Oil reserves and resources 

 

Reserves

Following the declaration of commerciality of the Tupi/Iracema area to the Agência Nacional do Petróleo, Gás Natural e Biocombustíveis (ANP) on 29 December 2010, the proved, probable and possible reserves (3P) in Brazil reached 554 million barrels of oil and natural gas. This volume of reserves was initially classified as contingent resources, since there was no development plan approved for that area. This coincided with the delivery of the Declaration of Commerciality and the plan of development.

In Angola, the volume of reserves (2P), on a net entitlement basis, decreased from 35 million to 20 million barrels of oil. This decline result from the technical revision of the new data of the reservoirs and the Company’s 2010 production, which totalled 3.7 million barrels of oil on a net entitlement basis. The production of the CPT in the Tômbua-Lândana   field started in 2009 and strongly contributed to the increase in production in Angola in 2010. To calculate these reserves, a crude reference price of $79.5/bbl was used, equivalent to the 2010 average, as opposed to the 2009 figure of $61.5/bbl.

Contingent resources

Throughout 2010, Galp Energia’s exploration activity continued to be very intense in the various regions where the Company operates. These activities, including seismic and exploration drilling operations, had an impact on the estimated level of contingent resources (3C) for Angola and Brazil. At the end of 2010 this stood at 2.4 billion barrels of oil and natural gas, a decrease of 0.7 billion compared to 2009. This was due to the incorporation of part of the contingent resources (3C) of the Tupi/Iracema fi elds into 3P reserves.

Prospective resources

The estimate of prospective resources (mean unrisked estimate) at the end of 2010 stood at 2.6 billion barrels of barrels a year earlier. This increasewas due to intense exploration activities in the Santos basin and other projects worldwide, with a clear diversifi cation of Galp Energia’s resource base. The diversifi cation of oil and natural gas resources is also signifi cant, with natural gas resources accounting for close to 13% of total prospective resources.

The amount of recovered contingent resources refers to the 3C classification (as defined by SPE/WPC/AAPG). By definition, stated amounts represent Galp Energia's working interest.

Major definitions

Proved reserves (1P)

Under the definitions approved by the SPE and the WPC, proved reserves are those quantities of petroleum which, by analysis of geological and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under current economic conditions, operating methods and government regulations. If deterministic methods are used, the expression ‘reasonable certainty’ is intended to express a high degree of confidence that the quantities will be
recovered. If probabilistic methods are used, there should be at least a 90% probability that the quantities actually recovered will equal or exceed the estimate. The definition of current economic conditions should include relevant historical petroleum prices and associated costs. In general, reserves are considered proven if the commercial producibility of the reservoir is supported by actual production or formation tests. In this context, the term ‘proven’ refers to the actual quantities of petroleum reserves and not just the productivity of the well or reservoir. The area of the reservoir considered as proven includes (1) the area delineated by drilling and defined by fluid contacts, if any, and (2) the undrilled portions of the reservoir that can reasonably be judged as commercially productive on the basis of available geological and engineering data. Reserves may be classified as proven if facilities to process and transport those reserves to market are operational at the time of the estimate or there is a reasonable expectation that such facilities will be installed.

Proved and Probable reserves (2P)

2P reserves correspond to the addition of proved (1P) and probable reserves. Under the definitions approved by the SPE and the WPC, probable reserves are a category of unproved reserves. Unproved reserves are based on geological or engineering data similar to those used in estimates of proved reserves but in relation to which technical, contractual,
economic or regulatory uncertainties preclude such reserves from being classified as proven. Proved reserves are those quantities of petroleum which, by analysis of geological and engineering data, have lower probability of being recovered than the proved reserves, but higher than the possible reserves. If probabilistic methods are used, there should be at least a 50% probability that the quantities actually recovered will equal or exceed the 2P estimate.

Proved, probable and possible reserves (3P)

3P reserves correspond to the addition of proved, probable and possible reserves. Under the definition approved by the SPE and the WPC, the possible reserves are a category of unproved reserves. Unproved reserves are based on geological or engineering data similar to those used in estimates of proved reserves but in relation to which technical, contractual, economic or regulatory uncertainties preclude such reserves from being classified as proven. The possible reserves have lower probability of being recovered than the probable reserves. If probabilistic methods are used, there should be at least a 10% probability that the quantities actually recovered will equal or exceed the 3P estimate.

Contingent resources

Contingent resources refer to quantities of petroleum that have, on a certain date, been estimated as potentially recoverable from known reservoirs but are not commercially recoverable yet.

This may be the case for several reasons such as, for instance, those related to the maturity of the project (the discovery needs further appraisal in order to provide support for the development plan), those of a technical nature (new technology needs to be developed and tested in order to commercially exploit the estimated quantities) or those related to the market (the sales contracts are not yet in place or the infrastructure needs to be built in order to take the product to the clients).

The quantities classed in this category may not be considered as reserves.

Prospective resources

Prospective resources refer to quantities of petroleum that have, on a certain date, been estimated as potentially recoverable from undiscovered accumulations by application of future development projects. The estimation of resources quantities for a prospect is subject to both technical and commercial uncertainties. The quantities classified as prospective resources cannot be classified as contingent resources or reserves.