There are 3 main reserve categories under the Society of Petroleum Engineers (SPE) definition: proved; probable and possible reserves.
For an oil or gas deposit to be classified as “reserves,” you first need to establish technical and commercial certainty of extraction using existing technology. Once this has been established, the degree of this certainty is then decided, breaking reserves down into 3 distinct categories: Proved Reserves, 90% Certainty of Commercial Extraction Probable Reserves, 50% Certainty of Commercial Extraction Possible Reserves,10% Certainty of Commercial Extraction
3P reserves refers to the combination of all three of these totals, i.e. Proved plus Probable plus Possible.
Anything below “possible”, i.e. less than a 10% certainty of being able to commercially extract the oil or gas with currently available technology, will fall into ‘contingent resources’ or ‘recoverable resources’ categories.
See the below diagram of the SPE definitions for further detail.
Why Do Only Some Companies Report 3P Reserves?Proved (1P) and Proved plus Probable (2P) reserves are commonly used throughout the oil and gas world, but 3P reserve information, Proved plus Probable plus Possible, is relatively scarce.
This is due to basic reporting requirements set by governing bodies. In Canada, for example, companies have to report proved (1P) and proved plus probable (2P) reserves under NI-51-101 regulations, but 3P will only be reported if the company chooses to do so, as there is no legal obligation.
This means that the cost of having oil and gas deposits evaluated by reserves engineers for 3P reserves can be weighed up against the overall benefit/potential investment a company will get from publishing the findings, to see if it is worth carrying out at all.Therefore, many companies will not report their full spectrum of reserves under all classifications to the investment community unless they see a benefit of doing so. This balance between cost and benefits is also a reason why many companies will only give 3P reserves for certain fields, focus areas, or prized assets – paying for assessments of deposits you aren’t going to develop any time soon is not required.
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