Arctic Hydrocarbon Resources: A Note on Data, Information, Terms and Definitions

(by Arnfinn Jørgensen-Dahl)


When size and location of natural resources is the subject matter at hand, concerns about the veracity and source of the data and information will almost inevitably arise. Natural resources of the size and importance we are concerned with in this chapter carry significance and value well beyond the borders of the countries in which they are found and to which they belong. They become a source of international attention and demand. 

Estimates dealing with resources are subject to conjecture and are often and even routinely revised. As oil fields are developed or mature, initial estimates of reserves often turn out to have been too conservative. Improvements in extraction and production technology also lead to revisions of estimates, sometimes radical. Apart from the fact that different methods exist of calculating oil reserves, other factors may also play a role. In Russia official estimates are kept secret for reasons not entirely clear and perhaps therefore all the more open to wayward and inaccurate speculation.

There are also doubts about the reliability of official OPEC reserves estimates. Since the system of production quotas was introduced in the early 1980s, some OPEC members have reported dramatic increases in reserves. Some may have resulted from a change in ownership of the reserves away from international oil companies which are required to report reserves according to very strict standards set by the US Securities and Exchange Commission. These are said to lead to conservative estimates. A more important reason, however, is likely to be the introduction of quotas that related the size of the reserves to the allotment of production quotas - in other words, the greater the reserves, the greater the production quota. The increases in OPEC reserves over the last twenty years or so would in any case seem to have had little to do with discovery of new reserves. 

At times somewhat more unusual reasons for inaccurate estimates and reporting reach the public arena. In January 2004 Shell shocked the financial world and business rivals by revealing that it had overstated its proved reserves of oil and gas by 20 per cent, or 3.9 billion barrels. Including unusual practices in the realm of corporate governance, the company admitted to having classified in the late 1990s the oil and gas in an Australian project as proven even though the fields had yet to be developed. The same year the El Paso Corporation of the US was compelled to cut its proven natural gas reserves by 41 per cent1 .

Corporate “mistakes” of this magnitude is a rare occurrence in the petroleum industry. But there are other reasons for uncertain and inaccurate estimates. Not every country with natural resources has a bureaucratic structure skilful and competent enough to meet the highest standards of reporting and statistics production. Some may even lack the inclination to do so. As mentioned above, some OPEC members may have inflated their reserves quite considerably without convincing evidence being brought forward to support the increases. Accusations to this effect have been levelled against countries such as Kuwait, Saudi Arabia, Iran, Iraq and the United Arab Emirates2 .

But the petroleum industry is not the only one suffering from doubtful and inaccurate data. A reference is made below to the preference of the Food and Agricultural Organization of the United Nations (FAO) in some contexts to deal separately with the data on fisheries submitted by China because of uncertainties attached to data going as far back as the early 1990s.

There are also significantly different methods of reporting. The system of reporting mineral resources and reserves followed by Russia has made it almost impossible to compare Russian data with data on reserves in marked based economies. The Russian method was based on establishing drilling parameters to ascertain the certainty of reserves and does not include market-based economic criteria to establish the feasibility of producing these resources using current technology and prevailing market conditions. Like data on oil and gas reserves, data on reserves of many mineral resources was also either kept secret or very difficult to obtain3 .

In all reporting on natural resources the professional vocabulary adopted by those whose main preoccupation is to deal with a particular resource is, of course, crucial. It may well be that some of the uncertainties and discrepancies found in the data of the petroleum industry can be traced back to less than careful use of or unfamiliarity with prevalent and important terms and definitions adopted by the industry.

All estimates of oil and gas reserves involve uncertainty which in part is a function of the reliability of geologic and engineering data and the interpretation of these data. There are always degrees of uncertainty and this is reflected in the categories proved and unproved reserves.  

Proved reserves are…”generally taken to be those quantities that geological and engineering information indicates with reasonable certainty can be recovered in the future from known reservoirs under existing economic and operating conditions”4 . Proved reserves may be further sub-divided into Proved Developed (PD) and Proved Undeveloped (PUD). Proved reserves are the only type the U.S. Securities and Exchange Commission allows companies to report to investors. Whereas companies listed on the U.S. Stock Exchange and other bourses must verify their claims, many governments and national oil companies are under no such obligation and therefore do not always disclose data to support their claims.

Unproved reserves are divided into probable and possible, the two terms reflecting the unequal degree to which they can be recovered. Unproved reserves are used by oil companies and government agencies for future planning purposes. Many countries also possess so called strategic petroleum reserves for economic and national security reasons. These reserves are not included in the statistics for national oil reserves.

Two frequently encountered categories should be noted. These are contingent and prospective resources. Contingent resources refer to petroleum estimated, as of a given date, to be potentially recoverable from known accumulations but are not yet considered ready for commercial development due to one or more contingencies such as no currently viable market, dependence on technology under development, and so on. Prospective resources refer to petroleum that, of a given date, is thought to be recoverable from undiscovered accumulations in future development projects. A last category to be included is unconventional resources. These are petroleum accumulations found over large areas. Examples are heavy oil, natural bitumen, and oil and gas shale deposits. These are resources that require specialized extraction technology to produce and may require significant processing before sale. The unconventional resources considerably exceed conventional oil reserves but are difficult and expensive to develop5 .

When discrepancies in estimates occur it could well be that insufficient care is taken to avoid adding up estimates of different kinds of reserves. What is said to be proved reserves may be a cocktail of different types of reserves rather than the single type it purports to be. As reported in a recent study, the Russian Ministry of Nature Resources and Ecology estimated in 2006 that Russia possessed 12 per cent of the world’s oil resources and 45 per cent of the world’s gas resources6 . What was included in the terms “oil resources” and “gas resources” was not specified but these estimates were nearly twice as high as the BP estimates of proved reserves.

Although no one in the petroleum sector claims that the industry and their own recording and reporting activities are infallible, data from some are used and referred to more often than others. Publications like the BP Statistical Review of World Energy and data published by journals such as Oil and Gas Journal and World Oil are generally regarded as reliable and they often refer to each other’s data. In addition a number of national governmental and intergovernmental bodies such as the US Department of Energy, the Norwegian Petroleum Directorate, the International Energy Agency and several others are high on the ranking list of “reliable” sources. But almost as a matter of course they take care to stress the uncertainty of the accuracy of all important resource data, including those they themselves generate.


  •  1. Timmons, Heather (2004).
  •  2. Wikipedia: http://en.wikipedia.org/wiki/Oil_reserves
  •  3. U.S. Geological Survey Minerals Yearbook – 2005, 7.11
  •  4. BP Review (2008), p .6, notes
  •  5. This survey of terms and definitions are taken from Wikipedia, op. cit.
  •  6. Bambulyak, A & Frantzen, B. (2009), Oil transport from the Russian part of the Barents Region. Status per January 2009. Akvaplan-niva AS, The Norwegian Barents Secretariat, 2009

Arnfinn Jørgensen-Dahl, 2010, Arctic Hydrocarbon Resources: A Note on Data, Information, Terms and Definitions, CHNL.©