Natural Gas Injection

To include injection gas in the reserves, the volumes would have to meet the normal criteria in the
definitions. In particular, they would need to be demonstrably economic to produce once available
for production. In addition, the existence of a firm market for the gas needs to be assured; the
proximity of a gas pipeline distribution system or other export option should be in evidence; and
production and sale of these gas reserves should be part of the established development plan for
the field.

If third-party gas is utilized, then for the originator of the gas, gas reserves, production, and sales are
reported in the normal way; for the recipient, the gas normally would be treated as a purchase and is
unlikely to be considered as a reserve. It should be accounted for as inventory. When reproduced, the
gas would not contribute toward field production or sales. On commencing gas production from the
field, the last-in/first-out principle is recommended; hence, the inventory gas would be produced first
and would not count toward field production.

There may be occasion for the transfer of gas from one lease to another free of charge. In such a
case, injected gas could be considered a transfer of mineral rights, and the associated gas reserves
and subsequent production can be accounted for by the receiving field.

Liquid Conversion to Crude Oil Equivalent

Regulatory reporting usually stipulates that liquid and gas hydrocarbon reserves volumes are
reported separately, with liquids being the sum of the crude oil, condensate, and natural gas liquids
(NGL). For internal company reporting purposes and for intercompany analysis, the combined
volumes for crude oil, condensate, NGL, and gas as an oil-equivalent value offer a convenient
method for comparison.

Often the combination of crude oil, condensate, and NGL reserves volumes are simply added
arithmetically to provide an oil-equivalent volume. A more correct method in terms of value
involves taking account of the different densities of the fluids. Further improvement in combining
crude oil, condensate, and NGL can be achieved by considering the heating equivalent of the three
fluids and combining accordingly.

Gas Conversion to Oil Equivalent

Converting gas volumes to the oil equivalent is customarily done on the basis of the heating content
or calorific value of the fuel. There are a number of methodologies in common use.
Before aggregating, the gas volumes first must be converted to the same temperature and pressure.
Common industry gas conversion factors usually range between 1 barrel of oil equivalent (boe) = 5.8
thousand standard cubic feet of gas (mscf) to 1 boe = 6.0 mscf.

The conversion factor of 5.8 mscf/boe is a reasonable approximation and is recommended for gases
where the condition of the gas is dry at the point of sale. If a conversion factor is to be applied to one
field or a portfolio of fields where a material proportion of the gas is wet or has a calorific value
materially different to 1,000 Btu/scf, it is necessary to calculate a conversion factor based on the
actual calorific value.

26 Guidelines for the Evaluation of Petroleum Reserves and Resources