Registration document 2007 - Total.com

10
The following tables present, for crude oil, condensates and
natural gas liquids reserves and for the natural gas reserves, an
estimate of the Group’s oil and gas quantities by geographical
areas at December 31, 2006, 2005 and 2004.
Quantities shown concern:
• proved developed and undeveloped reserves together with
changes in quantities for 2006, 2005 and 2004;
• proved developed reserves.
The definitions used for proved oil and gas reserves, proved
developed oil and gas reserves and proved undeveloped
reserves are in accordance with the applicable U.S. Securities
and Exchange Commission regulation, Rule 4-10 of Regulation
S-X.
Proved reserves are estimated using geological and engineering
data to determine with reasonable certainty whether the crude oil
or natural gas in known reservoirs is recoverable under existing
economic and operating conditions.
This process involves making subjective judgments;
consequently, estimates of reserves are not exact measurements
and are subject to revision.
The estimation of proved reserves is controlled by the Group
through established validation guidelines. Reserve evaluations are
made annually by senior level geoscience and engineering
professionals (assisted by a central reserves group with
significant technical experience) including reviews with and
validation by senior management.
Significant features of the reserves estimation process include:
• internal peer-reviews of technical evaluations also ensuring
that the SEC definitions and guidance are followed; and
• a requirement that management make significant funding
commitments toward the development of the reserves prior to
booking.
All references in the following tables to reserves or production are
to the entire Group’s consolidated share of such reserves or
production. TOTAL’s worldwide proved reserves include the
proved reserves of its consolidated subsidiaries as well as its
proportionate share of the proved reserves of equity affiliates and
of two companies accounted for by the cost method.
The reserve estimates shown below do not include quantities
that may or may not be produced, due to changes in economic
conditions or pursuant to new technologies.
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Appendix 2 – Supplemental oil and gas information (unaudited)
Oil and gas reserves
Oil and gas reserves
TOTAL – Registration Document 2006
Rule 4-10 of Regulation S-X requires the use of the year-end
price, as well as existing operating conditions, to determine
reserve quantities. Reserves at year-end 2005 have been
determined based on the Brent price on December 31, 2006
($58.93/b).
Proved reserves are the estimated quantities of TOTAL’s
entitlement under concession contracts, production sharing
agreements or buy back agreements. These estimated quantities
may vary depending on oil and gas price.
An increase in year-end price has the effect of reducing proved
reserves associated with production sharing or buyback
agreements (which represent approximately 30% of TOTAL’s
reserves as of December 31, 2006). Under such contracts,
TOTAL is entitled to receive a portion of the production,
calculated so that its sale should cover expenses incurred by the
Group. With higher oil prices, the volume of entitlement
necessary to cover the same amount of expenses is lower.
This reduction is partially offset by an extension of the duration
over which fields can be produced economically. However, the
increase in reserves due to the extensions is smaller than the
decrease in reserves under production sharing or buyback
agreements. For this reason, a higher year-end price translates,
on the whole, into a decrease in TOTAL’s reserves.
The percentage of proved developed reserves has remained
relatively stable over the past five years, indicating that proved
reserves are consistently moved from undeveloped to developed
status. Over time, undeveloped reserves will be reclassified to the
developed category as new wells are drilled and/or facilities to
produce from existing and future wells are installed. Major
development projects typically take two to four years from the
time of recording proved reserves to the start of production from
these reserves.