Key terms are defined as follows:

Term	Definition
Ultimate recovery	Total recovery from a field, i.e. reserves plus past production.
Reserves	Discovered, remaining reserves which are recoverable and commercial. Can be proven, probable or possible depending on confidence level (as described below).
Potential additional reserves	Discovered reserves that are not currently technically or economically producible.
Undiscovered resources	Undiscovered potentially recoverable resources in mapped leads.

Reserves are categorised as being ‘proven’, ‘probable’ or ‘possible’ based on confidence levels, as follows:

Introduction

The methodology for calculating undiscovered resources uses undiscovered potential resources in mapped leads. In areas where detailed mapping has been carried out, mapped leads are analysed by standard statistical techniques to obtain estimates of resources in each basin. Geological risk is assigned by play and also to each individual lead. For each geological basin, the risk factors are calibrated to drilling results.

In previous years, only leads mapped by DTI were used to generate undiscovered resource estimates. This year, leads and prospects mapped by oil companies were added. These were mainly extracted from Licence Round application documents and Fallow Block submissions. Little mapping is done by DTI in licensed acreage so there are large gaps in the mature areas of the UKCS with little prospect data. Company data have been used to populate these areas. This year we have excluded the highest risk leads from the estimate as part of the calibration of risking to historical drilling results and to risking provided for the oil industry generated prospects. The database is updated to take account of the new drilling and mapping that took place in 2003.

The table below summarises current estimates of the hydrocarbons technically recoverable from the undiscovered resources on the UKCS.

Estimates of Technical Recovery from Undiscovered Resources on the UKCS(1) by Geological Area as at end 2003
[figures in brackets for end 2002]

Notes

1. Includes onshore and offshore assessments.
2. All entries are rounded to the nearest one million tonnes of oil or to one billion cubic metres of gas.
3. Every offshore prospect included in the detailed analysis on which this table is based was estimated to contain resources of at least 1.33 million tonnes (10 million barrels) or 0.57 billion cubic metres (20 billion cubic feet) of gas. For prospects in West of Shetland the minimum size is at least 4 million tonnes of oil (30 million barrels) or 5.7 billion cubic metres of gas (200 billion cubic feet).
4. Gas associated with oil and condensate.
5. The conversion factors used are 7.5 barrels/tonne for oil and 35.31 bcf/bcm for gas.
6. The figures in the table have the highest risk prospects removed. If these are included, the range of resources increases to 413 - 900 - 1986 million tonnes and 306 - 535 - 1295 billion cubic metres.

* Areas where detailed studies are limited or not carried out.

Estimated undiscovered resources have increased in the Central North Sea because of the large number of company generated leads and prospects added to the area. New company leads and prospects contributed to the increase for West of Shetland. Recent DTI mapping also contributed to this increase.

The Southern North Sea central estimate has reduced from 216 billion cubic metres to 178 billion cubic metres. This is mainly due to a change in the method of calculation which removed the highest risk leads from the estimate. This process was performed for all basins as part of the calibration of risking to historical drilling results and to risking provided for the oil industry generated prospects. Only in the Southern North Sea did this have a significant impact as the leads mapped there are predominately in the margins of the basin in higher risk plays. There are few mapped prospects in the main Leman sand play as this mature area is rarely unlicensed and so has had little recent mapping by DTI.

Estimated technical recovery from undiscovered oil resources lie in the range 323 - 1,826 million tonnes at the end of 2003, compared to 272 - 1,770 million tonnes at the end of 2002. Estimated technical recovery from undiscovered gas resources lie in the range 279 - 1,259 billion cubic metres compared to the previous estimate of 238 - 1,386 billion cubic metres.

Estimates of undiscovered resources must be treated with caution. They provide only a broad indication of the ultimate remaining potential. Commercially recoverable reserves will strongly depend on whether leads are sufficiently de-risked to drillable levels. The limits of these ranges should not be regarded as minima or maxima. The mid range figures do not imply that these volumes are the most likely to be discovered. No estimate is made of unconventional gas resources.

The US Geological Survey publishes estimates of undiscovered resources on the UKCS every five years, the most recent in 2000. The method used is also published and is based on statistics for each geological basin. This method was used by DTI to generate estimates using all existing field and discovery sizes (with a minimum size of at least 4 million barrels of oil or 20 billion cubic feet of gas). A lower - central - upper case range of 3.8 - 7.9 - 14.4 billion barrels of oil equivalent resulted. The DTI standard, individual prospect based figures for oil and gas in the table above give a lower - central - upper case range of 4.0 - 7.4 - 16.0 billion boe. These ranges do not include estimates from the West of Scotland, Land and other areas of the UKCS where there is insufficient data to generate the basin statistics from existing fields and discoveries. The lower and central estimates are similar to the USGS method but the upper case estimates are different by 1.6 billion boe. This is probably due to the uncertainty involved in the estimation of the upper cases.