Question

What is the distinction between undiscovered resources and proved reserves of crude oil, and what factors cause the amounts of each to change?

Short answer

Undiscovered resources are potential oil deposits predicted based on geological data, but not yet found, while proved reserves are quantities of oil that could be extracted from known reserves under existing conditions. Factors impacting undiscovered resources include geological discoveries, technological advancements, and economic factors such as oil prices. Similarly, changes in proved reserves can be caused by improvements in technology, fluctuations in oil prices, and new oil discoveries.

Step-by-step solution

Definition of Undiscovered Resources and Proved Reserves

Undiscovered resources refer to potential oil deposits or fields that are predicted to exist based on geological data, but have not been yet located or drilled. In contrast, proved reserves are quantities of crude oil that can be extracted from known reserves under current economic conditions with existing technology.

Factors Impacting Undiscovered Resources

The amount of undiscovered resources can change due to several factors. Firstly, geological factors such as seismic studies and drilling can either confirm or disprove the existence of these resources. Secondly, advancements in technology can allow for more accurate predictions and detection of resources. Lastly, economic factors like oil prices can influence exploration activities, with higher prices incentivizing more exploration.

Factors Impacting Proved Reserves

The amount of proved reserves can also change due to several reasons. One, changes in technology can increase the amount of recoverable oil in a reserve. Two, fluctuations in oil prices can make it economically practical to extract more oil. Three, new discoveries from exploration activities may lead to increase in the quantity.