Ouvview | Tricky estimates of reserves

Ouvview | Tricky estimates of reserves

The mysteries of nature present themselves before mankind in many ways. When slabs of rocks below the earth’s surface decide to shake a bit, it causes untold misery. But the earth’s innards offer pleasant surprises, too. No wonder, finding oil and gas is often described as an art as much as it is a science. Leading oil firm BP captures this plumbing activity every year over the last six decades. Its recent compilation, released in June this year, captures the activities during calendar year 2010.

For most parts, the insights are instructive. The global economic crisis of 2008 failed to dampen the energy consumption, which recorded the strongest growth since 1973. Despite having a reputation of a polluting dirty fuel, coal raised its head; its share of global energy consumption at 29.6% was the highest since 1970. There was one more winner, and only too expected: natural gas recorded a consumption growth of 7.4%, strongest since 1984. Oil proved to be a laggard, at 3.1%.

The statistical review also throws the spotlight on mysteries beyond what nature has to offer: it shows that in 2010, India has recorded the highest growth in “proven" reserves both in oil as well as gas. In the case of crude oil, it is a staggering 55%; for natural gas, the spike is high as 36%.

For a country that imports 80% of its crude oil requirements and is suffering severe production setbacks from its largest gas field, Reliance Industries Ltd’s D6 deep-water block located off the coast of Andhra Pradesh, this should offer much reason to cheer. After all, it takes no more than a couple of years to lift the reserves to the shore. So, why are there no celebrations as yet?

This mystery unravels when we appreciate the generous allowances made for the mysteries of nature. Reserves are described in three categories: Proves, or P, where certainty is as high as 90%; 2P, or Possible, where the ratio drops to 50% and 3P, which captures the elusive side of nature, where certainty drops to 10%. And state-owned oil company ONGC Ltd, which spends a couple of billion dollars every year on exploration efforts, prefers to stick to 3P estimates. A perfect screen to hide behind its performance: not a single large find since the late 1980s.

Are India’s energy reserve estimates reliable? Tell us at views@livemint.com