Reserves
Lundin Petroleum, like most companies in Europe, calculates reserves and resources according to the SPE/WPC definition of petroleum resources. This definition was first published in 1997 by the SPE (Society of Petroleum Engineers) and WPC (World Petroleum Congress) in an effort to standardise reserves reporting and has been further clarified by the Petroleum Resource Management System in 2007.

Reserves are defined as those quantities of petroleum which are anticipated to be commercially recovered from known accumulations from a given date forward. Estimation of reserves is inherently uncertain and to express an uncertainty range, reserves are subdivided in Proved, Probable and Possible categories. Lundin Petroleum reports its reserves as Proved plus Probable reserves, also abbreviated as 2P.

Lundin Petroleum’s reserves are calculated using forward projections of production levels, work programmes and the associated capital investment and operating cost levels. From these projections the last year of economic production is calculated, given an assumed oil price scenario. The aggregate production until this economic cut off point constitutes the reserves. Lundin Petroleum has used a long term oil price scenario of USD 65 per barrel for this calculation.

Each year Lundin Petroleum’s reserves base is certified by an independent reserves auditor. Over the last years Gaffney, Cline and Associates (GCA) has performed this service. GCA is one of the largest independent reserves certifiers in the world and this year GCA certified 184.2 MMboe (million barrels of oil equivalent) of 2P oil and gas reserves net to Lundin Petroleum as at 1 January 2008, which is an increase of 12 percent compared to last year’s reserves and Lundin Petroleum replaced last year’s production by 148 percent from revisions in the existing reserves base as well as increases by moving contingent resources into reserves.

In particular 2P reserves in Norway and the United Kingdom increased as a result of the inclusion of the Peik field. This, coupled with increased reserves for the Thistle and Alvheim fields more than offset our 2007 production in these countries. Similarly our successful redevelopment of the Rhethian fields in France has resulted in a net increase in our 2P reserves. The acquisition of the Carr licence interests in 2007 further increased our French reserves. Reserves in Tunisia, Netherlands and Indonesia were reduced due to production. A downward adjustment was made to the Russia 2P reserves as a result of GCA’s first full audit of the Russian assets.

During the last 5 years Lundin Petroleum has demonstrated its ability to grow its acquired reserves organically. The reserves growth graph shows that despite production, our French reserves are now 12 percent higher and our Indonesian reserves are 25 percent higher than after their acquisition in 2002. Our Norwegian reserves have increased by 57 percent since the DNO acquisition in 2004. And despite large volumes produced from the Broom field, our United Kingdom reserves today are 7 percent higher than at the end of 2004


Contingent Resources
In addition to its certified reserves, Lundin Petroleum has a number of discovered oil and gas resources which currently do not classify as reserves. According to the SPE/WPC these classify as contingent resources. Contingent resources are those quantities of petroleum which are estimated, on a given date, to be potentially recoverable from known accumulations, but which are not currently considered to be commercially recoverable. In addition a viable development strategy has to be developed to allow contingent resources to be categorised as reserves.

Lundin Petroleum has an estimated 188.3 MMboe of contingent resources. These resources are not reserves, because further work is required to mature them. During 2007 some 20 MMboe of contingent resources were matured into 2P reserves. Contingent resources have been replenished by some 70 MMboe from the recent Luno and Scolty discoveries in the North Sea.

Lundin Petroleum estimates its contingent resources in exactly the same manner as its reserves, be it that an additional maturation work plan is associated with these resources. There is a chance that identified resources will not mature into reserves.

Prospective Resources
It is important to realise that Lundin Petroleum’s contingent resources are not the same as Lundin Petroleum’s exploration resources. Under the SPE/WPC definitions exploration resources are classified as prospective resources. Prospective resources are those quantities of petroleum which are estimated, on a given date, to be potentially recoverable from undiscovered accumulations.

Lundin Petroleum has a large portfolio of exploration licences. These exploration licences are evaluated using techniques like gravity and magnetic surveys, geochemical surveys, seismic surveys and basin analysis. This analysis results in a long list of leads and drillable prospects. Only drillable prospects are categorised as prospective resources by Lundin Petroleum. Leads are identified potential hydrocarbon accumulations that will require additional study before they are matured in prospects and appear in drilling plans. Prospects are ready to drill. It is important to realise that prospects and leads carry exploration risks, which result in a chance of not finding commercial hydrocarbons. These risks are identified by Lundin Petroleum and help management in ranking exploration activities.

In 2008 Lundin Petroleum is planning to drill (operated and non-operated) 17 exploration wells targeting in total 1.2 billion boe of unrisked prospective resources net. Lundin Petroleum estimates more than 1.9 billion boe of net unrisked prospective resources, which could be targeted by exploration work programmes in 2009 and beyond.

Organic Growth
As an integrated exploration and production company, Lundin Petroleum is continuously aiming to grow the business by identifying exploration targets and maturing them into drillable prospects, and thus increase its prospective resource base. Successful exploration discoveries following drilling activity results in prospective resources moving into contingent resources. After formulating a development strategy and demonstrating commerciality, contingent resources are moved into reserves.