Reserve replacement ratio

An oil company's reserve replacement ratio is the amount added to its reserves divided by the amount extracted. A ratio of 100% means current production is sustainable, above 100% means it can grow, and below 100% means it is likely to decline.

As the amount of discoveries and changes in estimates fluctuates from year to year, it is common practice to calculate the reserve replacement ratio over several years.

The use of the proven oil reserves is common, but a case can be made for including probable reserves as well. Either way, these numbers are very susceptible to manipulation by the companies, and care needs to be taken, particularly with inter-company comparisons.

The reserve replacement ratio is also sometimes calculated at a global or national basis, usually in the context of long term industry and economic forecasting. As national numbers for reserves are even more likely to be manipulated, these numbers need to be treated with some caution.

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