Proven reserves, or 1P, is a term used by the oil and natural gas industry. It refers to the amount of oil or gas in a reservoir under the given economic situation that is recoverable using current technology. In any reservoir, there is a limited amount that can be extracted. These reserves are a way of quantifying exactly how much hydrocarbons can be expected from a well or reservoir.
There are two types of proven reserves: developed and undeveloped. Developed proven reserves already have all or most of the equipment in place and the necessary drilling needed to extract the resource. Undeveloped reserves require an investment of money, time and effort before the resource can be extracted.
Several methods exist to estimate proven reserves, though no method is entirely precise. Some experts also allege that some companies and countries have overestimated their reserves for economic reasons. For example, an oil company that claims to have high proven reserves would have a higher stock price as a result.
One method of estimation is known as decline curve analysis. This is done by plotting output levels against time and then graphically extending the data to estimate future output. Decline curve analysis can only be applied to a reservoir already in production; otherwise, the necessary data is not available.
Another method is the volumetric method. This method requires a great deal of initial data to get an accurate estimate. The dimensions of the reservoir and the type of rocks it contains must be known or estimated. This method works best after enough drilling has taken place to yield accurate information as to the reservoir size and the composition of its contents.
A third method is known as the materials balance method. This method examines the ratio of oil, natural gas and water extracted from an oil source. The ratios are then related to the changing pressure in the reservoir.
As of 2009, the countries with the largest proven reserves were believed to be Saudi Arabia, Canada and Iran. Questions have been raised as to whether a number of countries in the Organization of Petroleum Exporting Countries (OPEC) actually possess their stated reserves. OPEC rules base output quotas on the amount of proven reserves. Countries with higher stated reserves can therefore sell more oil or natural gas. Most countries do not have independent auditors estimate their reserves, which has fueled suspicion as to the accuracy of their figures.