24-Pet-B3 Petroleum Geology · May 2016
Nivaar worked solution (AI-drafted; not reviewed by a licensed engineer)
National Exams, May 2016 — 98-Pet-B3, Oil and Gas Evaluation and Economics (3 hours, closed book, approved non-programmable calculator only). The exam's own cover page is titled "Oil and Gas Evaluation and Economics" and every question is property valuation / reserves & production economics / DCF-NPV screening content — no geology anywhere.
Reference texts: Thompson & Wright, Oil Property Evaluation; Canadian Oil and Gas Evaluation Handbook (COGEH), Vol. 1 (Society of Petroleum Evaluation Engineers, Calgary Chapter); National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities (Canadian Securities Administrators); SPE/WPC/AAPG/SPEE Petroleum Resources Management System (PRMS); Economides & Nolte, Reservoir Stimulation; Ahmed, Reservoir Engineering Handbook.
The exam's own instructions ask for only 7 of the 10 short-answer questions and note the Cash-Flow/Future-Value tables are graded by column; for "choose N of M" exams, every item below is answered in full as a study resource. Questions 1–10 correspond to the exam's printed Short-Answer items 1–10; Questions 11–20 correspond to the printed Multiple-Choice items 1–10; Question 21 is the Future Value table; Question 22 is the Cash Flow table.
Question text not reproduced: the examination questions are © Engineers and Geoscientists BC. Open the official past paper (linked at the top of this page) to read the question, then follow the worked solution below.
(1) Different classification systems. Governments, companies and evaluators do not all use the same reserves definitions — the SEC's rules, the SPE/WPC/AAPG/SPEE PRMS framework, and various national reporting standards (e.g., Canada's NI 51-101) classify and probabilistically define “proved,” “probable” and “possible” differently, so the same field can be reported at materially different numbers depending on which standard is applied.
(2) Political / strategic incentive to misreport. Many of the largest reserve holders are state-owned national oil companies whose reported figures are not independently audited and can be inflated (to support OPEC production-quota allocations, which are partly reserves-based, or national prestige) or deliberately kept opaque for security reasons.
(3) Genuine technical and economic uncertainty. Reserves are inherently a probabilistic estimate from incomplete subsurface data (well control, seismic resolution), and the “reserves” cutoff itself moves with price and technology (a barrel that is an uneconomic sub-surface resource at $40/bbl becomes a reserve at $80/bbl, and improved recovery technology converts resource to reserve without any new discovery) — so honest estimates from two competent evaluators using different price decks or recovery assumptions will legitimately diverge.
