The reserves-to-production ratio is the most widely quoted of the key indicators used in the oil and gas industry. It has a certain strategic significance for companies, which try to keep the value reasonably constant at approximately 10 years. A ratio which falls too low indicates a company in poor health. For a country or region, a value which falls too low can be a warning of impending scarcity. Globally, the RPR for petroleum varies from 8 years in the North Sea to 80 years in the Middle East. The former is typical of a region undergoing a steep production decline, the latter a region which will be continuing to produce oil well into the future. The reserves-to-production ratio can be misleading to the average person, particularly since it is expressed in years. The fact that a region has a RPR of 40 years does not mean that it will continue to produce the resource for 40 years, at which point it will suddenly run out, and then production will decline to zero. More commonly, a resource will show an increase in production until it reaches a peak, and then production will plateau and enter a declining phase. In theoretical terms, this is more accurately described by the
Hubbert curve, a bell-shaped curve which is the mathematical
derivative of the
logistics function. The magnitude of the RPR is inversely related to the annual rate of production, which may depend on
geological features. For example, a highly fractured oil reserve with water drive may have a RPR as low as 6 years. By contrast, a low permeability oil reserve may have a RPR as high as 50 or 100 years. Government policies may deliberately slow production, thereby increasing the RPR in the interests of prolonging reserve life, whereas a company may inject water and/or gases into a reservoir to increase production, thereby decreasing the RPR—the increased production comes at the expense of decreased reserve life. The RPR depends significantly on the stage of resource development. Typically, there is a high initial RPR during the early phases of development, then the RPR sharply declines toward the maximum level of production. Following to the production decline, the magnitude of the P/R ratio can either continue to decline, remain stable for some period of time, or increase, especially when a production slump occurs. New discoveries, changes in technology, or changes in economic conditions, can significantly alter the ratio in a short period of time, while misevaluation by involved parties can produce inaccurate and/or misleading results. Optimism or pessimism can influence reserve estimates. Further, reserves are resources that are
economically recoverable under
existing conditions. Reserves may change as a result of political change, or by manipulation. Consumption of many resources is not constant, but typically increases as the population grows and becomes more prosperous. Non-constant values for both the numerator and denominator of the ratio implies it may either overestimate or underestimate the remaining life of the resource. == Fossil fuel reserve-to-production ratios ==