3P Oil Reserves is a term used in the oil and gas industry to represent the most optimistic estimate of a company’s total recoverable hydrocarbon reserves.
The “3P” stands for the sum of three distinct categories of reserves:
- Proven Reserves (1P): These are the quantities of oil and gas that can be estimated with reasonable certainty of being commercially recoverable.
- Probability: Typically considered to have a 90% or greater chance of being produced.
- Probable Reserves: These are the unproven reserves that analysis of geological and engineering data suggests are more likely than not to be recoverable.
- Probability: Typically considered to have at least a 50% chance that the actual recovered volume will equal or exceed the sum of Proven plus Probable (2P) reserves.
- Possible Reserves: These are the unproven reserves that are estimated to have a lesser chance of being recovered than Probable reserves. They are considered the most uncertain.
- Probability: Typically considered to have at least a 10% chance that the actual recovered volume will equal or exceed the sum of Proven plus Probable plus Possible (3P) reserves.
The Calculation
3P Oil Reserves = Proven Reserves + Probable Reserves + Possible Reserves
Key Takeaways
- Optimistic Estimate: The 3P figure represents the largest and most inclusive estimate of a company’s reserves, offering a comprehensive view of its potential long-term asset base.
- Confidence Level: Due to the inclusion of Possible Reserves, the overall confidence level for the entire 3P volume is low (around 10%).
- Investor Use: While investors and regulators often focus on 1P (most certain) and 2P (Proven + Probable), 3P figures can be important for assessing the total long-term potential of a field or company, especially for junior exploration companies whose assets are in the early stages of development.
- Contrasts with 1P and 2P:
- 1P Reserves: Only Proven reserves (P≥90%).
- 2P Reserves: Proven plus Probable reserves (P≥50%).
- 3P Reserves: Proven plus Probable plus Possible reserves (P≥10%).