Oil & Gas Reserves, Methodology of Calculations-its Importance to Auditors & the Need of Energy Audit

Abstract

Extraction of oil/gas is done from wells. The classification of well is determined by geological and engineering data and are done by geologists and engineers and not by accountants. However, they follow the definition of proved, proved developed reserves and proved undeveloped reserves which are important in gas and oil accounting. Estimation of reserve is an inexact science, especially, when on the basis of an exploratory well the entire field reserve is calculated. It has ascertained on a study by PWC that estimates done initially on exploratory well was inaccurate by + 50% approx while after five years of production estimate was inaccurate + 20%. It is significant to ascertain the volume and correctness of oil reserves based on clear, scientific studies, characterized by reality and credibility and supported by international documents and certificates.