Oil and gas reserves and resources are volumes of oil and gas that can be commercially recovered in the FUTURE. It is particularly important for operators/governments to determine the present and future value of an oil and gas company’s reserves and resources.

Trust me, Reserves and Resources are some of the most misunderstood terms in the industry.

According to the Society of Petroleum Engineers (SPE), there are 5 classifications of commerciality for Oil and Gas resources:

1. Production: Oil and gas that has already been recovered, so recovery is demonstrable.

2. Reserves: Proven, Probable and Possible (the 3Ps). The 3Ps categorize the level of certainty of commercial extraction for the reserves.

3. Contingent Reserves: These are potentially recoverable reserves that may not yet be mature enough to commercially extract, or that may require some technological complications.

4. Prospective Resources: These are resources that have not yet been discovered, and whose presence and volume is estimated based on indirect evidence and no drilling.

5. Unrecoverable Petroleum: These are resources that are not recoverable currently due to geological/technological reasons/difficulties.

Hence, under this (SPE) classification system, the least risk is associated with “Reserves”, because it carries some degree of certainty regarding future commercial extraction; while “Contingent Reserves” are “discovered” but considered “sub-commercial”, and “Prospective Reserves” are a considered the highest risk and a gamble because they are yet undiscovered.