BP reduces reserve estimate, but says new oil and gas fields offset reduction

Bruce Stanley

The Associated Press

BP PLC became the latest major oil company to reduce its own estimates of its oil and gas reserves, but said March 12 that discoveries and acquisitions of new fields have more than offset the 2.5 percent reduction in its older holdings.

BP made a 445 million barrel cut in estimates of the proven oil and natural gas fields it had on its books as of Jan. 1, 2003, according to the London-based company’s latest annual report released this week.

Company spokesman Ronnie Chappell said the revision was not unusual and attributed it to fresh information that BP had obtained about these fields, including the results of additional drilling and new seismic survey data.

Proven reserves are an important asset and a measure of an energy company’s future profit potential.

BP’s reduction came in the wake of a Jan. 9 announcement by Royal Dutch/Shell Group, its London rival, that it was reclassifying 20 percent, or 3.9 billion barrels, of its proved reserves to less certain, unproved categories. Shell’s stunning disclosure led to the resignations earlier this month of its chairman and the chief of its exploration and production business.

El Paso Corp. of Houston reduced its estimated proven oil and gas reserves by 41 percent in February.

Chappell acknowledged that last year’s 2.5 percent reduction in BP’s total estimated reserves of 17.58 billion barrels was the largest the company has made since at least 1998.

However, BP discovered and acquired an additional 2.3 billion barrels of oil and gas last year, including as much as 1.6 billion barrels that it acquired in a joint venture with Russian oil company TNK last August. These new increases in reserves helped boost BP’s total holdings by 4.3 percent by the end of 2003 to 18.34 billion barrels.

Overall, Chappell said BP replaced its oil and gas reserves faster than it used and sold them in 2003. BP’s reserve replacement ratio was 122 percent in 2003. This figure improved to 158 percent if BP’s 50 percent stake in its Russian joint venture TNK-BP was included.