**2.2 Oil discovery: Surface indicators and geophysical surveys**

The first concept of oil reserves closely embraced the amounts of oil available in tapped reservoirs. Forecasting techniques like the volumetric and historical-statistical methods required that some successful drilling had already been carried out. In this sense, reserves resulted in ex-post measurements, with geologists tracking a path previously opened by wildcatters and oil-companies. Considering the epochal criteria, two omissions stand out as particularly relevant:


existing fields, the results would have shown a net increase in the volume of reserves. Indeed, as long as this situation lasted, the deadline for depletion would be extended rather than shortened. It was precisely this type of knowledge deriving from the business dynamic of discovery-exhaustion-new discovery that the 1909 geological survey failed to

Important as this logical viewpoint may be, the fact is the rate of discovery did slow considerably just after the survey's publication. The 1910s was a decade of "dry" wells, rising prices and new discoveries falling short of replacement needs. National Petroleum News, the journal of the independent oilmen, reported in 1913 that "during the past years the prospector has gone over the country with the drill, selecting the most favorable locations, and has not in a single instance been rewarded with a barrel of commercial oil, outside of what is generally accepted as the proven area" (Dunham,1913). Because compensation for growing demand barely occurred, the balance between withdrawals and additions to petroleum reserves moved the countdown of the time elapsing until exhaustion from 17 years (1918-1919 surveys), 13-15 years (1921-1922 surveys) and 6-10 years (1923-1925

This course of events definitely leaned towards the interests and the views of

The first concept of oil reserves closely embraced the amounts of oil available in tapped reservoirs. Forecasting techniques like the volumetric and historical-statistical methods required that some successful drilling had already been carried out. In this sense, reserves resulted in ex-post measurements, with geologists tracking a path previously opened by wildcatters and oil-companies. Considering the epochal criteria, two omissions stand out



possible reserves, this assessment was quantitative in nature (Madureira, 2012).

take into account (Olien & Olien, 1993).

surveys) (McLaughin,1939: 128-129; Clark, 1987:148).

**2.2 Oil discovery: Surface indicators and geophysical surveys** 

chemicals, *in situ* combustion and electric hydraulic shocks.

conservationists and geologists.

as particularly relevant:

Insofar as oil reserves were equated as fixed assets, the depletion of reservoirs could somehow be thought of as the depletion of a non-renewable forest. The geological survey thus became a contentious issue that carved a trench between the business view of a drifting amount determined by new discoveries and the official view of a fixed amount determined by the already confirmed oil reservoirs. Hence, the stage was set for a public confrontation between those who claimed "a petroleum famine is imminent" and those who countervailed with "there will always be enough petroleum to meet demand" (Garfias & Whetsel, 1936:213).

Henceforth, the surveys were clouded by the suspicion that the conservative nature of the forecasts set the tone for those who argued in favor of government interference through regulation, pro-rationing, production controls, waste-disposal or even – the rumors persisted - partial nationalization. In an attempt to calm these troubled waters, in 1922 the U.S. Geological Survey (USGS) mobilized ten geologists representing the American Association of Petroleum Geologists and six from the USGS for a comprehensive and accurate study aimed at once and for all stemming the controversies and bringing the debate back to indisputably geological grounds. For the first time, the distinction between known fields and undiscovered reservoirs was acknowledged. The oilman's view of exhaustiondiscovery cycles was translated into probabilistic categorizations that accounted for "prospective" and "possible" oil. The concluding estimate identified 5 billion (5 x109) barrels of crude "in sight" and an additional 4 billion barrels as "prospective" and "possible". The former was judged "reasonably reliable" with the latter deemed absolutely "speculative and hazardous". In the end, neither the enhanced accuracy of petroleum in sight nor the acknowledgment of "speculative" discoveries reassured the industry. On the contrary, the enduring politicization of the geological survey opened the door to the institutionalization of competing reports on petroleum reserves sponsored by the government, by specialized reviews (*Oil & Gas Journal, Oil Weekly*), and by the American Petroleum Institute business association. From 1922 onwards, this pluralism of estimates became the rule: each vested interest, each major institution produced its own forecasts. Maybe the surprising issue in this evolution towards customized surveys is that there were hardly any discrepancies in the final figures of proven reserves, although that did not halt public and private bickering between institutions (Dennis, 1985).

The crux of the matter was naturally the amount of oil still undiscovered. In this regard, the uncertainty could hardly be solved. There were bold stands on the subject but little means to figure out a reasonable and acceptable forecast. As regards finding oil, geological knowledge had limited utility: it could forecast where oil was not supposed to be found (for instance in rocks dating from the Jurassic, Permian and Silurian Eras) and it could provide some advice on defining areas worth exploring (areas of extensive limestone dolomization, salt domes or beds of porous sandstone lying within shales) (Johnson & Huntley, 1916; Bacon & Hamor, 1916). Nevertheless, the only way to be certain about oil reserves was to drill; as an experienced field-worker reported: "geologists have gone deeply into the matter and in a way seem to be able to select oil producing territory. But they are not infallible. A hole in the ground seems to be the only sure test" (Horlacher, 1929:24).

Up to the First World War, all geological knowledge was in fact exclusively based on surface indicators providing a vague clue as to the location of underground reservoirs. Throughout the U.S., the most reliable signal for the oil prospector was the localization of natural eruptions

Estimating Oil Reserves: History and Methods 153

However, perhaps the most important contribution of the anticline theory to petroleum discovery lay in the technical innovations that accompanied it, especially the systematic observation of rocks altitudes and the representation of anticlines by contour-line subsurface maps. Invented for a geological survey undertaken in Trenton, Ohio (1889), topographic contour lines represented lines in depth below sea-level so that the highest points on the map were labeled with the lowest values. By disclosing the topographical relationship between the observable landscape and concealed petroleum reservoirs, the maps triggered debate about the whereabouts of gas and oil deposits. Above all, this new scientific "gadget" proved extremely useful to impress the value of geological prospecting on both the public and on companies. As expected, geologists endeavored to play their

The anticline theory gained momentum as more oil was found in anticlines with oil traps as theoretically predicted. West Virginia and South-western Pennsylvania in this respect offered the best supportive evidence; conversely Ohio, Indiana and Illinois cast serious reservations on the global validity of the theory. We know today that most of the world's oil was in effect discovered in anticline structures (Downey, 2009:98). However, this fact, per se, did not significantly raise the earlier probability of actually finding oil. Even when selecting anticlines as their main target, geologists of the 1920s could not single out precise location criteria. Surface indicators said little about whether or not anticlines might contain oil and gas, the amount of hydrocarbons in place, where the accumulation occurred, or the configuration of structural and stratigraphic traps. Ultimately, they could miss the spot simply because the oil was not at the top of a pronounced anticline or because the trap had an unexpected stratigraphic configuration. Furthermore, since oil was found in a great variety of structural positions, the basic anticline hypothesis underwent many vicissitudes

The work with surface indicators required a sizable and labor-intensive organization. Nowhere as in the prospecting of foreign lands was this feature so remarkable. One may even say that an era of geologically-inspired "invasions" began with the dawn of the twentieth century sometimes involving the overseas relocation of battalions of forty to two hundred men. This stream was fostered by planned investments made by the largest oil companies and reflected the pressure to find untapped sources of supply in the face of increasingly global competition. Mesopotamia (1904 and 1908) Trinidad and the British West Indies (1908), Argentina (1908), Ecuador (1909) Egypt (1911), Algeria (1914) Venezuela (1917) were the most eminent cases of success in finding oil abroad. A geological expedition to China and Formosa (1914-1916) commissioned by the Standard Oil Company of New York also suggested there was a likelihood of discovering good reservoirs but the advance towards the production phase stalled for political reasons. In addition to the new production regions, multinational oil companies further reinforced their presence in Canada and in Peru, leading to a new cycle of discoveries, notably in Peru. So overwhelming was this trend that even firms long skeptical about geological endeavors ended up recruiting 10, 18, 26 geologists (Persia, Anglo-Persian, 1919-1924). Given the higher costs of oil prospecting in the international arena, the massification of discovery had to be spearheaded by some new institutional form of doing business: the multinational holding company was precisely the organizational structure able to finance

trump card by every feasible means.

(Hager, 1923; Hubbert, 1966).

a multiform presence in oil fields around the world.

like oil seepages or springs, natural gas springs, outcrops of sands impregnated with petroleum or bitumen, bituminous dikes and bituminous lakes. These "eruptions" were the first feature to look for as they demonstrated that at least some oil existed in the vicinity and was able to migrate to the surface. Other sedimentary formations such as sands, sandstones, shales and limestones were also potential, though less certain, clues. For field-working American geologists, this hint was nonetheless of limited relevance since the few unveiled seepages were quickly drilled by wildcatters. On the contrary, seepage search did prove very productive in countries like Mexico and Azerbaijan- Russia where oil and gas leaked copiously from source rocks. So abundant was this type of primary surface indicators that the methodology for the second comprehensive Mexican oil survey relied chiefly on inventorying "chapopoteras" (seepages) scattered all over the country, and complemented by a geological description of the underlying sedimentary rock structure (Villarello, 1908). Before the 1910 revolution, the country had consolidated a hub of national oil geology expertise centered in the "small but highly respected organization" of the *Instituto Geológico de Mexico,* which kept in close contact with their North American colleagues (Owen, 1975: 246-256). In Azerbaijan, on the other hand, far-reaching seepages made the tapping of oil from surface wells a remunerative business for local tribes and an ecological nightmare once every amateur, adventurer and speculator began drilling at random during the oil rush of the 1880s. In truth, drilling appeared to be the single talent required to find oil (Leeuw, 2000).

Finally, in the absence of any such clear-cut indicators, geological advice could do no better than recommending searching for the usual landscape fold bed surfacing in an upwards convex form, with the oldest geological beds at its core. Unlike the former empirical guidelines, this particular suggestion was grounded on a theory of oil occurrence – in fact, the most accepted epochal-theory within the scientific community: the anticlinal theory of oil accumulation (Arnold, 1923; USGS, 1934). This convex salience identified by the observer was likely to match a geologic structure called an anticline. Anticlines are rock formations bent into an undulating pattern by a tectonic process and whose fold traps form an excellent reservoir for hydrocarbons, particularly when container reservoir-like rocks at their core and impermeable seals on the outer layers (Figure 1). The hypothesis that an extended "nose" at the surface could become an underground petroleum-bearing fold aroused interest in the systematic exploration of the American countryside, bringing topography back into the arms of geology. From the common perspective, this was summed-up in the unwarranted idea that "all oil is found in folds" (Johnson & Huntley, 1916:50).

Source: Decker, Charles, E. (1920). *Studies in Minor Folds*, University of Chicago Press, Chicago-Illinois, 6. Fig. 1. Diagram of a symmetrical anticline.

like oil seepages or springs, natural gas springs, outcrops of sands impregnated with petroleum or bitumen, bituminous dikes and bituminous lakes. These "eruptions" were the first feature to look for as they demonstrated that at least some oil existed in the vicinity and was able to migrate to the surface. Other sedimentary formations such as sands, sandstones, shales and limestones were also potential, though less certain, clues. For field-working American geologists, this hint was nonetheless of limited relevance since the few unveiled seepages were quickly drilled by wildcatters. On the contrary, seepage search did prove very productive in countries like Mexico and Azerbaijan- Russia where oil and gas leaked copiously from source rocks. So abundant was this type of primary surface indicators that the methodology for the second comprehensive Mexican oil survey relied chiefly on inventorying "chapopoteras" (seepages) scattered all over the country, and complemented by a geological description of the underlying sedimentary rock structure (Villarello, 1908). Before the 1910 revolution, the country had consolidated a hub of national oil geology expertise centered in the "small but highly respected organization" of the *Instituto Geológico de Mexico,* which kept in close contact with their North American colleagues (Owen, 1975: 246-256). In Azerbaijan, on the other hand, far-reaching seepages made the tapping of oil from surface wells a remunerative business for local tribes and an ecological nightmare once every amateur, adventurer and speculator began drilling at random during the oil rush of the 1880s. In truth,

drilling appeared to be the single talent required to find oil (Leeuw, 2000).

idea that "all oil is found in folds" (Johnson & Huntley, 1916:50).

Fig. 1. Diagram of a symmetrical anticline.

Finally, in the absence of any such clear-cut indicators, geological advice could do no better than recommending searching for the usual landscape fold bed surfacing in an upwards convex form, with the oldest geological beds at its core. Unlike the former empirical guidelines, this particular suggestion was grounded on a theory of oil occurrence – in fact, the most accepted epochal-theory within the scientific community: the anticlinal theory of oil accumulation (Arnold, 1923; USGS, 1934). This convex salience identified by the observer was likely to match a geologic structure called an anticline. Anticlines are rock formations bent into an undulating pattern by a tectonic process and whose fold traps form an excellent reservoir for hydrocarbons, particularly when container reservoir-like rocks at their core and impermeable seals on the outer layers (Figure 1). The hypothesis that an extended "nose" at the surface could become an underground petroleum-bearing fold aroused interest in the systematic exploration of the American countryside, bringing topography back into the arms of geology. From the common perspective, this was summed-up in the unwarranted

Source: Decker, Charles, E. (1920). *Studies in Minor Folds*, University of Chicago Press, Chicago-Illinois, 6.

However, perhaps the most important contribution of the anticline theory to petroleum discovery lay in the technical innovations that accompanied it, especially the systematic observation of rocks altitudes and the representation of anticlines by contour-line subsurface maps. Invented for a geological survey undertaken in Trenton, Ohio (1889), topographic contour lines represented lines in depth below sea-level so that the highest points on the map were labeled with the lowest values. By disclosing the topographical relationship between the observable landscape and concealed petroleum reservoirs, the maps triggered debate about the whereabouts of gas and oil deposits. Above all, this new scientific "gadget" proved extremely useful to impress the value of geological prospecting on both the public and on companies. As expected, geologists endeavored to play their trump card by every feasible means.

The anticline theory gained momentum as more oil was found in anticlines with oil traps as theoretically predicted. West Virginia and South-western Pennsylvania in this respect offered the best supportive evidence; conversely Ohio, Indiana and Illinois cast serious reservations on the global validity of the theory. We know today that most of the world's oil was in effect discovered in anticline structures (Downey, 2009:98). However, this fact, per se, did not significantly raise the earlier probability of actually finding oil. Even when selecting anticlines as their main target, geologists of the 1920s could not single out precise location criteria. Surface indicators said little about whether or not anticlines might contain oil and gas, the amount of hydrocarbons in place, where the accumulation occurred, or the configuration of structural and stratigraphic traps. Ultimately, they could miss the spot simply because the oil was not at the top of a pronounced anticline or because the trap had an unexpected stratigraphic configuration. Furthermore, since oil was found in a great variety of structural positions, the basic anticline hypothesis underwent many vicissitudes (Hager, 1923; Hubbert, 1966).

The work with surface indicators required a sizable and labor-intensive organization. Nowhere as in the prospecting of foreign lands was this feature so remarkable. One may even say that an era of geologically-inspired "invasions" began with the dawn of the twentieth century sometimes involving the overseas relocation of battalions of forty to two hundred men. This stream was fostered by planned investments made by the largest oil companies and reflected the pressure to find untapped sources of supply in the face of increasingly global competition. Mesopotamia (1904 and 1908) Trinidad and the British West Indies (1908), Argentina (1908), Ecuador (1909) Egypt (1911), Algeria (1914) Venezuela (1917) were the most eminent cases of success in finding oil abroad. A geological expedition to China and Formosa (1914-1916) commissioned by the Standard Oil Company of New York also suggested there was a likelihood of discovering good reservoirs but the advance towards the production phase stalled for political reasons. In addition to the new production regions, multinational oil companies further reinforced their presence in Canada and in Peru, leading to a new cycle of discoveries, notably in Peru. So overwhelming was this trend that even firms long skeptical about geological endeavors ended up recruiting 10, 18, 26 geologists (Persia, Anglo-Persian, 1919-1924). Given the higher costs of oil prospecting in the international arena, the massification of discovery had to be spearheaded by some new institutional form of doing business: the multinational holding company was precisely the organizational structure able to finance a multiform presence in oil fields around the world.

Estimating Oil Reserves: History and Methods 155

Afterwards, the effectiveness of these gravitational and magnetic methods became increasingly associated with reconnaissance surveys and efforts to measure sediment thickness. The seismic method additionally broadened its scope and seized the general purpose geophysical exploration market outside Texas, largely on account of its reliability, cost-benefit advantages and enhanced opportunity "for securing preferred acreage over mapped structures" (Bignell, 1934). The trend that turned seismic methods into the bedrock of core oil prospection activities was further reinforced by two international developments: first, the boom in offshore exploration that began in the late 1950s and was chiefly based on marine seismic surveys; in this respect the production of waterproof microphones (hydrophones) deployed along a cable or a steamer proved to be, far and away, the cheapest and most efficient technology; second, the interface with computing power which led to 3-D seismic surveys and the revolution in "the process of exploration and production, since the early 1990s" Among other aspects, 3-D surveys had the advantage of easing the

A final piece in this puzzle may be called luck, coincidence or the unexpected coincidence of different series of events: in 1926 and 1927, a series of discoveries in Oklahoma, Texas and New Mexico hit some of the largest oil concentrations in the world, adding almost overnight 5 billion barrels (5 x109) to the proven reserves of the United States. The frenzied oil boom that ensued flooded the markets and drove prices down, silencing the "famine", "shortage" and "exhaustion" thesis for fifty years (i.e. up to the Club of Rome warnings). Institutions that had been founded to deal with scarcity and to fight "waste" were subsequently reshuffled to enforce conservation through the self-regulation of the industry. Overall, the rise of geophysical exploration played a minor role in this spurt (circumscribed to part of East Texas) as most of the discoveries resulted from wildcat drilling practices and surface indicator insights. Hence, the urgency that turned geophysical exploration into a key science for the future of humanity became less momentous. Conservationist ideas were also hit. The oil being endlessly pumped out of

Geophysical surveys and particularly the promising branch of seismic refraction and reflection surveys changed the meaning of geological observations and mapping technologies. As aforementioned, the surface topography could henceforth be related with underground strata and, sometimes, with oil accumulations. For all these reasons, the stage seemed set for qualified assessments of prospective resources, at least of (untested) probable resources identified by geological or geophysical means. However, surprising as it may

After 1925, geological uncertainty was removed from the very activity of measurement and substituted by the narrowest gauge of assessing "only the amount of crude oil which may be extracted by present known methods from fields completed developed or drilled or sufficiently drilled and explored to permit of reasonably accurate calculations" (API, 1938, as cited in Miser, Richardson & Dane, 1939: 289). This criterion pervaded the surveys of the American Petroleum Institute (API), the oil industry's trade association founded after the war by several oil companies. Over and over again, a special API committee called the Committee of Eleven, followed by the Committee on Petroleum Reserves, reasserted its

seem, the United States institutional evolution headed off in the opposite direction.

identification of the optimal drilling point (Downey, 2009: 100-101).

the earth washed away the bleak predictions of the early 1910s.

**2.3 Classifying oil reserves: The U.S. and the Soviet Union** 

After the First World War, the strategic commitment of these large corporations to get hold of secure supplies by constituting buffers of private reserves intensified the scrambling for oil and for leases. Soaring prices further increased the pay-offs for each dollar invested in prospection. The more active stand in geological affairs prompted a phase of swift technological innovation with a bet on every technique that might disclose the sedimentary structures lying beyond anticline's surfaces. Between 1919 and 1929 the core of geophysical technologies, as we currently know them, were experimented for the first time, improved and put to good usage.

Gravity surveys, magnetic surveys and seismic surveys derived from the idea that variations in rock density could be mapped by measuring the way they conveyed some signal. Hence, experiments with the torsion balance, a scientific instrument devised by the Hungarian Baron von Eoetvoes, relied on the assumption that the gravitational force exerted by very light rocks found close to the surface is less than those of very heavy rocks. By the same token, the electrical current sent by a magnetometer depicted a different magnetic "anomaly" when encountering minor magnetic sedimentary rocks and when coming across highly magnetic igneous rocks, thus enabling the identification of the former where oil was more likely to be found. Last of all, a concussive sound produced at the surface, in such a way that as much of its energy as possible was directed downwards, was then partially refracted backwards with greater or lesser velocity depending on the density or compactness of the geological formations encountered. In this echo-sounding technology, a picture could be formed by registering the way in which the velocity of vibrations changed with depth. The time taken for the sound wave to reach a seismic detector located on the surface was recorded on a strip of photographic paper. Owing to the fact that the speed of transmission was proportional to the density or compactness of the geological formation, the technique was firstly used to detect salt domes, which returned a high velocity of propagation. Later on, seismic refraction methods were improved and applied for the mapping of other rock strata (Forbes & O'Beirne, 1957:120-122).

Conceived for general scientific research in geodesy and geophysics (the gravitational method), for iron ore prospecting (the magnetic method) and for the location of enemy artillery firing positions (the seismic method), these technologies had to be further adapted to the particularities of oil surveying. As Bowker (1994:22) pointed out, during the first phase of learning and adjustment, the data produced by prospecting instruments could be correlated with underground structures and those structures could sometimes be correlated with the presence oil. Nevertheless, as of the 1920s, no link in this chain had been firmly established. It was only through further research and practical tests, financed by oil companies like Amerada Petroleum Company, Royal Dutch Shell and Shell's affiliate Roxana, Gulf Oil and its subsidiaries, Louisiana Land & Exploration, Calcasieu Oil, Standard Oil of New York, Humble, Pure and Louisiana, Aguila and Burmah Oil, that fundamental improvements were brought about. Within a short period of time, these investments paid off and paid off handsomely. Successful discoveries of new reservoirs in southern Texas, U.S., Mexico and Hungary with the use of gravitational methods; discoveries in the nearby counties of Texas, in Louisiana, U.S. and Mexico by means of seismic refraction methods; and new finds in Texas, Venezuela and Rumania by means of magnetic surveys and electric logs imparted an aura of buoyancy to geophysical techniques (Williams, 1928; USGS 1934; Forbes & O'Beirne, 1957; Owen, 1975; Bowker, 1994; Robertson, 2000, Petty, n.d.).

After the First World War, the strategic commitment of these large corporations to get hold of secure supplies by constituting buffers of private reserves intensified the scrambling for oil and for leases. Soaring prices further increased the pay-offs for each dollar invested in prospection. The more active stand in geological affairs prompted a phase of swift technological innovation with a bet on every technique that might disclose the sedimentary structures lying beyond anticline's surfaces. Between 1919 and 1929 the core of geophysical technologies, as we currently know them, were experimented for the

Gravity surveys, magnetic surveys and seismic surveys derived from the idea that variations in rock density could be mapped by measuring the way they conveyed some signal. Hence, experiments with the torsion balance, a scientific instrument devised by the Hungarian Baron von Eoetvoes, relied on the assumption that the gravitational force exerted by very light rocks found close to the surface is less than those of very heavy rocks. By the same token, the electrical current sent by a magnetometer depicted a different magnetic "anomaly" when encountering minor magnetic sedimentary rocks and when coming across highly magnetic igneous rocks, thus enabling the identification of the former where oil was more likely to be found. Last of all, a concussive sound produced at the surface, in such a way that as much of its energy as possible was directed downwards, was then partially refracted backwards with greater or lesser velocity depending on the density or compactness of the geological formations encountered. In this echo-sounding technology, a picture could be formed by registering the way in which the velocity of vibrations changed with depth. The time taken for the sound wave to reach a seismic detector located on the surface was recorded on a strip of photographic paper. Owing to the fact that the speed of transmission was proportional to the density or compactness of the geological formation, the technique was firstly used to detect salt domes, which returned a high velocity of propagation. Later on, seismic refraction methods were improved and applied for the

Conceived for general scientific research in geodesy and geophysics (the gravitational method), for iron ore prospecting (the magnetic method) and for the location of enemy artillery firing positions (the seismic method), these technologies had to be further adapted to the particularities of oil surveying. As Bowker (1994:22) pointed out, during the first phase of learning and adjustment, the data produced by prospecting instruments could be correlated with underground structures and those structures could sometimes be correlated with the presence oil. Nevertheless, as of the 1920s, no link in this chain had been firmly established. It was only through further research and practical tests, financed by oil companies like Amerada Petroleum Company, Royal Dutch Shell and Shell's affiliate Roxana, Gulf Oil and its subsidiaries, Louisiana Land & Exploration, Calcasieu Oil, Standard Oil of New York, Humble, Pure and Louisiana, Aguila and Burmah Oil, that fundamental improvements were brought about. Within a short period of time, these investments paid off and paid off handsomely. Successful discoveries of new reservoirs in southern Texas, U.S., Mexico and Hungary with the use of gravitational methods; discoveries in the nearby counties of Texas, in Louisiana, U.S. and Mexico by means of seismic refraction methods; and new finds in Texas, Venezuela and Rumania by means of magnetic surveys and electric logs imparted an aura of buoyancy to geophysical techniques (Williams, 1928; USGS 1934; Forbes & O'Beirne, 1957; Owen, 1975; Bowker,

first time, improved and put to good usage.

mapping of other rock strata (Forbes & O'Beirne, 1957:120-122).

1994; Robertson, 2000, Petty, n.d.).

Afterwards, the effectiveness of these gravitational and magnetic methods became increasingly associated with reconnaissance surveys and efforts to measure sediment thickness. The seismic method additionally broadened its scope and seized the general purpose geophysical exploration market outside Texas, largely on account of its reliability, cost-benefit advantages and enhanced opportunity "for securing preferred acreage over mapped structures" (Bignell, 1934). The trend that turned seismic methods into the bedrock of core oil prospection activities was further reinforced by two international developments: first, the boom in offshore exploration that began in the late 1950s and was chiefly based on marine seismic surveys; in this respect the production of waterproof microphones (hydrophones) deployed along a cable or a steamer proved to be, far and away, the cheapest and most efficient technology; second, the interface with computing power which led to 3-D seismic surveys and the revolution in "the process of exploration and production, since the early 1990s" Among other aspects, 3-D surveys had the advantage of easing the identification of the optimal drilling point (Downey, 2009: 100-101).

A final piece in this puzzle may be called luck, coincidence or the unexpected coincidence of different series of events: in 1926 and 1927, a series of discoveries in Oklahoma, Texas and New Mexico hit some of the largest oil concentrations in the world, adding almost overnight 5 billion barrels (5 x109) to the proven reserves of the United States. The frenzied oil boom that ensued flooded the markets and drove prices down, silencing the "famine", "shortage" and "exhaustion" thesis for fifty years (i.e. up to the Club of Rome warnings). Institutions that had been founded to deal with scarcity and to fight "waste" were subsequently reshuffled to enforce conservation through the self-regulation of the industry. Overall, the rise of geophysical exploration played a minor role in this spurt (circumscribed to part of East Texas) as most of the discoveries resulted from wildcat drilling practices and surface indicator insights. Hence, the urgency that turned geophysical exploration into a key science for the future of humanity became less momentous. Conservationist ideas were also hit. The oil being endlessly pumped out of the earth washed away the bleak predictions of the early 1910s.

#### **2.3 Classifying oil reserves: The U.S. and the Soviet Union**

Geophysical surveys and particularly the promising branch of seismic refraction and reflection surveys changed the meaning of geological observations and mapping technologies. As aforementioned, the surface topography could henceforth be related with underground strata and, sometimes, with oil accumulations. For all these reasons, the stage seemed set for qualified assessments of prospective resources, at least of (untested) probable resources identified by geological or geophysical means. However, surprising as it may seem, the United States institutional evolution headed off in the opposite direction.

After 1925, geological uncertainty was removed from the very activity of measurement and substituted by the narrowest gauge of assessing "only the amount of crude oil which may be extracted by present known methods from fields completed developed or drilled or sufficiently drilled and explored to permit of reasonably accurate calculations" (API, 1938, as cited in Miser, Richardson & Dane, 1939: 289). This criterion pervaded the surveys of the American Petroleum Institute (API), the oil industry's trade association founded after the war by several oil companies. Over and over again, a special API committee called the Committee of Eleven, followed by the Committee on Petroleum Reserves, reasserted its

Estimating Oil Reserves: History and Methods 157

institutions. Drawing on the long-standing informal network of "scouts", traditionally employed by producers to collect confidential information on the activities of rivals, the first API secretary-general, Robert Welch, set up an overarching system of data-field collection, based on weekly reports telegraphed to the headquarters. However, this move was anything but pacific. Suspicions loomed across the affiliates that the information thereby provided might end up in the wrong hands, paving the way for antitrust prosecutions or, even worse, to harmful competition by direct business rivals. According to Joseph Pratt, the dispute over the API's proper role in the area of statistics climaxed in a public confrontation between Robert Welch and Robert Stewart, the President of Standard Oil of Indiana, with the two men almost coming to blows during an API board meeting (Pratt, 1980:78). To ease the concerns of members, Welch reassured that all information submitted would be treated as strictly confidential; that no information on prices would ever be subject to enquiry; and that no strategic information concerning future oilexploration plans would be collected. Hence, the narrow definition of "proven reserves" was a natural consequence of institutional arrangements inside the API. The assembled information left aside data on private development strategies for as long as the reservoirs remained unexplored (falling into the category of insufficiently drilled fields) they were beyond the survey's scope. This meant that proven reserves was a narrower concept than the vaguer "oil in sight" measurement and also narrower than the standard settled for

Soon API's simplicity and pointedness paid off. The deployment of operational economic criteria enhanced the accuracy, reliability and comparability of statistics. It was this grounding of surveys on proprietary operational information, furthered by Robert Welch's keen leadership and expertise, which established a first order reputation for the API's publications. Henceforth, they became the most current and the most accurate estimates of U.S. oil reserves. On the flip side, such a reality pushed the main government agencies - the U.S. Geological Survey, the Bureau of Mines, and the Bureau of Foreign and Domestic Commerce – into a secondary and complementary role in data collection (Pratt, 1980). The federal state acknowledged that government institutions could not compete with API's resourceful inroads into the industrial milieu. Accordingly, the oil-business association continued to issue reports until 1979, when the oil reserve estimation function was officially taken over by the U.S. Department of Energy. Along with that, the State department further embraced the in-built corporate concept of proven reserves. Finally, in 1983, the World Petroleum Congresses issued expanded definitions for categories ranging from "proven" to "speculative" reserves thereby

Due to its very history, the North American system of classifications bears the marks of private property, of individual rights and collective corporate action. To get a broader outlook of the ways in which social and economic systems imbue technical classifications, it is worth concisely considering the economic organization that took shape in the Soviet Union. The fact Russia only completed its systematic oil-surveys in the 1930s, when a central command economy was already well underway, eased the creation of a brand new system

Changes were nonetheless slow. The Bolshevik revolution and the Soviet nationalization of the oil industry did not alter the imperial tradition of oil-geology centered on Moscow with scarce field work outside the Caspian. Lenin's objective of boosting oil production to obtain

proven coal reserves (see McInnes, Dowling & Leach, 1913).

reopening the door to probabilistic accounts of oil resources (Porter, 1995).

of oil-reserve classification.

pledge not to evaluate unproven reserves, for such estimates would only be "guess-work" and the "the committee refuses to indulge in speculation". Even when criticism mounted, the API stuck to its predefined policy guidelines (Pew, 1944).

The entrenchment around a narrow definition of "proven reserves" meant that the criterion of economic and technical feasibility overtook the criterion of geological probability. To put it differently, the business-oriented view of oil reserves outlived the scientific-administrative view. This conclusion does not imply a single-sided rule of data gathering and data analysis. It is worth recalling that an era of pluralism of estimates had just dawned and whose key institutional actors were the most reputable oil journals, the U.S. Geological Survey (USGC) and the API. During the interwar period, for instance, the USGC drew on its recognized regional expertise to map the probability of discovering oil (figure 2, possible and unfavorable categories).

Credit: U.S. Geological Survey; Department of the Interior/USGS Source: Miser, H.D., Richardson, G.B. & Dane, C.H. (1939) Petroleum Reserves, In: Energy Resources and National Policy, National Resources Committee (Ed.), 293, Government Printing Office, Washington.

Fig. 2. Map of the United States showing the classification of oil regions (1938).

However, beyond the ongoing pluralism, the API criterion broadly held sway in providing the standard upon which resource measurements were based. History and politics turned an instrumental categorization of proven reserves into an encompassing definition. From the outset, the business association was bent on producing its own trade statistics to protect the independence of the industry and counteract the arguments raised by conservationists, by antitrust reformers such as the La Follette Committee and by state and federal regulatory

pledge not to evaluate unproven reserves, for such estimates would only be "guess-work" and the "the committee refuses to indulge in speculation". Even when criticism mounted,

The entrenchment around a narrow definition of "proven reserves" meant that the criterion of economic and technical feasibility overtook the criterion of geological probability. To put it differently, the business-oriented view of oil reserves outlived the scientific-administrative view. This conclusion does not imply a single-sided rule of data gathering and data analysis. It is worth recalling that an era of pluralism of estimates had just dawned and whose key institutional actors were the most reputable oil journals, the U.S. Geological Survey (USGC) and the API. During the interwar period, for instance, the USGC drew on its recognized regional expertise to map the probability of discovering oil (figure 2, possible and

the API stuck to its predefined policy guidelines (Pew, 1944).

Credit: U.S. Geological Survey; Department of the Interior/USGS

Source: Miser, H.D., Richardson, G.B. & Dane, C.H. (1939) Petroleum Reserves, In: Energy Resources and National Policy, National Resources Committee (Ed.), 293, Government Printing Office,

However, beyond the ongoing pluralism, the API criterion broadly held sway in providing the standard upon which resource measurements were based. History and politics turned an instrumental categorization of proven reserves into an encompassing definition. From the outset, the business association was bent on producing its own trade statistics to protect the independence of the industry and counteract the arguments raised by conservationists, by antitrust reformers such as the La Follette Committee and by state and federal regulatory

Fig. 2. Map of the United States showing the classification of oil regions (1938).

unfavorable categories).

Washington.

institutions. Drawing on the long-standing informal network of "scouts", traditionally employed by producers to collect confidential information on the activities of rivals, the first API secretary-general, Robert Welch, set up an overarching system of data-field collection, based on weekly reports telegraphed to the headquarters. However, this move was anything but pacific. Suspicions loomed across the affiliates that the information thereby provided might end up in the wrong hands, paving the way for antitrust prosecutions or, even worse, to harmful competition by direct business rivals. According to Joseph Pratt, the dispute over the API's proper role in the area of statistics climaxed in a public confrontation between Robert Welch and Robert Stewart, the President of Standard Oil of Indiana, with the two men almost coming to blows during an API board meeting (Pratt, 1980:78). To ease the concerns of members, Welch reassured that all information submitted would be treated as strictly confidential; that no information on prices would ever be subject to enquiry; and that no strategic information concerning future oilexploration plans would be collected. Hence, the narrow definition of "proven reserves" was a natural consequence of institutional arrangements inside the API. The assembled information left aside data on private development strategies for as long as the reservoirs remained unexplored (falling into the category of insufficiently drilled fields) they were beyond the survey's scope. This meant that proven reserves was a narrower concept than the vaguer "oil in sight" measurement and also narrower than the standard settled for proven coal reserves (see McInnes, Dowling & Leach, 1913).

Soon API's simplicity and pointedness paid off. The deployment of operational economic criteria enhanced the accuracy, reliability and comparability of statistics. It was this grounding of surveys on proprietary operational information, furthered by Robert Welch's keen leadership and expertise, which established a first order reputation for the API's publications. Henceforth, they became the most current and the most accurate estimates of U.S. oil reserves. On the flip side, such a reality pushed the main government agencies - the U.S. Geological Survey, the Bureau of Mines, and the Bureau of Foreign and Domestic Commerce – into a secondary and complementary role in data collection (Pratt, 1980). The federal state acknowledged that government institutions could not compete with API's resourceful inroads into the industrial milieu. Accordingly, the oil-business association continued to issue reports until 1979, when the oil reserve estimation function was officially taken over by the U.S. Department of Energy. Along with that, the State department further embraced the in-built corporate concept of proven reserves. Finally, in 1983, the World Petroleum Congresses issued expanded definitions for categories ranging from "proven" to "speculative" reserves thereby reopening the door to probabilistic accounts of oil resources (Porter, 1995).

Due to its very history, the North American system of classifications bears the marks of private property, of individual rights and collective corporate action. To get a broader outlook of the ways in which social and economic systems imbue technical classifications, it is worth concisely considering the economic organization that took shape in the Soviet Union. The fact Russia only completed its systematic oil-surveys in the 1930s, when a central command economy was already well underway, eased the creation of a brand new system of oil-reserve classification.

Changes were nonetheless slow. The Bolshevik revolution and the Soviet nationalization of the oil industry did not alter the imperial tradition of oil-geology centered on Moscow with scarce field work outside the Caspian. Lenin's objective of boosting oil production to obtain

Estimating Oil Reserves: History and Methods 159

the state. Categories thus had to convey good information to "distant" decision-makers enabling these central planners not only to allocate investments and resources but also to anticipate the conduct of operations with minimal margins of error. In practice, coordination

Furubotn and Pejovich (1972) and Furubotn and Richter (1997:148-156) reveal how in a socialist economy the interests of decentralized managers seldom match the interests of central managers and politicians. In the case of oil discoveries, the interests of regional institutions, encharged with exploratory operations such as the Soviet industrial trusts and the geological services from the various republics, was to secure future investments and shelter their own organization by listing the maximum of reserves that could satisfy the industrial standards and technological requirements for production. On the contrary, the interest of central managers consisted of ascribing investments only to the most remunerative projects whose feasibility was fully established. Thus, the situation could be equated in terms of a principalagent relationship in which the information is asymmetric and the agent's action on information cannot be observed directly by the principal. Under the conditions of the Soviet Union in the 1930s, the decentralized institutions (agents) had incentives and the means to overestimate the deposit sizes. This was particularly the case when the justifications for arriving at likely figures for untapped petroleum were based on volumetric method assessments resorting to a string of variables – volume of reservoir rock, porosity, oil saturation, recovery coefficient – that could be quietly manipulated (Campbell,1968:62-63). Central planners learned the lesson the hard way on disclosing the premature and wasteful nature of many investments, which after all proved to be over dimensioned given the reality of the petroleum reserves effectively obtainable. In an attempt to overcome this asymmetry of information, the political powers stipulated an intermediate level of certification and supervision, positioned between the central command level of the ministries and the decentralized level of oil exploration. Recognized by the acronym GKZ (Gosudarstvennaia Komissiia po Zapasam poleznykh iskopaemykh), this state commission tightened its grip on local organizations and imposed a system of oil-reserve certification with higher standards of geological evidence (1940). But despite all these endeavors, the principal-agent imbalance

continued and attritions rumbled on down the years (Campbell, 1968: 62-68).

therefore as the distinctive feature of the Soviet central command economy.

correspond to three splits in the Soviet taxonomy:

Just as the institutional configuration sought to enforce rules for efficient information control by distant decision-makers, so the design of categories sought the same purpose. The goal of monitoring was achieved by breaking up established international categories into minor markers in order to single out, in each marker, data on oil reservoirs and additional meta-data on how the reservoirs were estimated. The emphasis on meta-data loomed

Reserves were classified by six different tags, labeled A, B, C1, C2, D1, D2, so that central planners could confidently calculate the total quantity of oil extractable over the next five years, controlling for the reliability of the geological forecast. No equivalence whatsoever existed between these six category-tags and the American classification system. The API concept of proven reserves, for instance, was "lost in translation". According to Krylov (Krylov et. al. 1998; see also Poroskun et. al., 2004), American proven reserves seem to


proved far more difficult than expected.

hard currency from exports during the "New Economic Policy" (1921-1924) phase hinged on directing investments strictly towards productive activities so as to permit the recovery of the mature Baku-Azerbaijan oil fields. It was only with Stalin's drive towards an effective central–planned economy that large-scale use of petroleum-geology entered onto the agenda of the Soviet leadership. The (re)organization of the Chief Administration for Geology and Geodesy of the Supreme Council of the Soviet Union (1929) paved the way for encompassing geological surveys, the foremost of which were an estimate of the Baku oil reserves based on data from individual reservoirs collected by D. Golubyatnikov, the exploration of untapped Soviet basins in the Volga-Ural oil region by the academic V. Wassilieff and the systematic survey of proven Soviet Union oil reserves by the leading figure at the State Petroleum Research Institute, the academic I. M. Gubkin. In addition, innovative geophysical techniques, and particularly the gravitational method and the electric method, made headway in geological prospecting (Hassman, 1953; Maximov & Vinnikovski, 1983). By the time of completion, most of the operative oilfields were still concentrated in the Caspian zone (figure 3).

Source: Kemnitzer, W. Oil fields of the U.S.R.R. A descriptive outline of their geography, geology and relative productiveness. The Oil & Gas Journal, (December 30 1937), pp. 71-73.

Fig. 3. Productive oil fields in the U.S.S.R., 1937.

For the Soviets, the description of oil reservoirs had to be customized to the needs of a fully nationalized economy with the collective property of the means of production secured by

hard currency from exports during the "New Economic Policy" (1921-1924) phase hinged on directing investments strictly towards productive activities so as to permit the recovery of the mature Baku-Azerbaijan oil fields. It was only with Stalin's drive towards an effective central–planned economy that large-scale use of petroleum-geology entered onto the agenda of the Soviet leadership. The (re)organization of the Chief Administration for Geology and Geodesy of the Supreme Council of the Soviet Union (1929) paved the way for encompassing geological surveys, the foremost of which were an estimate of the Baku oil reserves based on data from individual reservoirs collected by D. Golubyatnikov, the exploration of untapped Soviet basins in the Volga-Ural oil region by the academic V. Wassilieff and the systematic survey of proven Soviet Union oil reserves by the leading figure at the State Petroleum Research Institute, the academic I. M. Gubkin. In addition, innovative geophysical techniques, and particularly the gravitational method and the electric method, made headway in geological prospecting (Hassman, 1953; Maximov & Vinnikovski, 1983). By the time of completion, most of the operative oilfields were still

Source: Kemnitzer, W. Oil fields of the U.S.R.R. A descriptive outline of their geography, geology and

For the Soviets, the description of oil reservoirs had to be customized to the needs of a fully nationalized economy with the collective property of the means of production secured by

relative productiveness. The Oil & Gas Journal, (December 30 1937), pp. 71-73.

Fig. 3. Productive oil fields in the U.S.S.R., 1937.

concentrated in the Caspian zone (figure 3).

the state. Categories thus had to convey good information to "distant" decision-makers enabling these central planners not only to allocate investments and resources but also to anticipate the conduct of operations with minimal margins of error. In practice, coordination proved far more difficult than expected.

Furubotn and Pejovich (1972) and Furubotn and Richter (1997:148-156) reveal how in a socialist economy the interests of decentralized managers seldom match the interests of central managers and politicians. In the case of oil discoveries, the interests of regional institutions, encharged with exploratory operations such as the Soviet industrial trusts and the geological services from the various republics, was to secure future investments and shelter their own organization by listing the maximum of reserves that could satisfy the industrial standards and technological requirements for production. On the contrary, the interest of central managers consisted of ascribing investments only to the most remunerative projects whose feasibility was fully established. Thus, the situation could be equated in terms of a principalagent relationship in which the information is asymmetric and the agent's action on information cannot be observed directly by the principal. Under the conditions of the Soviet Union in the 1930s, the decentralized institutions (agents) had incentives and the means to overestimate the deposit sizes. This was particularly the case when the justifications for arriving at likely figures for untapped petroleum were based on volumetric method assessments resorting to a string of variables – volume of reservoir rock, porosity, oil saturation, recovery coefficient – that could be quietly manipulated (Campbell,1968:62-63). Central planners learned the lesson the hard way on disclosing the premature and wasteful nature of many investments, which after all proved to be over dimensioned given the reality of the petroleum reserves effectively obtainable. In an attempt to overcome this asymmetry of information, the political powers stipulated an intermediate level of certification and supervision, positioned between the central command level of the ministries and the decentralized level of oil exploration. Recognized by the acronym GKZ (Gosudarstvennaia Komissiia po Zapasam poleznykh iskopaemykh), this state commission tightened its grip on local organizations and imposed a system of oil-reserve certification with higher standards of geological evidence (1940). But despite all these endeavors, the principal-agent imbalance continued and attritions rumbled on down the years (Campbell, 1968: 62-68).

Just as the institutional configuration sought to enforce rules for efficient information control by distant decision-makers, so the design of categories sought the same purpose. The goal of monitoring was achieved by breaking up established international categories into minor markers in order to single out, in each marker, data on oil reservoirs and additional meta-data on how the reservoirs were estimated. The emphasis on meta-data loomed therefore as the distinctive feature of the Soviet central command economy.

Reserves were classified by six different tags, labeled A, B, C1, C2, D1, D2, so that central planners could confidently calculate the total quantity of oil extractable over the next five years, controlling for the reliability of the geological forecast. No equivalence whatsoever existed between these six category-tags and the American classification system. The API concept of proven reserves, for instance, was "lost in translation". According to Krylov (Krylov et. al. 1998; see also Poroskun et. al., 2004), American proven reserves seem to correspond to three splits in the Soviet taxonomy:


Estimating Oil Reserves: History and Methods 161

(C2 Category) Resources in the planning phase; part of the pool identified by geological and geophysical indicators.

(D1 Category)

(D2 Category)

Resources in rockstratigraphic units whose commercial production has not been proven.

Increasing geologogic certainty

Resources in rockstratigraphic units whose commercial production has been proven.

Unmapped resources

(A Category)

certified by geological and geophysical indicators.

(B Category)

Some wells with proven production; reasonably certified by geological and geophysical indicators.

(C1 Category) At least one well with proven production; in part

certified by geological and geophysical indicators.

Fig. 4. Modified McKelvey Box with oil reserve and resource categories according to the

The Khrushchev era brought geology into full blossom. The continuing effort to establish a firmer base for estimating category D triggered a boom of discoveries in Western Siberia, in the Pechora-Timan basin of the Komi Republic and in the Pricaspian Basin, Kazakhstan Republic. Large reservoirs were hit provoking an unparalleled rise in USSR exploration efficiency (measured in tones of recoverable reserves per meter of exploratory drilling). The reasons for such success lay not only in boosting investments by the Ministry of Geology and Conservation of Natural Resources but also in a selective goal-oriented policy: surveys looked primarily for oil in anticline structural traps; in stratigraphic formations with depth limits of 5,000 meters; and looked solely to onshore areas that had previously been studied (Campbell, 1968:64-66; Elliot, 1974:90-106; Krylov, 1998). Furthermore, much of the mapping of D categories was accomplished with the usage of low-cost geological analogue methods, which, as the name indicates, draw inferences from the evidence on known fields recording, for

Reserves lying deeper than 5000 meters

Soviet Union's classification scheme (1960).

Wells with proven production entirely

Historical commercial petroleum; accumulated production

Increasin

g economic and technical feasibilit

y

characteristics of the reservoir, quality of oil, well-logging indications, type of drive, pressure, permeability, position of the oil-gas contact and others.


One may conclude that "proven", in the Russian vocabulary, entails three levels of certification. In fact, the system of classification appears to have somehow been transformed into a system of certification.

From the perspective of "distant" decision-makers facing an asymmetry of information vis-à-vis the people in the field, more refined classifications could only mean enhanced control and lesser flaws. Ideally, there could be a quasi-perfect match between reserve categories and the successive stages of exploration. One may imagine the whole upstream sector of the nationalized oil industry functioning like an assembly line: each upgrade of petroleum reserves pushed oil reserves upwards in such a manner that the removal of pools from a lower category becomes the input for the next category (geological studies of category C2 let to them passing onto category C1; if confirmed, exploration and production of pools in category C1 made them pass to B, and so on). Because the whole process is supposed to be driven by adjustments in quantities, the sequence may theoretically be thought of as a linear enchainment (in normal circumstances no C1 pool is allowed to jump directly to A). The reader may remark, instead, how the current American tripartite classification of proved, probable and possible reserves supposes price-quantity adjustments and constitutes the basis of risk assessment and risk management by private investment companies (Poroskun et. al., 2004). Naturally, prices phase out the linearity of classificatory schemes.

For a better understanding of the entire framework, Figure 4 depicts Soviet classifications within the space of a rectangle named the McKelvey box. The McKelvey box (McKelvey,1973) generates an insight into the relative position of each classification according to its location along the horizontal axis (geological certainty increasing from right to left) and according to its location along the vertical axis (technical end economic feasibility increasing from bottom to top). Hence, while the more feasible and more economic oil stands in the northwest corner of the box - in this case the petroleum that has been produced over the years -, the less feasible and undiscovered petroleum lies in the southeast corner. The Soviet categories come somewhere in between these two extremes (figure 4).

The fundamental division in the Soviet scheme is between reserves and resources. The identification of reserves of commercial interest, through the discovery of a field, draws a boundary between categories A+B+C1 and the prospective resources of C2+D1+D2. In fact, the communist leadership only began paying serious attention to the latter group of prospective resources at the end of the 1950s. This means that for a long time category C2 was not tied in very precisely with the planning and conduct of explorations. Moreover, D categories only received closer consideration in the 1960s (Campbell, 1968:64-65).



One may conclude that "proven", in the Russian vocabulary, entails three levels of certification. In fact, the system of classification appears to have somehow been transformed

From the perspective of "distant" decision-makers facing an asymmetry of information vis-à-vis the people in the field, more refined classifications could only mean enhanced control and lesser flaws. Ideally, there could be a quasi-perfect match between reserve categories and the successive stages of exploration. One may imagine the whole upstream sector of the nationalized oil industry functioning like an assembly line: each upgrade of petroleum reserves pushed oil reserves upwards in such a manner that the removal of pools from a lower category becomes the input for the next category (geological studies of category C2 let to them passing onto category C1; if confirmed, exploration and production of pools in category C1 made them pass to B, and so on). Because the whole process is supposed to be driven by adjustments in quantities, the sequence may theoretically be thought of as a linear enchainment (in normal circumstances no C1 pool is allowed to jump directly to A). The reader may remark, instead, how the current American tripartite classification of proved, probable and possible reserves supposes price-quantity adjustments and constitutes the basis of risk assessment and risk management by private investment companies (Poroskun et. al., 2004). Naturally, prices

For a better understanding of the entire framework, Figure 4 depicts Soviet classifications within the space of a rectangle named the McKelvey box. The McKelvey box (McKelvey,1973) generates an insight into the relative position of each classification according to its location along the horizontal axis (geological certainty increasing from right to left) and according to its location along the vertical axis (technical end economic feasibility increasing from bottom to top). Hence, while the more feasible and more economic oil stands in the northwest corner of the box - in this case the petroleum that has been produced over the years -, the less feasible and undiscovered petroleum lies in the southeast corner. The Soviet categories come somewhere in between these two extremes

The fundamental division in the Soviet scheme is between reserves and resources. The identification of reserves of commercial interest, through the discovery of a field, draws a boundary between categories A+B+C1 and the prospective resources of C2+D1+D2. In fact, the communist leadership only began paying serious attention to the latter group of prospective resources at the end of the 1950s. This means that for a long time category C2 was not tied in very precisely with the planning and conduct of explorations. Moreover, D

categories only received closer consideration in the 1960s (Campbell, 1968:64-65).

pressure, permeability, position of the oil-gas contact and others.

category A, though some features may have been less fully studied.

1960 descriptions as cited in Campbell, 1968:60-61).

phase out the linearity of classificatory schemes.

into a system of certification.

(figure 4).

characteristics of the reservoir, quality of oil, well-logging indications, type of drive,


Fig. 4. Modified McKelvey Box with oil reserve and resource categories according to the Soviet Union's classification scheme (1960).

Increasing geologogic certainty

The Khrushchev era brought geology into full blossom. The continuing effort to establish a firmer base for estimating category D triggered a boom of discoveries in Western Siberia, in the Pechora-Timan basin of the Komi Republic and in the Pricaspian Basin, Kazakhstan Republic. Large reservoirs were hit provoking an unparalleled rise in USSR exploration efficiency (measured in tones of recoverable reserves per meter of exploratory drilling). The reasons for such success lay not only in boosting investments by the Ministry of Geology and Conservation of Natural Resources but also in a selective goal-oriented policy: surveys looked primarily for oil in anticline structural traps; in stratigraphic formations with depth limits of 5,000 meters; and looked solely to onshore areas that had previously been studied (Campbell, 1968:64-66; Elliot, 1974:90-106; Krylov, 1998). Furthermore, much of the mapping of D categories was accomplished with the usage of low-cost geological analogue methods, which, as the name indicates, draw inferences from the evidence on known fields recording, for

Estimating Oil Reserves: History and Methods 163

Overall, the conservation debate continues today with the dispute over whether or not oil production is approaching its maximum level and going to enter into decline soon afterwards, following the downward slope of a logistics curve. Dubbed the "peak oil problem" or "Hubbert's peak" (for an overview see Deffeyes, 2006), its basic assumptions reverse the terms of the debate: whilst in the 1920s it was thought that the oil already found set a ceiling on the likelihood of any new discoveries, the peak oil theory argues the ability

The author wishes to thank The Oil & Gas Journal for allowing the reproduction of copyrighted figures inserted in this chapter. Our appreciation is extensive to the University of Chicago Press and the United States Geologic Survey for their reply acknowledging that

Arnold, R. (1923). Two decades of petroleum geology 1903-1922. *Bulletin of the American* 

Bacon, W.F. & Hamor, W.A. (1916). *The American Petroleum Industry*. McGraw-Hill, ISBN

Beal, C. H. (1919). *The Decline and Ultimate Production of Oil Wells, with Notes on the Valuation* 

Bignell, L.G.(1934). Geophysical prospecting activity in all areas indicates need for

Bowker G. C. (1994). *Science on the Run Information Management and Industrial Geophysics at* 

Brown, N.C. (1919). *Forest products and Their Manufacture and Use*, John Wiley & Sons, ISBN,

Campbell , R. W. (1968). *The Economics of Soviet oil and gas*. Johns Hopkins University Press,

Clark, J.G. (1987). *Energy and the Federal Government. Fossil fuel policies 1900-1946*. University

Cooper, J.M. (1990). *Pivotal decades: The United States 1900-1920*, W.W. Norton, ISBN:

Day, D. T. (1909). The Petroleum Resources of the United States, In: *United States Geological* 

Decker, C. E. (1920). *Studies in Minor Folds*, University of Chicago Press, Chicago-Illinois,

Deffeyes, K. S. (2006). *Beyond Oil. The view from Hubbert's peak*. Hill and Wang, ISBN

*Survey Bulletin 394*, USGS, pp.30-50, Government Printing office, ISBN

of Illinois Press, ISBN 9780252012952, Urbana and Chicago, USA.

*Association of Petroleum Geologists*, Vol. 7, No. 6 (Nov-December 1923), pp.603-624,

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additional oil reserves*. The Oil & Gas Journal*, (February 15 1934), pp. 16, 52, ISSN

*Schlumberger, 1920-1940*. The MIT Press, ISBN 0262023679, Cambridge-

to find oil is dominated by the fraction of oil that remains undiscovered.

the figures inserted in this chapter are currently in the public domain.

**4. Acknowledgment** 

**5. References** 

ISSN: 0883-9247.

0030-1388.

Massachusetts.

9781144838599, New York, Vol.1.

9781146574471, Washington.

9781177904148, New York.

9780393956559, New York.

9780217915557, Washington.

9780374707026, New York.

ISBN 9781141569311.

ISBN 9780801801051, Baltimore.

example, its real extent, thickness and porosity, to extrapolate them to similar stratigraphic areas where oil and gas accumulation is expected to be found (Maximov & Vinnikovski, 1983).

To sum up, this chapter highlighted how the core concept of proven reserves has grown out of the willingness to strengthen the role of the business association, the American Petroleum Industry- API, in the turbulent waters of the 1920s. Just when the development of geophysical methods opened up the way for more accurate probabilistic assessments of oil reserves, North American institutions refrained from this path, preferring instead to draw their estimates from business-reports and surveys, therefore anchoring the concept on the solid ground of observable actions undertaken by corporations. In quite the opposite camp, the Soviet regime used oil reserve categories as instruments of control and certification thereby shortening the distance between decentralized operative exploration and central management. Although with less success, the regime also tried to use classifications to ease economic transactions by fitting the categories into the bureaucratic sequence of exploration, certification and production.
