Reserves

At the end of 2011, Santos’ total proved and probable (2P) hydrocarbon reserves were 1,364 million barrels of oil equivalent (mmboe).

Successful appraisal and commercialisation activity, and the sanctioning of the Fletcher Finucane project, added 82 mmboe of 2P reserves in 2011.  The reserve additions represent an organic 2P reserves replacement ratio (RRR) of 173%, before net acquisitions and divestments.

The reserve additions were driven by strong growth in Cooper Basin gas reserves combined with increases in coal seam gas (CSG) reserves dedicated to the GLNG project.

Reserves - Santos Share (million boe)

Defining Reserves

Santos has in place an evaluation and reporting process that is in line with international industry practice and conforms with the 2007 Petroleum Resource Management System (PRMS) published by the Society of Petroleum Engineers (SPE), World Petroleum Council (WPC), the American Association of Petroleum Geologists (AAPG) and the Society of Petroleum Evaluation Engineers (SPEE). Reserves are defined as those quantities of petroleum which are anticipated to be commercially recovered from known accumulations from a given date forward.

Santos reports reserves net of the petroleum required for processing and transportation to the customer. Reserves reported are based on, and accurately reflect, information compiled by full-time employees of the Company who have the requisite qualifications and experience prescribed by the ASX Listing Rules.

Externally audited booking process

Santos engages independent experts Gaffney, Cline & Associates, Netherland, Sewell & Associates, Inc. and DeGolyer and MacNaughton to audit and/or evaluate reserves and contingent resources.  The auditors found that, based on the outcomes of each of the respective audits and evaluations, and their understanding of the estimation processes employed by Santos, that Santos’ 31 December 2011 reserves and contingent resources quantities in aggregate compare reasonably to those estimates prepared by the auditors. In addition, based on incorporating the results from the other auditors, without independent validation of their results and Santos’ own estimates for unaudited properties, Gaffney, Cline & Associates found that, in the aggregate, the total volumes summarised in the Santos summary table represents a reasonable estimate of Santos’ 31 December 2011 reserves and contingent resources position.

Reserves are defined by Santos on the following basis:

Proven (1P) reserves are those reserves that, to a high degree of certainty (90% confidence), are recoverable. There is relatively little risk associated with these reserves. Proven developed reserves are reserves that can be recovered from existing wells with existing infrastructure and operating methods. Proven undeveloped reserves require development.

Proven plus Probable (2P) reserves are those reserves that analysis of geological and engineering data suggests are more likely than not to be recoverable. There is at least a 50% probability that reserves recovered will exceed Proven plus Probable reserves.

Proven, Probable plus Possible (3P) reserves are those reserves that, to a low degree of certainty (10% confidence), are recoverable. There is relatively high risk associated with these reserves.

Contingent Resources are those quantities of hydrocarbons which are estimated, on a given date, to be potentially recoverable from known accumulations, but which are not currently considered to be commercially recoverable. Contingent Resources may be of a significant size, but still have constraints to development. These constraints, preventing the booking of reserves, may relate to lack of gas marketing arrangements or to technical, environmental or political barriers.