Occidental Petroleum 2008 Annual Report Download - page 89

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Supplemental Oil and Gas Information (Unaudited)
The following tables set forth Occidental’s net interests in quantities of proved developed and undeveloped reserves of crude oil,
NGLs, condensate and natural gas and changes in such quantities. Unless otherwise indicated hereafter, discussion of oil or oil and liquids
refers to crude oil, condensate and NGLs. In addition, discussions of oil and gas production or volumes, in general, refer to sales volumes
unless context requires or it is indicated otherwise. The reserves are stated after applicable royalties. These estimates include reserves in
which Occidental holds an economic interest under PSCs and other similar economic arrangements.
The reserve estimation process involves reservoir engineers, geoscientists, planning engineers and financial analysts. As part of this
process, all reserves 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 using current costs combined with
expectations of future costs for 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 (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 2003.
In 2008, Ryder Scott compared Occidental’s methods and procedures for estimating oil and gas reserves to generally accepted
industry standards and reviewed certain pertinent facts interpreted and assumptions made in estimating the proved reserves volumes,
preparing the economic evaluations and determining reserves classifications. Ryder Scott reviewed the specific application of such methods
and procedures for selected oil and gas properties considered to be a valid representation of Occidental’s total reserves portfolio. In 2008,
Ryder Scott reviewed approximately 22 percent of Occidental’s proved oil and gas reserves. Since being engaged in 2003, Ryder Scott has
reviewed the specific application of Occidental’s reserve estimation methods and procedures for approximately 66 percent of Occidental’s
proved oil and gas reserves.
Based on its reviews, including the data, technical processes and interpretations presented by Occidental, Ryder Scott has concluded
that the overall procedures and methodologies utilized in determining the proved reserves for the reviewed properties as estimated by
Occidental are reasonable and consistent with generally accepted industry standards and comply with current Securities and Exchange
Commission (SEC) standards. Ryder Scott has not been engaged to render an opinion as to the reasonableness of reserves quantities
reported by Occidental.
Estimates of proved reserves are collected in a database and changes in this database are reviewed by engineering personnel to
ensure accuracy. Finally, reserves volumes and changes are reviewed and approved by Occidental's senior management.
Occidental has classified its Horn Mountain (in 2007), Pakistan (in 2007) and Ecuador (in 2006) operations as discontinued
operations on a retrospective basis and excluded them from all tables in the Supplemental Oil and Gas Information section.
75
Oil Reserves