Reserves-to-production ratio

Reserves-to-production ratio

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The Reserves-to-production ratio (RPR or R/P) is the remaining amount of a non-renewable resource
Non-renewable resource
A non-renewable resource is a natural resource which cannot be produced, grown, generated, or used on a scale which can sustain its consumption rate, once depleted there is no more available for future needs. Also considered non-renewable are resources that are consumed much faster than nature...

, expressed in years. While applicable to all natural resource
Natural resource
Natural resources occur naturally within environments that exist relatively undisturbed by mankind, in a natural form. A natural resource is often characterized by amounts of biodiversity and geodiversity existent in various ecosystems....

s, the RPR is most commonly applied to fossil fuels, particularly petroleum
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...

 and natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...

. The reserve portion (numerator) of the ratio is the amount of a resource known to exist in an area and to be economically recoverable (proved reserves). The production portion (denominator) of the ratio is the amount of resource used in one year at the current rate.

RPR = (amount of known resource) / (amount used per year)

This ratio is used by companies and government agencies in forecasting the future availability of a resource to determine project life, future income, employment, etc, and to determine whether more exploration must be undertaken to ensure continued supply of the resource. Annual production of a resource can usually be calculated to quite an accurate number. However, reserve quantities can only be estimated to varying degrees of accuracy, depending on the availability of information and the methods used to evaluate them.

Significance and interpretation


The reserves-to-production ratio is the most widely quoted of the key indicators used in the oil and gas industry. It has a certain strategic significance for companies, which try to keep the value reasonably constant at approximately 10 years. A ratio which falls too low indicates a company in poor health. For a country or region, a value which falls too low can be a warning of impending scarcity. Globally, the RPR for petroleum varies from 8 years in the North Sea to 80 years in the Middle East. The former is typical of a region undergoing a steep production decline, the latter a region which will be continuing to produce oil well into the future.

The reserves-to-production ratio can misleading to the average person, particularly since it is expressed in years. The fact that a region has a RPR of 40 years does not mean that it will continue to produce the resource for 40 years, at which point it will suddenly run out, and then production will decline to zero. More commonly, a resource will show an increase in production until it reaches a peak, and then production will plateau and enter a declining phase. In theoretical terms, this is more accurately described by the Hubbert curve
Hubbert curve
The Hubbert curve is an approximation of the production rate of a resource over time. It is a symmetric logistic distribution curve, often confused with the "normal" gaussian function. It first appeared in "Nuclear Energy and the Fossil Fuels," geophysicist M...

, a bell-shaped curve which mathematically is the derivative
Derivative
In calculus, a branch of mathematics, the derivative is a measure of how a function changes as its input changes. Loosely speaking, a derivative can be thought of as how much one quantity is changing in response to changes in some other quantity; for example, the derivative of the position of a...

 of the logistics function.

The magnitude of the RPR is inversely related to the annual rate of production, which may depend on geological features
Geology
Geology is the science comprising the study of solid Earth, the rocks of which it is composed, and the processes by which it evolves. Geology gives insight into the history of the Earth, as it provides the primary evidence for plate tectonics, the evolutionary history of life, and past climates...

. For example, a highly fractured oil reserve with water drive may have a RPR as low as 6 years. By contrast, a low permeability oil reserve may have a RPR as high as 50 or 100 years. Government policies may deliberately slow production, thereby increasing the RPR in the interests of prolonging reserve life, whereas a company may inject water and/or gases into a reservoir to increase production, thereby decreasing the RPR beyond natural levels - the increased production comes at the expense of decreased reserve life. The RPR depends significantly on the stage of resource development. Typically, there is a high initial RPR during the early phases of development, then the RPR sharply declines toward the end of the reserve life.

New discoveries or changes in technology can significantly alter the ratio in a short period of time, while misevaluation by involved parties can produce inaccurate and/or misleading results. Optimism or pessimism can influence reserve estimates. Further, reserves are resources that are economically recoverable under existing conditions. Reserves may change as a result of new discoveries, technological advances, political change, or manipulation.
Consumption of many resources is not constant, but typically increases as the population grows and becomes more prosperous. Non-constant values for both the numerator and denominator of the ratio implies it may either overestimate or underestimate the remaining life of the resource.

Fossil fuel reserve-to-production ratios


Reserve-to-production ratios may be calculated for individual countries or globally for specific resources. Oil
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...

, coal
Coal
Coal is a combustible black or brownish-black sedimentary rock usually occurring in rock strata in layers or veins called coal beds or coal seams. The harder forms, such as anthracite coal, can be regarded as metamorphic rock because of later exposure to elevated temperature and pressure...

, and gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...

 are the three most important fuels for powering the modern world. These resources are not uniformly distributed over the earth, so some countries have larger reserves than others. Because the global economy depends critically on availability of these fuels, the global RPR for each is an indicator of the time remaining before each resource is completely exhausted. The peak oil
Peak oil
Peak oil is the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline. This concept is based on the observed production rates of individual oil wells, projected reserves and the combined production rate of a field...

 school of thought believes an energy crisis
Energy crisis
An energy crisis is any great bottleneck in the supply of energy resources to an economy. In popular literature though, it often refers to one of the energy sources used at a certain time and place, particularly those that supply national electricity grids or serve as fuel for vehicles...

 will occur when around half of the total resource is depleted. Due to the uncertainty of the reserves numbers, estimates of RPR vary widely. The oil and coal production (annual usage) values
in the following table are converted from quad
Quad (energy)
A quad is a unit of energy equal to 1015 BTU, or 1.055 × 1018 joules in SI units.The unit is used by the U.S. Department of Energy in discussing world and national energy budgets. The global primary energy production in 2004 was 446 quad, equivalent to 471 EJ...

s.
Fuel Unit of measure Reserves Annual Usage (2005) RPR (years)
Oil trillions of barrels 1.2-2 0.03 40-80
Coal billions of tons 998 6 164
Natural gas quads
Quad (energy)
A quad is a unit of energy equal to 1015 BTU, or 1.055 × 1018 joules in SI units.The unit is used by the U.S. Department of Energy in discussing world and national energy budgets. The global primary energy production in 2004 was 446 quad, equivalent to 471 EJ...

6370 108 59

See also



  • List of countries by natural gas proven reserves
  • List of countries by natural gas production
  • Peak gas
    Peak gas
    Peak gas is the point in time at which the maximum global natural gas production rate is reached, after which the rate of production enters its terminal decline. Natural gas is a fossil fuel formed from plant matter over the course of millions of years. It is a finite resource and thus considered...

  • Oil reserves
    Oil reserves
    The total estimated amount of oil in an oil reservoir, including both producible and non-producible oil, is called oil in place. However, because of reservoir characteristics and limitations in petroleum extraction technologies, only a fraction of this oil can be brought to the surface, and it is...