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Section 106. Rule 4-10(a)(6) Definitions — Developed Oil and Gas Reserves
us SEC - C&DI - Oil and Gas Rules
Question 106.01
Background: Prior to the revision of the oil and gas rules in 2008, reserves obtained from applying improved recovery techniques (such as fluid injection) to increase the ultimate recovery of hydrocarbons could be classified as “proved developed reserves” (as defined in prior Rule 4-10(a)(3) of Regulation S-X) only under limited circumstances. Specifically, the rule expressly required that a registrant could classify such reserves as proved developed only after the improved recovery technique had caused a production response, such as a measurable change in reservoir pressure or production performance, confirming that the registrant would achieve the recovery of such reserves.
Unlike the prior rules, the new rules adopted in 2008 do not expressly define the term “proved developed reserves.” Rather, the new rules separate the concepts of “proved reserves” from “developed reserves,” separately defining “proved reserves” in Rule 4-10(a)(22) of Regulation S-X and “developed reserves” in Rule 4-10(a)(6) of Regulation S-X. The revised definition for developed reserves applies to developed reserves of all categories, including proved, probable and possible reserves. In addition, the revised definition of developed oil and gas reserves no longer expressly requires a production response from the improved recovery technique to classify such reserves as developed.
Question: Under the new rules, if a registrant has expended all of the money required to install and implement the improved recovery technique but has not yet achieved a production response from it, may it classify the reserves as proved developed?
Answer: Yes, so long as the reserves otherwise meet all of the criteria for proved reserves set forth in Rule 4-10(a)(22) and developed reserves set forth in Rule 4-10(a)(6). [May 16, 2013]
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