Registration Document 2005 - Total.com

10
Oil and gas reserves
The following tables present, for crude oil, condensates and natural
gas liquids reserves and for the natural gas reserves, an estimate
of the Group’s oil and gas quantities by geographical areas at
December 31, 2005, 2004 and 2003.
Quantities shown concern:
•
proved developed and undeveloped reserves together with
changes in quantities for 2005, 2004 and 2003;
• proved developed reserves.
The definitions used for proved oil and gas reserves, proved
developed oil and gas reserves and proved undeveloped reserves
are in accordance with the applicable US Securities & Exchange
Commission regulation, Rule 4-10 of Regulation S-X.
Proved reserves are estimated using geological and engineering
data to determine with reasonable certainty whether the crude oil
or natural gas in known reservoirs is recoverable under existing
economic and operating conditions.
This process involves making subjective judgments; consequently,
measures of reserves are not precise and are subject to revision.
The estimation of proved reserves is controlled by the Group
through established validation guidelines. Reserve evaluations
are made annually by senior level geoscience and engineering
professionals (assisted by a central reserves group with significant
technical experience) including reviews with and validation by senior
management.
Significant features of the reserves estimation process include:
•
•
Appendix 2 - Supplemental oil and gas information (unaudited)
Oil and gas reserves
internal peer-reviews of technical evaluations also ensuring that
the SEC definitions and guidance are followed; and
a requirement that management make significant funding
commitments toward the development of the reserves prior to
booking.
All references in the following tables to reserves or production
are to the entire Group’s consolidated share of such reserves or
production. TOTAL’s worldwide proved reserves include the proved
reserves of its consolidated subsidiaries as well as its proportionate
share of the proved reserves of equity affiliates and of two
companies accounted for by the cost method.
232 TOTAL - Registration Document 2005
The reserve estimates shown below do not include quantities
that may or may not be produced, due to changes in economic
conditions or pursuant to new technologies.
Rule 4-10 of Regulation S-X requires the use of the year-end price,
as well as existing operating conditions, to determine reserve
quantities. Reserves at year-end 2005 have been determined
based on the Brent price on December 31, 2005 (58.21 $/bbl).
Proved reserves are the estimated quantities of TOTAL’s entitlement
under concession contracts, production sharing agreements or buy
back agreements. These estimated quantities may vary depending
on oil and gas price.
An increase in year-end price has the effect of reducing proved
reserves associated with production sharing or buyback
agreements (which represent approximately 28% of TOTAL’s
reserves as of December 31, 2005). Under such contracts, TOTAL
is entitled to receive a portion of the production, calculated so that
its sale should cover expenses incurred by the Group. With higher
oil prices, the volume of entitlement necessary to cover the same
amount of expenses is lower.
This reduction is partially offset by an extension of the duration over
which fields can be produced economically. However, the increase
in reserves due to the extensions is smaller than the decrease in
reserves under production sharing or buyback agreements.
For this reason, a higher year-end price translates into a decrease
in TOTAL’s reserves.
Considering the relatively high Brent price on December 31, 2005
(Brent $ 58.21/bbl), an estimate of reserves is provided herebelow
for a price of Brent $ 40/b. These estimates are for reserves that
would have been calculated in accordance with Rule 4-10 of
Regulation S-X if the Brent price at December 31, 2005 had been
$ 40/b, which is comparable to the 2004 year-end price of
$ 40.47/b. The proved reserves calculated under this $ 40/b
assumption would have been 11,329 Mboe.
The percentage of proved developed reserves has remained
relatively stable over the past five years, indicating that proved
reserves are consistently moved from undeveloped to developed
status. Over time, undeveloped reserves will be reclassified to the
developed category as new wells are drilled, existing wells are
recompleted and/or facilities to produce from existing and future
wells are installed. Major development projects typically take two to
four years from the time of recording proved reserves to the start of
production from these reserves.