How to Calculate the Reserve Life Index
The reserve life index measures the length of time it will take to deplete a resource. The RLI often is used to measure how long a well or mine will last, such as for oil, natural gas or minerals. Typically, the higher the RLI, the higher the quality of the asset. For example, an oil well with a RLI of 15 years will be a more productive asset in the long term than an oil well with a RLI of 5 years, assuming the production levels are the same.
Estimate the amount of the material that will be used per year, or use the annual production amount from the previous year. For example, if you have an oil well that you expect to produce 1.7 million barrels per year, you would use 1.7 million barrels as the annual production rate.
Estimate the volume of the product remaining in the reserves, if you do not know the amount with certainty. For example, you might estimate 17 million barrels of oil remain in the well.
Divide the volume of the product remaining by the annual production rate per year to find the RLI. In this example, divide 17 million barrels by 1.7 million barrels per year to find the RLI to be 10 years.