Proven Property

Proven Property Oil and Gas Exploration Development Wells Energy Sector Resource Valuation Exploration Activities
The principal value of an oil or gas property, demonstrated through methods such as prospecting, exploration, or discovery work. Proven property examples include development wells, but exclude wildcat wells.
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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

  1. 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.

  2. Production Facilities: Structures and equipment directly involved in the extraction, processing, and transportation of oil and gas from proven reserves.

Non-Examples

  1. 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.
  • 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

Suggested Books for Further Studies

  1. “Fundamentals of Oil & Gas Accounting” by Charlotte J. Wright
  2. “Petroleum Exploration and Production: New Frontiers” by Niranjan C. Nanda
  3. “Petroleum Economics and Engineering” by M.A. Al-Sahlawi

Fundamentals of Proven Property: Energy Sector Basics Quiz

### What qualifies a property as 'proven' in the oil and gas industry? - [x] Demonstrated presence of hydrocarbons through exploration or discovery. - [ ] High-risk ventures with uncertain outcomes. - [ ] Estimates based on theoretical models. - [ ] Proximity to urban areas. > **Explanation:** A property is considered proven when there is a high degree of certainty (90% confidence) regarding the presence and recoverability of hydrocarbons through methods such as exploration and discovery. ### Which of the following is classified as a proven property? - [x] Development well - [ ] Wildcat well - [ ] Prospective site - [ ] Surveyed land > **Explanation:** Development wells are drilled within the productive areas to further develop the known reserves, thus qualifying as proven property. ### What is excluded from the classification of proven property? - [ ] Development wells - [ ] Production facilities - [x] Wildcat wells - [ ] Confirmed reservoirs > **Explanation:** Wildcat wells are exploratory and do not have a high certainty of finding hydrocarbons, excluding them from proven property classification. ### What aspect predominantly determines the classification of proven property? - [ ] The depth of drilling - [x] Confirmation of hydrocarbon presence - [ ] Type of drilling equipment used - [ ] Local environmental regulations > **Explanation:** Proven property is determined by the confirmation of hydrocarbon presence with a high degree of certainty through exploration or discovery. ### What percentage of certainty is required for reserves to be classified as proven? - [ ] 10% - [ ] 50% - [x] 90% - [ ] 100% > **Explanation:** Proven reserves require a 90% or higher degree of certainty regarding the recoverability of hydrocarbons based on geological and engineering data. ### Which type of well is considered high-risk and not classified as a proven property? - [ ] Development Well - [ ] Infill Well - [x] Wildcat Well - [ ] Production Well > **Explanation:** Wildcat wells are exploratory and high-risk, typically drilled in unproven areas, and do not qualify as proven property. ### What is a critical requirement for a property to be deemed as proven? - [ ] Recent survey data - [ ] Environmental impact study - [x] Geological and engineering data - [ ] Proximity to infrastructure > **Explanation:** The classification of proven property relies heavily on geological and engineering data that demonstrate the presence and recoverability of hydrocarbons. ### What type of reserves has less certainty compared to proven reserves? - [ ] Guaranteed reserves - [ ] Confirmed reserves - [x] Probable reserves - [ ] Measured reserves > **Explanation:** Probable reserves have a 50% probability of successful recovery, which is less certain compared to the 90% certainty of proven reserves. ### Which sector relies heavily on the classification of proven property? - [ ] Real Estate - [ ] Technology - [x] Oil and Gas - [ ] Agriculture > **Explanation:** The oil and gas sector relies heavily on the classification of proven property to assess the value and viability of oil and gas reserves. ### What differentiates a proven property from a wildcat well? - [x] Degree of certainty regarding hydrocarbon recoverability - [ ] Geographic location - [ ] Type of crude oil - [ ] Well depth > **Explanation:** Proven properties have a high degree of certainty regarding hydrocarbon recoverability (90%), whereas wildcat wells are exploratory with uncertain outcomes.

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!

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