SPE 88554

Forecast of Natural Gas Development: from the Point of Reserve-production Ratio

Wang Feng-Jiang, Ma Xin-Hua, SPE, and Cong Lian-Zhu, Research Institute of Petroleum Exploration and Development,
PetroChina Company Limited

Copyright 2004, Society of Petroleum Engineers Inc.

for prediction.
This paper was prepared for presentation at the SPE Asia Pacific Oil and Gas Conference and Based on the analysis of gas RPR, the rational RPR level
Exhibition held in Perth, Australia, 18–20 October 2004.
for China was discussed. Taking RPR as a controlling factor,
This paper was selected for presentation by an SPE Program Committee following review of
information contained in a proposal submitted by the author(s). Contents of the paper, as
the natural gas development was predicted.
presented, have not been reviewed by the Society of Petroleum Engineers and are subject to
correction by the author(s). The material, as presented, does not necessarily reflect any
position of the Society of Petroleum Engineers, its officers, or members. Papers presented at Phase of natural gas development and RPR
SPE meetings are subject to publication review by Editorial Committees of the Society of
Petroleum Engineers. Electronic reproduction, distribution, or storage of any part of this paper
characteristics
for commercial purposes without the written consent of the Society of Petroleum Engineers is
prohibited. Permission to reproduce in print is restricted to a proposal of not more than 300
words; illustrations may not be copied. The proposal must contain conspicuous Four-phase mode of gas development. From the history of
acknowledgment of where and by whom the paper was presented. Write Librarian, SPE, P.O.
Box 833836, Richardson, TX 75083-3836, U.S.A., fax 01-972-952-9435.
natural gas industry in a number of countries (Fig 1 illustrates
America’s case), a four-phase mode could be induced. i.e.:
Phase 1: early stage of exploration and development: This
Abstract
stage could be characterized as low level of gas reserve and
production rate. As a result, gas consumption remains low.
Reserve-production ratio (RPR) is a key factor in the
RPR could have a wide range of change and behaves
strategy of natural gas development. According to the
unsteadily. New findings could give relatively large affect to
characteristics in the course of gas industry development, a
RPR and leads to jump of RPR. For example, the gas history
four-stage mode was developed. Current stage for China’s gas
of America before 1930 was this case. The annual production
development was identified as a benchmark for prediction.
was less than 55 billion cubic meters (bcm), and RPR waved
The factors influencing RPR were analyzed, and the rational
between 12 and 23.
RPR level for China was discussed. The gas development of
Phase 2: booming stage of exploration and development:
China was predicted using a method taking RPR as a
this phase would see the fast and steady growth in both reserve
controlling factor.
and production. Accompanying with new findings of gas
reserve and relative delay of producing, RPR increases rapidly
Introduction
and could reach its historical summit. As long as the
production increases, RPR would decreases to a lower level.
Reserve-production ratio (RPR) means the ratio of the
In the booming stage of gas in America (from 1930 to 1973),
remaining recoverable reserve to the current annual
the remaining recoverable reserve went up from 1303 bcm to
production. RPR implies how many years the existent
7670 bcm, and production grew from 54.2 bcm/a to 641
remaining reserve can support a production of the current rate.
bcm/a, and RPR witnessed an increase from 24 to 37 in the
The value chain of natural gas industry is an integrated
period of 1930 to 1945 and a decrease to 11.9 in 1973.
system of up-, mid-, and down-streams, and RPR is a concern
Phase 3: sustained development stage of exploration and
of both up- and down-stream sections. RPR is a key factor in
production: in this phase, the production rate and RPR would
the strategy of natural gas development. It has been realized
remain relatively steady, reflecting a balance between
that the level of RPR is related with the harmonious
exploration and production. For the case of America (since
development of the natural gas industry: For the upstream of
1974), the production rate sustained between 530-630 bcm/a,
gas industry, RPR is not only a balance between exploration
and RPR remained 8.3 to 11.6.
and production, but also a balance between short-term interest
Phase 4: late stage of exploration and development: in the
and long-term stable development for a particular enterprise.
late stage, RPR decrease and production decline will occur as
Further, the level of the ratio is closely related with the
a result of reserve decrease.
development of the mid- and downstream. RPR is often taken
Gas development in China. Since 1990, China’s gas
as an essential factor in the decision making of infrastructure
industry has been entering a booming stage of exploration and
construction and the gas marketing.
development. A number of exploration breakthroughs have
According to the history of gas industry advancement and
been obtained, resulting in the discoveries of new gas fields
the RPR characteristics in other countries, a four-stage mode
and rapid growth of gas reserve. In 1989, the accumulative
of gas development was proposed. This mode was applied to
proved reserves of gas was 559.7 bcm, while in 2002, it has
China’s gas development analysis. The current stage for
reached 3376.3bcm, indicating an annual increase averaged
China’s gas development was identified as a benchmark
at 216.7 bcm.
2 SPE 88554
Gas output was growing in a steady to fast manner. In 1989,
the gas yield was 14.5 bcm, while in 2002, it arrived
at 31.6 bcm.
With the stable progress of natural gas exploration and
development in Sichuan basin, a few of new natural gas areas
including Tarim Basin, Ordos Basin, Tsaidam Basin and
South China Basin have come into being.
Along with increase of gas reserve, gas RPR has increased
substantially. With the remaining recoverable gas reserve
growing from 170.8 bcm in 1989 to 1863.2 bcm in
2002(solution gas not involved), reserve-production ratio of
gas reservoir gas has risen from 18 in 1989 to 77.9 in 2002(Fig
2). A good foundation of resources is held for China’s natural
gas industry to achieve further development.
China’s natural gas transmission and distribution system is
also developing rapidly. A number of gas pipelines, such as
West-East pipeline (Tarim Basin to the Yangtze River Delta),
Zhongxian-Wuhan pipeline (Sichuan Basin to Central China)
and the 2nd Shaanxi-Beijing pipeline (Ordos Basin to North
China) are currently under construction or planning. The
planning and construction of underground gas storage have
been launched synchronously.
Overall, China’s natural gas industry has been entering into
the stage of booming development. It is expected that the
summit will be seen in about 15 to 20years, and then
continued with a platform period, i.e. the sustained
development stage of exploration and production.
Rational RPR
In this paper, the rational RPR means the rational level of
RPR at which to maintain at the sustained development phase.
Overview of Foreign gas RPR. Statistics1 indicated the
span of distribution interval for natural gas RPR was quite
large. In 1999, for instance, RPR data from 55 countries
showed that UK had the lowest (7.2), Papua New Guinea had
the highest (1,184.6), and the arithmetic average was 58.1.
The analysis of distribution frequency indicates there are 18
countries with a RPR in range of [10, 30], nearly occupying
one thirds of the sum number. It was the most concentrated
distribution interval (Fig 3). In view of regions, the natural gas
RPR of the Middle East was the highest (376.2), following
were Africa (129.5), CIS countries (78.6), Asia-Pacific region
(42.3), and Western Europe (15.3), and America
countries (15.4).
Factors affecting RPR. There may be a number of factors
affecting RPR in a particular region or country, and it is
difficult to find a direct correlation between these factor and
RPR. According to our primary survey, in most cases, the
abundance of local resources, development level of gas
industry, and the guarantee status of gas supply sources, etc.
are key factors related to the level of RPR.
Abundance degree of resources. It is common that the
more abundant are the natural gas resources, the higher is the
level of RPR. In accordance with the net import/export status
of natural gas, the countries except those with supply –
demand-balanced gas, fall into two classes: those with
relatively excess resources (Class I) and those with relatively
insufficient resources (Class II). Class I refer to the countries
with net export natural gas, whose gas yield of natural can not
only satisfy the demand of their own, but also supply foreign
markets. According to the statistics of 1998, fourteen countries
fall into this group whose mean value of RPR was 41.2.
Excluding United Arab Emirates, Iran and Tunisia (Although
enjoying abundant gas resources, gas development in these
countries features backward), Class II included 11 countries
with net import of natural gas. The mean value of gas RPR for
these countries was 16.3.
Development level of gas industry. Generally, the lower is
the development level of natural gas industry, the higher is the
RPR, and as long as the natural gas industry get more mature,
gas RPR becomes lower. For instance, although African
countries are not rich in gas resources, they had high RPR
(over 70) because of the low gas development and utilization
level. RPR in a few countries reached several hundreds or
even over one thousand. On the contrary, the countries with
relatively advanced gas industry generally witness a relatively
low RPR. In 1999, for example, the natural gas RPR for USA,
Canada and UK were respectively 8.3, 9.5, and 7.2. In Russia,
a country with extremely abundant reserves, the remaining
recoverable reserves were 48 trillion cubic meters, and the
annual yield was 690 bcm, resulting in a RPR of 69.8. It can
be inferred that the RPR in Russia would be much higher than
70 if without highly advanced natural gas industry.
Guarantee conditions of gas sources. Usually a high
guarantee degree of gas supply sources is favorable for leading
to a low RPR. In Canada and UK, for example, a stable gas
supply can be relied on the local gas sources. Romania,
Hungary, Germany, Italy and other European countries can get
reliable pipeline gas supply from Russia for a long term,
although the local resources are insufficient. In the North
American region, the perfect gas pipeline network combines
the gas sources and consumption markets into one system, and
the long-term stable gas supply can be ensured. Therefore, a
relatively low level RPR has maintained in all the above-
mentioned regions.
Rational RPR for China. As mentioned above, the issue of
RPR is extremely complex. It is hard to select a definite value
as the rational RPR for a particular country or region.
However, a tentative opinion was proposed based on the
existent knowledge.
In the long run, China’s natural gas resources will be
relatively insufficient, and it will be hard to hold a high RPR.
According to 14th WPC, China occupies only 3% of
conventional gas resource of the world. Moreover, with the
advancement of the national economy, gas proportion in the
energy mix will be lifted substantially. According to the
market survey, gas demand will increase vigorously2, and
reach 100 to 110 bcm in 2010 and over 200 bcm in 2020,
respectively. It is not quite possible for the domestic gas to
meet such a demand. Therefore, China can be classified into
the countries of insufficient natural gas resources. So, in the
future, RPR of China would be more close to the average level
that of the countries with insufficient gas resources.
With the buildup of gas pipelines and the enlargement of
consumption, the gas yield will increase substantially. As the
gas industry gets more mature, the RPR will decrease rapidly
in the next ten to twenty years.
It is viable for China to share gas resources of the world3. A
series of LNG import projects has been under planning, and
SPE 88554 3

some has been put into construction. Besides, preliminary Conclusions

study indicates it is feasible to import pipeline gas from Russia
and Central Asian countries. Availability of foreign gas will
help to realize a stable gas supply to the consumers, and
maintain a relatively lower RPR for domestic gas exploitation.
According to the analysis of historical data, a critical RPR
exists for a particular region, i.e., the minimum RPR for
maintaining a stable production (As for Sichuan gas zone in
China, the critical RPR was 15.4). Therefore, RPR should not
be unlimitedly low to support a lasting productivity.
Based on the analysis to the gas development mode, it is
estimated that the rational RPR level for China is around 20.
This could come into being about fifteen to twenty years later,
i.e., in the year of 2020 or so.
China’s natural gas industry has been entering into the stage
of booming development. It is expected that the summit would
be seen in about 15 to 20years.
It is estimated that the rational RPR level for China is
around 20. This could come into being in the year of
about 2020.
Based on the current knowledge of gas reserve growth
trend, gas yield could increase to 120 to 130 bcm in 2020.
Acknowledgements
The authors thank Research Institute of Petroleum
Exploration and Development for its permission to publish
this paper.

Forecast of gas exploration and development References

Gas exploration has lasted over one hundred years in 1. Hu Aolin, et al,: “World Report on Natural Gas,2000”, Sichuan
America, and almost seen the whole process of gas reserve Narural Gas Economics and Information Center, 2000
increase. In terms of annual increase of proved gas reserve, 2. Qian Kai, et al.: “A Study on China’s Natural Gas Exploitation
gas exploration in America (Fig 4) witnessed early Strategy”, Project Study Report, April 2001
(before1917, cumulative discovery rate within 10%), fast 3. Gao Shoubai, et al.: “Available Natural Gas Resources in the
growth (1917-1957, cumulative discovery rate 10-45%, annual Surrounding Countries”, Collection of Papers on Natural Gas
Exploration and Development Technologies, Petroleum Industry
discovery rate averaged at 1%), stable growth (1958-1974, Press, Page 138, Nov. 2000
cumulative discovery rate 45-60%, annual discovery rate
averaged at 0.9%) and decline stages (after 1974, cumulative
discovery rate over 60%). It was believed this mode has a
common sense in the trend of gas reserve growth and could be
applied to China.
As mentioned before, gas exploration in China has entered
into a new phase of high growth rate of reserve. In the next
twenty to thirty rears, it is expected gas reserve would be
found at a rate of over one percent of the ultimate reserve2.
Taking RPR as a controlling factor ， a method was
developed for mid- and long-term prediction.

t
Qo × RPRo + ∑ ∆RESi − ∫ Q(t )dt = Qt × RPRt
t

1
i =1

Where
Qo：initial production just before forecast period
RPRo：initial RPR just before forecast period
Δ RESi：increment of recoverable reserve
Q（t）：annual production
Qt：production of forecast time point
RPRt：RPR of forecast time point
According to the above relation and reserve increase trend,
assuming RPR in 2020 will be about 20, it was predicted that
gas production will be 80 to 90 bcm and 120 to 130 bcm in
2010 and 2020, respectively.
4 SPE 88554

9000 40

8000
35
8 3

7000
Reserve，10 m ；Production，10 m

30
6000

5000 25

RPR
9 3

4000 Remaining recoverable reserve 20

Production
3000
RPR
15
2000

10
1000

0 5
1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
Year

Fig 1 Gas development history in America

250 20000

18000

200 Remaining recoverable gas reserve 16000

3
Remaining recoverable reserve, 10 m

Well head production

8

Reserve-production ratio 14000

Production,10 m , RPR
150 12000

10000 3
8

100 8000

6000

50 4000

2000

0 0
1949 1953 1957 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001
Year

Fig 2 History of gas exploration and development of China

SPE 88554 5

40

32.7 Num. Proportion,%

30
Frequency

20 18

12.7
10.9 10.9
10 9.1 9.1
7.3 7.3 7
6 6
5 5
4 4

0
[7,10] [10,30] [30,60] [60,70] [70,100] [100,200] [200-300] [300,1200]

RPR interval

Fig 3 RPR distribution in 1999

3.5 70

Annual discovery rate

3 Cumulative discovery rate 60

2.5 50

Cummulative discovery rate, %

Annual discovery rate, %

2 40

1.5 30

1 20

0.5 10

0 0
1900 1910 1920 1930 1940 1950 1960 1970 1980
Year

Fig 4 Gas discovery history of America