such reserve estimates on all producing properties (those of all of their competi- 

 tors as well as their own) to stay posted on their relative reserve position, and to 

 help their pipe-line subsidiaries in their competition for control of the available 

 oil. 



In spite of the fact that these valuations are in daily use by every part of 

 the oil and gas business, and although they are computed on large, expensive 

 mechanical calculators that carry the answer out to four decimal places — still 

 they are all based on assumptions and are far from exact. Every engineering 

 valuation assumes (1) some continuity of reservoir rock and porosity, (2) some 

 amount of connate water, (3) a recovery factor, (4) a future rate of production, 

 (5) a future price for oil or gas, (6) future costs, and (7) some discount factor 

 or factors. In addition to the above seven estimates, at least some of the follow- 

 ing factors are estimated in every valuation (usually one half of them are 

 estimates) ; (8) productive acreage, (9) thickness of productive zone including 

 gas-oil and oil-water contacts, and the amount of cross section that is porous, 

 (10) percentage of porosity and how permeable, and (11) shrinkage factor. 



As mentioned above, quite reliable valuations can be made by a geologist 

 who is well acquainted with the general area if he uses only a map and a set 

 of electric logs; and very many of the valuations are based only on that data. 

 Rather than bemoaning the mistakes in valuations, we should marvel that they 

 are so near right and have formed a basis on which the oil and gas business 

 could grow to where its present annual production exceeds the annual national 

 production of coal, iron, copper, gold, silver, and all other metals combined. 



FIGURING THE RESERVE In actual practice the figuring of the reserve 



by the engineering (often called the volu- 

 metric) method involves (1) delineating the reservoir area and thickness, and 

 calculating the acre-feet of gross rock, (2) figuring the amount of pore space 

 in that reservoir, (3) deducting the part of space occupied by water, (4) figur- 

 ing the oil or gas in place, (5) deducting the shrinkage it will suffer on coming 

 to atmospheric pressure and temperature, (6) deducting the part of oil or gas 

 that will not be recoverable by present methods and will therefore be left in 

 the ground, and (7) deducting the past cumulative production — what has al- 

 ready been produced. 



For oil, these steps are usually expressed in the following formula: 



R = 7758 X A X T X Px (1-7) xSxF 



in which R is the recoverable reserve. 



The 7758 is the number of barrels of tank-stock oil needed to fill one acre, 

 one foot deep. 



797 



