒂𝒔 + 𝑨𝒅𝒔𝒐𝒓𝒃𝒆𝒅 𝑮𝒂𝒔 + 𝑫𝒊𝒔𝒔𝒐𝒍𝒗𝒆𝒅 𝑮𝒂𝒔

𝐺𝐼𝐼𝑃 = 𝐺𝑓 + 𝐺𝑎 + 𝐺𝑑
43,560 ∗ 𝐴 ∗ ℎ ∗ ∅ ∗ 𝑆𝑔 ∗ 𝑃
𝐺𝑓 =
𝐶∗𝑇∗𝑍
𝐺𝑎 = 43,560 ∗ 𝐴 ∗ ℎ ∗ 𝜌𝑏 ∗ 𝐺𝑐𝑡
𝐴 = 𝐷𝑟𝑎𝑖𝑛𝑎𝑔𝑒 𝐴𝑟𝑒𝑎 (𝑎𝑐𝑟𝑒𝑠), ℎ = 𝑇ℎ𝑖𝑐𝑘𝑛𝑒𝑠𝑠(𝑓𝑡),
∅ = 𝐸𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝑝𝑜𝑟𝑜𝑠𝑖𝑡𝑦(𝑓𝑟𝑐), 𝑆𝑔 = 𝐺𝑎𝑠 𝑠𝑎𝑡𝑢𝑟𝑎𝑡𝑖𝑜𝑛 (𝑓𝑟𝑐),
𝑃 = 𝑅𝑒𝑠𝑒𝑟𝑣𝑜𝑖𝑟 𝑝𝑟𝑒𝑠𝑠𝑢𝑟𝑒 (𝑝𝑠𝑖), 𝐶 = 𝐶𝑜𝑛𝑠𝑡𝑎𝑛𝑡
𝑇 = 𝑇𝑒𝑚𝑝𝑒𝑟𝑎𝑡𝑢𝑟𝑒 (𝑅), 𝑍 = 𝐺𝑎𝑠 𝑐𝑜𝑚𝑝𝑟𝑒𝑠𝑠𝑖𝑏𝑖𝑙𝑖𝑡𝑦
𝜌𝑏 = 𝐵𝑢𝑙𝑘 𝑑𝑒𝑛𝑠𝑖𝑡𝑦(𝑔𝑚/𝑐𝑐), 𝐺𝑐𝑡 = 𝐺𝑎𝑠 𝑐𝑜𝑛𝑡𝑒𝑛𝑡 (𝑆𝐶𝐹/𝑡𝑜𝑛)
Gf is the gas stored in the non-organic and organic pore space, Ga is the gas adsorbed onto
the surface of the clay and organic matter, and Gd is the gas dissolved into the formation water
and/or liquid hydrocarbon. Current industry standard calculations ignore the contribution of
dissolved gas, Gd.
The estimation of the free gas component of GIIP, Gf, can be performed using the conventional
methodology based on estimates of GRV, porosity, gas saturation and the gas expansion
factor. Ga can be estimated using measurements of gas content (isotherm method) similar to
those performed in CBM reservoirs. However, log-derived bulk volume of gas (∅ × (1 − 𝑆𝑤 ))
is actually the total volume of gas sensed by a logging tool, both free and adsorbed (Bust
2013). Therefore, care must be taken to ensure that there is no mixing of the underlying
petrophysical concepts of free and adsorbed gas porosity in the estimation of in-place
volumes.
A common method for evaluating the total volume of reservoir rock that has been hydraulically
fractured from an individual well, is the stimulated rock volume (SRV). SRV calculations are
typically based on microseismic data acquired during stimulation.
4.2.2 Dynamic Methods
One of the most difficult challenges is predicting the long term performance of Shale Gas
wells. There is little to no experience of long-term declines, even in the US, where it should be
noted that the majority of the earlier Shale Gas producers were vertical wells. The advent of
the modern-day Shale Gas producer – horizontal wells with long horizontal sections completed
by multi-stage fracs – is much more recent so there is limited history of the long term
performance of these well types.
This makes it more difficult to validate models and modelling approaches which are inherently
complex due to the many physical processes involved. Such processes include long-duration
transient flow, unknown contributions from hydraulic fractures and unknown physical
mechanisms that may control multi-phase flow characteristics.
Shale reservoir performance prediction is therefore more complex than more traditional
formations and is further challenged by the observation that decline behaviour does not
conform to the traditional Arps decline equations (see Section 1.6.3.3), where decline type
curves vary between exponential (b factor = 0), hyperbolic (0 < b <1) and harmonic (b = 1).
This is illustrated in the example plot below.
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Figure 43: Uncertainty in Shale Gas Well Performance
Early Shale Gas producer performance is more frequently described as “super-hyperbolic”

with b factors >1 and also varying with time. Researchers have now developed alternative
decline equations to match observed performance, key of which are noted as follows:
 Stretched Exponential Decline Model (SEDM) – this is a variation of the Arps method, but
better suuited to Shale Gas reservoirs due to its bounded nature. The model has been
validated for wells with both transient and stabilised flow in the Barnett Shale (horizontal,
multi-stage fractures wells) and in the Carthage Cotton Valley (vertical, layered, with some
depleted wells).
 The equation for the SEDM is provided below, where q is the gas flowrate and, t is the
production time in months, and n (dimensionless) and 𝜏 (month) are the characteristic
exponent and time parameters, respectively, for the SEDM model.
𝑡 𝑛
−( )
𝑞 = 𝑞𝑖 𝑒 𝜏
 Power-law – this is an empirical approach to production forecasting, which can be

described by the following equation, where 𝐷∞ is the decline constant at infinite time and
𝐷1 is the decline conctsant at 1 time unit (e.g. 1 day, or 1 month, depending on the unit for
t). The model has been shown to also fit transient data.
𝐷
(−𝐷∞ 𝑡− 1 𝑡 𝑛 )
𝑞 = 𝑞𝑖 𝑒 𝑛
 Duong model – developed based on observation of production history of vertical wells in

the Barnett Shale over time, where the lot of q/Gp against time appear to form a straight
line with a slope m and intercept a, as described in the following equation.
𝑞
= 𝑎𝑡 −𝑚
𝐺𝑝
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Figure 44: Determining Range of Uncertainty in Shale Gas Wells
Guideline: Determining Range of Uncertainty in Shale Gas Wells
Individual well performance is a key factor in determining the range of uncertainty. This is
particularly so in the early stages where reliance on a single “best-fit” case may lead to major
forecasting errors. The following procedure is recommended to bracket the potential range
of outcomes for an individual well:
 Assume the decline continues as exponential, with a b value of 0. This will give a Low
EUR value.
 Estimate the decline using the SEDM, power law and or Duong methods. This can be
used for the Best Case EUR.
 Calculate continued super-hyperbolic decline, but with imposition of minimum terminal
decline.
- Use a range of Dmin values based on analogues.
- The range may be from 2% (optimistic) to 10% (conservative).
As the Project matures and more experience is gained, this procedure can be refined to
narrow the uncertainty range. In actual practice there is typically a wide range of performance
exhibited by individual wells even in the same area, as demonstrated in the example plot
below, which is taken from PETRONAS’ own Shale Gas operations in Canada. The range of
actual performance can be used to provide Low, Best and High EUR estimates for single
wells.
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4.2.3 Principles for Resource Estimation
The comments made in Section 4.1.4 about the generic methodology for evaluating
Unconventional Resources apply to Shale Gas. There are, however, some additional aspects
to consider. Most Shale Gas developments require hydraulic fracturing from horizontal wells.
The standard “concentric ring” incremental scenario method can be modified to represent a
typical horizontal well spacing as shown in below.
Figure 45: Incremental Scenario for Horizontal Wells
These more generic industry practices are usually modified to suit the experience developed
in a specific area/basin as is the case with the methodology employed by third party
consultants in the Reserves/Resources assessment of PETRONAS’ Shale Gas operations in
Canada. Different reserves evaluator may have slightly different approach on the reserves
estimation and classification and still acceptable by overall industry practices.
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Figure 46: Example of Shale Gas Estimation from PETRONAS Own Assets
Guideline: Example from PETRONAS Canada (performed by GLJ Consultants)
A vertical well is drilled and declared a discovery (in this example, the discovery criteria was
that it tested more than 400 Mscfd). The 6-mile area shown below is booked as Contingent
Resources and the area outside of the blue box remains as Prospective Resources
A horizontal producer is then drilled and the area around the producing well (red) is
upgraded to different categories of Reserves, as shown below.
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Guideline: Example from PETRONAS Canada (continued)

As more producers are drilled, the same principle of incremental areas can be applied as
shown below.
The PRMS framework is designed as management tool. It does not include Regulatory
framework. An unconventional field could have different Reserves depending on the Project
end sales market either to LNG or domestic consumption. Comparing Reserves from one
company to another would require a regulatory framework.
To be included in Reserves there must be a high confidence in the commercial producibility of

the reservoir as supported by actual production or production tests. The Pilot wells must
produce sustainable commercial rates that can be expected to be replicated in the future
development wells that are following almost similar drilling and completion programs. Based
on normal practices in Montney Shale Gas, the average production rates have to exceed 400
Mscfd and be sustained over a number of months. This benchmark traditionally was made in
comparison to vertical well productivity and is very dependent on the well cost for economic
feasibility.
Figure 47: Comparison Cash Flow for Conventional and Unconventional Resources
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4.3 Coal Bed Methane
In Coal Bed Methane (CBM), also known as Coal Seam Gas (CSG) reservoirs, gas is stored
primarily in an adsorbed state on the surface of the coals. The gas itself may have thermal
and/or biogenic origins.
CBM reservoirs are generally naturally fractured due to the natural cleating characteristics of
coals. The coal matrix has a very low permeability, so the mechanism of transport is initially
considered to be due to diffusion, followed by Darcy flow through the fractures to the wellbore
as shown in Figure 48. Coal seams are usually water filled and act as aquifers. As such, they
must first be de-watered to reduce pressure and allow gas to desorb from the coals.
Free gas is generally negligible, but there are some CBM reservoirs where there is free gas
storage and gas flows without the need for dewatering. Areas such as Fairview, Scotia and
Peat in Queensland, Australia have a large amount of free gas. There are also situations, for
example, where there is a connection to a regional aquifer, where dewatering will continue
indefinitely with little or no gas production. Usually, after a period of dewatering, the gas
production will increase and the water production will decrease. A typical production profile
from a CBM well is shown in Figure 49.
The dewatering period is typically months, although it can be years. The dewatering period
will also depend on the condition of the reservoir. If many wells have been drilled already and
dewatering of the reservoir is well underway, the dewatering period will be reduced. Pilot
projects are often developed for just this purpose, with a typical five-spot pattern drilled to
quickly dewater the area and assess the likelihood of commercial production.
There may also be gas stored in other formations other than the coals themselves. Coals are
typically part of sedimentary sequences containing conventional source and reservoir rocks.
There may be carbonaceous shales which contribute to gas flow, as well as conventional
production from inter-bedded sands. Such conventional reservoirs will not require dewatering
and may provide an initial boost to early gas production.
Figure 48: CBM Flow Mechanisms
Source: Schlumberger Oilfield Glossary
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Figure 49: Typical CBM Production Profile
4.3.1 In-Place Estimation
Adsorbed gas is the most important storage mechanism in most CBM reservoirs, so any in-
place estimates must use the appropriate formulas and techniques. Adsorption is a process
similar to surface tension where the methane gas is held in near a liquid like state lining the
surfaces of the pores within the coal. The adsorption process allows a large amount of
methane to be stored in coals close to the earth’s surface. At depths up to around 1,000 m,
much greater volumes of gas can be stored within a CBM reservoir than an equivalent
conventional reservoir. A typical GIIP calculation using standard parameters is based on the
following equation.
𝐺𝐼𝐼𝑃 = 𝐴 × ℎ × 𝜌 × 𝐺𝐶 × (1 − 𝐴𝑠ℎ − 𝑀𝑜𝑖𝑠)
A is the area (in km2), h is the net thickness of the coal seam (in m), 𝜌 is the coal density
(g/cm3), GC is the gas content of the coal on a dry, ash-free basis (in m3/tonne), and Ash and
Mois are the ash and moisture contents of the coal, respectively (in decimals).
The input parameters for this calculation come from various sources. All of the above input
parameters are subject to uncertainty. Typical guidelines for assessing inputs and their
uncertainty ranges are described below.
Guideline: GIIP – Area

The area will be derived from mapping, but will need to consider stratigraphic continuity of
coal seams, depth limits as well as surface limitations. Indications of coal seam termination,
washout etc. either from seismic data or wells could be used to limit the areal extent. CBM
developments typically occur within a depth range of around 200-1000 m below surface,
although local conditions may cause this to vary. Too shallow and there is not enough gas
absorbed to the coal; too deep and the permeability may not allow commercial flow rates.
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Figure 50: Permeability Range of Selected CBM Basins around the World
The diagram below shows the range of permeability versus depth for a selection of CBM
basins around the world.
Guideline: GIIP – Thickness and Depth Limits

Thickness of coal seams will typically be derived from wireline log measurements at wells,
typically high-resolution density logs. Commonly, the upper density cut-off for coal is 1.75
g/cm3 but this may exclude gas contained in carbonaceous shale intervals. Upper density
limits up to 2.1 or more g/cm3 can be used if appropriate. Different cut-offs e.g. 1.75, 1.85,
2.00 g/cm3 may be used to define Low, Best and High estimates, respectively, as shown in
the next example. The actual values used will depend on local conditions.
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Coal distribution should also be considered. Coal seams may occur in a small number of thick
continuous seams or in a series of thin seams. A minimum completion thickness might be
considered to eliminate thin coals that are unlikely to be developed. The effect of such cut-
offs and thickness limitations will vary depending on the type and quality of the seam(s) being
evaluated.
Depth limits may be greater in some areas due to local tectonic effects or if stimulation
methods are used. For example, in the Piceance Basin in the US, there are commercial CBM
developments at depths of over 5,000 m (Olson 2003). Surface limitations may include
licensing boundaries, natural parks, built-up areas or other inaccessible areas. If there is
information about unfavourable gas quality e.g. high CO2 content, these could also be
considered. Different depth limits can be used to define Low, Best and High estimates.
Different assumptions about coal seam extent could also be used to define ranges of
uncertainty.
Cleat development and coal rank will also be factors to consider. Cleats develop naturally
during the coalification process as moisture is lost. Some types of coals such as bright vitrains
devolatise more than other (e.g. dull inertinite-rich coals) which should lead to increased cleat
development. However, cleats can be overprinted, their orientation can change and they can
be open or closed depending on the stress regime and the degree of degree of mineralisation.
Permeability can also change through time; with initial production, pressure is reduced which
can open up cleats and increase permeability, but later in production, compaction can reduce
permeability.
Guideline: GIIP – Coal Density

Coal Density would typically be derived from core data, but should be calibrated against log
data. Average in-situ density may vary between 1.5 – 1.8 g/cc. It is important to ensure that
the in-situ density is consistent with the cut-off being used. Thicker seams may be evaluated
on a total seam basis i.e. allowing in poorer quality intervals as the cut-off is relaxed. This
concept is similar to the use of petrophysical cut-offs for net reservoir in conventional reservoir
analysis (see Section 1.6.3.2). Uncertainty ranges can be applied by using different cut-offs
and considering variability between and within core samples.
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Guideline: GIIP – Gas Content

Gas Content is generally the greatest source of uncertainty in CBM volumetric estimates.
Gas contents measured from core samples are subject to various errors and uncertainties,
the most common being “lost gas” where gas is lost before the sample is captured. Some
sampling methods, such as sealed pressure vessels, can reduce this effect and obtain
more reliable results. Gas content is related to depth/pressure based on a Langmuir
Isotherm. There is often a wide variation in Langmuir isotherms between wells and
between seams. A range of isotherms can be used to define a range of uncertainty. Gas
contents can also be related to pressure/depth, so it is possible to make a gas content
map from a depth map. Another factor to consider when evaluating gas content is the
degree of gas saturation in a seam, as seams may not be saturated to full capacity.
It is important to consider additional volumes that may be present in free gas in coals
cleats, conventional interbedded sand reservoirs or carbonaceous shales. These volumes
should be added to any volumes estimated from the adsorbed portion in the coal. These
volumes, especially the free gas components, either in sands or cleats, can provide an
initial increase in gas production when wells are first put on stream.
Guideline: GIIP – Ash and Moisture Content

Ash content is derived from proximate analysis, a destructive analysis carried out on core
and cuttings. Ash contents can vary between seams and laterally within seams. If any
trends are identified, they can be mapped. Log data can also be calibrated against core
data and is useful as log data is usually a more comprehensive data set than core
samples. Some basins/seams have well-defined relationships e.g. between log density
and ash content (lower ash = lower density). Uncertainty ranges can be derived by using
different relationships, or comparing a log-derived relationship with an average from core
data, etc.
Moisture content is also derived from proximate analysis. Moisture contents in coals are
typically small, a few percent. Relationships with log data are also possible.
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Figure 51: Estimating Recovery Factor for Unconventional
Guideline: Recovery Factor
The following should be considered when estimating Recovery Factors for CBM reservoirs.
 Adsorbed gas content calculated at initial and abandonment pressure based on
Langmuir isotherm. This is a simple method that assumes that the gas desorbs based
on the Langmuir isotherm and can be performed in an Excel spreadsheet.
 Analogue can also be used, although as with all analogue methods, care must be taken
to ensure that the analogues are appropriate. Analogues should have similar coal
characteristics, development plans, completion techniques and ideally be from the
same basin and coal seams as the target reservoir.
 Single well simulation is a common method using standard software such as Fekete’s
CBM module. Such models can be used to provide production profiles based on key
CBM inputs such as volumetric inputs, isotherms, permeability, etc. Single well models
can be used to build type curves for different areas and/or to understand uncertainty
ranges for low, best and high estimates.
 Full field simulation can be performed (standard software packages such as ECLIPSE
have CBM modules), but it is not commonly used and is not generally recommended
for Reserves estimation. This is because the gas production profiles are dominated by
local effects, and not significantly affected by field-wide effects. The main exception to
this is where free gas caps are either present initially or have developed as a result of
pressure reduction and de-watering.
4.3.2 Principle of Resource Estimation
The Guidelines on the Incremental Scenario and Rubber-Banding Methods, and their
applications and examples in CBM reservoirs is discussed in Section 4.1.4.
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4.4 Basement Reservoir
Fractured basement reservoirs are becoming increasingly important and better understood in
recent years. Fractured basement reservoirs occur in several locations around the world.
Significant fractured basement reservoir discoveries have been made in Vietnam and Yemen
while many other regions including Malaysia, North Sea, India, China, Argentina and other
countries have large basement fields.
There are various definitions of basement rocks, but a general definition of “basement rocks
are considered as any metamorphic or igneous rocks (regardless of age) which are
unconformably overlain by a sedimentary sequence” as proposed by Landes et al (1960) is
sufficient.
All basement reservoirs underlie a regional unconformity and most lie on an uplift or structural
high. This high was generally uplifted for long periods of geological time and subjected to
weathering and erosion. Younger sediments which also act as sources flank and/or overlie
the basement allowing trapping of hydrocarbons. Most commercial accumulations of
basement reservoirs occur in igneous, typically weathered and/or fractured granites. The
schematic below shows the key basement play concepts as wells as the overlying clastic
reservoir which are often associated with basement highs in Vietnam.
Figure 52: Basement Play Concepts
Source: Hung & Le 2004
Basement rocks are typically hard and brittle with very low matrix porosity and permeability.
Reservoir quality depends on the development of secondary porosity through either tectonics
(joints, fractures etc.) and/or dissolution porosity in weathering fault zones.
Fractures and discontinuities in the subsurface can have a variety of origins. Basement
reservoirs can also have a long and complex tectonic history. Understanding tectonic history
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is an important factor in characterising fracture systems. Fracture porosity and permeability

may be concentrated in the youngest and/or critically stressed fractures.
Although understanding of fractures and our ability to represent them with computer Discrete
Fracture Network (DFN) models is improving, there is still a large inherent uncertainty in most
fractured basement assessments. Petrophysical measurements of key parameters such as
porosity and permeability are uncertain. In-place estimates of hydrocarbons typically have
large ranges of uncertainty. Even after significant amounts of production, it is unclear if there
is a low recovery factor from a high STOIIP or a high recovery factor from a low STOIIP. Timing
of water breakthrough is a critical issue which is not generally predicted well from simulation
models.
Within such an uncertain framework, it becomes important to use multiple techniques to cross-
check results, compare with appropriate analogues and be prepared to change and modify
assumptions and results through time.
Estimation of in-place volumes is challenging in fractured basement reservoirs. Most or all of

the pore volume is in fracture systems so traditional modelling and mapping techniques are
not appropriate. Wireline log measurements do not work well in very low porosity tight rocks
so petrophysical properties have greater uncertainty. There are no direct measurements of
net pore volume (porosity and NTG) available. Conventional log-derived porosity is not valid;
conventional log-derived Swi is not valid, so areal and vertical NTG must be inferred from
indirect means.
Various techniques have been developed to evaluate fractured reservoirs. These include the
range of fracture network modelling techniques available in most modern 3D geological
modelling software. A Discrete Fracture Network (DFN) is a computer simulation approach
that should be consistent with: geological/structural understanding, well measurements (e.g.
FMI), well tests and core data. The consistency is represented by: spatial distribution (strike,
dip, spacing etc.) and fracture properties (aperture, length, type, permeability). A DFN is not a
unique solution and it is usually possible to generate multiple models that are consistent with
the data. Seismic data and well data such as FMI are often the key input data that provides
constraints to the model.
Assessing fracture systems is also problematic because not all of the fracture systems may
be connected, contribute to flow, and be seen by wells.
Other techniques have been developed in particular areas, which may have a more general
application. The Halo Model (see Figure 53) developed for fractured basement reservoirs in
Vietnam is an example. The Halo Model assumes that the fracture damage zones, and
associated porosity and permeability, are related to fault planes in combination with depth
from top of basement. In many places, Vietnam in particular, there is a well understood
relationship that net pore volume decreases with depth from the top of basement. Fault planes
have a “Halo” of fracture development which decreases with distance from the fault and with
depth. Thus, the best reservoir is at the top of the reservoir and along the fault plane. Fault
planes are typically mapped from seismic data and calibrated to log data.
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Figure 53: Main Concepts of the Halo Model
Modified from Hepler
Various other specialist techniques, such as the BASROC method used in Vietnam, have
been derived to estimate reservoir properties from wireline logs. Measurements of mud log
gas data can also be used to calibrate net interval. Fracture porosity vs. depth can be used to
derive appropriate depth relationships.
Seismic attributes can also be used to characterise the fracture system. The example shown
below is from Vietnam and shows how re-processed seismic data has been used to
characterise faults and fractures in a basement reservoir. Coherency volumes and ant-
tracking methods can be useful for detection of faults and fractures. Figure 54 below shows
an example from Vietnam where an Artificial Neural Network approach was used to
characterise porosity in a basement reservoir. The figure shows porosity strongly associated
with linear fault features.
Figure 54: Use of Seismic to Characterise Fractures in Basement Reservoirs
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Figure 55: Example of the BASROC Method in Vietnam
The BASROC method used in Vietnam is a multi-mineral approach in estimating porosity

utilising the error minimisation technique between the theoretically generated curves and
actual responses. The following workflow is typically used:
The secondary porosity, Φs, calculated above is then used to estimate in-place volumes,
using the conventional equation for STOIIP or GIIP. Different depth functions may be
implemented to represent Low, Best and High estimates, as shown below.
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Figure 56 below shows an example from Vietnam where different attributes are compared for
the evaluation of fracture zones in a basement reservoir. In the figure, A = Variance, B = Ant-
Tracking, C – Cosine of Phase, D = Envelope. Use of analogues is also important for fractured
basement reservoirs. Comparisons of in-place volumes vs. EUR, GRV vs. STOIIP, GRV vs.
EUR and etc. are all useful indicators that can be done. As with all analogue comparisons it is
important to ensure that analogues are “apple to apple” in terms of reservoir characteristics,
dynamic behaviour, fluid type, development concept etc.
However, even when using such techniques, there will often be a large range in in-place
estimates, even for fields with many wells and extensive production data. Due to these
uncertainties and the overall difficulties in assessing fractured basement reservoirs, in-place
volumetric estimates do not have the same importance as for conventional reservoirs where
most of the volume is in a matrix pore system.
Figure 56: Use of Different Seismic Attributes to Characterise Fractures in Basement

Reservoirs
Source: Nguyen, et al (2014)
The same basic techniques used in conventional reservoirs can be used to assess fractured
basement reservoirs. Material balance, reservoir simulation, well test analysis, decline curve
analysis can all be used. A key issue is predicting the timing of water breakthrough in wells,
which in turn is controlled by the fracture characterisation.
Well test analysis can be a useful technique in fractured basement as it can help to
characterise fundamental and useful information about the hydraulic geometry of the fracture
system. It can indicate geometries associated with the fracture network such as: linear
features, planar features (e.g. faults) or well-connected 3-dimensional networks. Boundary
effects can also indicate whether the fracture network intersecting a well is compartmentalised
or connected to a larger volume. Pressure transient analysis can be indicative of linear flow,
pseudo-radial flow or spherical flow, which in turn allows better characterisation of the fracture
network.
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Decline Curve Analysis can be used, but care should be taken that a trend has been
established, especially in relation to timing of water breakthrough. If a well or field has been
producing dry oil for some time without any water production, extrapolation of such a trend
might lead to an optimistic assessment of EUR. Once water breakthrough has occurred and
a clear water trend has been observed, it might be possible to have more confidence in the
analysis.
Material balance can usually provide an estimate of in-place (connected) volume which can
be compared to volumetric estimates derived from other sources e.g. DFN. Material Balance
will allow confirmation of a minimum connected pore volume.
Reservoir simulation is a useful technique, but must be used with caution in fractured
basement reservoirs. Single well and full field models can help to constrain the number of
fracture network realisations and volumetric ranges.
A good early history match, especially without significant water influx, does not mean that
production forecast will be reliable. Timing of early gas or water breakthrough is typically an
important issue. Even if such behaviour is observed, it is often hard to determine if this is due
to localised coning or an overall reservoir-wide gas cap expansion or overall oil water contact
movement.
Other data such as Production Logging Tool (PLT) data can provide indications of high inflow
points in the well trajectory and therefore identification of effective fractures intersected by the
well. A comparison can be made to see if these are the same as those identified from other
data e.g. seismic, FMI.
Tracer injection and detection studies can assist in determining flow path through fracture
networks and tracer breakthrough time can be simulated.
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Figure 57: Example of Reconciliation of Different Methods
Example on Reconciliation of Different Methods
Comparison of methods and reconciliation of results is important in analysis of any reservoir

but has particular importance for fractured basement. This includes comparison of different
volumetric and dynamic techniques. If multiple techniques converge on a similar range of
results, then greater confidence can be assumed. If techniques give different results, then
the reasons for the differences should be investigated. In particular dynamic methods can
be used to constrain volumetric ranges.
The example shown below is from a fractured basement reservoir where several methods
have been compared to estimate in-place volumes. The range of acceptable volumes
should be consistent with all of the data available.
 The STOIIP range estimated from volumetric methods is from ~100 to ~400 MMstb.
 Two reservoir limit tests (green diamonds) estimate the connected volume to be 100
MMstb or less. A reservoir limit test is a long drawdown test whose objective is to
quantify the pore space connected to the well(s).
 Material balance results (red circles) suggest a connected volume of ~100-150 MMstb.
 Reservoir simulation history match data (blue triangle) suggest a STOIIP of around 200
MMstb.
The dynamic methods are consistent with the volumetric estimates, but all show in-place
volumes towards the low end of the range. In this example further work would need to be
done to assess the reasons, but the two most obvious possibilities are compartmentalisation
or unrealistically high static volumetric assessment. All of the dynamic methods only see
volumes connected to the wells so it is possible that there might be volumes not being
accessed by the wells. Another possibility is that a more appropriate volumetric range is <100
to ~250 MMstb and that the higher STOIIP volumes up to 400 MMstb are not realistic. All
data should be critically reviewed to determine which of these situations is more likely.
Factors to assess would include evidence for continuity and extent of the fracture system,
numbers of wells drilled and their location, evidence from nearby fields and analogues, etc.
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4.4.3 Principles for Resources Estimation
Resources estimation should take all of the above issues into consideration. It is likely that the
range of Resources for fractured basement reservoir will generally be greater than for a
conventional reservoir at the same level of maturity. The same principles of confidence are
required as for any other analysis and assessments should be supported by appropriate data
and analysis. If different methods give different results, then that in itself may be a basis for
the range of Low, Best and High estimates. Particular care should be taken when using
reservoir simulation with relation to water breakthrough which can be the most critical factor
when assessing a fractured basement reservoir.
A key issue for fractured basement reservoirs is the timing and nature of water influx which
will be controlled by the fracture system. Consider three situations shown in Figure 58 below.
Figure 58: Water Influx Model
Consider a producing well, in green, and an injector, in blue. The injector can also represent
aquifer influx. The producing well will initially produce dry oil with little or no water. The timing
of water breakthrough and whether it is sensitive to production rate will depend on which model
of water influx is prevalent. In the left hand case, water is coning and water influx can likely be
delayed by lower production rates. In the middle case, water influx can occur quickly through
a single fracture and is not necessarily rate sensitive. The right hand case is ideal, but unlikely
in fractured basement reservoir, where water movement occurs throughout the reservoir
equally and water production at the well is delayed until the whole reservoir has been swept.
If the fracture system is properly characterised, then better predictions can be made. If
reservoir and fracture characterisation is poorly understood, it is appropriate to run with a
range of models.
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Development planning including types of wells and their location also influences timing of
water breakthrough. In fractured basement reservoirs, wells are often drilled at high angles,
even horizontally and high on the structure to stay away from water. Likewise, production rates
can be optimised to delay water breakthrough, lengthen time of dry oil production and ideally
increase Reserves.
In summary, an integrated approach is recommended that includes all relevant data. If the
field is at an early stage of production, especially if most wells are still producing dry oil,
analogues should be used if available to assist in calibrating production profiles, recovery
factors etc. Once wells start to decline as water breaks through, conventional declines curves
and reservoir simulation techniques become more appropriate.
4.5 Tight Gas
Tight Gas reservoirs, including sandstones and carbonates are low permeability reservoirs. In
the US, a permeability of less than 0.1 md is considered a Tight Gas formation. A more general
definition is a reservoir that cannot be produced at economic flow rates nor recover economic
volumes of hydrocarbons unless the well is stimulated by hydraulic fracturing or produced by
horizontal or multi-lateral wells. Tight Gas formations are classed as basin-centred (where
migration from source has been limited) or conventional traps where the reservoir quality is
very poor. The main difference between Shale Gas and Tight Gas formations is the absence
of an organic component of gas storage in Tight Gas formations.
Tight Gas does not have an organic component. Therefore, in-place estimation methods are
the same as for conventional reservoirs (see Section 1.6.3.2).
Porosity will typically be quite low and it may also be necessary to critically review the concept
of net reservoir and cut-offs. Assessment of the amount of reservoir, if any that can produce
hydrocarbons should be considered along with an assessment of the amount of reservoir that
can be effectively stimulated by hydraulic fracturing. Another factor to consider is the ability of
the rock to produce hydrocarbons when hydraulically fractured.
A wide range in individual well performance is usually experienced due to the heterogeneous
nature of these formations. Wells typically perform following a hyperbolic decline with high
initial first year declines (60-80%), as shown in Figure 59. Low, Best and High estimates can
be developed based on different type wells with different initial rate assumptions and decline
rates (see Guideline in Shale Gas). These parameters could be tailored to match specific
recovery factors from the estimated stimulated GIIP area surrounding each well and a per well
EUR range.
Low, Best and High development profiles can then be developed using these type wells to
produce the overall field EUR range.
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Figure 59: Typical Tight Gas Well Performance
4.6 Shale Oil
Similar to the rock characteristics for Shale Gas, oil is present in the rock instead of gas due
to the less thermally mature organic rocks in the Shale Oil reservoirs. The hydrocarbons they
contain are primarily liquids, which distinguish them from Shale Gas reservoirs. They are low
permeability and typically require hydraulic fracturing to produce hydrocarbons. The most well-
known example is the Bakken Formation in the US and Canada. Some reservoirs, such as
the Eagleford, also in the US, contain both Shale Gas and Shale Oil with decreasing liquid
content as the formation becomes deeper and more thermally mature.
Note that “Shale Oil” contains hydrocarbons that have already been generated by organic-rich
source rocks through geological time. By contrast, the term “Oil Shale” (see later Section 4.9)
is used for immature kerogen-rich source rocks which require artificial maturation.
Storage mechanisms of hydrocarbons are generally not well-understood or documented.

Jarvie (2012), classifies shale oil systems using a simple system with three main types:
 Tight Shales, organic-rich mudstones without open fractures (e.g. Barnett)
 Fractured Shales, organic-rich mudstones with open fractures
 Hybrid Systems, that have juxtaposed organic-rich and organic-lean intervals (e.g.
Bakken)
Production characteristics and evaluation methods will differ according to which system
dominates. It is also common that a given formation may have elements of several of these
systems.
The subject of how much oil is adsorbed within a Shale Oil reservoir is a subject of current
research and there does not appear to be an industry consensus on the subject. Various
methods have been proposed. These include the conventional method using a standard in-
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place equation. This method assumes that oil is stored in pore spaces, which may not be
appropriate for many Shale Oil reservoirs, where most, or all, oil is associated with the organic
matter.
A geochemical method that can be used to estimate the amount of hydrocarbons retained in
the shale is as follows.
𝑆𝑇𝑂𝐼𝐼𝑃 = 𝐶 × 𝐺𝑅𝑉 × 𝑇𝑂𝐶 × 𝐺𝑂𝐶 × 𝑇𝑅 × 𝑉𝐹
C is the constant for unit conversion, TOC is the amount of organic carbon in the immature
rock, GOC is the generative organic carbon, i.e. the proportion of organic carbon responsible
for generating hydrocarbons (as maturity increases, GOC will reduce), TR is the
transformation ratio, i.e. the proportion of organic matter transformed into hydrocarbons during
maturation and VF is the volume factor, i.e. the increase in volume when converting mass to
volume.
Note that this method does not include the proportion of hydrocarbons expulsed vs. retained
and there is little to base this critical parameter on. A Resources estimate for a Shale Oil
reservoir is concerned with the ability of kerogen to sorb oil. As a source rock matures, oil is
generated but not expelled until the kerogen “sponge” is saturated. Only after that is the oil
expelled. This is termed the “oil crossover” (Jarvie, 2012), i.e. the portion where the oil content
is greater than the TOC and is a geochemical indicator of potentially producible oil.
Rock-Eval pyrolysis is a standard geochemical technique that characterises the oil content of
sedimentary rocks. The oil content, reported as mg oil/g rock can be estimated from Rock-
Eval and compared with TOC. Rock Eval data, especially the S1 Peak can provide an estimate
of the amount of oil retained within a shale sample, as shown in Figure 60. S1 represents the
amount of hydrocarbons already generated and present within the sample. However, such
estimates are susceptible to evaporation losses, whereby light hydrocarbons are lost during
sampling.
Figure 60: Oil Crossover Concept in Shale Oil
Source: Jarvie, 2012
In summary, the estimation of oil in place for Shale Oil is complex and requires specialist
geochemical data, and knowledge. Readers are advised to refer to the literature for the latest
developments in estimating Shale Oil reservoirs.
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Low recovery factors of 4 to 8%. Material balance and reservoir simulation techniques will be
difficult to apply due to the complexities involved in characterising Shale Oil reservoirs.
Traditional decline curve analysis techniques may be applicable once production trends are
established.
The same basic principles of Resources estimation as for other Unconventional Resources,
especially those described for Shale Gas in Section 4.2.3, apply to Shale Oil. The incremental
scenario method is commonly used.
4.7 Extra Heavy Oil
Extra heavy crude oil is differentiated from heavy crude by its requirement to be upgraded
prior to sale. It is defined as having an oil density less than10 degrees API and a viscosity of
1,000 to 10,000 centipoise. Accumulations have limited mobility but typically do have defined
oil water contacts and normal buoyancy effects.
Over 90% of the world’s extra heavy oil are in the Orinoco Belt of Venezuela. Other deposits
are in Canada. Cold production is achieved through multi-lateral horizontal wells often in
combination with ESPs and PCPs. Secondary recovery can also be achieved through thermal
recovery projects.
Estimation of in-place volumes for extra heavy oil is essentially the same as for conventional
reservoirs. For extra heavy oil, it is the hydrocarbons that are unconventional rather than the
reservoir. However, commercial production may only be achieved from relatively thick units (7
– 12 m), with good porosity (27 – 32 %), high permeability (multi-Darcy) and good lateral
continuity. In-place estimates should therefore be restricted to whatever cut-offs are
appropriate for the local situation.
The low mobility of extra heavy oil in reservoir conditions makes recovery more difficult.
Nevertheless, in situ cold production techniques can be applied to produce these Resources
by natural depletion using a relatively straightforward production technique whereby a diluent
is injected into the bottom of the reservoir to lower the viscosity of the oil and increase its
mobility so it can be pumped up to the surface. Thermal recovery techniques may also be
applied as secondary recovery Projects.
The conventional recovery estimation approaches – material balance, reservoir simulation and
DCA can all be applied, depending on the available data and the establishment of reliable
production performance trends, though changes in fluid and reservoir properties will have to
be accounted for due to the effects of introducing diluents or the injection of steam into the
reservoir.
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Key issues for Reserves assessment relate to confidence of recovery mechanisms. Cold
production may be possible in good quality sands with electric submersible pumps and
progressive cavity pumps, but Recovery Factors are likely to be limited (<10%). While upside
secondary recovery with thermal Projects is forecast, these incremental volumes would be
classified as Contingent Resources until Pilot Projects are complete, Projects are shown to be
effective and Projects are sanctioned.
4.8 Bitumen
Bitumen is defined as the portion of petroleum that exists in the semi-solid or solid phase in
natural deposits. Recovery can be either from surface mining or various in-situ recovery
methods. Surface mining is appropriate at depths of up to 100m, whereas in-situ methods
could be carried out at depths greater than 100m. Bitumen requires different assessment
methods than conventional deposits due to its density and immobile character. The largest
bitumen deposits in the world are in western Canada e.g. Athabasca tar sands. They are not
necessarily affected by hydrodynamic influences.
Estimation of in-place volumes for bitumen is essentially the same as for conventional
reservoirs as it is the hydrocarbons rather than the reservoir that is unconventional.
Commercial production may only be achieved from thick (> 12 m) sands with high porosity (30
– 40%) and high permeability (> 1 Darcy). In-place estimates should therefore be restricted to
whatever cut-offs are appropriate for the local situation.
Evaluations are also complicated as oil sands may contain a mixture of bitumen, extra heavy
oil and Heavy Oil whose properties differ within and between reservoirs.
Not directly relevant in this context as recovery is more akin to a mining process.
Reserves classification has similar issues to other improved recovery projects in conventional
reservoirs. Pilot Projects or the operation of an installed programme in the reservoir would
typically be required to support classification of volumes as Reserves. In contrast to extra
heavy oil, where there may be initial cold production, there is typically no primary production
upon which to base recovery efficiencies. Commonly used methods e.g. SAGD in well-known
reservoirs, e.g. in Canada, may allow great confidence in the use of nearby analogues to
support a classification as Reserves. There are also commercial issues to consider as raw
bitumen is sold at a considerable discount to conventional Petroleum.
For mined bitumen, Reserves estimates should be tied to the plans for the mines. In Canada,
guidelines have been published by the Alberta Energy Resources Conservation Board for
reporting mineable Resources. This categorisation is tied to the grid of core holes that is
required to support the volumetric estimate. Proved Reserves may require a 1,600-ft grid (61-
acre spacing), while Probable Reserves requires a 3,200-ft grid (247-acre spacing).
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Assessment methods for in-situ bitumen production also require close well spacing but can
also be supported by conventional techniques such as seismic and wireline logging. Pilot tests
are a key technique for demonstrating that techniques are applicable, commercial, and for
estimating ranges of recovery. SAGD processes are very sensitive to reservoirs with
associated gas and/or top or bottom water zones that may act as potential thief zones. Water
zones can rob the steam chamber of energy and result in higher operating costs and poorer
oil recoveries.
Raw bitumen is marketed at a discount to conventional petroleum at prices ranging from 25 to

85% of West Texas Intermediate depending on quality and seasonal demand. Many projects
therefore include integrated or third-party upgrading to yield Synthetic Crude Oil (SCO). This
is often done by adding lighter hydrocarbons such as Naphta to create the SCO. Care should
be taken when assessing Reserves to avoid “double-dipping” of volumes. Figure 61 below
shows the process flow from production to refining.
Figure 61: Bitumen from Production to Refining
Source: IEA 2013
4.9 Oil Shale
Oil Shales are fine-grained sedimentary rocks containing large amounts of organic matter
(kerogen) from which significant amounts of synthetic crude oil (and gas) can be extracted. In
their natural state, Oil Shales are not hydrocarbons and it is the thermal maturation process,
similar to that which occurs naturally over millions of years, that generates the petroleum
products.
The Green River Formation in the western United States is one of the largest Oil Shale
deposits in the world. Oil Shale production is reported from Estonia, China and Brazil, with
Brazil having the world’s largest surface Oil Shale pyrolysis retort at Parana. Petrobras
produces synthetic oil from this project and files SEC Proved Reserves of synthetic oil in
barrels.
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Estimation of in-place volumes for Oil Shale is problematic because the kerogen does not
exist in the form of hydrocarbons. Therefore, assessments need to consider the amount of
organic carbon and its ability to be transformed into hydrocarbons as discussed in Section
4.6.1.
Not directly relevant in this context as recovery is more akin to a mining process.
All current known commercial production of synthetic hydrocarbons from Oil Shale is from
mining followed by surface retorting e.g. in China, Estonia and Brazil. In-situ processes can
also be used but they are largely experimental and no known commercial scale Projects are
in operation.
Resources estimation is somewhat different when assessing Projects which involve mining
followed by upgrading. Key factors for consideration are:
 Entitlement. It is necessary for an entity to have entitlement at all stages of the process,
from mining, through upgrading to sales. For example, if mined Oil Shale is sold to a third
party for upgrading, it could not be classified as hydrocarbon Resources (although it could
be assessed using mining codes such as CRISCO/JORC). Likewise, if an entity received
a mined product from a third party which it then upgraded and sold, it could not be
classified as hydrocarbon Resources.
 Methods of Assessment. Additional skills and techniques need to be employed. For Oil
Shales this would include mining and industrial chemistry. Mining expertise is required for
assessing the nature of the mineable resource and the scope of the mining “Project”.
Although there is currently no official mapping of mining classes from mining classifications
systems, adoption of CRISO/JORC standards is recommended as the basis for assessing
mineable Resources. Industrial chemistry expertise is required for assessing the
upgrading process and the range of yields and saleable products produced from it.
 Proof of Concept. It is common for such techniques to be first demonstrated on a small

scale pilot or demonstration plant to demonstrate “proof of concept”. These pilot or
demonstration plants serve as a discovery test. Such facilities do not however demonstrate
commerciality per se, but are a prerequisite for demonstrating commerciality. Further work
is required to prove the commerciality of the large scale upgrading plant. Issues such as
scalability, cost reductions through scale-up and demonstrations of reliable operations at
commercial scale will need to be considered.
 Use of analogues e.g. from existing commercial operations, to assist with an assessment
providing that the usual criteria for analogues. However, it will be necessary to
demonstrate the key reservoir parameters and upgrading techniques are sufficiently
analogous. Pilot testing will likely be required to demonstrate this.
 Regulatory Approvals. Oil Shale Projects will likely require different approvals, some of
which may be for mining as well as upgrading. Specific regulatory and environmental
regulations in relevant countries should be followed.
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5 COMPARISON OF THE SPE PRMS WITH OTHER SYSTEMS
PETRONAS currently participates in both Malaysian and International joint ventures and may
well expand both portfolios in the future. Although the PRrMS classification system is
appropriate for applying to the global hydrocarbon volumes of PETRONAS; it may be that
local regulatory and reporting requirements will require classifying the hydrocarbon Resources
using a different system. It is also important for PETRONAS to be aware of the different
systems since it may consider acquisitions in countries with alternative Resources
classification methodologies.
The SPE reference below is the single publicly available source for comparison between
different systems, and it compares a number of the main classification systems that
PETRONAS is likely to encounter. The executive summary of this paper is included for
reference.
Reference: Comparison of Selected Reserves and Resource Classifications and Associated

Definitions - SPE Oil and Gas Reserves Committee (OGRC) – “Mapping” Subcommittee Final
Report; December 2005.
The full report can be accessed on the “Petroleum Reserves & Resources Definitions” page
of the SPE website (www.spe.org/industry/reserves.php). The document is in the open access
area of the website and can be downloaded by anyone.
Although a number of the guidelines referenced in the study have subsequently been updated
(most notably the SPE and the SEC guidelines) the statements made in the document are still
valid (with the exception of the SEC which now allows reporting of 1P, 2P and 3P Reserves
and has become ever closer aligned to the SPE guidelines). It should be noted that the 2007
SPE PRMS was largely a consolidation of the separate 2000, 2001 and the 2004 documents,
all of which were referenced by the “mapping” subcommittee.
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PRrMS Issue No: 1
Executive Summary:
In October 2005, the “Mapping” subcommittee of the SPE Oil and Gas Reserves Committee
(OGRC) completed a study of Reserves/Resources classification systems published by the
following eight international “agencies”:
1. US Security and Exchange Commission (SEC - 1978)

2. UK Statement of Recommended Practices (SORP -2001)
3. Canadian Security Administrators (CSA -2002)
4. Russian Ministry of Natural Resources (RF-2005)
5. China Petroleum Reserves Office (PRO – 2005)
6. Norwegian Petroleum Directorate (NPD – 2001)
7. United States Geological Survey (USGS - 1980)
8. United Nations Framework Classification (UNFC- 2004)
The overall structure of, and Reserves definitions within, each system were compared to the
1997 SPE/WPC Reserves definitions, the 2000 SPE/WPC/AAPG classification, the 2001
supplemental guidelines, and the 2004 glossary (hereafter referred to as the “SPE
definitions”).
Although the terminology varies, there is a high degree of commonality:
 All systems define major Resources Classes that can be mapped directly to the SPE
PRMS Classes: undiscovered (Prospective Resources), discovered unrecoverable,
discovered sub-commercial (Contingent Resources) and discovered commercial
(Reserves).
 Most classifications recognise three deterministic scenarios with decreasing technical
certainty: Low estimate, Best estimate and High estimate. While probabilistic assessments
are not commonly applied, it is generally accepted that the equivalent estimates on a
cumulative probability distribution would be greater than or equal to P90, P50 and P10
respectively. For discovered and commercial volume estimates, the discrete (incremental)
volumes within these bounds are generally referred to as Proved, Probable and Possible
Reserves. The Russian, UNFC and USGS recognise similar certainty Classes but use
alternative terminology.
The regulatory agencies typically define a subset of the total classification for disclosure to
investors and further impose specific rules around technical and commercial certainty. The
SEC guidance is the most restrictive while the Canadian and UK regulations allow disclosures
more closely aligned with assessments used for internal Resources management.
The UNFC uniquely provides a high-level classification system that can be applied to all
extractive industries including energy minerals (petroleum, coal and uranium).
Based on analysis of each agency’s classification system, the subcommittee collated the
following potential “best practices” for review by the OGRC subcommittee charged to
recommend revisions to current SPE Reserves and Resources definitions:
 Utilise a consistent set of criteria to segregate discovered from undiscovered without

reference to ultimate commerciality. All such discovered volumes should be initially
classified as Contingent Resources.
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CONFIDENTIAL 135
PRrMS Issue No: 1
 Estimates of recoverable quantities must clearly identify the development Project(s)

applied to a specific accumulation (reservoir) and its in-place hydrocarbons. The “Project-
reservoir” intersect becomes the Resources entity for which an uncertainty distribution of
recoverable quantities is defined. The Project maturity/chance of reaching production
status is used to segregate Reserves from Contingent Resources.
 To maintain consistency, the same class confidence hurdles (P90/P50/P10) should be
applied to estimates whether assessed using deterministic or probabilistic methods.
Although the assessment should support either arithmetic summation or probabilistic
aggregation, the guidelines should clearly identify that these certainty guidelines apply to
the Project-reservoir entity.
 From a business perspective, the inclusion of additional deterministic technical and
commercial criteria for Reserves categories (proved, probable, possible) or discrete
estimates (1P, 2P, 3P) may have value in providing increased consistency in
assessments. However, these should be provided as guidelines and not imbedded in the
class definitions. The definitions should be broad enough to accommodate such criteria as
imposed by regulatory agencies.
 Apply developed/undeveloped status to all Reserves Classes. Reserves that remain
undeveloped beyond a reasonable period demonstrate lack of commitment and should be
reclassified as Contingent Resources.
 The definitions should encompass all hydrocarbons whether conventional or
unconventional (gas, liquid or solid phases) irrespective of the extraction method and
processing applied.
The total system should provide for accounting of all components to support mass balance;
that is, the sum of produced, recoverable, production/processing losses and unrecoverable
quantities should equal the estimated initially-in-place hydrocarbons. The guidelines should
provide the option, subject to regulatory rules, of including hydrocarbons to be consumed as
fuel in production and processing as Reserves and Contingent Resources.
Documentation regarding Reserves and Resources is best presented in a more structured

manner consisting of:
Overall Resources Classification – chart and Resources category definitions

Reserves Definitions – high level, principle-based
Application Guidelines – detailed guidance, subject to periodic revisions
Application Examples – illustrations of both common and exceptional issues
The format used by the Petroleum Society of the Canadian Institute of Mining, Metallurgy and
Petroleum in their 2002 definitions provides a useful template.
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CONFIDENTIAL 136
PRrMS Issue No: 1
6 RESERVES & RESOURCES EVALUATION – BEST PRACTICES CHECKLIST
 Attend PRrMS training and obtain certification, as required and explained in the Application
Manual - part 1: Governance Structure, and make reference to the latest PRrMS
Guidelines and Applications Manuals before commencing any Reserves and Resources
related work.
 Ensure that all significant changes identified each year (both to the static volume and to
the recoverables) are captured either through the assurance process or via the Watch List
(RRWL) process.
 Seek guidance from your BU Reserves Manager or PRG on any issues or concerns you
may have with regard to Resources booking and reporting.
 For all major Resources bookings and changes ensure that a Reserves Assurance
Memorandum (RAM) has been submitted to PRG, and ask early for guidance before any
assurance sessions, if these are required. It is desirable for all projects in Pledge for
Results (P4R) to prepare and submit Reserves Assurance Memorandum (RAM) before
ARPR submission.
 Project Managers to regularly inform BF Reserves Coordinators, BU Reserves Managers
and PRG of timing of all upcoming assurance reviews.
 Ensure that all relevant geological, geophysical, petrophysical and engineering data are
used in the estimation of Resources volumes.
 Identify and plan early for the assurance of any Resources classification changes.
 Keep a full inventory of any documentation and data used in the Resources bookings.
Ensure documentation is “cleaned up” and only contains versions and iterations actually
used in the interpretation as discussed in section 4.3 of in the Application Manual - part 1:
Governance Structure.
 File all support documentation as per the PRrMS requirements and ensure that they are
not subsequently changed or altered.
 Always provide a range for Reserves and Resources estimates. Ensure that the Low Case
and High Case estimates are realistic and capture the full range of uncertainty related to
the reservoir and fluid properties and using consistence methodology.
 Communicate with other disciplines when deriving the input parameters for both Static and
Dynamic estimates.
 Ensure that all Projects have realistic production and cost forecasts associated with the
booked volume. This applies equally to Prospective Resources, Contingent Resources
and Reserves.
 Wherever possible make use of multiple methods to determine Resources volumes and
the uncertainty distribution. Always do cross checks for reasonableness of estimates and
ensure that the upside and downside cases are not absolute maximums or absolute
minimums.
 Ensure that PIIP volumes are consistent when using both Static and Dynamic models.
Capture the In-Place for oil, associated gas, non-associated gas and condensate.
 Take into account any changes to a field where new data have been acquired or deviations
from planned versus actual production have occurred and quantify the impact/change that
these may have on the reservoir/field volumes.
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PRrMS Issue No: 1
 Understand the difference between Resources Categories (uncertainty) and Resources

Classes (project maturity). 2P Reserves and 2C Contingent Resources have the same
level of certainty (Best Case), but one is commercial (Reserves) and the other one is sub-
commercial (Contingent Resources).
 Reserves are only to be captured after both FDP and FID approval.
 Ensure that all Behind Casing Opportunities (BCO) have been booked – Section 1.3.2.
 Fuel (defined in SPE PRMS June 2018, version 1.01, as Consumed in Operations (CiO)),
Flare and Vent are usually captured as a Separate Line Item (SLI) and are not part of
Reserves or Contingent Resources. However, Flare or Vent gas where there is an
identified project to capture those gas volumes in the future for sales can be booked as
Contingent Resources Sub-Class 4 (CR4). The volumes that are booked should be those
forecast to be recovered after implementation of the said project.
 For oil, provide available production profile, whereas for gas provide the gas sales profile
instead of the TP profiles.
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CONFIDENTIAL 138

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PRrMS Issue No: 1

APPLICATIONS MANUAL – part 2: Revision: 5

PETRONAS RESERVES AND RESOURCES

APPLICATIONS MANUAL – part 2:

Petroliam Nasional Berhad

1 TECHNICAL EVALUATION OF RESERVES AND RESOURCES ....................................... 8

1.7.3 Aggregation of Volumes for Multi Target Prospects .................................................. 78

4.6.3 Principles for Resources Estimation ........................................................................ 130

Figure 1: SPE PRMS Resources Classification and Categorisation ..................................................................8

Figure 25: Best Case DCA to Support Reservoir Simulation........................................................................... 64

Figure 61: Bitumen from Production to Refining ............................................................................................. 132

1 TECHNICAL EVALUATION OF RESERVES AND RESOURCES

Figure 1: SPE PRMS Resources Classification and Categorisation

The PRrMS is a Project-based system, where a Project

1 “Defining a Project”, SPE PRMS Application Guidelines Nov 2011, Page 8

Ownership: PETRONAS vs. PCSB

1.1 Definition of a Project

Definition of a Project in PETRONAS

1.2 Resources Classification

Figure 3: SPE PRMS Project Maturity Sub-Classes

Figure 4: Comparison of SPE PRMS and PRrMS Project Maturity Sub-Classes

Reserves are those quantities of Petroleum anticipated to be commercially recoverable by

Discovered recoverable volumes (Contingent Resources) may be considered commercially

 Evidence to support a reasonable timetable for development.

Reserves Criteria for PETRONAS

1.3.1 Reserves Sub-Class

Approved for Development

Justified for Development

Figure 5: Reserves Sub-Class under PRrMS

Both FDP and FID approvals

1.3.2 Reserves Status

Developed Producing Reserves are those Reserves expected to be recovered from

Examples of Developed Non-Producing Reserves are volumes from:

Figure 6: Developed Non-Producing

Behind Casing Reserves (Developed Non-Producing)

Perform studies on the

Perform studies on how to

Does the workover

Locked in the More than

Create FDP or equivalent

Developed Non-Producing Reserves are “Opex” Projects, while Contingent Resources

In general, Undeveloped Reserves are quantities expected to be recovered through future

Examples of Undeveloped Reserves are volumes from:

Undeveloped Reserves in PETRONAS

Table 1: Relationship between Reserves Status and Project Maturity Sub-Class

Approved for Development

1.4 Contingent Resources

1.4.1 Contingent Resources Sub-Class

Table 2: Contingent Resources SPE PRMS Sub-Class Definitions

Development Not Viable

Table 3: Contingent Resources PRrMS Sub-Class Definitions

Sub-Class 2 (CR2) This is only applicable to PCSB.

Guidelines on “reasonable expectation”

1.4.2 Reclassification of Volumes

1.4.2.1 Evidence to Support a Reasonable Timetable for Development

1.4.2.2 Future Economics Meeting Defined Investment and Operating Criteria

A Project has to be economic to be classified as Reserves.

1.4.2.3 A Reasonable Expectation that there will be Market

For Contingent Resources to be reclassified as Reserves, the key conditions, or

Refer to the Guidelines shown in Figure 7 for gas projects.

Figure 7: Guidelines for Gas Projects

No Book volumes from the

Separate the gas volumes based