DEFINITION of 'Reserves to Production Ratio'

The reserves to production ratio indicates the remaining lifespan of a natural resource, given a production rate. This ratio is expressed in terms of years, and is used in forecasting project life, income, employment, etc. While applicable to all natural resources, it is primarily used in the oil and gas industry.

RPR = amount of known resource
amount produced per year

BREAKING DOWN 'Reserves to Production Ratio'

Often this ratio is used to estimate how many years' worth of oil a country may have. If a country has 10 million barrels of proven oil reserves, for example, and it is producing 250,000 barrels a year, then the RPR, or life of the reserves, is 10,000,000/250,000 = 40 years.

The reserves to production ratio for a resource can change as new technology emerges. New technology that enables extraction of oil, for example, that was previously not extractable can extend the life of a reserve and create new reserves. In the oil and gas industry, hydraulic fracturing and horizontal drilling have opened up many oil reserves that were not previously recoverable.

RELATED TERMS
  1. Recoverable Reserves

    Recoverable reserves are oil and gas reserves that are economically ...
  2. Reserve Ratio

    The portion (expressed as a percent) of depositors' balances ...
  3. Oil Reserves

    An estimate of the amount of crude oil located in a particular ...
  4. Barrels Of Oil Equivalent Per Day ...

    A term that is used often in conjunction with the production ...
  5. Possible Reserves

    An estimate of the amount of oil or natural gas reserves that ...
  6. Working Reserves

    Reserves held by banks above the required minimum level - or ...
Related Articles
  1. Investing

    Key Financial Ratios to Analyze Oil Companies

    Learn about key financial ratios investors will want to use when analyzing oil companies, and what these ratios say about the future prospects for companies.
  2. Investing

    Natural Gas Industry: An Investment Guide

    Investors looking into this industry are faced with a confusing amount of information. We explain the important concepts and terms.
  3. Insights

    Here Are the Countries With the Most Natural Resources

    Commodities are the raw materials for all products produced worldwide. This article lists the top 10 countries with the most natural resources.
  4. Investing

    Top 5 Oil-Producing Countries In 2011

    The recent spike in the price of oil has once again drawn our attention to the importance of a ready supply of oil to our modern economy.
  5. Investing

    The Strategic Oil Reserves Explained

    Strategic oil reserves are one of the least known and least understood national security measures in the United States.
  6. Investing

    Want To Start Trading Oil? Understand The Basics First

    The overall economics of oil extraction is that there is money in it - both for extraction companies and their investors.
  7. Investing

    The Economics of Oil Extraction

    The overall economics of oil extraction is that there is money in it - both for extraction companies and their investors.
  8. Investing

    How does crude oil affect gas prices?

    Understand the origins of oil, how its price is determined and where its correlation with gas prices falls in the global economy.
  9. Investing

    Key Ratios For Analyzing Oil And Gas Stocks

    Oil and gas investors need to focus on a different subset of ratios to analyze the growth and profitability of these companies.
RELATED FAQS
  1. Who determines the reserve ratio?

    Understand what the Federal Reserve is and what it regulates in the U.S. economy. Learn about the reserve ratio and how the ... Read Answer >>
  2. Why would the Federal Reserve change the reserve ratio?

    Understand the Federal Reserve's monetary policy and the tools it uses to change that monetary policy. Learn about the reserve ... Read Answer >>
  3. What is the difference between proven and probable reserves in the oil and gas sector?

    Learn how those in the oil and gas sector classify oil reserves and the specific differences between proven and probable ... Read Answer >>
  4. How does an oil and gas company measure and state their reserves?

    Understand how oil and gas companies estimate possible reserves and how different classifications are used to designate the ... Read Answer >>
  5. How do central banks acquire currency reserves and how much are they required to ...

    A currency reserve is a currency that is held in large amounts by governments and other institutions as part of their foreign ... Read Answer >>
  6. How does fracking increase oil production?

    Learn how fracking, the process of high-pressure oil and gas extraction, has tripled domestic oil production and reduced ... Read Answer >>
Hot Definitions
  1. Return on Assets - ROA

    Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets.
  2. Fibonacci Retracement

    A term used in technical analysis that refers to areas of support (price stops going lower) or resistance (price stops going ...
  3. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
  4. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
  5. Financial Industry Regulatory Authority - FINRA

    A regulatory body created after the merger of the National Association of Securities Dealers and the New York Stock Exchange's ...
  6. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by companies seeking the capital to expand ...
Trading Center