Occidental Petroleum 2006 Annual Report Download - page 91

Supplemental Oil and Gas Information 
The following tables set forth Occidental’s net interests in quantities of proved developed and undeveloped reserves of crude oil, condensate
and natural gas and changes in such quantities. Crude oil reserves include condensate. The reserves are stated after applicable royalties. These
estimates include reserves in which Occidental holds an economic interest under PSCs and other economic arrangements.
The reserve estimation process involves reservoir engineers, geoscientists, planning engineers and financial analysts. As part of this process,
all reserve volumes are estimated by a forecast of production rates, operating costs and capital expenditures. Price differentials between
benchmark prices and prices realized and specifics of each operating agreement are then used to estimate the net reserves. Production rate
forecasts are derived by a number of methods, including estimates from decline curve analyses, material balance calculations that take into
account the volume of substances replacing the volumes produced and associated reservoir pressure changes, or computer simulation of the
reservoir performance. Operating costs and capital costs are forecast based on past experience combined with expectations of future cost for the
specific reservoirs. In many cases, activity-based cost models for a reservoir are utilized to project operating costs as production rates and the
number of wells for production and injection vary.
A senior corporate officer of Occidental is responsible for the internal audit and review of its oil and gas reserves data. In addition, a Corporate
Reserves Review Committee (the Reserves Committee) has been established, consisting of senior corporate officers, to monitor and review
Occidental's oil and gas reserves. The Reserves Committee reports to the Audit Committee of Occidental's Board of Directors periodically
throughout the year. Occidental has retained Ryder Scott Company, L.P. (Ryder Scott), independent petroleum engineering consultants, to
review its annual oil and gas reserve estimation processes since 2004.
Again in 2006, Ryder Scott has compared Occidental’s methods and procedures for estimating oil and gas reserves to generally accepted
industry standards and has reviewed certain data, methods and procedures used in estimating reserves volumes, the economic evaluations and
reserves classifications. Ryder Scott reviewed the specific application of such methods and procedures for a selection of oil and gas fields
considered to be a valid representation of Occidental’s total reserves portfolio. In 2006, Ryder Scott reviewed 10.5 percent of Occidental’s oil and
gas reserves. Since being engaged in 2004, Ryder Scott has reviewed Occidental’s reserve estimation methods and procedures for approximately
49 percent of Occidental’s oil and gas reserves.
Based on this review, including the data, technical processes and interpretations presented by Occidental, Ryder Scott has concluded that the
methodologies used by Occidental in preparing the relevant estimates generally comply with current SEC standards. Ryder Scott has not been
engaged to render an opinion as to the reserves volumes reported by Occidental.
Estimates of proven reserves are collected in a database and changes in this database are reviewed by engineering personnel to ensure
accuracy. Finally, reserve volumes and changes are reviewed and approved by Occidental's senior management.
In May 2006, Ecuador terminated Occidental’s contract for the operation of Block 15, which comprised all of its oil-producing operations in the
country, and seized Occidental’s Block 15 assets. As a result of this seizure, Occidental has classified its Block 15 operations as discontinued
operations on a retrospective basis and excluded them from all tables in the Supplemental Oil and Gas Information section.
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