With independent auditor’s report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
23
4. 
Critical estimates and judgements (continued)
Oil and gas reserves (continued)
All reserve estimates involve some degree of uncertainty. The uncertainty depends mainly on the amount of
reliable geological and engineering data available at the time of the estimate and the interpretation of this data.
The relative degree of uncertainty can be conveyed by placing reserves into one of two principal classifications,
either proved or unproved. Proved reserves are more certain to be recovered than unproved reserves and
may be further sub-classified as developed and undeveloped to denote progressively increasing uncertainty
in their recoverability.
Estimates are reviewed and revised annually. Revisions occur due to the evaluation or re-evaluation of already
available geological, reservoir or production data, availability of new data, or changes to underlying price
assumptions. Reserve estimates may also be revised due to improved recovery projects, changes in
production capacity or changes in development strategy. Proved developed reserves are used to calculate the
unit of production rates for Depreciation, Depletion & Amortization (DD&A) in relation to oil and gas production
assets. The Group has included in proved reserves only those quantities that are expected to be produced
during the initial subsoil use contract period. This is due to the uncertainties surrounding the outcome of such
renewal procedures, since the renewal is ultimately at the discretion of the Government. An increase in the
Group’s subsoil use contract periods and corresponding increase in reported reserves would generally lead to
lower DD&A expense and could materially affect earnings. A reduction in proved developed reserves will
increase DD&A expense (assuming constant production), reduce income and could also result in an immediate
write-down of the property’s book value. Given the relatively small number of producing fields, it is possible
that any changes in reserve estimates year on year could significantly affect prospective charges for DD&A.
Proved reserves of the Group as of 31 December 2020 were based on reports prepared by independent
reservoir engineers in accordance with Petroleum Resources Management System rules. For certain assets
proved reserves are based on estimation of internal engineers.