It takes massive amounts of investment capital to explore and drill for oil and gas. more and more investment is required to get any discovered oil produced and transported to market. The risk factors of the market, the geography and politics of an area must be taken into account.

many of the companies turn away from discoveries that were measured in the billions of barrels simply due to the fact that the costs of getting the resource to a refinery made it un-economic at the then current price. Building a pipeline across the Andes to get the product to market exceeded the economic resources available to the company at the time.

the political uncertainties of an area ourweigh the potential economic benifits so capital was invested elsewhere.

It is all about cost benifit and risk analysis.

Usually countries try to woo companies to invest or purchase exploration or study consessions by providing teaser data. This used to be done at the national oil companies offices in Data Rooms where access was purchased by prospective companies. The data was usually data acquired over time from other companies that had previously done work. data such as seismic data collected 30 years ago is still good, modern techniques of processing can pull a lot more information out of it than was possible when it was first collected. New interpetation software also allows interpreters to see things they could not even 10 years ago. So companies will get the data and re-study areas that other companies studied before and may have missed oil deposits.

The exploration begins when a play concept is derived. A concept is an idea concieved by a geologist based on the rocks present in the area and the type of structural history that is evident. First he had to come up with a model for the depositional basin. An example: A geologist sees sandstones and oil bearing shales in an area. He can derive several models. Maybe the rocks were from an ancient river and flood muds, or an ancient river delta along a former coast line. By studying the rocks he can determine which model is most correct. Once he has done that he needs to determine if it was even possible that petroleum formed. This is done by studying the structural history of the basin and whether or not the shales were buried long enough and deep enough to form oil. Then if the oil migrated. If the oil did migrate, did the sandstone in the area undergo structural deformation before or after that. If before the structures may contain oil. If after, the oil probably migrated out and was not trapped. A lot of the formation and trapping is a matter of timing.

Now that he has pieced together the structural history his play concept is taking shape.

He can now present it to management: Organic rich shales were deposited in a near shore delta and fluvial complex. Clean highly porous sandstones formed channel bars, and deltaic sheet sands interbedded with the organic shales due to frequent high energy flood events providing ample potential reservoir rocks. Later burial in the basin showed that the subject shales were in the petroleum generation window for sufficient time to kerogen to be converted to petroleum. Subsequent faulting and deformation of the sand and shale sequence due to tectonic activity in the area has resulted in ample opportuniy for formation of reservoir traps in the form of fold closure and fault closure. It is even likely that stratigraphic traps may have formed due to porosity differnces in the sands.

Once management has bought in on the concept, the geologist gets busy looking for potential plays or prospets in the region.

It is not uncommon for NOCs or national oil companies to pump up the "prospectiveness" of an area simply to get companies to come in and spend money. a country under contract and found that the whole "play concept"

The term Oil Reserve is a general term to describe the ESTIMATED quantity of oil in an area that may be recoverable under existing economic and operating conditions. They can be broken down into two types, Proven and Unproven (probable and possible).

Proven reserves have a 90% degree of confidence under prevailing economic and poltiical conditions with current technology. These are further divided into Proved Developed and Proved Undeveloped. These two further classifications refer to whether existing wells can recover the oil or new wells will be needed.

In the US only proved reserves can be reported to investors.

Unproved reserves are bases on the are waving describe below. They can be Possible (50% confidence) and Probable (<50% confidence).

These numbers are derived from methods that would not impress a fortune teller. Engineers use laboratory derived estimates from little cores no larger around than a small coin and maybe two centimeters long. Based on their examination of the rock properties, they they estimate how much oil the little core could contain, then extrapolate that to cover vast areas that they THINK the rock may exist. Geologists help, but the engineers usually ignore things like changes in the porosity of the rock and depostional enviroment. They may estimate that the rock has 10% porosity. This generates a certain estimate of oil for the body of rock. Of the oil, from experience the amount of recoverable oil is only 30%. The rest is trapped in the rock and can only be freed by secondary or tertiary methods, both drive up the cost of producing it.

So of the OIL IN PLACE (producible + non-producible) only 30% is recoverable. The value of this needs to be weight against the current market price and any existing political risks as well as the future costs of getting it to market.

Another classification is that of Resources, This is the exstimate of petroleum that is potentially recoverable on a given date (considering economics, politics and technology). These are further classed as Contingent (from know accumulations), Prospective (from as yet undiscovered accumulations) and Unconventional (known accumulations of unconventional types: oil shales and sands etc) resources.


There are several methods for estimating the Reserves. The Volumetric method using the small core samples as described above. or Decline curve analysis, where the oil remaining is estimated based on the historic decline in production of a reservoir and the assumption that the production will decline along a linear predictable curve.

An engineer responsible for such analyses and got rewarded for modeling a field in Alaska that increased the reserves for our company. It turned out his estimates were wrong due to failure to account for changes in reservoir porousity. This led to negative tax ramifications and also contract terms since the gas that was supposed to be there and had been "sold" under a production contract was not there and had to be obtained elsewhere to fulfill the terms of the contract with the purchaser.

Other instances of reserves manipulation is when company stock is threatened with being under valued and putting a company at risk of a potential hostile take over. The engineers can increase their porosity numbers from say 10% to 12% and overnight add millions if not billions of barrels of oil to the companies "inventory" of reserves.

This has happened on numerous occasions. Just in recent years, a major oil company, may be it was Shell, was found to have doctored their company reserve estimates.

So, it is not unlikely that two things are happenign in Baluchistan.

The reserve estimates are inflated to attract interest in a region that has huge risks associated with it. The biggest in political. I recall from my days at Phillips Petroleum, when we operated in the Sind Province of Pakistan. We had to regularly pay graft to the local chieftan/govenor to prevent equipment sabotage and work stoppages by the locals. These were hidden under AFE's (authorization for expenditures) for replacement equipment etc. All companies know of these added expenses but they add to the risk factors. Then there is the costs of getting the product to the refineries, pipeline construction, terminals and shipping.

Pipelines are very attractive targets for terrorists or political dissenting parties. They are horribly vulnerable and impossible to protect. They are also a PR nightmare as cutting a pipeline results in massive oil spills. The Alaska pipeline is equipped with cut offs every 1 mile. This still means that a brake in the pipeline results in a volume of oil equal to a pile 36 inches in diameter and one mile long spilling onto the ground. In South America and other areas pipelines have no such safeguards so an accidental cut (due to quakes or landslides) or deliberate cut (due to terrorists or political dissent) results in massive spills.

Offshore reserves are subject to all the same variables plus the additional costs of producing from subsea reservors.

I think that Pakistan (Baluchistan and probably Sindh) have a reasonable amount of oil, but it is hard to say what reserve numbers mean. How were they derived and for what purpose?
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