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. Oil Reserves

    Oil reserves are an estimate of the amount of crude oil located ...
  2. Reserve Ratio

    The reserve ratio is the portion of depositors' balances that ...
  3. Probable Reserves

    Probable reserves are oil and gas resources determined to have ...
  4. Estimated Ultimate Recovery - EUR

    Estimated Ultimate Recovery (EUR) is a production term used in ...
  5. Working Reserves

    Working reserves, or excess reserves, are reserves held by banks ...
  6. 3P Oil Reserves

    3P oil reserves are the total amount of reserves that a company ...
Related Articles
  1. 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.
  2. Insights

    Which 10 Countries Have the Most Natural Resources?

    Commodities are the raw materials used for all products manufactured worldwide. This article lists the top 10 countries with the most natural resources.
  3. 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.
  4. Investing

    Natural Resource Investing

    Learn more about ETFs and futures, two of the many investment options available to natural resource investors.
  5. Investing

    Common debt-to-equity ratios for oil and gas companies

    Learn about the trend of debt financing in the oil and gas industry since the financial crisis as expressed through the debt-to-equity (D/E) ratio.
  6. Investing

    5 biggest risks faced by oil and gas companies

    Learn about factors to consider, such as political and geological risks, before investing in gas and oil stocks.
  7. Investing

    How Oil Prices Impact the U.S. Economy

    Now that the United States has increased oil production through shale oil and fracking, low oil prices can harm the U.S. oil industry and its workers.
  8. Financial Advisor

    The US States That Produce the Most Oil

    Learn what eight states produce over 90% of U.S. oil, and how fracking has helped the United States become the world's largest oil-producing nation.
  9. Investing

    Oil Companies With High Reserve-Replacement Ratios

    The reserve replacement ratio can help judge the operating performance of an exploration and production company.
RELATED FAQS
  1. How Oil Cos. Treat Reserves on a Balance Sheet

    Oil reserves are estimated quantities of crude oil that have a high degree of certainty. Read Answer >>
  2. How can a company quickly increase its liquidity ratio?

    Discover what high and low values in the liquidity ratio mean and what steps companies can take to improve liquidity ratios ... Read Answer >>
  3. What are average operating expenses for the oil and gas sector?

    Learn about the average operating expenses and average operating expenses margin for the oil and gas sector and how they ... Read Answer >>
Trading Center