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GEOHORIZONS AUTHOR

Peter R. Rose  Rose & Associates, LLP.,


Measuring what we think we 3405 Glenview Avenue, Austin, Texas 78703;
prrose@roseassoc.com

have found: Advantages of Pete Rose has been deeply involved since 1983
in the evolution of the emerging field of pe-
troleum exploration and production (E&P) risk
probabilistic over deterministic analysis, consulting extensively with many
major, independent, and national oil companies.
methods for estimating oil and In 2000, he founded Rose & Associates, LLP.,
today a leading international consulting firm
gas reserves and resources in specializing in E&P risk analysis. He is the author
of Risk Analysis and Management of Petro-
exploration and production leum Exploration Ventures, AAPG Methods in
Exploration 12 (2001), as well as many other
publications on basin and play analysis, pe-
Peter R. Rose troleum resources and reserves, and E&P risk
analysis. From 2001 to 2003, he wrote a monthly
column, The Business Side of Geology, for the
AAPG Explorer. In 2005 –2006, he was AAPG’s
ABSTRACT 89th president.
Proved reserves is the class of crude oil and natural gas resources in
whose recovery we have high confidence. Investors, bankers, gov-
ACKNOWLEDGEMENTS
ernments, and the media perceive proved reserves as the basic as-
sets of petroleum exploration and production (E&P) companies, and I am indebted to Tom Ahlbrandt, John Campbell,
downward revisions of proved reserves, especially if they are un- David Elliott, John Etherington, Jim Gouveia,
anticipated, negatively impact the value of such firms. Many re- Ron Harrell, Sigurd Heiberg, Creties Jenkins,
John Lorenz, Mark McLane, Glenn McMaster,
serves write-downs stem directly or indirectly from a long-standing,
John Ritter, Dan Tearpock, and Richard Ward
fundamental flaw in the definition of proved reserves as an estimate
for their reviews of an earlier draft of this essay.
of future production that the estimator is reasonably certain will
I appreciate their comments very much and
be achieved or exceeded. However, because no specific confidence affirm that any errors of fact or failures of
level (= probability) is specified for reasonable certainty, and dif- logic are my responsibility alone.
ferent estimators and companies have different standards, proved Thanks to David Cook for assistance with
reserves is an inconsistent metric, so estimators cannot be account- graphs and to Elizabeth Sherry for the prepa-
able. This basic unaccountability taints the entire field of reserves ration of figures and text.
estimating.
The proved-reserves issue is only one aspect of a larger con-
ceptual and procedural problem in petroleum E&P: how to best
measure and express the uncertain quantities of oil and gas thought
to be recoverable from wells, properties, fields, prospects, and plays
owned by E&P companies. Traditional methods are deterministic,
where single-number estimates represent uncertain future produc-
tion volumes or segments of variously uncertain future oil or gas
recoveries (proved, probable, and possible). Probabilistic methods,

Copyright #2007. The American Association of Petroleum Geologists. All rights reserved.
Manuscript received February 3, 2006; provisional acceptance May 16, 2006; revised manuscript
received July 17, 2006; final acceptance August 3, 2006.
DOI:10.1306/08030606016

AAPG Bulletin, v. 91, no. 1 (January 2007), pp. 21 – 29 21


where ranges of possible recoverable volumes are as- categories include probable reserves, which geotechni-
sociated with their perceived likelihood, have, by now, cal analysis indicates more likely than not to be recov-
been widely embraced by the exploration part of E&P, erable, and possible reserves, which geological analysis
whereas the production/development arm of the indus- indicates to be less likely to be recoverable than prob-
try has been slow to surrender the use of determinism. able reserves (SPE, 1997). Measuring resources and
Considering six clear advantages of the probabi- reserves commences even before an exploration proj-
listic approach, it may be difficult to understand why ect is drilled and continues throughout the life of the
determinism persists, but there are pragmatic reasons oil or gas field that may be found and developed. How-
why some segments of E&P, the accounting profession, ever, because substantial uncertainty attends the vol-
the banking and financial community, news media, and umes of these fugitive liquids, measuring always in-
governmental regulators and administrators prefer to volves estimating. We need to estimate what resources
use deterministic values. Joint technical committees a prospect may contain to know whether to enter it
of the leading professional E&P societies are currently into our annual exploratory drilling portfolio. Given a
addressing these issues in the hope of achieving an im- discovery, we need to estimate its area, pay thickness,
proved, more uniform approach. and the ranges of possibly recoverable volumes before
we commit to the substantial investments required to
develop it, and as we produce the field over its life, we
INTRODUCTION need to estimate periodically what reserves and resources
still remain. Banks require reserve figures for produc-
Exploration and production (E&P) professionals have tion loans. The U.S. Government has directed that pub-
three main jobs: (1) finding commercial accumulations licly held companies report annually their proved re-
profitably; (2) measuring them; and (3) profitably de- serves, as a safeguard to protect stockholders in all such
veloping and producing what has been found. This ar- companies whose stock is traded on U.S. stock exchanges,
ticle is about that second job— measuring what we be- and has directed the Securities and Exchange Com-
lieve to be present and recoverable — and the uses of mission (SEC) to monitor this process. The SEC rules
such measurements, and it is addressed to (1) engi- are numerous, cumbersome, and outdated, overtaken by
neering and geological professionals engaged in reserves technological development, and accounting procedures
estimating and (2) the managers, executives, bankers, do not deal readily and routinely with uncertainty.
accountants, investors, and regulators who use their A company’s proved reserves are seen as the basic
numbers. The basic message is that the present system assets of the firm. Proved-reserves values (for a well,
of reserves estimating, developed over the past 70 yr by property, field, or province) are commonly presented
petroleum engineers and geologists (SPE, 1997), is fun- in deterministic form (that is, single numbers), although
damentally flawed and in need of real repair. Prominent substantial uncertainty may be involved. That is one
authorities, such as Cronquist (1991, 2001) and Capen of the insidious aspects of deterministic reserves: they
(1996), have previously pointed out these deficiencies. convey a false sense of certainty and thereby may en-
We developed this system; we should, as responsible courage investors, bankers, accountants, government
professionals, fix it. The good news is that fixing it only officials, and the general public to perceive certainty
requires the commitment of the E&P professional so- where substantial uncertainty is much more appropri-
cieties to employ a common confidence level as the basis ate. The SEC does not ask companies to declare their
for reasonable certainty and, thus, proved reserves. estimated unproved resources, so-called probable and
possible reserves, although such estimated values are
extremely important to companies engaged in midterm
RESOURCES AND RESERVES and long-term planning and management. Such resource
estimates are closely guarded corporate secrets because
Resources are the subsurface volumes of oil and natural of their immense strategic importance.
gas we think may be present and eventually recoverable Reserves estimates are based on many geotechnical
(McKelvey, 1972), whereas proved reserves are those and economic factors and, indeed, are in a continuous
resources in whose recovery we have high confidence— flux; so they should be expected to fluctuate. Expected
reasonable certainty, the operative phrase now under depletion is replaced through additional exploration
considerable debate (Cambridge Energy Research Associ- and development, new applications of technology, or
ates, 2005, personal communication). Unproven reserves more favorable economics. So on a well, property, or

22 Geohorizons
field scale, reserves declines or increases occur regular- umes. Thus, a geotechnical exploration team might be
ly, whereas they tend to be accommodated or absorbed 90% sure that (given a discovery) Prospect Alpha would
on a portfolio scale. However, when a company an- contain at least 1 bcf recoverable natural gas, 50% sure
nounces an unexpected and substantial reduction in its that it would contain 6.33 bcf gas or more, and think
proved reserves at a corporate scale, its common stock there was a small chance (10% confidence) that it would
(and often its bond rating) declines, because the public contain 40 bcf gas or more. The average (or mean) of the
correctly perceives that its value has diminished. Assets distribution, the single best representation of all out-
described as proved turn out to be ephemeral. Reserves comes, is, in this case, about 14.83 bcf gas. The relative
write-downs are correctly seen as embarrassing by the uncertainty (analogous to the statistical variance) may
E&P community. Abrupt management and staff depar- be expressed by the P10/P90 ratio, in this case, 40. This
tures occur. Markets of other E&P stocks may also be- basic methodology (Rose, 2001) has now been adopted
come jittery. by most exploration companies, public as well as private,
Many reasons for reserves write-downs exist: some around the world (MacKay, 1996). Distributions of es-
arising from technical surprises; some related to con- timates commonly are portrayed using two forms: prob-
struction and contractual schedules; some caused by ability density ( = frequency) or cumulative log proba-
vague or differing definitions and standards; some caused bility (Figure 1a, b).
by the incompetence of untrained evaluators; and some Now, let us suppose that Prospect Alpha has turned
(regrettably but thankfully few) stimulated by ethical out to be a discovery, New Field Alpha. The geotechni-
lapses by supervisors, managers, and/or executives, com- cal team evaluates all of the new data generated in dril-
monly stemming from misguided incentive schemes. ling the discovery well. Because of the new well infor-
Fundamentally, all substantial and unanticipated re- mation, recalibration of the seismic data, and evaluation
serves write-downs represent a failure of company lead- of early production information, uncertainty about re-
ership (McLane and Rose, 2001). coverable reserves has now been reduced from P10/P90
However, I believe that a substantial number of re- ratios of 40 to 8.3. It has not been eliminated, however,
serves problems (certainly not all, or perhaps even most, because several development wells still await drilling and
but many) are ultimately related to a fundamentally completion, and additional production history will clarify
flawed definition of proved reserves as an estimate that future production techniques and reservoir responses.
the evaluator is reasonably certain will be produced or The geotechnical delineation and development team
exceeded. Note the language ‘‘reasonable certainty in generates a new probabilistic distribution of expected
the designated recoverable barrels, or more.’’ That recovery from New Field Alpha (Figure 2a, b): they are
is a probability statement, except that no probability now 90% sure of recovering at least 2.2 bcf gas, 50%
value ( = confidence) is specified. Because the con- sure of recovering at least 6.33 bcf gas, and think there
fidence is not specified, estimators cannot be account- is still a 10% chance of recovering 18.2 bcf gas or more.
able, and this basic technical unaccountability seeps The mean of the new distribution is 8.65 bcf gas. Using
into and infects the whole theater of reserves estimat- their new reserves distribution for New Field Alpha,
ing. We will come back to this in a following section. the team can also provide estimated future gas recov-
eries at any specified confidence level, from 99 to 1%. For
example (Figure 2b), they could tell management that
PROBABILISM VERSUS DETERMINISM they were 80% confident in recovering at least 3.2 bcf
gas and 20% confident in recovering 12 bcf gas or more.
One of the technological developments of the 1990s A traditional, deterministic assessment of New
was the adoption by the exploration part of petroleum Field Alpha would also evaluate (and reevaluate) all of
E&P of a fundamentally different way of measuring the the new data following the discovery. Following cur-
resource potential of drilling prospects and plays: proba- rent practice, however, a deterministic geotechnical
bilistic estimating. Recognizing the substantial uncer- delineation and development team probably would
tainty involved in forecasting recoverable volumes of not construct a probabilistic reserves distribution. They
oil and/or natural gas from a prospect awaiting drilling would instead estimate a proved reserves value (or more)
(given discovery) or a discovery awaiting delineation, at whatever subjective level the team judged to repre-
exploration geoscientists and engineers began to express sent reasonable certainty. Similarly, probable reserves
their technical expectations by standardized confidence would be a single bcf gas value the estimators thought
levels ( = probabilities) in specified recoverable vol- was more likely than not to be met or exceeded, and

Rose 23
Figure 1. Comparison of two
conventional forms of graphical
expression of probabilistic re-
serves distribution for Exploration
Prospect Alpha. (a) Frequency
(probability density), with arith-
metic-scale horizontal axis and
frequency (percent) vertical axis.
Note the near-vertical rising limb
arising from the point of origin
on the left side of the graph.
(b) Cumulative log probability,
with log-scale horizontal axis and
probability-scale vertical axis.
P10/P90 ratio ( = 40) expresses
the degree of uncertainty before
drilling.

possible reserves would be a single bcf gas value that possible), together with example unspecified ranges,
was less likely than their probable reserves value to be plotted on the probabilistic distribution of New Field
met or exceeded. Unless the estimators designated con- Alpha (Figure 2b), to compare the deterministic and
fidence levels associated with proved, probable, and probabilistic approaches. Assumed confidence for proved
possible, those determinations would be subjective and lies between about 99 and 80%; for probable, between
unspecified. The three reserves values, proved, prob- 95 and 20%; and for possible, between 1 and 45%. Ac-
able, and possible, would instead be single best esti- tual deterministic choices representing proved, prob-
mates, each a proxy representing unspecified segments able, and possible depend on subjective standards of
of decreasing confidence in future recovery, and the individual estimators.
three values, when added, are conceived to present the With respect to resource and reserves estimating,
full range of possible reserves outcomes. Figure 3 shows the E&P industry is now a house divided. Exploration
the three deterministic values (proved, probable, and overwhelmingly uses the probabilistic approach, whereas

24 Geohorizons
Figure 2. Comparison of two
conventional forms of graphical
expression of probabilistic re-
serves distribution for New Field
Alpha, constructed for delinea-
tion of the new field discovered
by Prospect Alpha (Figures 1a, b).
(a) Frequency (probability den-
sity), with arithmetic-scale hori-
zontal axis and frequency
(percent) vertical axis. (b) Cu-
mulative log probability, with
log-scale horizontal axis and
probability-scale vertical axis.
P10/P90 ratio ( = 8.3) expresses
the degree of uncertainty after
discovery. Note that the uncer-
tainty has been reduced but not
eliminated by information pro-
vided by the discovery well.

the development and production arm continues to use the statistics handle it from there. We dodge the mislead-
mostly deterministic methods, although creeping proba- ing deterministic bullet, and we can free up all the extra
bilism can now be detected in some companies. time we formerly spent working problems out to falsely
The engineering ethos and training encourage us to precise answers and use it instead to generate new proj-
work harder and harder, devoting increasing time and ects, thus expanding our portfolio of opportunities.
money, to get ever closer to ‘‘The Answer’’ (Figure 4).
However, once we accept (1) that we will never com-
pletely eliminate the Earth’s natural uncertainties; ADVANTAGES OF PROBABILISTIC APPROACH
(2) that geotechnical parameters follow certain statis-
tical distributions; and (3) that the E&P business is a Probabilistic methodology has at least six advantages
repeated-trials game, we can embrace a new paradigm over deterministic methods:
(Rose, 2001). Now, we see that we would be far better off
to devote sufficient efforts to get the probabilistic ranges 1. Accuracy of estimates can be measured, so estima-
and distributions about right and then be content to let tors can be accountable.

Rose 25
Figure 3. Graphical de-
piction of deterministic
classes of reserves (proved,
probable, possible) for
New Field Alpha, plotted
on cumulative probability
graph of Figure 2b for pur-
poses of comparing de-
terministic and probabilistic
expressions of reserves.
Compare with Figure 2b.

2. Use of statistics improves estimates. geotechnical parameters made prior to drilling, delinea-
3. Predrill reality checks can detect errors before tion, or development and comparing them with the
drilling. actual outcomes, we can measure the ability of geosci-
4. Reserves estimating is faster, more efficient, and entists and engineers to estimate objectively. Obvious-
avoids false precision. ly, parameter forecasts assuming discovery (recoverable
5. Realistic communication of uncertainty to decision reserves, productive area, average net pay, etc.) can
makers and investors is facilitated. only be compared with outcomes in those ventures that
6. Results are immediately usable in modern holistic were productive (not dry holes). Other parameter out-
portfolio management. comes can be compared whether or not the well was
successful (reservoir thickness, porosity, net to gross,
I particularly want to emphasize advantage 1: ac- etc.). Thus, for the objective individual professional mak-
countability. By preserving probabilistic estimates of ing predrilling estimates of many different geotechnical

Figure 4. Comparison
of deterministic versus
probabilistic approaches
to estimating E&P geo-
technical parameters that
are critical to measuring
reserves of undeveloped
and developed oil and
gas fields.

26 Geohorizons
parameters (including recoverable volumes), 90% of the lessens the chance of costly retrofitting of facilities
outcomes should exceed the professional’s correspond- that turn out to be too small or value destruction
ing P90 estimate. Half of the outcomes should exceed that attends oversized systems.
the corresponding P50 estimates, and 10% of the out- 2. ‘‘The SEC rules such as ‘lowest known oil’ or ‘well-
comes should exceed the P10 estimates. Of all outcomes, spacing limits’ artificially constrain the real proba-
80% should fall within their original P90–P10 ranges. bilistic distributions, thereby justifying deterministic
This means that individual estimators’ performances expression.’’ Although such rules do reduce recov-
can be measured; thus, they can be accountable. Conse- erable-reserves uncertainty, they do not come close
quently, they can learn how to become better estimators. to eliminating it. In addition, there are still many
Of course, however, this requires preserving forecasts uncertain parameters that affect recovery, such as
and comparing them against outcomes and dedicating structural and stratigraphic variations, reservoir per-
adequate time to such geotechnical learning and im- formance issues, and future economic limits, that are
provement; and it requires professional and corporate best expressed probabilistically. Again, such issues
acceptance of the need for accountability. may lead to costly underfitting of offshore facilities.
Compare such a procedure with the current proved 3. ‘‘Adopting probabilistic reserves expression would
reserves definition, in which no confidence level is spec- not make much difference; more important issues
ified, only reasonable certainty, a definition that does have to do with production rates, decline curves,
not allow professionals to be accountable and does not abandonment pressures, permeability patterns, and
allow them to calibrate their estimating capabilities. residual saturations, as well as interpretation of SEC
The SEC rules and guidance do not contain language rules and correct calculation of recoverable volumes.’’
establishing a numeric confidence level for reasonable However, all these preceding parameters are more
certainty, and SEC representatives participating in re- usefully expressed probabilistically than determinis-
serves forums sponsored by the Society of Petroleum tically. It is true, however, that the present SEC rules
Evaluation Engineers (SPEE) during 2000 – 2003 indi- are couched for deterministic mindsets. Changing
cated that reasonable certainty was not related to any them will take time.
numerical standard (R. Harrell, 2006, personal com- 4. ‘‘Probabilistic expression will not deter unethical
munication). Accounting trumps nature. behavior by estimators or executives any more than
deterministic expression will.’’ However, the perni-
cious lack of geotechnical accountability that per-
OBJECTIONS TO PROBABILISTIC APPROACH vades the entire proved reserves arena goes back to
the fundamental flaw in determinism: that reserves
Despite the clear applicability of probabilistic meth- estimators cannot be accountable because the ac-
ods to development and production parameters, their curacy of their estimates cannot be measured, which
adoption has been resisted. Characteristic objections impedes their ability to improve their technical per-
to the adoption of probabilistic methods, voiced over formance in estimating. This flaw infects and com-
the past 6 yr to me by client company staff and pro- promises the entire field of reserve estimating. No
fessional colleagues, include the following: system will inhibit people who want to cheat. But
the probabilistic method identifies those who con-
1. ‘‘Despite all probabilistic expressions, at the end of sistently miss their estimates, and it enables dedicat-
the day, production facilities of a given size and ca- ed professional estimators to document their track
pacity have to be built.’’ Such statements fail to rec- records.
ognize that appropriate productive areas, well num- 5. ‘‘But what about aggregating proved reserves in
bers, well capacities, and facilities design can be wells, properties, fields, basins, regions, regulatory
better derived from probabilistic expression of criti- entities, countries, and entire companies?’’ (Aggre-
cal geotechnical and engineering parameters than gation refers to the combining of several or many
from deterministic expressions. Moreover, additional individual probability distributions via addition. The
seismic and delineation drilling, resulting in reduced operative mathematical principle is that only the in-
(but not eliminated) uncertainty, always precede dividual mean values can be summed; distal values,
decisions as to the design of production facilities. such as the P90s or P10s, may not be added. Monte
Probabilism does not prevent informed specific de- Carlo simulation provides the most common meth-
cisions being made; indeed, it encourages them and od for resolving the aggregation problem.) Certainly,

Rose 27
this is a real problem for those still using a slide rule sure estimating performance and, thus, enable indi-
or abacus, but in today’s automated data-processing vidual and team accountability (Rose, 2001, 2004).
world, this concern is specious. So long as a proba- Probabilistic methods will eventually be adopted by
bilistic reserves distribution has been made for every the production part of E&P simply because they
well, such distributions can be aggregated to any su- are superior to determinism (Capen, 1996) and be-
perior level: wells in a field, properties in a state, etc., cause professionals and the public are crying out for
by what is now a well-understood and routine sta- accountability.
tistical process— Monte Carlo simulation. The key 7. ‘‘Why worry? Modern holistic portfolio management
concepts are as follows: of E&P opportunities is now basically probabilistic
a. The P90 values ( = proved reserves) of the indi- anyway; proved reserves numbers are just mechan-
vidual constituent distributions aggregate so that ical values generated to satisfy the SEC.’’ Although
their combined proved reserves value is of higher the statement is broadly correct, proved reserves
confidence than 90%. For example, adding proved figures represent expressions of basic value for public
reserves ( = P90s) for four wells to determine the consumption; therefore, it is essential that they be
proved reserves of a single four-well property valid and reliable, if E&P companies and their pro-
might yield a proved reserves value that actually fessional employees are to enjoy public confidence.
represented 93% confidence. Accordingly, the cor- 8. ‘‘Auditing probabilistic estimates is more difficult
rect P90 value for the property would be signif- and expensive than traditional deterministic ones.’’
icantly larger than the sum of the four P90 val- This is true only if the basic supporting data (which
ues. Honoring this principle, the confidence levels should be required for deterministic estimates any-
for an aggregation of 200 wells in a given regu- way) and distributions have not been preserved. In
latory region might turn out such that the P65% my opinion, this objection arises chiefly from un-
reserve values for each of the 200 wells aggregated familiarity with probabilistic estimating and the un-
so as to equal the P90% ( = proved) for the com- derstandable comfort with tradition.
bined 200-well package.
b. The actual probabilistic values of the aggregate
are related to the variance of each well distribu- WHY DETERMINISM PERSISTS
tion to be aggregated, upon how many wells are
being aggregated, and upon any substantial geo- Objectively and respectfully, one may speculate on the
logic or engineering dependencies, most of which reasons why an outmoded and demonstrably inferior
are already known. measuring process persists:
Aggregation is no more of a problem than previous
(erroneous) methods of adding proved reserves in 1. Deterministic methods represent orthodoxy, and
wells, properties, fields, etc., has been. Moreover, change is always resisted.
the simple addition of probabilistic values (except 2. Most users of reserves values would prefer to ascribe
for the means) is simply incorrect mathematics, certainty to recoverable volumes, which are, in fact,
resulting in increasingly and significantly underes- uncomfortably uncertain; i.e., determinism enables
timated proved reserves (Capen, 1996; Cronquist, fallacious thinking.
2001). Underestimation increases with the num- 3. Standard accounting procedures have difficulty
ber of wells that are being incorrectly added. dealing with probabilistic ranges and aggregation;
6. ‘‘Probabilistic reserves promotes reserves abuses, so single numbers are much preferred.
it will never be adopted by reserves estimators and 4. Reserves estimators (and some company executives),
regulators.’’ The exact same objection was widely in fact, prefer to be unaccountable, and vague defi-
expressed in the late 1980s by exploration geoscien- nitions serve their purposes.
tists and engineers. It proved to be false; the explo-
ration arm of E&P passed the tipping point in about Fortunately, a simple solution is available, requir-
1996, and exploration is today almost universally ing only that all professional oil and gas evaluators
probabilistic. Moreover, prior to drilling, it is easier embrace a common worldwide standard: that when
to detect inappropriate estimates by the use of sta- every reserve appraiser uses the term ‘‘proved,’’ he is
tistical patterns and reality checks; these are then expressly attaching a specified confidence level to the
reinforced by vigorous project postaudits that mea- stated reserves value. Because the Society of Petroleum

28 Geohorizons
Engineers (SPE) and the World Petroleum Congress not all have the same risk preferences, so the use of
(WPC), later joined by the AAPG, have recommended only a single percentile is presumptuous in itself. Re-
that ‘‘proved’’ be equated with 90% confidence, I urge gardless, until E&P professionals can finally embrace
that the 90% standard be embraced as a mandatory even one specified and consistent confidence level
industry standard. However, the actual confidence level that justifies the use of the term ‘‘proved reserves,’’
chosen, 90%, 95%, 97%, and 99%, is not as critical as the prior tradition of unaccountability will continue
the fact that world professionals agree on a standard and to plague the measurement of subsurface crude oil
commit to its use as a necessary best practice. (Capen, and natural gas.
1996, advocated a modified probabilistic scheme in
which 97% confidence represented ‘‘proved,’’ 60% con-
fidence represented ‘‘probable,’’ and 10% confidence
REFERENCES CITED
represented ‘‘possible.’’) If that happens, corporations
and governments (including the U.S. SEC) can only fol-
Capen, E. C., 1996, A consistent probabilistic definition of reserves:
low. Determinism will give way to probabilism, the su- Society of Petroleum Engineers Reservoir Engineering, v. 11,
perior method. Accountability can be embraced. no. 1, p. 23 – 28.
Cronquist, C., 1991, Reserves and probabilities — Synergism or anach-
ronism?: Journal of Petroleum Technology, v. 43, p. 1258 –
1264.
CONCLUSION Cronquist, C., 2001, Estimation and classification of reserves of crude
oil, natural gas, and condensate: Society of Petroleum Engineers,
416 p.
Currently, major professional societies, such as AAPG,
MacKay, J. A., 1996, Risk management in international petroleum
SPE, WPC, and SPEE, are now hard at work, engaged ventures: Ideas from a Hedberg conference: AAPG Bulletin,
in joint efforts to establish consistent international v. 80, no. 12, p. 1845 – 1849.
standards for reserves and resources. So far, their efforts McKelvey, V. E., 1972, Mineral resource estimates and public pol-
icy: American Scientist, v. 60, p. 32.
have focused mostly on technical definitions and en- McLane, M. A., and P. R. Rose, 2001, Reserve overbooking — The
gineering details; they have tended to avoid dealing problem no one wants to talk about: Society of Petroleum En-
with probabilism vs. determinism, and the enduring is- gineers Hydrocarbon Economics and Evaluation Symposium,
April, SPE Paper 68580, 7 p.
sue of professional accountability. Whether they can es-
Rose, P. R., 2001, Risk analysis and management of petroleum ex-
cape the clutches of the past and choose a better, more ploration ventures: AAPG Methods in Exploration 12, 178 p.
responsible future remains to be seen. Many knowledge- Rose, P. R., 2004, Delivering on our E&P promises: The Leading
able E&P authorities would prefer that the entire dis- Edge, v. 23, p. 165 – 168.
Society of Petroleum Engineers, 1997, Society of Petroleum
tribution be presented in reserves and resources reports Engineers – World Petroleum Congress reserves definitions ap-
and not just specific percentiles. After all, investors do proved: Journal of Petroleum Technology, v. 49, p. 527.

Rose 29