Resources are the total estimated hydrocarbons in the ground (discovered and undiscovered), whereas reserves are the subset of resources proven to be recoverable economically with current technology.
In petroleum terms, 'resources' encompass all oil and gas believed to be in a region or formation, including quantities not yet discovered or not economically recoverable. 'Reserves' refer specifically to the portions of those resources that have been discovered, verified, and can be commercially produced under current conditions. Reserves are further categorized (proved, probable, possible) based on certainty, but all reserves imply a high likelihood of extraction. In contrast, a resource estimate might be large, but until those volumes are proved and viable, they carry far more uncertainty. Investors and companies focus on reserves as a more concrete indicator of value, while resource figures signal potential that may or may not be realized.
Distinguishing between resources and reserves is critical for investors. Companies might tout large resource numbers, but reserves indicate real, bankable assets. Investors rely on reserve estimates (especially proved reserves) to assess asset value and risk, knowing that resources without corresponding reserves could end up having little economic value.
