U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Proved Reserves, 2008
"The Energy Information Administration's (EIA) estimates of proved reserves of natural gas and crude oil as of the end of 2008 tell very different stories about apparent changes in the availability of these two energy resources in the United States. Proved reserves are those volumes of oil and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved reserves of natural gas rose enough not only to replace production, but also to grow by almost 3 percent over 2007, largely due to continued development of unconventional gas from shales (see Table 1). In contrast, even though discoveries of crude oil rose for the third year in a row, proved reserves of crude oil fell by more than 10 percent. Under Securities and Exchange Commission (SEC) rules for determining reserves that have been in effect since 1982, operators assessed their 2008 reserves based on what they could produce with reasonable certainty at the market price on the last day of the year. Under updated SEC rules issued in 2008 that take effect in 2010, operators will instead use an average of first-day-of-the-month prices throughout the year, which is less sensitive to volatility in prices, in developing their reserves estimates. The SEC's new rules would have shown an increase in oil prices in 2008 compared to 2007, rather than the significant decline in the year-end 2008 price relative to the year-end 2007 price. Under the new rules, there would likely have been a smaller drop (or possibly even an increase) in crude oil proved reserves."