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Estimating Reserves and Resources in Russia

Estimating Reserves and Resources in Russia. New York Energy Forum May 15, 2008. Presented by Miller and Lents, Ltd. International Oil and Gas Consultants James C. Pearson, Chairman. Prospect Generation. Wildcat Drilling. Discovery, Appraisal, Development. Field Optimization.

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Estimating Reserves and Resources in Russia

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  1. Estimating Reserves and Resources in Russia New York Energy Forum May 15, 2008 Presented by Miller and Lents, Ltd. International Oil and Gas Consultants James C. Pearson, Chairman

  2. Prospect Generation Wildcat Drilling Discovery, Appraisal, Development Field Optimization Enhanced Recovery E&P Life Cycle Decline, Abandonment Hydrocarbon Finding, Developing and Producing

  3. Reserves and Resource Classifications • Within the petroleum industry, there are three basic classification systems being used by oil and gas companies and financial institutions. • Hydrocarbon Reserves • Contingent Resources • Prospective Resources

  4. Reserves and Resources Classification Framework

  5. Key Reserve Definitions • SEC U.S. Stock Exchanges GAAP Reporting • SPE Other Stock Exchanges (Modified Versions) Financial Institutions WPC, AAPG, SPEE OPEC • Russian State Committee of Reserves

  6. History of Reserve Definitions • SEC 1978 Definitions Issued 2000 Guidelines • SPE 1964 Definitions Issued 1981 Revised Definitions 1987 Revised Definitions 1997 Adopted by SPE and WPC 2000 Resource Definitions 2007 Combined Reserve and Resource Definitions • Russian Pre 1/1/09 Soviet Era Definitions As of 1/1/09 New Definitions

  7. Scope of Definitions • SEC Proved • SPE Proved, Probable, Possible, Resources • Russian A, B, C1, C2, D1, D2, D3

  8. Limitations of SEC Definition that Affect Russia • License expiration date • Only offset locations proved

  9. TNKProved Reserves EstimatesJanuary 1, 2003 Russian A + B + C1 15, 082 Million Barrels of Oil SPE Definition Proved 8,374 Million Barrels of Oil SEC Definition 3,048 Million Barrels of Oil

  10. TNKProved Reserve Categories EstimatesJanuary 1, 2003 Million Barrels of Oil

  11. Case A – Discovery and Delineation of an Oil Field 400 Meter Spacing (16 Hectares/Well) PD Reserves = 2 mm bbl (SPE) PUD Reserves = 62 mm bbl (SPE) Total Proved = 64 mm bbl (SPE)

  12. Case B – SEC Proved Undeveloped Locations PD Reserves = 2 mm bbl (SPE) PUD Reserves = 16 mm bbl (SPE) Total Proved = 18 mm bbl (SPE)

  13. Russian Upsides • Infill drilling • Improved waterfloods – Miscible flood • Horizontal drilling • Gas cycling • Reservoir surveillance • Dedicated work force

  14. Means San Andres UnitExxon Operated WaterfloodProduction History

  15. Waterflood PatternsOil Recoveries and Life of Production20 to 1 Water-Oil Ratio

  16. Comparison of API Recovery Factors to Performance Derived Recovery Factors Cretaceous Reservoirs – Western Siberia, Russia

  17. Russian Downsides • Reserve uncertainty • Political risk • Nationalism • High taxes12/31/07 contract export price = $88.16/BBLNet oil price, before profit tax = $30.58/BBL

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