BP 2011 Annual Report Download - page 261

Financial statements
BP Annual Report and Form 20-F 2011 259
The regional analysis presented below is on a continent basis, with separate disclosure for countries that contain 15% or more of the total proved
reserves (for subsidiaries plus equity-accounted entities), in accordance with SEC and FASB requirements.
Oil and gas reserves – certain definitions
Unless the context indicates otherwise, the following terms have the meanings shown below:
Proved oil and gas reserves
Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable
certainty to be economically producible – from a given date forward, from known reservoirs, and under existing economic conditions, operating methods,
and government regulations – prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is
reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must
have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.
(i) The area of the reservoir considered as proved includes:
(A) The area identified by drilling and limited by fluid contacts, if any; and
(B) Adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with it and to contain
economically producible oil or gas on the basis of available geoscience and engineering data.
(ii) In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons (LKH) as seen in a well
penetration unless geoscience, engineering, or performance data and reliable technology establishes a lower contact with reasonable certainty.
(iii) Where direct observation from well penetrations has defined a highest known oil (HKO) elevation and the potential exists for an associated gas
cap, proved oil reserves may be assigned in the structurally higher portions of the reservoir only if geoscience, engineering, or performance data
and reliable technology establish the higher contact with reasonable certainty.
(iv) Reserves which can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection)
are included in the proved classification when:
(A) Successful testing by a pilot project in an area of the reservoir with properties no more favourable than in the reservoir as a whole, the
operation of an installed programme in the reservoir or an analogous reservoir, or other evidence using reliable technology establishes the
reasonable certainty of the engineering analysis on which the project or programme was based; and
(B) The project has been approved for development by all necessary parties and entities, including governmental entities.
(v) Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the
average price during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic
average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding
escalations based upon future conditions.
Undeveloped oil and gas reserves
Undeveloped oil and gas reserves are reserves of any category that are expected to be recovered from new wells on undrilled acreage, or from existing
wells where a relatively major expenditure is required for recompletion.
(i) Reserves on undrilled acreage shall be limited to those directly offsetting development spacing areas that are reasonably certain of production
when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic producibility at greater distances.
(ii) Undrilled locations can be classified as having undeveloped reserves only if a development plan has been adopted indicating that they are
scheduled to be drilled within five years, unless the specific circumstances, justify a longer time.
(iii) Under no circumstances shall estimates for undeveloped reserves be attributable to any acreage for which an application of fluid injection or other
improved recovery technique is contemplated, unless such techniques have been proved effective by actual projects in the same reservoir or an
analogous reservoir, or by other evidence using reliable technology establishing reasonable certainty.
Developed oil and gas reserves
Developed oil and gas reserves are reserves of any category that can be expected to be recovered:
(i) Through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor
compared to the cost of a new well; and
(ii) Through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not
involving a well.
For details on BP’s proved reserves and production compliance and governance processes, see pages 90 to 91.
Supplementary information on oil and natural gas (unaudited)