Reserves vs. Resources

There is a great deal of disagreement on the issue of future oil supply; one reason is that there is confusion among the terms used, such as active and inactive reserves, known and unknown resources, etc. Like the mining term ore, oil reserves are by definition economic or profitable. Oil resources, conversely, are less tangible. Two useful oil business terms are:

Reserves--engineers' (conservative) opinions of how much oil is known to be producible, within a known time, with known techniques, at known costs, and in known fields. Conservative bankers will loan money on reserves.

Resources--geologists' (optimistic) opinions of all undiscovered oil theoretically present in an area. Conservative bankers will NOT loan money on resources.

Petroleum explorers must find--and then petroleum engineers convert--theoretical resources into producible reserves. An example of a resource that will probably never become a reserve is gold dissolved in seawater.

Use of either term depends greatly on whose money is involved. "Resources" means using your money; "reserves" means using my money. Differences can be enormous. Government agencies and academic scientists tend to estimate resources, whereas industrial/oil companies appraise only reserves. The public, using its own money to buy gasoline, is interested in producible reserves, not in theoretical resources.

"Assessing world oil is only the beginning of the search for oil," says C.D. Masters, retired chief of U.S. Geological Survey Petroleum Resource Analysis. "Assessment means nothing more than a judgment on its occurrence. Whether it will be discovered depends on discovery activity." Well-intentioned but irresponsible scientists who continue to discuss resources rather than reserves may be a significant reason for the lack of realistic energy policies.

from: L.F. Ivanhoe, THE FUTURIST, January/February, 1997