Petroleum Resources Management System (PRMS)
Frequently Asked Questions (FAQs)

November 2022

Table of Contents

Introduction to FAQs

  1. Communications with the SPE Oil and Gas Reserves Committee (OGRC)
  2. Production
  3. Reserves
  4. Contingent Resources
  5. Prospective Resources
  6. Miscellaneous Topics

Disclaimer: These FAQs cannot anticipate every combination of circumstances that may occur. The guidance and examples provided within the FAQs are for general situations. Additional information about the situation could materially modify the guidance. In all cases, the guidance provided herein should never be interpreted to cause a violation of the principles that are the basis of PRMS.

Since the publication of the updated PRMS in June 2018, the SPE Oil and Gas Reserves Committee (OGRC) has received questions regarding the interpretation of the PRMS’s principles and guidelines. 

This document presents questions received with answers prepared by the OGRC and reviewed by the other Sponsors of the PRMS, offering guidance on the interpretation and usage of the PRMS.

Please note that the original text of the original submitted questions has been edited for clarity and rephrased to remove specific references.

This FAQ document will be updated by the OGRC from time to time to include both additional pertinent questions and clarifications to responses to existing questions. The latest document version will be referenced in the title and each question will also contain the “date of latest update.”

Questions provided to the SPE OGRC are denoted under the general section headings and replies are provided in blue.


1. Communications with the SPE Oil and Gas Reserves Committee (OGRC)

1.1. Question: How does the industry, e.g., IOCs, NOCs, consultancies, etc., communicate with the SPE and the OGRC about the PRMS and Reserves issues?

Answer: [Oct. 2022] The industry can communicate with SPE and the OGRC in several ways.

(1) Communication on Reserves is preferable through Reserves and Resources evaluation workshops on the PRMS organized by SPE. Workshops provide for direct Q&A exchanges with Subject Matter Experts (SMEs) from the workshop and workshop coordinators are responsible for feedback to the OGRC on completion of the workshop of potential issues raised.

The OGRC gathers feedback from these meetings and reviews it periodically to understand the issues that users encounter and consider responses in future PRMS updates, PRMS guidance, examples, or FAQs.  

(2) Questions about the PRMS can be addressed directly to the OGRC by sending them via e-mail to (Please note this is not “ogrc” in the e-mail address but “ogr”).

1.2. Question: Can the OGRC provide the basis for or some commentary on the 2018 PRMS updates, e.g., similar to what the SEC provides (i.e., not just the changes but the rationale for the changes)?

Answer: [Oct. 2022] The OGRC has prepared a summary of the changes but has not provided detailed commentary to the level that the SEC has provided. The summary of changes in the PRMS 2018 update is available at this link:

1.3. Question: How does the OGRC plan to communicate clarifications, guidelines, examples, etc.?

Answer: [Oct. 2022] The OGRC will communicate information in workshops, web postings, and distinguished lectures in which SPE or its other sponsor organizations discuss Reserves and Resources. 

The OGRC updated the 2011 “Guidelines for Application of the PRMS” in 2022. The guidelines are available for purchase on the SPE website.

The OGRC also plans to provide examples which discuss interpretation of select PRMS principles on the SPE website to allow for guidance on selected topics. These examples may be updated periodically to clarify topics, and new examples may be added over time.


2. Production

2.1.  Question: Fig 1.1 includes Production. This Production should be “raw,” which means combined sales and non-sales. Raw Production is required for reservoir voidage in Discovered PIIP (Raw Production + Reserves + Contingent Resources + Unrecoverable). However, § C describes production as being measured in terms of the sales product specifications. C Production is the cumulative quantities of petroleum that have been recovered at a given date. While all recoverable resources are estimated, and production is measured in terms of the sales product specifications, raw production (sales plus non-sales) quantities are also measured and required to support engineering analyses based on reservoir voidage.

Answer: [Oct. 2022] Production in Fig 1.1 is the cumulative quantities recovered at a given date of either (i) “Raw Production” when ensuring consistency in voidage and material balance calculations or (ii) petroleum measured in terms of the sales or marketable hydrocarbons (depending on how Consumed in Operations is recognized) product specifications that are recognized at the Reference Point(s) for Reserves and Resources classification. 

If the Reference Point is at the wellhead, then Production = Raw Production.


3. Reserves 

3.1. Question: Reserves chance of development. What is the minimum chance of development permissible for the Justified for Development sub-class? (The y-axis arrow on Fig. 1.1 and 2.1 ends at the boundary with FID.)

Answer: [Oct. 2022] The Justified for Development subclass requires a “reasonable expectation” that the project will proceed. Reasonable expectation is defined in the PRMS as having a high degree of confidence that the project will be implemented and that all commercial criteria for the assignment of Reserves have been achieved (see §2.1.2 Determination of Commerciality).  

The evaluator applying the PRMS to classify Reserves for a project, needs to determine whether the project is reasonably expected to proceed and should be able to defend this assumption. In practice, when using probabilities, the chance of commercial development must be 90% or greater (frequently evaluated at 100%). This requires all elements of commerciality listed in § to be demonstrated with no known contingencies that may impede the development from proceeding in a reasonable time period.

3.2. Question: 1P = 0. When the low estimate quantities of a project are uneconomic and therefore 1P = 0, would you support a footnote to: (a) say 1P is zero because it is uneconomic, and (b) state the low-side quantity?

Answer: [Oct. 2022] Yes, the OGRC encourages evaluators and users of the PRMS to add such a footnote to provide clarity to the project that the economic status of low case quantities does not qualify as 1P.  

The evaluator is required to test the economics of the low-case project quantities to determine if 1P Reserves pass the economic criteria. When a project fails the economic criteria for 1P, providing both the future capex and the forward-looking forecast of cumulative net present value will provide an improved context to the reader compared to the low-side quantity figure alone for 1P being zero for a project.  In summary, the future costs, Resources quantities, and forward looking net present value are typically cited when discussing a project evaluation referenced to a specific resource category.

3.3. Question : 1P = 0 and P1 + P2 = 2P. If the 1P (or P1) is uneconomic when using the deterministic incremental method, what is 2P? Is it P1 + P2 or is it 0 + P2 (which does not add up)?

Answer: [Oct. 2022] If all the low-case quantities fail the Reserves qualification test in the Proved area, then 1P = 0, while if the best-estimate quantities pass the commerciality test (including economic viability), this will allow 2P Reserves recognition.

The deterministic incremental method has discrete estimates made for each category.  The development technical evaluation quantities are denoted in the example table.

  • P1 = proved, requires positive economics of the low estimate 
  • 2P = P1 + P2, denotes the best estimate

Project evaluation example image
Example: Project evaluation example that results in the low and best estimate technical assessment that is then tested for economics. Three different scenarios are shown below to illustrate the technical quantity referenced that “passes” or “fails” an economic testing where the technical low scenario outcome is 5 and the best estimate outcome is 7 (5 + 2).

When the low case fails screening economics, the 2P scenario still respects the best estimate evaluation quantities. Thus, the best estimate outcome will be the same when it has positive economics regardless of the low case economics outcome.

3.4. Question: When a project is in Reserves and 1P = 0 and split classification is not allowed; how or where do you capture the low-case recoverable quantity (net present value negative) if it is not captured in 1P or 1C?

Answer: [Oct. 2022] FAQ 3.2 provides context to consider adding a footnote about how to communicate the low case quantity.

Once a project is commercial and meets all criteria required for the Reserves class, then 2P exists. The low estimate quantities are then checked for positive economics and, if the low estimate does not pass, 1P = 0 and the low case quantities are captured within the best estimate and within the 2P. They are not classified as 1C if they are found to be uneconomic as this would be a “split classification” of a project and the PRMS does not allow a portion of the project in Contingent Resources and the other portion in Reserves.  

Some entities, to comply with internal policy or to satisfy regulatory reporting requirements, may defer reclassifying projects from Contingent Resources to Reserves until the low-estimate case is economic. 

3.5. Question: Reserves in unpenetrated fault blocks. Can we claim “discovery” status for an unpenetrated conventional accumulation if we have strong justification and are committed to a commercial development, e.g., a 99% success rate (in target or alternate target) from many nearby analogues and application of technology?  

Answer: [Oct. 2022] No, an unpenetrated petroleum accumulation, by definition, is undiscovered and cannot be deemed to be discovered.
A Qualified Reserves Evaluator’s evaluation is required in establishing “discovery” status after drilling a well and meeting the PRMS discovery criteria (refer to §2.1.1.) for an accumulation to be a “known accumulation.”

Second part of question: Within a “discovered accumulation” that has Reserves, can we include unpenetrated fault blocks in that accumulation as Reserves? 

Answer: Yes, provided the hydraulic communication between fault blocks evaluated within the hydrocarbon column (not through a downdip common aquifer) is assessed with a degree of confidence.

Of course, the commercial criteria for Reserves need to be satisfied for such unpenetrated fault blocks.  

3.6. Question: Project moving to Reserves class and contains Possible activities. If the focus of a Reserves assessment is on the best-estimate development plan, how should the 3P case be evaluated when using the incremental method? Or, do the quantities become Contingent Resources if they are not included in the development plan?  

Answer: [Oct. 2022] The commerciality test is applied to the best estimate of the project (see or stricter case. This is the case that management reviews for sanction (in many entities with an understanding of the risk of the low and high outcomes). In addition, each category of the project must also meet the commerciality requirements (refer to § A–G, § C Possible Reserves). 

  • If the Possible scenario represents a developed upside with no additional activities the quantities may be recognized as Possible Reserves.
  • If the high case is an upside-activity outcome for the project included in the project approval’s funding (e.g., drilling production wells below the contact used in the 2P evaluation), the quantities related to upside activity may also be recognized as Possible Reserves.

If additional activity to achieve the project’s high case outcome does not have funding included in the investment decision or any other criteria of commerciality required are not met, the additional high case activities will remain in Contingent Resources until the separate project reaches Reserves status.

3.7. Question: Qualification of low/best/high estimates (P90/P50/P10) from Contingent Resources to Reserves. An evaluator is considering a project with Contingent Resources for promotion to Reserves and is examining the economics and commercial criteria required for reclassification. Does the evaluator also need to re-evaluate the confidence level of the resources in the Contingent Resources categories before promotion to Reserves?

Answer: [Oct. 2022] As appraisal activities and development studies progress, the evaluator will carry forward the technical conditions that are in the latest project development plan from the Contingent Resources Development Pending sub-class into the proposed Reserves class. Thus, the project’s low/best/high estimates of the Reserves will be the same as in Contingent Resources as long as the scope of activities is the same. The economic and contractual conditions (duration of license term), both are criteria elements for commerciality, must be confirmed before qualifying as Reserves as they can limit the quantity of Contingent Resources qualifying as Reserves.

For reference, a relevant PRMS citation is § Without new technical information, there should be no change in the distribution of technically recoverable resources and the categorization boundaries when conditions are satisfied to reclassify a project from Contingent Resources to Reserves.

3.8. Question: Commodity price change impact on Reserves. In an existing “on production” developed project, should we transfer the former Reserves quantities that failed to meet the economics criterion at the end of the year to Contingent Resources (CR)? (With price increases in future years, this quantity may again move back to the existing project.) Alternatively, should we de-book the quantity completely and record zero in both Reserves and Contingent Resources? If we move the quantity to CR, should there be an “on production” or developed status in CR? 

Answer: [Oct. 2022] The PRMS uses forecast prices as of the effective date to assess economic viability. If there is a major negative change in the product price forecasts at year-end, projects that are “on production” may no longer meet the economic hurdles for Reserves and would need to be reclassified as CR. 

The Reserves will be moved to CR at year end with the updated product prices. The PRMS does not include a sub-class of CR “on production” but it does include the CR “Not Viable” sub-class to describe this situation. § explains how to account for production in future years, and the evaluator will need to review the CR annually to determine whether the classification as CR or Reserves is appropriate at the time.  

For regulatory reporting, issuers should consult the applicable commodity pricing guidance that the regulator provides.

§ of the PRMS explains that: In some situations, entities may choose to initiate production below or continue production past the economic limit. Production must be economic to be considered as Reserves, and the intent to or act of producing sub-economic resources does not confer Reserves status to those quantities. In these instances, the production represents a movement from Contingent Resources to Production. However, once produced such quantities can be shown in the reconciliation process for production and revenue accounting as a positive technical revision to Reserves. No future sub-economic production can be Reserves.

3.9. Question: Developed and undeveloped Reserves. In a project including drilling multiple wells and a phased ramp-up of production, how should resources, which include developed and undeveloped Reserves, be treated over a multi-year time period? Should we change the status of the total quantity to developed upon first production even though some development activities are still underway or may not have commenced or must we wait until all wells are producing?

Answer: [Oct. 2022] The status of Reserves as either developed or undeveloped, is evaluated and reported as of the Effective Date, depends on the progress of the development infrastructure, facility availability, wells drilled and completed and the determination of the remaining cost significance. The reserves status typically changes to Developed at the completion of drilling and completion operations of each well that is placed into production assuming production facilities are available on the effective date.

3.10. Question: Developed Reserves: Clarification of “minor costs” and “significant investments” in § What is the definition of “minor” in minor costs and “significant” in significant investments? § The distinction between the “minor costs to access” Developed Non-Producing Reserves and the “significant investment” needed to develop Undeveloped Reserves requires the judgment of the evaluator taking into account the cost environment. A significant investment would be a relatively large expenditure when compared to the cost of drilling and completing a new well. A minor cost would be a lower expenditure when compared to the cost of drilling and completing a new well.

Answer: [Oct. 2022] The OGRC recognizes that the answer to this question requires an interpretation applied to specific projects. Each entity should develop and provide to its evaluators internal documented guidelines regarding percentage and/or monetary hurdles. For example, 10% of the cost of a new well in the deep water may be of much greater financial significance to a company than 35% of the cost of a new well in an unconventional drilling program.   

Support for the determination of what constitutes a minor expenditure should include consideration of costs for conditions such as deep water, arctic, and remote locations as appropriate and the relationship of such costs to more conventional situations such as drilling and completing new wells in an onshore environment with infrastructure. 

Entities often distinguish between major and minor costs as a percentage of the cost of drilling and completing a new well. Threshold values range between 10% to 50%; while a range of 25% to 35% is common practice.

3.11. Question: Project scope in Reserves. Can the same project have different work programs underlying its various Reserves categories? (e.g., 1P with 1 well and tie-in to existing 3rd party facility, 2P assuming 5 wells and tie-in, and 3P with 8 wells and standalone facility construction.)

Answer: [Oct. 2022] There can be variations in the number of wells to be drilled between 1P, 2P, and 3P. However, in the example, changing the surface facility for the 3P scenario has a different facility scope than what is in the 2P development decision in the field development plan that was the technical basis of the project’s commerciality investment decision. The feasibility to implement the 3P scope is not aligned with 2P and thus is not allowed.  Without the decision to execute and fund up to the 3P activities, the commercial conditions are not met to support the incremental wells and stand-alone facility, Reserves for the standalone facility cannot be recognized in 3P. The 3P can only recognize the high side of the 2P project. A new investment decision for the upside scope will be a separate project and that project will be in Contingent Resources. See also FAQ 3.8 question and answer.


4. Contingent Resources

4.1. Question: Contingent Resources sub-classes. Why is the sub-class “On Hold” considered more mature than the sub-class “Unclarified?”

Answer: [Oct. 2022] Evaluators are to review the project’s chance of commerciality link on the vertical axis of the PRMS framework matrix (Fig. 1.1) on an individual project basis. The evaluator shall not automatically assign a chance of commerciality because of the sub-class name. 

The evaluator may conclude that some projects have a greater chance of commerciality than others when placing them in these two sub-classes, especially if results of recent activity have not clarified the project’s justification as a commercial development. 

In relation to this, the PRMS requires a defined project, commensurate with the maturity of the project, as the basis for its recoverable resources estimates, even for Not Viable and Unclarified (refer to § E, §, §, §, and various sections in §4.0).

A project “On Hold” typically will have a development scope but is not being advanced where justification as a commercial development may be subject to a significant delay. In the Unclarified sub-class, the project scope (i.e., size, wells count, facilities, development type, etc.) typically are still under additional evaluation for refinement/selection.

Development Unclarified sub-class is assigned when the project scope has definition but there may still be several development options which depend on evaluation work still underway or there may be commerciality criteria that render the project maturity as “unclarified.” Project activities are ongoing in attempt to clarify whether or not the project may mature to Reserves.

4.2. Question: Use of contingent sub-classes. Why is quantitative chance of development mentioned as a “may” and not a “should” when we recommend sub-classes? 

Answer: [Oct. 2022] The PRMS requires “classification” of Reserves, Contingent Resources, and Prospective Resources.  Sub-classes, although usage is optional, provide more thorough portfolio management, visibility to stakeholders of project’s status within a portfolio, and thus they are recommended to be utilized as best practice. Because of the optionality usage, the “may” is used instead of “should” in the PRMS.

The PRMS did not require the sub-class usage in the 2018 version due to the variability in current global practice usage at that time. Later version updates of the PRMS will revisit this best practice in consideration of mandatory usage.

§ Evaluators have the option to establish a more detailed resources classification reporting system that can also provide the basis for portfolio management by subdividing the chance of commerciality axis according to project maturity. Such sub-classes may be characterized qualitatively by the project maturity level descriptions and associated quantitative chance of reaching commercial status and being placed on production.

4.3. Question: Economic limit consideration in Resources. Should Contingent Resources (or Prospective Resources) be subjected to an economic limit test?

Answer: [Oct. 2022] Resources include quantities from projects that do not meet all Reserves criteria and economics may be one of the criteria not met. Thus, the economic limit may or may not be taken into account for the Contingent Resources assessment. If evaluators include Contingent Resources quantities based on economics within contract terms because they want to clearly define the quantities to be reported as potential Reserves based on project scope envisioned, then they should apply economic producibility with an economic limit test determination. If the objective is to recognize the project’s potential recovery, the evaluation process may use a technical limit instead.

Contingent and Prospective Resources have different project maturity sub-class levels and, for projects approaching Commerciality (Contingent Resources Development Pending), evaluators should increase focus on achieving economic criteria. Contingent Resources projects are already discovered and may be approaching Commerciality determination, while Prospective Resources are not at such level of maturity.

Entities that are maturing a project in the Contingent Resources Development Pending sub-class and intend to move the project into the Reserves class will have economics included in the entity’s assessment of project commercial viability.

In preparing to decide to drill Prospective Resources projects in the Prospect sub-class, a risk assessment with economics is typically evaluated to support investment decision. Please note that economics are only one element of commerciality.

Entities may assign less-mature projects with no economic evaluation (or which are non-commercial) to Contingent and Prospective Resources sub-classes that reflect their remaining contingencies. Evaluators should clarify their assumptions and state whether or not they have applied an economic limit test. 

4.4. Question: Contract renewals in Contingent Resources. Does § imply that evaluators do not need to address all defined conditions for Contingent Resources, and that they do not need to limit these resources to an economic limit test or contract limits?

Answer: [Oct. 2022] The PRMS allows contingencies to exist in non-Reserves classes and these contingencies can be related to unknown and known elements. Whether or not to recognize technical, economic, or contractual limits depends on the situation. 

Contingent Resources quantities based on a project’s incremental recovery planned to be implemented but which has not been approved should respect the technical, economic, and contract limits, whichever occurs first. Separate projects to recover additional resources after the first project’s limitation occurs (technical, economic, or contractual) may also be able to be recognized. 

When Contingent Resources are based on renegotiating a contract extension, the assessment likelihood of the outcome and its chance of commercialization are taken into account for Contingent Resources [see § below]. 

The use of the economic limit test in evaluating projects is common with Development Pending projects, and its application in lesser mature sub-classes would depend on the specific situation. There are methods available that do not contain the detail of an economic limit test that may be used in these cases.

§ Reserves cannot be claimed for those quantities that will be produced beyond the expiration date of the current agreement unless there is reasonable expectation that an extension, a renewal, or a new contract will be granted. Such reasonable expectation may be based on the status of renewal negotiations and historical treatment of similar agreements by the license-issuing jurisdiction. Otherwise, forecast production beyond the contract term must be classified as Contingent Resources with an associated reduced chance of commercialization. Moreover, it may not be reasonable to assume that the fiscal terms in a negotiated extension will be similar to existing terms. [There may be governmental or regulatory conditions of the reporting basis that require Reserves and Resources provided that is different than the entity’s entitlement share. Such requirements must therefore be reflected.]

4.5. Question: Economic application to Contingent Resources. Should Contingent Resources be limited to the economic portion of the cashflow forecast? Does this limitation apply to different sub-classes?

Answer: [Oct. 2022] Contingent Resources quantities are not limited to those with economic cashflow, as there is a Contingent Resources sub-class “Development Not Viable” which is often related to a project’s economic viability and may not yield a positive cash flow under reasonable forecast conditions.  

Projects in the more mature Development Pending sub-class of contingent resources are typically truncated by the economic limit.

4.6. Question: Economic application to Contingent Resources. If a project with Contingent Resources has no single period (e.g., one year) of positive cashflow, should quantities recorded be zero?

Answer: [Oct. 2022] No, a positive cash flow is not a requirement to recognize Contingent Resources. See § B for reference to “Economically Not Viable Contingent Resources” and the inability of such projects in this sub-class to yield a positive cash flow under reasonable forecast conditions. For non-economic projects, the economic viability will be a project contingency before it can be considered for Reserves classification. 

However, if unreasonable commercial criteria (i.e., economic or any other) are required to enable the project to become commercial, then it should be deemed Unrecoverable rather than Development Not Viable (refer to the PRMS Glossary: Unrecoverable Resources).

4.7. Question: Reasonable time frame for Contingent Resources. Is there a limit to the time Contingent Resources remain in Development Pending? If so, is a “reasonable” time five years as for Reserves?

Answer: [Oct. 2022] The PRMS does not give a specified time frame a project may reside in Development Pending but does denote the project will achieve commerciality in the foreseeable future. Evaluators should determine the time limit, if any, that resources should remain in Development Pending and should be able to defend their assumptions. The justification must be documented and must be based on the assumptions within the reasonable forecast conditions.

For Reserves, the PRMS denotes five years to be developed as a recommended benchmark while a longer time period could be applied where justified.  

4.8. Question: Time limit of sub-classes. Is there a limit to the time Contingent Resources remain in Development Not Viable? Can they remain for decades?

Answer: [Oct. 2022] Evaluators should determine how long resources can remain in Development Not Viable and be able to defend their assumptions. Projects that are not defendable may be considered to be classified as Unrecoverable. Entities should review classifications of their projects in their portfolio regularly.   

4.9. Question: Reasonable price assumptions in Contingent Resources. How should Contingent Resources be assessed if an “unreasonable” forecast price (e.g., $400/bbl) is required for the resources to be economic? Should these resources be excluded from Contingent Resources and be considered, e.g., unrecoverable?

Answer: [Oct. 2022] Evaluators should be able to defend their assumptions. While most evaluators would agree that $400/bbl is unreasonable, what about $150/bbl?

Certainly, evaluators should use “reasonable assumptions,” but reasonably higher prices may be applied to recognize quantities within the Contingent Resources Not Viable sub-class. It is the obligation of the entity and evaluator to provide to the users of the assessment sufficient information to understand the assumptions that have been applied.


5. Prospective Resources

5.1. Question: Chance of Geologic Discovery. How should we assess and report the Chance of Geologic Discovery (Pg) and 1U, 2U, 3U for the Play sub-class when this is likely to include many different prospects and leads? Does that mean that the “project” is several different prospects?

Answer: [Oct. 2022] The project scope may require a single or multiple exploration wells (each with their own Pg), and the project scope definition will have a link to the entity’s business decisions. It is up to the evaluator to define the project and apply the Pg in such situations based on the evaluation method applied.  

Transparency from the evaluator in the application of Pg should be clear to the user or stakeholder. If prospects and/or leads have been identified, they would be reported as such, and not as part of a “play,” which by definition applies only to a “prospective trend of potential prospects”. The evaluator should state clearly which play risks are common to all prospects within the play and which are specific for individual prospects within the play that may comprise either a single or multiple projects.
For documentation, the evaluator should provide the Pg (%) and Chance of Development (Pd) (%) together with the unrisked 1U, 2U, and 3U quantities.

5.2. Question: Risked and unrisked Prospective Resources. Do Prospective Resources refer to unrisked (without considering the Pg, chance of geological success) quantities in the PRMS, or are risked figures also allowed?    

Answer: [Oct. 2022] The PRMS requires reporting unrisked 1U, 2U, and 3U quantities. Entities should determine the Pg and Pd of the project for use in the evaluation assessment and decision making. 

If a risked value is reported, which is a modification to the PRMS allowed in the Preamble, then reporting the Pg and Pd is required and the unrisked 1U, 2U, and 3U quantities are to be included as well. The evaluator needs to clearly indicate whether risked or unrisked figures are reported.  


6. Miscellaneous Topics

Flare, Vent and Consumed in Operations (CiO)
6.1. Question: Flare and vent quantities. How are forecast flare and vent quantities captured in the classification system? They cannot be Reserves or Contingent Resources, but we need to capture them to ensure a correct material balance.

Answer: [Oct. 2022] The PRMS Fig 1.1 which has universal adoption, is a principle view of the PRMS. In practice, the flare and losses are forecast with each resource class and recognized as separate quantities to ensure the mass balance is maintained. The Consumed in Operations, when included as Reserves, will be within the Fig 1.1 and when not treated as Reserves will be handled similarly to flare and losses.

§ C. and § states that raw production measurements are necessary to form the basis of engineering calculations. These quantities are included in the production forecast but not in the Reserves, Contingent, or Prospective Resources quantities.

6.2. Question: Consumed in Operations: If Consumed in Operations is claimed as Reserves, should there be a description of the project to justify booking?

Answer: [Oct. 2022] Consumed in Operations must be a part of the project description and justification of the quantities must be documented at the same level as the non-Consumed in Operations Reserves quantities. All Consumed in Operations quantities included in Reserves must be reported separately. 

Recoverable Hydrocarbons
6.3. Question: Recoverable or Unrecoverable. How do we reconcile the concept of “recoverable hydrocarbons,” and then say the resource is “Discovered Unrecoverable?” (§

Answer: [Oct. 2022] The PRMS § covers the discovery aspect and the assessment of “potentially recoverable hydrocarbons.”, § then discusses the situation in which no viable development project can be identified with either established technology or technology under development.  

If the evaluator determines that no feasible development plan may exist, then the discovered in-place quantities are regarded as unrecoverable in the classification system. The definition of Discovered Unrecoverable is discovered petroleum in-place resources that are evaluated, as of a given date, as not able to be recovered by the commercial and sub-commercial projects envisioned (PRMS Glossary).

6.4. Question: Use of technology terminology. What is “currently available technology” (as in the TRR definition)? Is this “Established Technology” only or can it also include “Technology Under Development”? 

Answer: [Oct. 2022] Currently available technology is not a defined term in the PRMS. Its usage in the PRMS recognizes known methods and practices, as of the Effective Date, that can be implemented to recover petroleum and is inferred to comprise Established Technology and some technologies that may reasonably be expected to be available for commercial application but still classified as Technology Under Development due to lack of commercial viability.  

The term Established Technology is a defined term in the PRMS and refers to methods that have proved to be commercial. 

  • A project may only be considered for Reserves if its recovery technology is “Established Technology for the project.”
  • If the recovery technology has not been demonstrated as “Established Technology for the Project”, then Reserves cannot be recognized. The Contingent Resources classification may be considered only if the requirements of Technology Under Development are met. 
6.5. Question: Technically Recoverable Resources (TRR). Is cumulative production included in TRR? We assume yes, but the PRMS does not state this in the definition of TRR. 

Answer: [Oct. 2022] The answer is “no”, TRR does not include prior production. The PRMS introduced TRR as a term to describe the technically, potentially recoverable quantities before considering commercial criteria. Since the term includes “Recoverable,” it implies quantities yet to be recovered. If a project has produced a certain cumulative quantity and the evaluator is discussing TRR for the project, it is appropriate to refer to the cumulative production and the addition of the TRR as the Technical Estimated Ultimate Recovery. Of note, it is also appropriate to include a range of TRR recovery: low, best, and high. 

Further, the evaluator should be clear about what is included in TRR and Estimated Ultimate Recovery so that the reader can understand what the evaluator is providing, e.g., Estimated Ultimate Recovery must reference the associated technical and commercial conditions assumed for the resources. (Refer to the PRMS § and this FAQ, question 6.7.)

6.6. Question: How does the update to the PRMS improve clarity in Estimated Ultimate Recovery terminology?

Answer: [Oct. 2022] The PRMS 2018 intended to provide increased visibility to the quantities being discussed. It requires its terms of usage to be defined so that the estimated quantities are understood.

Estimated Ultimate Recovery is typically calculated on a 100% basis (and either in raw production terms, or recoverable quantities at the Reference Point depending on the purpose of the evaluation) and uses descriptors associated to the resources’ recovery (technical and confidence range, or class and category) for the stakeholder’s understanding. (Reference this FAQ, question 6.5.)


6.7. Question: Can quantities beyond an individual project’s economic limit rate be included as Reserves based on the “field” or Production-Sharing Contract economics along with other projects that achieved Reserves, as discussed in the PRMS § In other words, can Reserves include sub-economic quantities for wells, or even projects, provided the overall field economics are positive?

Answer: [Oct. 2022] The referenced project must meet the Reserves criteria to aggregate it with other Reserves. In cases where the project is comprised of one or more wells, each well must meet the Reserves criteria.  

When the project is part of a PSC or a similar ring-fenced entity, Reserves can be assigned when it can be demonstrated that the cumulative net cash flow including the project is greater than without it.

6.8. Question: PIIP. The PRMS § refers to “before production.” What will be “after production” or any injection before and after production—is it not PIIP?

Total Petroleum Initially-In-Place (PIIP) is all quantities of petroleum that are estimated to exist originally in naturally occurring accumulations, discovered and undiscovered, before production. 
Discovered PIIP is the quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations before production. 

Answer: [Oct. 2022] Correct, after production commences, evaluations of remaining in-place are able to only assess the petroleum in-place as of a give date. Such evaluations often reference the difference from the petroleum-in-place at such time to the PIIP to compute drive mechanism indices and other performance behaviours.

PIIP refers to quantities “initially” in place and thus before production commences. Quantities after production or injection has occurred are “remaining” or just “in-place” quantities and no longer reference the “initial” conditions status.

6.9. Question: Aggregation. Can resources be added up, provided they are in the same category, as long as a proper breakdown is also presented reflecting the different risk profiles (e.g., 2PD + 2PUD + 2C + 2U = Recoverable Resources Best Estimate)?

Answer: [Oct. 2022] A mandatory requirement of the PRMS is that the Prospective Resources, Contingent Resources, and Reserves are separate prior to any aggregation. Additionally, providing “risked” quantities is intended to convey the realistic outcome. Please refer to the PRMS § as follows:

The sum of Reserves, Contingent Resources, and Prospective Resources may be referred to as “remaining recoverable resources.” Importantly, these quantities should not be aggregated without due consideration of the technical and commercial risk involved with their classification. When such terms are used, each classification component of the summation must be provided.

Representing that Contingent and Prospective Resources are either “risked” (along with each classes risk percentage) or “unrisked” is required so the reader can understand the resources included in the aggregation. Equations typically include terms such as “risked resources” which indicates that the unrisked PRMS categories have been modified by the chance of commerciality (Pc). The Pc is equal to the probability of development (Pd) for Contingent Resources. When evaluating the Pc in Prospective Resources, the Pc includes both a Pd and a probability of geologic discovery (Pg) when accounting for the risk. 

Evaluators must provide in their reports references to equations used, category(ies), class(es), and risked percentage(s) of the reported quantities.

6.10. Question: Aggregation—Multiple projects of variety of classes. In case of multiple incremental projects at different maturity levels, including at least one Contingent or Prospective Resources project, how should we determine the overall or combined recoverable resources? Should we report Reserves or Reserves + Contingent Resources or Reserves + Contingent Resources + Prospective Resources, or something else?

Answer: [Oct. 2022] See answer to question 6.9. 

Evaluators must provide in their reports references to equations used, category(ies), class(es), and risked percentage(s) of the reported quantities and not a single aggregated quantity.

Production Sharing Contracts
6.11. Question: Production Sharing Contracts—Consumed in Operations (CiO) quantities. Under Production-Sharing Contracts, where economics play a fundamental role in determining the split of Reserves between participating entities and the host government, how can an entity’s net entitlement CiO quantities be assessed given that it is not explicitly captured in the economic evaluation? In other words, how should gross CiO be allocated between Reserves holders?

Answer: [Oct. 2022] In practice, CiO is based on the working interest share as the consumed in operations fuel is typically available free of charge, before royalty, and thus is at a working interest share.  

The PRMS recommends, in all cases, review of contract terms to ensure ability to recognize CiO.

6.12. Question: Production Sharing Contracts—Multiple projects with Reserves status. In case of a Production-Sharing Contract, how should net entitlement resources be allocated among multiple projects under the same contract? (1) Incrementally [i.e., all additional entitlement resources are to be assigned to the incremental project(s)] or (2) proportionally (i.e., applying the same gross/net ratio to each project, derived from the overall gross/net quantities)? 

Answer: [Oct. 2022] The determination must account for the requirements of the Production-Sharing Contract contractual terms. If the Production-Sharing Contract calls for combining all projects, the procedure as described is adequate. 

For project sanction, it is best to evaluate the project incrementally to understand the impact of the decision and its economic and associated resources implications to the entity or entities on the project’s commercialization (and movement to Reserves). 

After the project decision is made and movement to Reserves confirmed with all the other commercial requirements, the resultant projects that are all Reserves are typically combined and reported. 

6.13. Question: P50 and Pmean. Several E&P entities use Pmean when they estimate the resources in the exploration stage of undiscovered resources. However, the latest PRMS 2018 does not define the meaning of Pmean while P50 (2U or 2C) denotes the unrisked best estimate in accordance with PRMS 2018. Can the use of Pmean be used for the Prospective Resources? Also, does the PRMS 2018 contain any terminology or methods of estimating Resources or Reserves using Pmean?

Answer: [Oct. 2022] The PRMS defines the best estimate as the median (P50) value if the evaluation is conducted stochastically. The PRMS also defines the mean in the glossary as “the sum of the set of numerical values divided by the number of values in the set.”

There is presently no discussion in the PRMS regarding the use of the mean of a distribution (note that the term “mean” is preferred to “Pmean” as there is no unique probability associated with the mean). That said, companies are free to use whatever tools they select to evaluate an asset or a portfolio of assets. It is not the OGRC’s role to “allow” or “disallow” the use of such methods. However, use of P50 as the best estimate is required to be compliant with the PRMS guidelines. Some companies may choose to tabulate the mean quantities for internal purposes.

Abandonment, Decommissioning, and Restoration (ADR)
6.14. Question: Abandonment, decommissioning, and restoration (ADR). In the PRMS, it is clear that ADR costs are excluded in the determination of economic limit of a developed project, yet the confusing part is how ADR is applied in evaluation of the economic producibility. § B. The estimated costs and schedule associated with the project to develop, recover, and produce the quantities to the reference point, including ADR costs, based on the entity’s view of the expected future costs. § states A project’s production is economically producible when the net revenue from an ongoing producing project exceeds the net expenses attributable to a certain entity’s interest. The ADR costs are excluded from the economically producibility determination. A project is commercial when it is economic and it meets the criteria discussed in Section 2.1.2. The question is, when is the inclusion of ADR costs a reason to downgrade a project from Reserves into Contingent Resources? 

Answer: [Oct. 2022] The inclusion of ADR costs can downgrade a project with Reserves when the project remains undeveloped in a subsequent evaluation and the ADR cost associated with the undeveloped project trigger the net cash flow to be uneconomic.

Once a project is an “ongoing producing” project it is developed Reserves. At that point, the ADR costs are excluded from the economic test.

6.15. Question: Abandonment, decommissioning, and restoration (ADR). § was clear that cumulative net cash flows must exceed ADR for a project to be classified as Reserves. Please explain the difference between scheduling ADR cost (field still has remaining Reserves yet, as per the government law, ADR costs need to be scheduled in the future) or whenever it’s due (termination of the life of project). Is there a difference in the PRMS?

Answer: [Oct. 2022] Normally, ADR costs are scheduled to be incurred after the economic limit is reached. It is recognized that the wells will not be immediately abandoned after reaching the economic limit.  

  • For onshore wells, it is common to assume that the abandonment will occur X months after reaching the economic limit, where X is some value usually less than 12.
  • For offshore projects, an individual well may not be abandoned until the next workover rig is active on the platform or until the end of the project, when the entire platform is removed.

In some cases, concession agreements require the funding of an ADR account and the evaluation includes the money set aside as required during the production life to be able to recognize entitlement share which takes into account all costs.  At the end of the project, there may not be any additional ADR costs, as the money for ADR will come from the previously funded ADR account.

  • Where future ADR costs are recognized and set aside during the production life, those costs, even though they are expenses, must not be considered as part of the economic limit for the developed project as referenced in the answer to question 6.14. 

In some cases, the well or field may have a longer economic life than the remaining life of the concession agreement. In this situation, the operator would show the obligation for ADR at the end of the concession term, when their rights expire, although the state oil company or some other entity may take over operations and continue to produce. In this case, it is assumed that the original concession holder is responsible for the ADR, unless it is specified in the concession agreement otherwise or there is a clear transfer of the ADR obligations to another party. 

In all situations where ADR is governed by contractual agreement, the terms of those agreements should be reflected in the evaluation.

6.16. Question: Review frequency: How often are projects reviewed to make sure they still are qualifying for their designated class and category? Twice a year? Or whenever a new situation (technical/economical) comes up?

Answer: [Oct. 2022] Projects should be reviewed at least annually as a part of the annual Reserves/Resources assessment. Each entity should have some guidelines as to the procedures to be followed in this regard. The frequency of reviews, or reviews triggered by new information, should be a part of those procedures. Many entities have reviews triggered by the external reporting requirements, annual budget cycle, and / or quantity of change involved, such as anything that changes the net quantities by “X” million barrels equivalent, etc.