How Reserves Are Calculated
When you hear "Cyprus has discovered 10 Tcf of gas," what does that actually mean? This guide explains how reserves are estimated, the uncertainty involved, and how to interpret the numbers.
Quick Reference
Resource Classification System
The oil and gas industry uses a standardized system (SPE-PRMS) to classify resources based on the certainty of recovery. This ranges from highly uncertain "prospective resources" to proven commercial reserves.
Proved Reserves
Quantities with reasonable certainty (90%+) to be recoverable from known reservoirs under existing economic and operating conditions.
Proved + Probable
Includes proved plus additional quantities that are less certain but still likely (50%+) to be recovered. This is the most commonly cited figure.
Proved + Probable + Possible
Includes all categories plus more speculative volumes that could be recovered under favorable conditions (10%+ probability).
Important: Early discovery announcements often cite "gross resources" or "gas in place," which is much larger than recoverable reserves. Recovery factors for gas are typically 60-80%.
Probability Ranges: P10, P50, P90
Reserve estimates always involve uncertainty. The industry uses probability notation to express this range:
90% probability that actual reserves will be at least this amount. Conservative estimate used for financial planning.
50% probability — equally likely to be higher or lower. Most commonly cited figure for discoveries.
Only 10% probability of reaching this amount. Optimistic upside scenario.
How Estimates Are Calculated
Volumetric Method (Exploration Stage)
For new discoveries, estimates use the volumetric method based on seismic interpretation:
Key Uncertainties
- • Structure size and shape (seismic interpretation)
- • Reservoir quality (porosity, permeability)
- • Gas-water contact depth
- • Seal integrity (does the cap rock leak?)
Cyprus Discovery Estimates
| Discovery | P90 | P50 | P10 | Status |
|---|---|---|---|---|
| Aphrodite | 3.0 Tcf | 4.1 Tcf | 5.0 Tcf | Appraised |
| Glaucus | 4.0 Tcf | 5-8 Tcf | 10+ Tcf | Discovered |
| Cronos | 1.5 Tcf | 2.5 Tcf | 4.0 Tcf | Discovered |
| Calypso | 3.0 Tcf | 4-6 Tcf | 8.0 Tcf | Discovered |
| Zeus | - | 1-2 Tcf | - | Discovered |
| Total Cyprus | 12+ Tcf | 17-22 Tcf | 30+ Tcf |
* Estimates are approximate and from various public sources. P50 values are most commonly cited.
Unit Conversions
Volume Units
- 1 Tcf (trillion cubic feet) = 28.3 Bcm
- 1 Bcm (billion cubic meters) = 35.3 Bcf
- 1 Tcf ≈ 180 million boe
- 1 Bcm LNG ≈ 0.73 Mt LNG
Value Benchmarks
- 1 Tcf @ $5/MMBtu ≈ $5B gross value
- Cyprus total (P50) $80-120B gross
- Government take 50-60%
- Net to Cyprus $40-70B potential
From Estimate to Reality
Reserve estimates become more reliable as a field moves through the development cycle:
Exploration Discovery
±40-60%Based on seismic + single well. High uncertainty.
Appraisal Complete
±20-30%Additional wells drilled. Better reservoir understanding.
Development Start
±10-15%Full field data. Commercial volumes confirmed.
Production
ActualReal production data refines estimates continuously.
Key Takeaways
- Always ask whether a number is P90 (conservative), P50 (best estimate), or P10 (optimistic)
- 2P (Proved + Probable) is the standard for comparing fields
- Early estimates often come down as more data is gathered
- Cyprus total discovered resources: ~17-22 Tcf (P50), worth potentially $80-120B gross