Proven Property
A Proven Property refers to an oil or gas property whose value has been demonstrated through prospecting, exploration, or discovery work. It is an oil or gas property where the presence of hydrocarbons has been confirmed with a high degree of certainty. This classification is crucial in the energy sector for assessing the viability and worth of oil and gas resources.
Examples
Development Well: A well drilled within the known productive area of an oil or gas reservoir with a high likelihood of successfully recovering hydrocarbons. Development wells are considered proven property.
Production Facilities: Structures and equipment directly involved in the extraction, processing, and transportation of oil and gas from proven reserves.
Non-Examples
- Wildcat Well: An exploratory well drilled in unproven or uncertain areas to discover new oil and gas fields, typically a higher-risk venture that does not qualify as proven property.
Frequently Asked Questions
Q1: What criteria must a property meet to be classified as proven property?
- A1: Proven property must exhibit confirmed hydrocarbon presence through geological and engineering data obtained from activities such as prospecting, exploration, or discovery work. It must show economical and operational feasibility for commercial production.
Q2: How does a proven property differ from probable and possible reserves?
- A2: Proven property (or proved reserves) has a high degree of certainty (90% confidence) that the resources are recoverable under existing economic and operational conditions. Probable reserves have at least a 50% chance of successful recovery, while possible reserves are less certain, with a 10-50% chance.
Q3: Are all development wells considered proven property?
- A3: Yes, all development wells are located within the known productive area of a reservoir and therefore are classified as proven property due to the high likelihood of successful hydrocarbon recovery.
Related Terms
- Development Well: A well drilled within the boundaries of a known oil or gas reservoir to exploit the existing reserves.
- Wildcat Well: An exploratory well drilled away from known oil or gas fields to find new reserves.
- Proven Reserves: Quantities of oil and gas that geological and engineering data demonstrate with reasonable certainty to be recoverable under existing economic and operating conditions.
Online References
- U.S. Energy Information Administration (EIA) - Definitions and Explanations
- Society of Petroleum Engineers (SPE) - Petroleum Resources Management System
Suggested Books for Further Studies
- “Fundamentals of Oil & Gas Accounting” by Charlotte J. Wright
- “Petroleum Exploration and Production: New Frontiers” by Niranjan C. Nanda
- “Petroleum Economics and Engineering” by M.A. Al-Sahlawi
Fundamentals of Proven Property: Energy Sector Basics Quiz
Thank you for exploring the concept of proven property in the energy sector. Continue to delve deeper into this critical area of study for a comprehensive understanding of oil and gas exploration and valuation!