Reserve Replacement Ratio
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The reserve replacement ratio is a measure of the magnitude of reserve additions. It is calculated by dividing the net reserve additions in a year by the annual production rate. A company’s reserve balance will decline if it does not add as many reserves as it produced during the year. A reserve replacement ratio of at least 100% means the company is at minimum maintaining its reserve base. Data available till 2004 indicate that the world oil reserves replacement ratio was 18% at the end of 2004 (Figure 11.1) .
In terms of companies, ExxonMobil Corporation’s additions to its worldwide proved oil and gas reserves totaled 1.7 billion barrels of oil-equivalent (boe) in 2005. It replaced 129% reserves of its oil and gas reserves in 2005. The Corporation's ten-year average reserves replacement is 114%, with liquids replacement at 118% and gas at 110%.
An increase in the reserve replacement ratio generally comes from acquisitions or new discoveries. For example, ConocoPhillips added 1.5 billion boe to its proved reserves during 2005. The company’s reserve replacement ratio was 230%, based on a production of 675m boe, bringing ConocoPhillips’ total reserves to 9.4 billion boe. The improvement in 2005 over 2004 is on account of extensions and discoveries from the projects in Qatar, the US and the Asia Pacific region, as well as their re-entry into Libya and their increased equity ownership in Lukoil.
BP’s reserve replacement ratio for the year 2010 was 106% – making 2010 the eighteenth consecutive year of reserve replacement of at least 100%. ExxonMobil Corporation also has 100% replacement ratio for the last 17 consecutive years. Its proved reserves in 2010 totaled 24.8 billion oil-equivalent barrels. The company’s 10-year average reserves replacement is 112%, with liquid replacement at 99% and gas at 131%.
The overall picture of world replacement can be seen in (Figure 4.4 [e]).