Contingent Resources are quantities of oil (or other hydrocarbons) that are estimated to be potentially recoverable from known accumulations but are not currently considered commercially viable. This classification exists within the framework established by the petroleum industry to assess and categorize petroleum reserves and resources.
Detailed Definition
In the context of petroleum exploration and production, Contingent Resources represent an important category of resource estimates. These are distinguished from reserves by their current lack of commercial viability, whether due to technical, economic, legal, environmental, or regulatory constraints.
Types of Contingent Resources
Contingent Resources are typically subdivided into categories based on their chance of commercial development, which include:
- 1C (Low Estimate): Conservative estimate assuming minimal economic viability and development contingencies.
- 2C (Best Estimate): Best estimate with balanced economic and technical assumptions.
- 3C (High Estimate): Optimistic estimate reflecting favorable conditions for development.
Special Considerations
When assessing Contingent Resources, several factors need to be meticulously evaluated:
- Technological Feasibility: Advances in extraction technology could potentially render these resources economically viable.
- Market Conditions: Fluctuations in hydrocarbon prices can shift the economic landscape, impacting viability.
- Regulatory Environment: Changes in legal restrictions or environmental regulations can influence development potential.
- Infrastructure Availability: The presence or absence of necessary infrastructure can affect recovery costs and logistics.
Examples and Historical Context
Example 1: Offshore Oil Fields
Often, oil fields located in deep-water or ultra-deep-water environments may be classified as Contingent Resources due to the high cost and complexity of extraction.
Example 2: Unconventional Resources
Oil shale and other unconventional resources are frequently placed in the contingent category because they require specialized extraction techniques that may not be profitable under current conditions.
Historically, the classification of resources has evolved alongside advances in geological science, economic theory, and extraction technologies. The concept of Contingent Resources helps companies and regulators plan for future scenarios that could make these resources viable.
Applicability and Comparisons
- Reserves vs. Contingent Resources: Reserves are resources that are considered commercially recoverable under current conditions, whereas Contingent Resources require certain changes to become viable.
- Prospective Resources: Unlike Contingent Resources, Prospective Resources refer to quantities of hydrocarbons that are estimated to be potentially recoverable from undiscovered accumulations.
Related Terms
- Proved Reserves: Quantities of oil that geological and engineering data demonstrate with reasonable certainty to be commercially recoverable.
- Probable Reserves: Quantities of oil with at least a 50% probability of being commercially recoverable.
- Possible Reserves: Quantities with at least a 10% probability of commercial recovery.
FAQs
What factors influence the classification of Contingent Resources?
Can Contingent Resources become Reserves?
How are Contingent Resources evaluated?
References
- Society of Petroleum Engineers (SPE) - PRMS: https://www.spe.org/en/industry/reserves/
- International Petroleum Industry Environmental Conservation Association (IPIECA) Guidelines
- U.S. Energy Information Administration (EIA) Reports
Summary
Contingent Resources play a crucial role in the strategic planning of energy companies by highlighting potential future opportunities. While not currently viable, they represent a significant portion of the world’s hydrocarbon potential, awaiting favorable changes in technology, economics, and regulation to unlock their value. This classification not only aids in proper resource management but also helps in aligning exploration and development strategies with long-term market and technological trends.
