International Energy
International Forums Contribute to Energy Cooperation within Constraints Gao ID: GAO-07-170 December 19, 2006Rising oil prices, resulting from growth in energy consumption by rapidly developing Asian nations and by most industrialized nations, have increased concern about competition over oil and natural gas resources. In particular, Congress expressed interest in how the United States participates in energy cooperation through international forums. GAO was asked to review: (1) what are the key international energy forums in which the United States pursues energy cooperation, (2) what are some of the key emerging energy market issues that are important for international energy cooperation, and (3) how is the United States addressing these issues through its participation in these forums. GAO's work is based on contacts with agency officials and energy experts and review of documents.
The United States pursues energy cooperation through several international energy forums designed to meet specific cooperative needs. They include a formal institution with binding petroleum reserve obligations, regional associations, and informal gatherings designed to facilitate information exchange. Major forums include the International Energy Agency (IEA), the Asia Pacific Economic Cooperation Energy Working Group, the North American Energy Working Group, and the International Energy Forum. GAO identified three energy market issues that are important for U.S. efforts in international energy cooperation. First, a tighter energy market with higher, more volatile, prices has developed. This is due to (1) an unanticipated rise in energy demand and (2) constrained supply due to less spare crude oil production capacity and increased political frictions in certain supplier countries. Second, market participation of national oil and gas companies, which are majority owned by governments, has led to limitations on access to resources. Third, more reliable energy market information is needed to facilitate market stability and plan investment. The U.S. government has addressed these issues through its participation in international energy cooperation forums; however, the nature of the forums can limit their impact. Forums have restricted membership, consensus-based agendas and decisions, and voluntary participation. They generally focus on noncontroversial issues such as energy efficiency and technology. Within these constraints, the United States has tried to mitigate effects of tight markets by supporting emergency preparedness. It has not directly addressed the impact of national oil companies, but it has pursued related areas. It has sought to improve energy information, but Energy Information Administration (EIA) statistical expertise has not been consistently leveraged for purposes beyond data exchange, and U.S. data submissions to the IEA have not been timely.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-07-170, International Energy: International Forums Contribute to Energy Cooperation within Constraints
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Report to the Chairman, Committee on International Relations, House of
Representatives:
United States Government Accountability Office:
GAO:
December 2006:
International Energy:
International Forums Contribute to Energy Cooperation within
Constraints:
GAO-07-170:
GAO Highlights:
Highlights of GAO-07-170, a report to the Chairman, Committee on
International Relations, House of Representatives.
Why GAO Did This Study:
Rising oil prices, resulting from growth in energy consumption by
rapidly developing Asian nations and by most industrialized nations,
have increased concern about competition over oil and natural gas
resources. In particular, Congress expressed interest in how the United
States participates in energy cooperation through international forums.
GAO was asked to review: (1) what are the key international energy
forums in which the United States pursues energy cooperation, (2) what
are some of the key emerging energy market issues that are important
for international energy cooperation, and (3) how is the United States
addressing these issues through its participation in these forums.
GAO‘s work is based on contacts with agency officials and energy
experts and review of documents.
What GAO Found:
The United States pursues energy cooperation through several
international energy forums designed to meet specific cooperative
needs. They include a formal institution with binding petroleum reserve
obligations, regional associations, and informal gatherings designed to
facilitate information exchange. Major forums include the International
Energy Agency (IEA), the Asia Pacific Economic Cooperation Energy
Working Group, the North American Energy Working Group, and the
International Energy Forum.
GAO identified three energy market issues that are important for U.S.
efforts in international energy cooperation. First, a tighter energy
market with higher, more volatile, prices has developed. This is due to
(1) an unanticipated rise in energy demand and (2) constrained supply
due to less spare crude oil production capacity and increased political
frictions in certain supplier countries. Second, market participation
of national oil and gas companies, which are majority owned by
governments, has led to limitations on access to resources. Third, more
reliable energy market information is needed to facilitate market
stability and plan investment.
The U.S. government has addressed these issues through its
participation in international energy cooperation forums; however, the
nature of the forums can limit their impact. Forums have restricted
membership, consensus-based agendas and decisions, and voluntary
participation. They generally focus on noncontroversial issues such as
energy efficiency and technology. Within these constraints, the United
States has tried to mitigate effects of tight markets by supporting
emergency preparedness. It has not directly addressed the impact of
national oil companies, but it has pursued related areas. It has sought
to improve energy information, but Energy Information Administration
(EIA) statistical expertise has not been consistently leveraged for
purposes beyond data exchange, and U.S. data submissions to the IEA
have not been timely.
Figure: Top World Oil Net Importers, 2004:
[See PDF for Image]
Source: GAO analysis of EIA data.
Note: This includes all countries that imported more than 1 million
barrels per day net in 2004.
[End of Figure]
What GAO Recommends:
GAO recommends that the Secretary of Energy emphasize improving
international energy information efforts, particularly by examining how
EIA statistical expertise can contribute to data efforts and U.S. data
submissions to IEA can be made more timely. DOE expressed concerns and
provided alternative language related to EIA‘s role and efforts.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-170].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Loren Yager at (202)512-
4347 or yagerl@gao.gov.
[End of Section]
Contents:
Letter:
Results in Brief:
Background:
The United States Pursues Energy Cooperation through International
Energy Forums Designed to Meet Specific Cooperative Needs:
Emerging Energy Market Issues Include Tight Markets, Growing Role of
National Oil Companies, and Increased Importance of Reliable Market
Information:
Important Constraints Affect U.S. Ability to Address Key Energy Market
Issues in Forums:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: July 2006 G-8 Summit and Bilateral Energy Cooperation
Forums:
Appendix III: Role of Natural Gas Is Increasing in Tight Energy Market:
Appendix IV: Comments from the Department of Energy:
GAO Comments:
Appendix V: Comments from the Department of Commerce:
Appendix VI: Comments from the Department of State:
Appendix VII: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Overview of Major International Energy Cooperation Forums:
Table 2: Top World Oil Consumers, with Level of Demand and Percentage
Change, 2000-2004, and Share of Total World Market in 2004:
Figures:
Figure 1: U.S. Crude Oil Production and Demand, 1980-2030:
Figure 2: U.S. Natural Gas Production and Demand, 1980-2030:
Figure 3: Top World Oil Net Importers, 2004:
Figure 4: Top 10 Companies Based on Oil Production and Reserves
Holdings, 2004:
Figure 5: Top 10 Companies Based on Gas Production and Reserves
Holdings, 2004:
Figure 6: Top World Dry Natural Gas Consumers, 2004:
Figure 7: Top World Dry Natural Gas Net Importers, 2004:
Figure 8: Top World Dry Natural Gas Producers, 2004:
Abbreviations:
APEC: Asia Pacific Economic Cooperation:
DOE: Department of Energy:
EIA: Energy Information Administration:
EUROSTAT: European Communities:
G-8: Group of Eight:
GDP: gross domestic product:
IEA: International Energy Agency:
IEF: International Energy Forum:
JODI: Joint Oil Data Initiative:
LNG: liquefied natural gas:
NAEWG: North American Energy Working Group:
OECD: Organization of Economic Cooperation and Development:
OLADE: Organization Latinamericana de Energia:
OPEC: Organization of Petroleum Exporting Countries:
UNSD: United Nations Statistics Division:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
December 19, 2006:
The Honorable Henry J. Hyde:
Chairman:
Committee on International Relations:
House of Representatives:
Dear Mr. Chairman:
One of the emerging forces affecting the global economy has been the
rapid growth of Asian economies, increased energy consumption in these
economies, and the rising oil prices accompanying this growth. Congress
has raised concerns about the nature of international competition for
oil and natural gas resources and how the United States can secure the
energy resources needed to support U.S. economic growth. In particular,
Congress has expressed interest in how the United States has sought to
advance one of the key principles of energy security--international
cooperation through participation in international energy cooperation
forums.
To determine how the U.S. government participates in international
energy cooperation forums, at your request, we reviewed: (1) what are
the key international energy forums in which the United States pursues
energy cooperation, (2) what are some of the key emerging energy market
issues that are important for international energy cooperation, and (3)
how the United States is addressing these issues through its
participation in these forums.
To answer these questions, we reviewed documents and interviewed
officials responsible for international energy cooperation at the
Departments of Energy (DOE), State, and Commerce. Our work at DOE also
included the Energy Information Administration (EIA), a DOE statistical
agency that provides independent data, forecasts, and analyses to
promote sound policy making and efficient markets. We focused on the
oil and natural gas sectors and on the following key international
energy cooperation forums: the International Energy Agency (IEA), the
Asia Pacific Economic Cooperation (APEC) Energy Working Group, the
North American Energy Working Group (NAEWG), and the International
Energy Forum (IEF). We neither evaluated these forums and their impacts
on energy policy and the global energy market nor did we evaluate U.S.
energy policy goals. Rather, we reviewed the forums' mission,
structure, and activities. We conducted fieldwork at IEA and the U.S.
Mission to the Organization of Economic Cooperation and Development
(OECD) in Paris, France, and interviewed U.S. members of the IEA and
APEC Energy Working Group business advisory groups, as well as private
sector energy experts. To determine some of the key emerging energy
market issues that are important for international energy cooperation,
we reviewed documents and data and interviewed officials at the DOE and
the Departments of State and Commerce, as well as reviewing relevant
reports and studies and discussing them with energy experts. We
conducted our work from January 2006 to November 2006 in accordance
with generally accepted government auditing standards. (See app. I for
details about our objectives, scope, and methodology.)
Results in Brief:
The United States pursues energy cooperation through international
energy forums that are designed to meet specific cooperative needs.
These forums range from formal institutions to regional associations to
more informal gatherings designed to facilitate a frank exchange of
information. IEA is the only formal institution with binding
obligations for a petroleum reserve system. It focuses on responding to
supply disruptions through emergency planning for the coordinated
release of members' petroleum reserves, such as in its response to
Hurricane Katrina in 2005, as well as on providing oil and natural gas
market information. The APEC Energy Working Group focuses on the
rapidly growing Asia Pacific economies; it is a voluntary regional
effort that seeks to build consensus on energy policy issues through
sharing best practices and technology insights. NAEWG focuses on
developing an open, efficient, and transparent North American energy
market through greater regulatory cooperation and exchanges of energy
data, information, and technology. IEF--formerly known as the "Producer-
Consumer Dialogue--facilitates dialogue between oil- producing and -
consuming countries in biennial ministerial meetings and sponsors the
Joint Oil Data Initiative (JODI), a recent effort to establish a world
oil database.
We identified three key energy market issues that are important for
U.S. efforts in international energy cooperation in the oil and natural
gas sectors. First, world oil demand has risen more rapidly than
expected, particularly from major developing countries such as China
and India. At the same time, supply has become more constrained and
more susceptible to disruptions, due to such constraints as political
or energy sector frictions in certain producing countries such as Iraq,
Nigeria, Venezuela, and Iran and less spare crude oil production
capacity. This has resulted in a tight energy market characterized by
higher prices. Second, the market participation of national oil and gas
companies--which are majority owned by national governments--from both
energy consuming and producing countries has led to limitations on
access to oil and natural gas resources. Concerns have arisen that some
national oil and gas companies may not be able to efficiently bring
energy resources to the market and that constrained investment climates
in some producing countries dominated by national companies may inhibit
the investment needed for continued production and growth. Third,
tightened markets and the need for substantial investment in the oil
and gas sectors have increased the importance of more reliable oil and
natural gas market information. For example, key industry forecasts
failed to anticipate the 2004 surge in Chinese and global oil demand
due in part to unreliable data.
The U.S. government has addressed these key emerging energy market
issues through its participation in international energy cooperation
forums; however, these forums, by their nature, can be constrained in
the degree to which they can have an impact on these issues. Discussion
of energy issues among sovereign nations for which energy has great
domestic economic and political sensitivity generally means that forums
focus on noncontroversial issues, like energy efficiency and
technology. Forum efforts are also constrained by inherent limitations
in restricted membership, consensus-based decision making, and the
voluntary nature of participation and follow-up. However, within these
constraints, the U.S. has tried to mitigate the imbalances associated
with tight markets by supporting efforts such as emergency
preparedness, policy and technical outreach to developing countries
with fast increasing energy needs, energy technology research and
training, and cooperation with producer countries. The United States
has not directly addressed the impact of the growing participation of
national oil companies on the energy market at the forums, but it has
pursued related areas such as investment climates. Forum initiatives to
improve information have included capacity building, data sharing, and
data standardization efforts. The United States has supported such
efforts through its participation in the forums; however, EIA's
involvement in initiatives to improve international data has been
indirect and ad hoc according to a senior EIA official. Despite the
importance of reliable international energy data for market stability,
EIA's expertise has not been consistently leveraged for international
energy cooperation. Furthermore, due to differing reporting schedules,
U.S. data submissions to the IEA have lacked timeliness and contributed
to the 18-month lag for which published international data is
available.
In this report, we make two recommendations to DOE to emphasize the
priority of improving energy information efforts within the
international forums, particularly by (1) examining how EIA expertise
can contribute to international forum data efforts and (2) examining
how U.S. data submissions to the IEA can be made more timely. We
provided a draft of this report to DOE and the Departments of Commerce
and State. All three agencies provided written comments, which are
reproduced in appendixes IV, V, and VI, respectively. The Department of
Commerce agreed with our recommendations. The Department of State
provided information about organizational changes it had made recently
that highlight the importance of global energy challenges. DOE stated
that the U.S. government has been actively engaged in international
energy forums to advance U.S. energy security objectives and that our
report adds to the greater understanding of these efforts. However, DOE
expressed concerns with our characterization that EIA expertise has not
been consistently leveraged to improve international energy data
through the multilateral forums and with our description of how U.S.
data submissions to IEA have not been timely. DOE provided alternative
language that we incorporated where appropriate. Finally, DOE stated
that it was concerned that GAO asserts that providing more data on a
timely basis will resolve energy market and security issues. While GAO
makes no such assertion, we emphasize that improving energy statistics
is one important way in which the international forums can enhance the
impact of international cooperation, especially as regards global
energy market transparency. DOE and the Departments of Commerce and
State also provided technical comments, which we have incorporated
where appropriate.
Background:
The growth rate of crude oil and natural gas demand in the United
States has outpaced the growth rate of the country's crude oil and
natural gas production over the last 20 years. This widening gap is
projected to accelerate in the future. As shown in figure 1, EIA
forecasts that this trend for crude oil will continue through 2030.
Natural gas demand, as shown in figure 2, has similarly outpaced
natural gas production, and EIA forecasts that this trend will also
continue. This widening gap between U.S. domestic energy production and
consumption of oil and natural gas has focused attention on the
importance of these commodities to the U.S. economy.
Figure 1: U.S. Crude Oil Production and Demand, 1980-2030:
[See PDF for Image]
Source: GAO analysis of EIA data.
Note: Production is based on U.S. domestic oil field production data;
demand is based on U.S. domestic oil field production plus net crude
oil imports.
[End of Figure]
Figure 2: U.S. Natural Gas Production and Demand, 1980-2030:
[See PDF for Image]
Source: GAO analysis of EIA data.
[End of Figure]
The United States' most recent "National Energy Policy" report, issued
in May 2001, outlines several U.S. energy security objectives that are
relevant for international energy cooperation.[Footnote 1] The report
states that the United States should work cooperatively with key
countries and institutions to expand sources and types of supply,
enhance the transparency and efficiency of markets, strengthen U.S.
capacity to respond to disruptions, promote international trade and
investment in the energy sector, and enhance emergency preparedness,
among other goals.[Footnote 2] Several recommendations outlined in the
"National Energy Policy" report provide guidance for the United States
as it engages in multilateral and bilateral forums and discussions
designed to enhance U.S. energy security, such as the following:
* Work with the IEA to ensure that member states fulfill their stock-
holding commitments and encourage major oil-consuming countries that
are not IEA members to consider strategic stocks as an option for
addressing potential supply disruptions;[Footnote 3]
* Work with producer and consumer country allies and the IEA to craft a
more comprehensive and timely world oil data reporting system;
* Use membership in multilateral organizations, such as APEC, and
bilateral relationships to implement clear, open, and transparent rules
and procedures governing foreign investment and reduce barriers to
trade and investment;
* Engage in a dialogue through NAEWG to develop closer energy
integration among Canada, Mexico, and the United States; and:
* Assist U.S. companies in their dialogue with Russia on investment and
trade and improve the overall investment climate.
The United States Pursues Energy Cooperation through International
Energy Forums Designed to Meet Specific Cooperative Needs:
The United States pursues energy cooperation through international
energy forums that meet specific cooperative purposes. These forums
range from formal institutions with binding obligations to regional
associations to more informal gatherings designed to facilitate a frank
exchange of information. Information related to these forums is
summarized below in table 1.
Table 1: Overview of Major International Energy Cooperation Forums:
Forum: IEA;
Number of members: 26;
Forum structure: Formal institution made up of OECD industrialized
democracies, with binding obligations for petroleum reserve system, and
about 150 professional staff;
Forum objectives: Collective response to oil supply disruptions;
Analysis and publication of energy market information; Energy policy
outreach to major developing countries, as well as energy producing
countries.
Forum: APEC Energy Working Group;
Number of members: 21;
Forum structure: Regional energy forum based on consensus decision
making and analysis from multiple expert groups;
Forum objectives: Promoting development of Asia-Pacific energy market
through sharing energy information, expertise, and best practices.
Forum: North American Energy Working Group;
Number of members: 3;
Forum structure: Trilateral (United States, Canada, and Mexico) energy
forum based on consensus decision making and analysis from multiple
expert groups;
Forum objectives: Optimal integration of North American energy market
by sharing policy, regulatory, and technical expertise.
Forum: International Energy Forum;
Number of members: over 60;
Forum structure: High-level international energy forum fostering
dialogue among both energy producing and consuming countries;
Forum objectives: Supports JODI; Informal discussion of energy security
issues.
Source: GAO.
[End of table]
IEA Focuses on Emergency Planning for Supply Disruptions, Oil Market
Information, and Outreach to Major Developing Nations:
IEA was established in November 1974 by most of the members of OECD,
the major industrialized democracies that were generally also the
largest consumers of oil, and today has 26 members.[Footnote 4] It was
a collective response to energy security concerns arising from the oil
embargo imposed by the Organization of the Petroleum Exporting
Countries (OPEC) the previous year to reduce the vulnerability of IEA
members to a major disruption in oil supplies. IEA's primary mission
was to respond to any future oil crisis through a binding emergency
preparedness system that established emergency oil reserves equivalent
to 90 days of members' net imports, countering any future threat of an
oil embargo. In addition, it collects and analyzes oil market data in
order to increase oil market information and transparency; assesses
member countries' domestic energy policies and programs; makes
projections based on differing scenarios; and prepares studies and
recommendations on specialized energy topics.
IEA's goals have evolved over the years as the energy market has
changed; today it focuses its emergency planning less on the threat of
embargoes and more on supply disruptions that might arise from natural
disasters, wars, or terrorist acts. More importantly, as the structure
of the oil market has changed over the years, IEA's emergency response
measures have also evolved from a government emergency allocation
program to market-based measures, according to a DOE official. IEA's
release of oil reserves in response to Hurricane Katrina in September
2005 is an example of its current focus. In addition to emergency
preparedness measures, IEA also emphasizes outreach to nonmember
countries, reducing dependence on oil through alternative energy and
advanced technology, and integrating environmental and energy policies.
Recently, IEA has also recognized that it needs to enhance its
expertise related to the growing global natural gas market.
IEA is an autonomous international organization based in Paris, France,
created within the framework of the OECD in order to implement the
treaty establishing it.[Footnote 5] IEA's main decision-making body is
the Governing Board, composed of senior energy officials from each
member country and meeting about four times per year.[Footnote 6] Day-
to-day operations are conducted by the IEA Secretariat, headed by an
Executive Director and comprising a professional staff of about 150
energy experts drawn from member countries. IEA also receives the input
of the IEA Industry Advisory Board, which has private sector
representatives from member countries and meets three to four times a
year.
The United States is significantly involved in IEA activities,
according to U.S. and IEA officials. The Deputy Executive Director is
traditionally an American. The DOE Assistant Secretary for Policy and
International Affairs and the Department of State Deputy Assistant
Secretary for Energy, Sanctions, and Commodities both serve on the
Governing Board and play an active role. U.S. energy officials
participate on almost every standing group and committee as either a
Chair or Vice-chair. In addition, the United States has historically
provided about 25 percent of IEA's annual budget, which amounted to
$5.5 million in 2006, according to a Department of State official.
APEC Energy Working Group Seeks to Build Broad Regional Consensus on
Key Energy Issues:
The APEC Energy Working Group, comprised of 21 Asian Pacific
economies[Footnote 7] accounting for 60 percent of world energy demand,
is a voluntary regional effort that seeks to build consensus on energy
policy issues, primarily through sharing best practices and technology
insights. This working group includes both net energy consuming
countries, such as the United States, Japan, and China, and net energy
producing countries, such as Russia and Indonesia. It was launched in
1990 to develop a program for energy cooperation. It seeks to maximize
the energy sector's contribution to the region's economic and social
well-being, while mitigating the environmental effects of energy supply
and use. Its objectives include strengthening the security and
reliability of affordable energy to all members, and promoting clean
and efficient technologies and the efficient use of energy to achieve
both economic gains and environmental enhancement.
APEC Energy Ministers' meetings, generally held every 2 years, provide
the Energy Working Group with political guidance regarding its
activities. The APEC Energy Working Group has its own Secretariat in
Australia, which has been financially underwritten and staffed by the
Australian government. The Energy Working Group, generally comprised of
member government energy officials, meets twice a year. It receives an
update on the activities of the five expert groups, which focus on
clean fossil energy, efficiency and conservation, energy data and
analysis, new and renewable energy technologies, and minerals and
energy exploration and development. It also guides the work of the Asia
Pacific Energy Research Centre, an international organization based in
Tokyo that receives the bulk of its financial support from the Japanese
government. Finally, it is advised by the Energy Working Group Business
Network, which provides private sector perspective on key energy issues
affecting the region.
The APEC Energy Working Group fosters discussion of members' energy
policies and planning priorities, sharing basic energy demand and
supply outlook data, considering regional energy policy implications,
and responding to wide-reaching energy-related issues. Recent efforts
include its Energy Security Initiative, which comprises both short-term
measures designed to respond to temporary energy supply disruptions and
longer term policy responses designed to address the broader challenges
facing the region's energy supply. It has also focused on development
of the Asia-Pacific natural gas market, particularly for liquefied
natural gas (LNG).[Footnote 8]
The United States generally sends two delegates from DOE's Office of
Policy and International Affairs and an observer from the Department of
State to the Energy Working Group meetings. DOE staff also participate
on the various expert groups.
NAEWG Focuses on Regional Regulatory Cooperation and Exchange of Energy
Market Data, Information, and Technology:
NAEWG is a trilateral regional forum--including the United States,
Canada, and Mexico--focused on developing an open, efficient, and
transparent North American energy market. The forum pursues this focus
by emphasizing efforts such as greater regulatory cooperation,
encouraging energy data and information exchange, collaborating on
energy science and technology, and examining natural gas trade and
interconnections.
NAEWG was established and initially led by the three Energy Ministers
of Canada, Mexico, and the United States in its inaugural meeting in
June 2001.[Footnote 9] Natural Resources Canada, the Mexican
Secretariat of Energy, and the U.S. DOE jointly chair NAEWG, with day-
to-day U.S. leadership now provided at the Assistant Secretary level.
DOE's Assistant Secretary of Energy for Policy and International
Affairs is the U.S. lead, while both the Department of Commerce and the
Department of State support the effort at the Deputy Assistant
Secretary level.
The agenda of work identified at the ministerial level is carried out
by nine expert working groups.[Footnote 10] Members of these expert
working groups share their policy, regulatory, and technical expertise
and energy statistics from the three countries. According to DOE
officials, the products of this work are enhanced regulatory
cooperation, such as on project siting issues; workshops on various
energy issues; and joint public written documents produced by the
expert working groups. For example, in 2005, NAEWG published the "North
America Natural Gas Vision," a report addressing the region's natural
gas regulations and policies, production and consumption, trade,
transportation, and supply and demand projections. Each expert working
group also consults informally with energy industry representatives to
enable numerous subject area workshops and to obtain private sector
input on an issue area.
IEF Seeks to Facilitate Dialogue and Information Exchange between Oil
Producing and Oil Consuming Countries:
IEF--formerly known as the "Producer-Consumer Dialogue"--is a unique
forum established to facilitate dialogue on energy security issues
between producing and consuming countries. IEF provides the largest
recurring global gathering of Energy Ministers, with over 60 countries
participating. The IEF Ministerial is held every 2 years, rotating in
location, and is a venue for Energy Ministers to discuss energy
security issues. IEF does not serve as a decision-making organization
or a forum for negotiating formal agreements. However, according to
Department of State and DOE officials, U.S. participation at the senior
staff level has increased since 2000 in recognition of IEF's value in
allowing for informal, frank, and wide exchange of
information.[Footnote 11]
IEF activities in addition to the Ministerial dialogue include the JODI
and the International Energy Business Forum. JODI is a recent
initiative to establish a world oil database, originally combining the
efforts of six international organizations including APEC and
IEA.[Footnote 12] The International Energy Business Forum serves as a
venue for Ministers to meet with industry representatives prior to the
IEF Ministerial and had over 30 companies participating in 2006. The
Ministerial dialogue, JODI, and the International Energy Business Forum
are now facilitated by the IEF Secretariat, which was established in
December 2003 and is headquartered in Riyadh, Saudi Arabia.
In addition to participation with IEA, APEC Energy Working Group,
NAEWG, and IEF, the United States also participated in the July 2006
Group of Eight (G-8) Summit hosted by Russia, which served as an ad hoc
forum addressing the need for international energy cooperation. The
United States also pursues international cooperation through bilateral
energy cooperation efforts. We reviewed U.S. bilateral energy
cooperation efforts with Canada, China, India, Mexico, and Russia.
Information related to these forums can be found in appendix II.
Emerging Energy Market Issues Include Tight Markets, Growing Role of
National Oil Companies, and Increased Importance of Reliable Market
Information:
Three key energy market issues that are important for U.S. efforts in
international energy cooperation in the oil and natural gas sectors
are: a tight energy market, growing market participation of national
oil companies, and increased importance of reliable energy market
information.
Rising Demand and Supply Constraints Have Resulted in a Tight Energy
Market:
World energy demand has risen in recent years, particularly from major
developing countries, at the same time supply has become more
constrained and more susceptible to disruptions--resulting in a tight
energy market characterized by higher prices. During most of the 1990s,
real crude oil prices (in 2003 dollars) fluctuated around $20 a barrel.
While crude oil prices started edging up with the economic recovery and
production cuts at the end of the 1990s, upward price pressures became
pronounced during 2003-2004. These market conditions contributed to
world crude oil prices increasing by more than two-and-a-half times
from about $30 a barrel in early December 2003 to a peak of about $77 a
barrel around mid-July 2006.[Footnote 13] While prices dropped by
around $20 a barrel in the 3 to 4 months following this peak,[Footnote
14] several energy experts believe that the fundamentals of the tight
market still exist and are a cause for continuing concern.
Rapid Increase in Oil Demand by Developing Countries Has Contributed to
a Tight Energy Market:
In recent years, rapid growth in energy demand by major developing
countries, such as China and India, and continued steady growth of
demand by many industrialized nations has contributed to tighter oil
markets. The main consumers of oil continue to be the advanced
economies. The United States, OECD Europe,[Footnote 15] and Japan
together account for about half of annual global oil consumption.
However, consumption in the major developing countries has generally
been increasing at a faster pace. China, in particular, has gained
prominence because its demand has grown so fast. One expert noted that
China's demand in 2004 rose by an extraordinary 16 percent compared
with 2003 and served as a "demand shock," or unexpected surge in
demand.[Footnote 16] From 2000 to 2004,[Footnote 17] total world demand
for oil grew by about 8 percent, increasing from nearly 77 million
barrels per day to about 82 million barrels per day. China's demand for
oil rose by 33 percent over this period, followed by India's growth in
demand of 15 percent, while U.S. demand increased by about 5 percent,
and OECD Europe by about 2 percent.
The data used to measure both oil demand and supply are subject to
limitations described later in this report, including lack of
timeliness and transparency, definitional inconsistencies, and national
sensitivities. The estimates provided represent the broad trends from
the most current market information used in forecasting and determining
cost. Table 2 shows the top world consumers of oil-- countries that
consumed more than 2 million barrels per day--with their level of
demand and the percentage change from 2000 to 2004, as well as their
share of the world oil market in 2004. The United States far exceeds
the rest of the world in its volume of consumption, accounting for a
quarter of world demand, with about 21 million barrels per day in 2004.
Most of U.S. oil demand arises from usage in the transportation sector.
China's demand surpassed Japan's in 2003, and it became the second
largest consumer of oil, with about 6 million barrels per day, or about
8 percent of world demand.[Footnote 18] India's demand is also growing
quickly. It consumed about 2 million barrels per day, the sixth highest
level of demand.
Table 2: Top World Oil Consumers, with Level of Demand and Percentage
Change, 2000-2004, and Share of Total World Market in 2004:
Million barrels per day.
Ranking: 1;
Country: United States;
2000: 19.7;
2004: 20.7;
Percentage change: 5%;
Percentage of total world demand: 25%.
Ranking: 2;
Country: China;
2000: 4.8;
2004: 6.4;
Percentage change: 33;
Percentage of total world demand: 8.
Ranking: 3;
Country: Japan;
2000: 5.5;
2004: 5.3;
Percentage change: -3;
Percentage of total world demand: 6.
Ranking: 4;
Country: Russia;
2000: 2.6;
2004: 2.8;
Percentage change: 7;
Percentage of total world demand: 3.
Ranking: 5;
Country: Germany;
2000: 2.8;
2004: 2.7;
Percentage change: -4;
Percentage of total world demand: 3.
Ranking: 6;
Country: India;
2000: 2.1;
2004: 2.5;
Percentage change: 15;
Percentage of total world demand: 3.
Ranking: 7;
Country: Canada;
2000: 2.0;
2004: 2.3;
Percentage change: 13;
Percentage of total world demand: 3.
Ranking: 8;
Country: South Korea;
2000: 2.1;
2004: 2.2;
Percentage change: 1;
Percentage of total world demand: 3.
Ranking: 9;
Country: Brazil;
2000: 2.2;
2004: 2.1;
Percentage change: -1;
Percentage of total world demand: 3.
Ranking: 10;
Country: France;
2000: 2.0;
2004: 2.0;
Percentage change: 0.5;
Percentage of total world demand: 2.
Ranking: 11;
Country: Mexico;
2000: 2.0;
2004: 2.0;
Percentage change: -3;
Percentage of total world demand: 2.
Total world;
Country: [Empty];
2000: 76.6;
2004: 82.5;
Percentage change: 8%;
Percentage of total world demand: 100%.
Source: GAO analysis of EIA data.
Note: All countries that consumed more than 2 million barrels per day
in 2004 are included. This is the most recent year of data available
for all countries.
[End of table]
As demand has risen, so have oil import needs. For instance, while the
United States produced almost 9 million barrels per day of oil in 2004,
making it the third largest world producer,[Footnote 19] its production
met only 42 percent of its demand, with net oil imports of about 12
million barrels per day meeting the remaining 58 percent of demand.
China's import dependence has also grown, and it imported about 45
percent of its oil in 2004. Figure 3 shows the top world net oil
importers in 2004, countries importing more than 1 million barrels per
day net. Of these 9 countries, 6 were totally or almost totally import
dependent for their oil consumption. For instance, Japan and South
Korea were totally dependent on imports, predominantly from the Persian
Gulf, while many European countries also imported from Algeria, Libya,
and Nigeria. The largest net oil exporter to the United States was
Canada, followed by Mexico, Saudi Arabia, and Venezuela.
Figure 3: Top World Oil Net Importers, 2004:
[See PDF for Image]
Source: GAO analysis of EIA data.
Notes: This includes all countries that imported more than 1 million
barrels per day net in 2004 and is the most recent year of data
available for all countries.
Countries importing more than 100 percent of consumption are likely
adding the extra oil to their petroleum stocks or this may be due to
anomalies in the data.
[End of Figure]
Oil Supply Constraints Have Increased, Putting Further Pressure on an
Already Tight Market:
While the world supply of oil and refined products has risen to meet
increased demand, supply constraints have also increased, eroding
certain market cushions and contributing further to market tightness.
Increased political or energy sector frictions in countries such as
Iran, Iraq, Nigeria, and Venezuela and decreased spare crude oil
production capacity have exerted pressure on crude oil markets. Given
the tight market situation, marked by less spare production capacity
and other cushions, any oil supply disruption can cause the price of
oil to rise dramatically.
One factor contributing to constrained oil supplies is that the
political, or energy sector, friction in key oil producing nations led
to supply disruptions and diminished production capacity, in some
cases. Participation by international oil companies in the oil sector
has been affected by political tensions in Iraq, Venezuela, and
Nigeria, and economic sanctions on Iran and Libya. For example, in
April 2006, Venezuela seized two oil fields operated by two foreign oil
companies because the companies did not comply with new rules imposed
by the Venezuelan government. In Nigeria, recent disruptions due to
militant actions have shut-in about 650 thousand barrels per day of
production.
A second contributing factor is that world production of oil is 84 to
85 million barrels of oil per day, and the rate of production increase
has not kept pace with the rate of increased demand. Furthermore, there
is very little spare production capacity given existing infrastructure.
Spare oil production capacity--the ability to produce extra barrels of
production in the short-term--is a key market cushion for responding to
market disruptions. Since the mid-1980s, growth in world oil production
capacity has lagged relative to growth in global oil demand, with the
result that spare capacity has declined from a high in recent times of
5.6 million barrels per day in 2002 to between 1 and 1.3 million
barrels per day today. Most of this spare capacity is held within Saudi
Arabia. While in previous oil supply disruptions, the U.S. government
has been able to negotiate with senior officials in Saudi Arabia and
other oil-producing countries to increase their supply of crude oil,
many oil industry officials, experts, and U.S. government officials
said that today such efforts would be less effective given the limited
levels of spare oil production capacity in world markets.
Downstream investment in pipelines and tankers has also lagged behind
the growth in global oil demand in recent years, contributing to
potential bottlenecks. Additionally, private inventories of oil have
been in a long-term declining trend, in part because of a trend toward
just-in-time inventory, according to energy experts.
Oil production is capital-intensive and heavily dependent on continuous
investment to maintain existing wells, drill new wells for crude oil
production, and develop and maintain the infrastructure supporting the
production network. Extensive investment in the oil sector will be
required to meet future oil demand and maintain spare capacity,
according to energy experts.
Looking ahead, there are additional uncertainties related to future
supplies of oil. Expected new supplies of crude oil may be in places
that are difficult to access and could involve high extraction and
processing costs, as with offshore reserves and unconventional crude
oils. There is also an ongoing peak oil debate--disagreement among oil
market experts as to when the world will reach its level of peak
production of conventional oil and then begin to decline.
For a discussion of the growing role of natural gas in world energy
markets, see appendix III.
Growing Market Participation of National Oil Companies Has Led to
Concerns:
In an energy market characterized by relatively high oil prices and
increasing energy demand, the growing participation and market
influence of national oil and gas companies--which are majority owned
by national governments--from both energy consuming and producing
countries has contributed to limited access to oil and natural gas
resources in some producing countries. National oil companies from
producing countries already control about 90 percent of the world's
crude oil reserves,[Footnote 20] according to DOE. In contrast, the
ability of the international oil and gas companies--the large,
privately owned and publicly traded oil and gas industry entities--to
maintain current production levels by replacing their energy assets
with new reserves is affected by increasingly limited access to energy
resources around the world. Additionally, access to capital and
technical expertise by the national oil and gas companies of consuming
countries has enabled them to compete with the international oil
companies in the global energy markets. The impact of this industry
shift is unclear, but some concerns have arisen over (1) the ability of
some national oil and gas companies from consuming nations to
efficiently bring energy resources to the market and (2) the
constrained investment climates in some producing countries dominated
by national oil and gas companies that may inhibit the investment
necessary to ensure continued production and growth.
National Oil Companies' Influence Is Growing Relative to International
Oil Companies:
The influence of the national oil and gas companies is perceived to be
growing, as the ability of international oil and gas companies to
replace their energy resource holdings becomes increasingly limited.
According to DOE Secretary Samuel W. Bodman, in a speech to the
National Petroleum Council in June 2006, 90 percent of the world's
untapped conventional oil reserves are controlled by governments and
their national oil and gas companies, many of which are in politically
unstable regions of the world. Figure 4 indicates that 7 of the top 10
companies are national or state-sponsored oil and gas companies, ranked
on the basis of oil[Footnote 21] production. The three international
oil companies that are among the top 10 are Exxon Mobil, BP, and Royal
Dutch Shell. Ranked on the basis of oil reserve holdings, 9 of the top
10 companies are national or state-sponsored oil and gas companies.
These top 10 oil and gas companies accounted for an estimated 42
percent of world daily oil production and an estimated 64 percent of
world oil reserves holdings in 2004, based on EIA data for world
estimates. Figure 5 shows a similarly strong position for the national
or state-sponsored oil and gas companies, with respect to natural gas
production and reserves holdings. These top 10 oil and gas companies
accounted for an estimated 44 percent of world daily natural gas
production in 2004 and an estimated 62 percent of world natural gas
reserves holdings, based on EIA data for world estimates. Some agency
officials and energy experts believe that, should some countries with
national oil and gas companies continue to limit competition and
investment opportunities in their energy sectors, the ability of
international oil and gas companies to replace their energy resource
holdings will become increasingly limited to locations marked by high
geological, political, and financial risks.
Figure 4: Top 10 Companies Based on Oil Production and Reserves
Holdings, 2004:
[See PDF for Image]
Source: GAO analysis of data from Petroleum Intelligence Weekly, Dec.
12, 2005.
Notes: "Oil" includes crude oil, natural gas liquids, and condensates.
Natural gas liquids are hydrocarbons in natural gas that are separated
from the gas as liquids through the process of absorption,
condensation, adsorption, or other methods in gas processing or cycling
plants. Condensates are a natural gas liquid recovered from gas wells
from lease separators or field facilities.
The Petroleum Intelligence Weekly data relies on company reports where
possible, as well as other information sources provided by companies.
However, estimates are generated for those companies that do not
release regular or complete reports. Estimates were created for most of
the state-owned oil companies in the figure above.
[End of Figure]
Figure 5: Top 10 Companies Based on Gas Production and Reserves
Holdings, 2004:
[See PDF for Image]
Source: GAO analysis of data from Petroleum Intelligence Weekly, Dec.
12, 2005.
Note: Natural gas is net or marketable output.
[End of Figure]
Competition among consuming countries to procure oil and gas assets has
also been affected by the growing participation of national oil and gas
companies. Some energy experts stated that increased access to capital,
combined with increased access to technical expertise available for
hire from third-party service companies, has allowed these consuming
countries' national oil and gas companies to compete with the
international oil companies in the global marketplace for energy
resources. Additionally, with political leverage and potential
financial support provided from their governments, some national oil
and gas companies may be willing to operate at a lower discount rate
and a potentially lower profit margin. For example, there has been an
increasing trend by some national oil and gas companies from energy
consuming countries such as Brazil, China, India, and Malaysia to
become active, competitive bidders for acquiring exploration rights to
energy resources in other producing countries. Some experts say these
national oil and gas companies may benefit from increased financial
support and political leverage in negotiations with the host supplier
countries.
National Oil and Gas Companies May Lack Resources to Develop Projects
and May Inhibit Competition:
According to some agency officials and energy experts, there are two
main concerns about participation of national oil and gas companies in
the energy market. One concern is that some national oil and gas
companies from consuming countries may not have the combination of
capital, technical expertise, and managerial expertise necessary to
efficiently and effectively develop certain oil and gas projects,
preventing some of the production from getting to the global energy
market in a timely manner. Some energy experts stated that a Chinese
national oil and gas company, for example, may have the capital to
compete for the rights to explore for energy resources but may not have
the technology and managerial expertise to develop some projects.
Additionally, agency officials and energy experts expressed concern
over the impact of national oil and gas companies procuring energy
assets based on national policy goals rather than on commercial market
business strategy. Whereas, international oil and gas companies
typically seek to maximize returns, some national oil and gas
companies' operations may be driven primarily by their government's
energy policy interests and revenue requirements. This may result in
(1) a national oil and gas company potentially preventing some or all
of the production from the resource base under their control from
getting to the global energy market in a timely way or (2) a national
company entering into bilateral exploration based on foreign policy
purposes. Some energy experts added that, although there may also be a
net gain in the resulting energy supply on the market due to increased
activity by national oil and gas companies from consuming countries,
the ability of some of these companies to bring those energy assets to
market is varied and remains a concern.
A second concern is that constrained investment climates in some
producing countries' energy markets will inhibit the investment
necessary to ensure continued production and growth is maintained by
the country's national oil and gas company. For some energy producing
countries, the national oil and gas companies serve as a source of
general government revenues and funding for social programs, and as a
result can be marked under-investment in the company that is required
to maintain the country's energy output. In addition, some energy
producing countries dominated by national oil and gas companies have
failed to open their investment climates or reinvest sufficiently.
Experts cited national oil companies in Russia, Mexico, Venezuela, and
Indonesia as examples of oil sectors with constrained investment
climates and insufficient government reinvestment in the energy sector.
Market Stability and Investment Require Reliable Energy Information:
Energy officials and experts state that more reliable energy market
information is an increasingly important element for market stability.
The reliability of oil and natural gas market information is
questionable due to systemic factors such as reporting delays,
definitional differences, and lack of transparency. In a tight energy
market, the negative impacts of uncertainty in market information on
planning and current and future needed investment are amplified.
Unreliable Market Information Contributes to Energy Market
Uncertainties:
Energy experts and officials question the reliability of oil and
natural gas market information in large part due to (1) concerns about
historical demand and supply data based on a lack of timeliness in
reporting, definitional differences, and national or industry
sensitivities and (2) concerns about future demand and supply estimates
based on unreliable historical data and insufficient transparency about
projection assumptions and methodologies.[Footnote 22] For example,
concerns about oil demand information include the following:
* Historical demand data: Uncertainty results from successive revisions
of data, a lack of timeliness in reporting, and questionable
reliability of data, particularly from rapidly growing non-OECD
countries such as China and India. Final demand data are generally
available about 16-20 months after the reference year. By the time
final data are reported, initial estimates may have been revised
repeatedly. EIA officials also question the basic reliability of demand
data for non-OECD countries like China and India. For example, Chinese
demand estimates are derived from "apparent demand"--as a sum of
estimated production and estimated net imports--or on inference from
Chinese gross domestic product (GDP) growth estimates. [Footnote 23] As
an example of the uncertainty that results from such methods, the EIA
indicated that Chinese oil demand had grown at roughly 500,000 barrels
per day in 2005, while a widely quoted Morgan-Stanley report indicated
that Chinese demand had declined.
* Projections: Uncertainty results from projected demand estimates that
rely upon questionable historical data and that may not fully
incorporate data revisions. For example, both the EIA and IEA use
historical demand and estimated economic growth as a basis for their
demand projections. However, both the EIA and IEA forecasts failed to
anticipate the surge in Chinese and global demand growth in 2004 due to
the poor quality of Chinese data. According to economic experts,
uncertainty in future demand is further compounded by insufficient
transparency in EIA and IEA methodologies for projecting impacts of a
high-price future.
Concerns about oil supply information include:
* Historical supply data: Uncertainty in production and stock
(inventories) data results from the proprietary nature of the data,
differences in definitions and conversion rates, and political
sensitivities. According to the EIA, for example, OPEC countries often
do not accurately report their current production levels. An EIA
official reported that estimates of OPEC's June 2006 crude oil
production varied by over 700,000 barrels per day, from a low of 29.3
million barrels per day by the Petroleum Intelligence Weekly, to 30
million barrels per day by the IEA. Reliability of OPEC production data
is further complicated by OPEC quotas that are based on estimated
reserves, which are suspected to have been inflated in order to
generate higher quotas. For Russia, swings of up to 100,000 barrels per
day have occurred in its production data since Russian data do not
break out gas condensate from oil production, and conversion rates for
a combined stream are uncertain.[Footnote 24] Production data for some
countries may be inferred from combining oil exports, oil demand, and
changes in oil stocks. However, in addition to problems with demand
data, oil stock data is incomplete and does not generally include
stocks held in non-OECD countries (such as in China or India where
stock data is considered a state secret) or in independent storage
within OECD countries. In a previous GAO study, we found that missing
stock data in IEA statistics, referred to as "missing barrels," were
present in 24 of 26 years between 1973 and 1998.[Footnote 25] Both IEA
and EIA data for 1999 through 2005 still reflected these gaps.
* Projections: Uncertainty results from projected supply estimates that
rely upon questionable historical data and an unknown level of oil
reserves. For example, both the EIA and IEA use historical data as a
basis of projecting future world demand and future non-OPEC supply.
Then, both agencies assume that OPEC production will "fill the gap."
IEA and EIA projections call for around a 50 percent increase in
current OPEC production, but there is growing debate over OPEC's
ability to meet this requirement. [Footnote 26] Supply projections are
also based on widely debated estimates of oil reserves due to
differences within and between industry and governments about the
definitions and measurement of "known," "proven," "probable," or
"undiscovered" reserves,[Footnote 27] the impact of technology on those
reserves, and the rate of decline in certain oil fields. According to
energy experts, uncertainty in projected supply is further compounded
by insufficient transparency in EIA and IEA assumptions about the
impacts of high prices on future production.
* Many of the concerns about oil demand and supply data also apply to
natural gas data. Both the EIA and IEA have indicated the need to
improve the timeliness and accuracy of natural gas demand, production,
and stock information. Data reliability issues occur due to the
increasing number of participants in natural gas markets, unspecified
exports due to a multitude of small players, large increases in inter-
regional trade and the loss of trade origin, longer supply chains, and
industry sensitivities in response to increasing market competition.
Reliable Energy Market Information Is Needed for Investment and Market
Stability:
Reliable energy market information is important for reducing price
volatility and facilitating planning and needed investment. For
example, the EIA reported that unanticipated world oil demand growth in
2004 contributed to depletion in oil stocks and resulted in the recent
high oil prices. Uncertainty about demand growth also negatively
impacts needed investment for future expansion of world oil and natural
gas supplies (including an estimated $3 trillion in each sector from
2005 to 2030 by the IEA), particularly given the long lead times and
payback periods required for such investments. Oil and natural gas
producer nations have stated the need to better understand future
demand in order to undertake costly investment--according to the OPEC
Secretariat, uncertainty about future oil demand, future non-OPEC
production, and needed OPEC investment is the largest challenge facing
the organization.[Footnote 28] Similarly, Russia's Gazprom has
indicated the need for future demand certainty, indicating possible
supply curtailments if its European consumers seek to diversify their
supplies away from Russia. Oil and natural gas consuming nations have
also indicated the need for more certainty in future supply. This is
particularly important given needed infrastructure investment in non-
OECD countries to use natural gas--EIA projects that 73 percent of
future natural gas demand will occur in countries outside the OECD--and
needed worldwide investment to expand the use of LNG.
Important Constraints Affect U.S. Ability to Address Key Energy Market
Issues in Forums:
The U.S. government has pursued emerging energy market issues through
its participation in international energy cooperation forums; however,
these forums, by their nature, can be constrained in the degree to
which they can have an impact on these issues. The greatest constraint
on the forums' ability to impact energy issues comes from the
sensitivity of sovereign nations to discussing their domestic energy
policies. Forum efforts are also constrained by limitations in
membership, consensus-based decision making, and voluntary
participation. However, within these constraints, the United States has
tried to mitigate energy market imbalances through efforts such as
promoting emergency preparedness and outreach to developing countries.
While the United States has not directly addressed the impact of the
growing participation of national oil companies on the energy market at
the forums, it has pursued related areas such as improving the
investment climate. Finally, the United States has supported
international efforts to improve energy information through various
data sharing agreements, standardization, and capacity building--
though EIA involvement has for the most part been indirect and ad hoc,
and U.S. data submissions to the IEA have lacked timeliness.
Sensitivity of National Energy Policies Is the Overriding Constraint:
International energy cooperation forums, by their nature, can be
constrained in the degree to which they can have an impact on energy
market issues. The greatest constraint comes from the sensitivity that
sovereign nations bring to discussing their domestic energy policies.
Supplier countries may resist international efforts to increase
opportunities for foreign investment in their energy sectors, and
consuming countries, like the United States, may resist international
efforts to influence their energy demand levels. For this reason,
discussion of energy issues at international energy cooperation forums
is almost always addressed through an agenda decided by consensus. This
generally means that forums focus on noncontroversial issues, like
energy efficiency and technology, according to U.S. officials. Forum
efforts are also constrained by inherent limitations in restricted
membership, consensus-based decision making, and the voluntary nature
of participation and follow-up.
For the United States, however, the consensus-based agenda does have
the advantage of "de-Americanizing" some issues, according to U.S.
officials. In some cases, an issue or action may be more likely to be
addressed on its own merits than if the United States is seen to be the
primary force behind it. Peer pressure can also be an important factor
when a group of countries is endorsing an issue or approach.
The United States Tried to Mitigate Imbalances from Recent Tight Energy
Markets through Energy Forum Efforts:
The United States has tried to mitigate the imbalances resulting from
the recent tightening of the energy market through its participation in
international energy cooperation forums. U.S. efforts have primarily
focused on support for emergency preparedness, including development of
strategic petroleum reserves and contingency plans. The challenges to
these efforts lie in factors such as key developing countries not being
members of the forum, such as China and India not having IEA
membership, or in the voluntary nature of participation and follow-up.
Enhancing Emergency Preparedness:
The United States has sought to address tight energy markets and
associated market imbalances primarily by supporting emergency
preparedness in both IEA and the APEC Energy Working Group. IEA is the
premier forum at which the United States addresses emergency
preparedness. It has an emergency response plan--called "Coordinated
Emergency Response Measures"--ready for use, supplemented by periodic
emergency scenario planning exercises that allow member countries to
practice how they would implement the plan in case of a real emergency.
This IEA emergency response plan was used in response to Hurricane
Katrina in September 2005, although such a situation had never been
anticipated in IEA scenario planning. A senior IEA official told us
that IEA's response to Hurricane Katrina showed the market that IEA
would act to mitigate supply shortfalls by releasing oil stocks. He
said that IEA does not act to affect price but showed that it would act
to affect supply, and this had helped restore confidence in the market.
The United States has strongly supported the APEC Energy Working
Group's Energy Security Initiative, which is also designed to respond
to the volatility resulting from the recent tightening of the market.
Short-term measures include improving the transparency of the global
oil market through improvement of APEC energy data and participation in
JODI, monitoring efforts to strengthen sea-lane security, implementing
the Real-Time Emergency Information Sharing System, and encouraging
members to have emergency mechanisms and contingency plans in place.
DOE's policy and international affairs office and strategic reserve
office both also worked with APEC Energy Working Group partners to
identify best practices for strategic oil stocks. DOE then hosted a
follow-up workshop in July 2005.
Conducting Outreach to Major Developing Countries:
Another way in which the United States has tried to address market
imbalances has been through outreach to major developing nations in
both IEA and the APEC Energy Working Group. For example, IEA conducts a
major outreach effort to developing countries and has established a
separate office, the Office of Non-Member Countries, for this purpose.
It has concluded "memoranda of policy understanding" to strengthen
cooperation with China and India and has conducted numerous workshops,
seminars, and training exercises.[Footnote 29] IEA held its first oil
security workshop with China in 2001, at which it provided training in
emergency response measures and strategic reserve management. China's 5-
Year Plan for 2000-2005 had raised the possibility of building a
national strategic petroleum reserve, and it subsequently is building
petroleum reserve tanks and has begun filling them, according to DOE.
IEA also invited China to attend its emergency response training and
disruption simulation exercise in October 2004 and hosted a follow-up
workshop with China on oil security in October 2006. IEA held a similar
oil security workshop with India in 2004. It has also conducted
numerous workshops and training efforts with Brazil, members of the
Association of Southeast Asian Nations, and others.
In contrast to IEA, U.S. outreach efforts to major developing countries
at the APEC Energy Working Group are more direct since many of the
major developing nations, such as China and Singapore, are members,
providing a continuing opportunity to conduct outreach. The focus in
the APEC Energy Working Group is on developing and sharing best
practices and technology insights.
Promoting Best Practices, Training, and Energy Technology Research:
The United States has also promoted best practices, training, and
research across a broad range of energy issues. IEA and the APEC Energy
Working Group both sponsor numerous conferences, workshops, and
seminars designed to share information and technology and to encourage
members to adopt practices and policies that are considered most
beneficial. An example of this approach is the APEC Energy Working
Group's focus on best practices in developing an Asian LNG market. The
United States hosted an APEC Energy Working Group workshop in San
Francisco in March 2004 to identify best practices for LNG trade, which
were later endorsed by members' Energy Ministers. A follow-up workshop
was held in Taipei in March 2005 to encourage acceptance of these best
practices. That workshop resulted in the launch of an LNG Public
Education and Communication Information Sharing Initiative to improve
public understanding of the benefits of LNG, as well as to address
safety concerns.
These forums also conduct economic analyses and research projects. IEA
annually publishes its flagship World Energy Outlook, which provides
global long-term energy market analysis. It also conducts extensive
energy policy analyses to promote conservation and the efficient use of
energy, as well as increased use of alternatives to oil (energy
diversification). The Asia Pacific Energy Research Centre also
publishes studies of global, regional, and domestic energy demand and
supply trends and related policy issues. In the area of research, IEA's
Energy Technology Collaboration Program currently sponsors more than 40
international collaborative energy research, development, and
demonstration projects, known as "Implementing Agreements." Their
purpose is to help coordinate national technology efforts so there are
no redundancies of effort across participating countries, which can
include nonmember countries.[Footnote 30]
Greater Cooperation with Producer Countries:
A final element of U.S. efforts to address market imbalances has been
support for greater cooperation with producer countries. IEA's Office
of Non-Member Countries has conducted outreach activities with producer
countries, as well as developing countries. It studies oil developments
in major emerging non-OPEC regions such as Russia, the Caspian, and
West Africa. For example, IEA has a memorandum of understanding with
Russia and has conducted workshops and training with Russia. It
completed an energy survey of Russia in 2002 that incorporated a review
of its energy situation, policies, electricity regulatory reviews, and
resulting recommendations. In addition, the United States participates
in IEF, which is a producer-consumer dialogue that promotes the
exchange of information among all parties with an interest in the
energy market.
Challenges to Efforts to Mitigate Market Imbalances:
The challenges to these efforts to mitigate market imbalances lie in
the inherent constraints of each forum. Since IEA was established
within the framework of OECD, a prerequisite for IEA membership is OECD
membership, which means that the applicant country must be a democracy
and have a market-based economy. This is one factor that complicates
the issue of extending IEA membership to fast-growing, energy consuming
countries like China. Another complicating factor is the requirement
that IEA members hold at least 90 days of oil reserves, which would be
difficult for most developing countries to achieve.[Footnote 31] For
IEA, deepening relations with nonmember countries is a delicate
balancing act. A senior IEA official said that IEA wants to improve its
relationship with developing countries like China and India--and, in
fact, is considering how to offer them observer status--but it also
does not want to give away the equivalent of membership without these
countries having to meet the basic requirements of membership.
Another inherent limitation to what can be achieved in these forums is
that participation and follow-up are voluntary. Apart from IEA's treaty
obligations related to emergency preparedness (i.e., holding 90 days of
oil reserves), IEA and APEC Energy Working Group activities are
voluntary, and decisions are made by consensus. These forums can take
steps to strongly encourage actions by members but cannot compel them.
For instance, IEA country reviews, conducted every 4 years for each
member, examine their energy policies and make recommendations. Two
years later, brief standard reviews update the main energy developments
and report on progress in implementing the recommendations. But, it is
up to each country whether, and to what degree, it will take the
recommended steps.
U.S. Has Addressed Impact of Growing Participation of National Oil
Companies by Pursuing Related Areas Such as Investment Climate:
The international energy forums do not directly address the impact of
the growing participation of national oil companies on the energy
market. The forums, however, do focus on the development of open,
competitive energy markets within countries. Opening the investment
climates in energy producing countries can provide increased access and
competition for the international energy companies. However, forum
efforts are constrained by inherent limitations in consensus-based
decision making, membership, and voluntary participation.
Encouraging Open Investment Climates Is a Priority in the Energy
Forums:
Both DOE officials and the Executive Director of the IEA stated that
contributing to opening up energy investment climates is a high
priority at the IEA and is an issue that has significant overlap with
the emerging influence of national oil companies. The IEA Offices of
Long-Term Cooperation and Non-Member Countries conduct in-depth reviews
of the energy policies of both IEA member countries and nonmember
countries to focus on their investment climate status and related
regulatory reforms. The IEA Shared Goals[Footnote 32] of participating
member countries are in part based on the establishment of free and
open markets as a fundamental starting point. For reviews of nonmember
countries' energy policies, the IEA provides observations on the status
of a country's investment climate and the regulatory reforms needed to
enhance competitive access to its domestic energy markets. For example,
the IEA conducted a 2002 Russia Energy Survey that identified the need
for regulatory and legislative reform within Russia and focused on
increasing competition and on opening its energy markets. Similarly,
the IEA has also performed reviews of some of China's energy sectors
that have focused on market liberalization and the transparency of the
country's oil market and related transactions, among other issues.
Other international energy forums also contribute to encouraging the
development of open investment climates and competitive access
opportunities within member countries. For example, NAEWG focuses on
improving the integration of the energy economies of Canada, Mexico,
and the United States through data and information sharing across
government-owned and privatized energy sectors. In addition, one DOE
official stated that NAEWG efforts to demonstrate the benefits of open
markets and expose the tight nature of gas supplies in North America,
limiting the amount and affecting the price of pipeline supplied gas
that would be available to Mexico, supported the development of the LNG
market as a significant private investment opportunity for companies in
what is primarily a government-owned energy sector in Mexico. The APEC
Energy Working Group also encourages APEC member economies to create
conditions to facilitate energy infrastructure investment through its
Energy Security Initiative. For example, the APEC Energy Working Group
developed a list of best practices for member countries to follow in
financing energy infrastructure projects so as to develop a competitive
energy investment climate.
Efforts Are Constrained by the Goals and Processes of the Forums:
The goals and processes of the international forums do not lend
themselves to directly addressing the impact of the growing
participation of national oil companies on the energy market. U.S.
agency officials and energy experts stated that the consensus approach
and limitations of membership in the international energy forums
covered in this review create challenges to addressing this emerging
energy market issue. Related efforts for more open investment climates,
such as through the IEA country reviews, or APEC Energy Working Group's
development of investment best practices, have also been hindered by
the voluntary nature of members' responses to forum recommendations.
The contentious nature of the topic of growing participation of
national oil companies on the energy market conflicts with the general
approach of the international energy forums in achieving consensus on
the energy issues covered. DOE and Department of State officials stated
that an international energy forum is not an appropriate venue for
addressing potentially contentious issues because a forum's studies and
action items are agreed to by consensus. Some energy experts
interviewed also questioned what, if any, role the international energy
forums can play on this issue. These experts emphasized that the
international energy forums are essentially organizations that allow
for gathering and exchanging of important energy data and information,
but they do not have either the negotiating leverage or the focus
needed to address this particular issue. One expert added that the
increasing influence of national oil companies in the international oil
markets may create a competition issue among the private sector players
in the market, but it is not a problem for energy security or an issue
that the international energy forums should or can address directly.
Limited membership in the international energy forums also inhibits
addressing the impact of the growing participation of national oil
companies on the energy market directly. Some of the major players
influencing the topic, such as China and India, are not active
participants in the discussion. For example, national oil companies
from China and India have been increasingly active in oil and gas
exploration by pursuing a policy of procuring access to energy
resources in various countries around the world. However, both have not
been active members in the international energy forums. Similarly,
Russia is one of the most influential energy producing countries in the
world, with its domestic energy market dominated by national oil
companies; but, it has not been an active participant in any of the
major international energy forums.
Related efforts for more open investment climates are hindered by the
voluntary nature of members' responses to forum recommendations.
International energy forums like the IEA make recommendations for
member countries and observations for nonmember countries to follow in
order to move to market pricing and open up their investment climates.
However, the forums lack the authority or mandate to require that these
recommendations actually be implemented. For example, despite
consistent recommendations to open up its energy markets from both
multilateral and bilateral forums, Russia has actually reversed the
liberalization of its energy sector and investment climate over the
last 2 years. According to DOE and IEA officials, its energy sector is
now less efficient, and the investment climate has worsened. Similarly,
despite the IEA's efforts to engage Mexico in participating in a review
of its energy policies, Mexico has shown no interest in the review or
implementation of the recommendations that typically result.
U.S. Has Supported International Efforts to Improve Energy Data within
Authority and Capacity Boundaries:
Improved energy market transparency is an important theme for each of
the major international energy forums. Through its participation in the
forums, the United States has supported improving energy information
with measures such as data sharing, data standardization, and capacity
building (i.e., improving a country's ability to collect and analyze
energy data). However, forum efforts often remain challenged in
improving data quality and timeliness, for example, due to authority
limitations and continued capacity needs in developing countries.
Additionally, U.S. support for forum efforts has not benefited from
consistent use of EIA expertise, and the United States has not provided
timely data submissions to the IEA.
Improving Information Is a Key Forum Goal:
International energy cooperation forums aim to facilitate the sharing
and collection of information across multiple governments. JODI is one
key data sharing effort and includes monthly oil data for over 90
countries, representing around 95 percent of global demand and
supply.[Footnote 33] IEA officials report that, through JODI, the
international community is able to view timelier world oil data and
assess the current quality of that data. Forum officials also reported
that JODI was receiving high-level political support and contributing
to increased transparency in some cases--China has begun collecting and
releasing some data on changes in levels of oil stocks to IEA, and the
IEA "Oil Market Report" is now incorporating timelier OPEC production
data. Additionally, through JODI, IEA and APEC are working to
standardize data collection by agreeing to use the same oil market
questionnaire. Both organizations are also considering developing a
similar natural gas data initiative in the future.
In addition to data sharing and standardization, the forums have
several efforts to improve energy information through capacity
building. Such efforts include IEA memorandums of understanding with
China and India to improve data sharing, the IEA Energy Statistics
Manual, and the 2005 and 2006 G-8's political endorsements of the
Extractive Industries Transparency Initiative through which data is
collected on developing country revenues from extractive industries.
U.S. and Forum Efforts to Improve Information Face Important
Challenges:
While the United States has supported forum efforts to improve
international energy information, EIA expertise has not been leveraged
in a consistent manner beyond the data exchange activities, as
discussed above. For example, the United States supports forum
initiatives such as JODI or NAEWG statistical sharing, and EIA is a
member of the IEA Energy Statistics Workgroup that develops reporting
standards for IEA data submissions. The United States also supports the
Extractive Industries Transparency Initiative through U.S. Agency for
International Development funding and through participation in an
International Advisory Group. However, when asked about consistent
leveraging of EIA expertise for forum efforts to improve the quality
and reliability of international data, a senior EIA official described
the administration's involvement as indirect and ad hoc. For example,
while EIA has provided briefings and analysis to DOE's policy office
for its cooperation efforts, EIA has not been directly and consistently
involved with international forum initiatives to improve data
collection efforts in other countries or in training workshops. The EIA
official also described EIA's participation as increasing and
decreasing with staff availability. International cooperation has been
a small part of EIA's overall mission; however, given the importance of
reliable international energy data for market stability and the
emphasis on comprehensive and timely energy data reporting in the
National Energy Policy, we believe that EIA's expertise can contribute
to enhanced international energy data improvement efforts.
Another challenge for international cooperative efforts to improve
energy market data is the fact that the forums must depend on
independent member countries to be responsive. According to IEA
officials, the IEA is criticized for providing annual statistical
publications that are 18 months old. These officials believe that the
IEA could publish annual data with only a 9-month lag if member
countries submitted their data within requested time frames. However,
according to the IEA officials we met with, several countries do not
meet the requested time frames--including the United States. For 2004
annual data, for example, the United States had not provided its
complete data submission to the IEA until March 17, 2006, although the
data was requested by September 30, 2005.[Footnote 34] According to a
senior EIA official, the United States is unable to meet IEA's
requested time frames, however, due to a national schedule for data
collection that does not correspond with the IEA's data collection
schedule and the fact that the United States may have to wait for data
from industry entities such as the American Petroleum Institute. The
United States anticipates submitting 2005 annual data to the IEA by
February 2007 (around 4 months after the requested date but earlier
than the previous year's submission).
Authority limitations also challenge international cooperative efforts
to collect detailed and consistent information on oil reserves and
production levels. Energy experts have emphasized the need for
international field-by-field production data and a better understanding
of future oil resources, as well as the true cost of developing them.
Currently, however, reserve estimates are unaudited figures, and there
are no common informational disclosure requirements for reserves under
international accounting standards.[Footnote 35]
Capacity limitations, particularly in emerging market economies, are
another challenge for international cooperative efforts to improve
energy market information. While establishment of JODI has generally
been considered a success by forum participants, periodic quality
reviews of the database reveal a mixed record of improvement, for
example. When asked about JODI data reliability, U.S. and IEA officials
report that data from developing countries may lack reliability due to
capacity limitations and that, despite organizational efforts to
support JODI, the forums must ultimately rely on the political will of
countries to improve and share their data.[Footnote 36]
Exacerbating capacity limitations, the IEA has also emphasized
challenges resulting from rapidly expanding data demands. According to
IEA officials, interest has grown in information on natural gas,
renewable energies, and energy efficiency. Additional statistical
resources may be needed to acquire such information from new markets--
many of them smaller and more dispersed, such as with renewable
energies like biofuels--and to provide data at a more detailed level,
such as within the household on energy use by vehicle or appliance. IEA
reports that statistical resources to fill these additional needs are
insufficient.
Conclusions:
Both oil importing and oil exporting countries seek stable, predictable
energy markets to support continued economic growth. Oil importing
countries, such as the United States and China, are concerned about
security of oil supply. Over the past few years, the unanticipated
growth in demand for oil has outpaced the growth in oil supplies. Oil
exporting countries have not been able to increase supply levels
accordingly, and spare capacity has declined to the point where
political, economic, and weather-related events can have disruptive
effects on the market. Increasing future supplies of crude oil and
refined oil will require high levels of investment and technical
expertise because new discoveries are expected to take place in remote,
offshore, and often politically risky locations. In some of these
locations, the producing country lacks the capital and expertise to
develop the resources and also lacks a predictable investment climate,
open to foreign investment--thus raising questions about when potential
supplies might come to the market. Energy market experts expect the
tight supply situation to continue in the medium and long term.
At the same time, oil exporting countries are concerned about the
security, or predictability, of oil demand. In the 1990s, demand for
oil was affected by a global economic slowdown, including the Asian
financial crisis of 1997-1998, and oil exporters experienced generally
low oil prices. With exploration costs so high now, some exporting
countries are concerned about committing to long-term investment
projects without clear indications of demand predictability.
International cooperation among importers and exporters can be founded
on the recognition that each group has a shared interest in market
stability. If the market does not provide this stability and questions
about demand and supply growth persist, "cooperation" may move more in
the direction of bilateral agreements covering oil and gas exploration
and pipeline routes. Such agreements may be perceived as excluding
other countries.
International forums can serve an important overall purpose in
providing the opportunity for oil importers and oil exporters to
discuss common interests and concerns. The forums have not directly
addressed matters that involve sovereign, sensitive decisions--such as
Mexico's foreign investment prohibitions or the competitive practices
of some national oil companies--but they do serve to keep channels of
communication open and improve understanding of various members'
concerns. By working on matters of interest to forum members--such as
technical advice on emergency preparedness and management of strategic
petroleum reserves and on ways to achieve cleaner, more efficient
energy production--they can build on shared interests and contribute to
the longer-term remediation of the demand-supply imbalance that has
caused volatile prices.
International forums can serve another critical role by improving
energy demand and supply statistics to facilitate investment planning.
In examining concerns about current energy market issues, a common
thread is that more reliable energy market information is increasingly
important for market stability, as well as to facilitate investment
planning. As recognized by the National Energy Policy report,
comprehensive and timely world energy data are needed. While the United
States has provided important leadership in international emergency
preparedness and the establishment of energy information systems, with
the increased importance of reliable energy market information in a
tight market, a greater effort may be needed to improve energy
statistics.
Recommendations for Executive Action:
To enhance the impact of international cooperation for improving energy
statistics needed for market stability and investment, we recommend
that the Secretary of Energy emphasize the priority of improving energy
information efforts within the international forums, particularly by
taking the following two actions:
* examining how EIA expertise can contribute to international forum
data efforts, and:
* examining how U.S. data submissions to the IEA can be made more
timely.
Agency Comments and Our Evaluation:
We provided a draft of this report to DOE and the Departments of
Commerce and State. All three agencies provided written comments, which
are reproduced in appendixes IV, V, and VI, respectively. The
Department of Commerce agreed with our recommendations. The Department
of State provided information in its letter about steps it has recently
taken, through organizational changes, in order to highlight the
importance of global energy challenges.
DOE stated that the U.S. government has been actively engaged in
international energy forums to advance U.S. energy security objectives
and that our report makes many valuable points regarding the nature and
the potentials of various international forums in which it
participates. DOE also stated that our report adds to the greater
understanding of the U.S. commitment to international energy
cooperation.
DOE disagreed with our characterization that EIA expertise has not been
leveraged in a consistent manner to improve international energy data
through the multilateral forums. DOE emphasized that EIA has been an
active member in each of the four international forums that are the
focus of this report. However, DOE also acknowledged that funding
issues have constrained EIA efforts to assist other countries to
improve their energy data and that this is an area where additional
funding would be useful. We have modified our report language to
emphasize that EIA has been more active in data exchange activities
rather than efforts to assist other countries in data collection and
modeling, such as through training workshops.
DOE expressed concern with our description of how U.S. data submissions
to IEA have not been timely, and it provided additional details about
several timeliness issues. We have modified our report language to
incorporate these clarifications. Additionally, while we recognize the
challenge for improving U.S. data submissions due to an EIA survey
schedule that does not correspond with IEA's scheduled due dates, we
maintain our recommendation that DOE examine ways to improve the
timeliness of U.S. data submissions. One consideration could include
the suggestion provided in DOE's comments to this report that the IEA
use EIA miniquestionnaires and monthly submissions to generate
preliminary U.S. data.
Finally, DOE stated that it was concerned that GAO asserts that more
data and more timely data will resolve energy market and security
issues. GAO makes no such assertion. Our findings highlight the
increased importance of reliable energy market information in a tight
market and, therefore, we recommend that DOE give greater priority to
improving energy information efforts within the international forums.
We specifically recommend that DOE address two relevant areas in which
we saw opportunities for improvement, by examining how EIA expertise
can be better leveraged and by examining how U.S. data submissions to
IEA can be made more timely. Improving energy statistics is one
important way in which the international forums can enhance the impact
of international cooperation, especially as regards global energy
market transparency.
DOE and the Departments of Commerce and State also provided technical
comments, which we have incorporated where appropriate.
We are sending copies of this report to interested Congressional
Committees and to the Departments of Commerce, Energy, and State. We
also will make copies available to others upon request. In addition,
this report will be available at no charge on the GAO Web site at
[Hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-4128 or yagerl@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made major contributions to
this report are listed in appendix VII.
Sincerely yours,
Signed by:
Loren Yager:
Director, International Affairs and Trade:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
To determine how the U.S. government participates in international
energy cooperation forums, we reviewed: (1) the key international
energy forums in which the U.S. pursues energy cooperation, (2) the key
emerging energy market issues that are important for international
energy cooperation, and (3) how the United States is addressing these
issues through its participation in these forums.
Our review focused mainly on the following key international energy
cooperation forums: the International Energy Agency (IEA), the Asia
Pacific Economic Cooperation (APEC) Energy Working Group, the North
American Energy Working Group (NAEWG), and the International Energy
Forum (IEF). We neither evaluated these forums and their impacts on
energy policy and the global energy market nor did we evaluate U.S.
energy policy goals, which are based on private sector approaches.
Rather, we reviewed the forums' mission, structure, and activities. In
addition, our review focused on the oil and natural gas sectors of the
energy market. These sectors provide the bulk of current energy traded
in the market. For this reason, the nuclear, coal, renewable, and
alternative energy sectors were outside the scope of our review.
To determine how the United States pursues energy cooperation in key
international energy forums, we reviewed documents and interviewed
officials responsible for international energy cooperation at the
Departments of Energy (DOE), State, and Commerce. We conducted
fieldwork at the IEA and the U.S. Mission to the Organization of
Economic Cooperation and Development (OECD) in Paris, France, where we
reviewed documents and interviewed officials. We also exchanged
correspondence with the Secretariat of the APEC Energy Working Group
and conducted telephone interviews with U.S. members of the IEA and
APEC Energy Working Group business advisory groups. In addition, we
interviewed several private sector energy experts and industry
representatives. While we had planned to conduct fieldwork in Mexico
City, Mexico, and Ottawa, Canada, with Mexican and Canadian government
officials responsible for NAEWG, we did not conduct this fieldwork
because the Department of State declined to facilitate our access to
these officials.
To identify the key emerging issues in the international oil and
natural gas markets in the past 5 years that are important for
international energy cooperation, we reviewed documents and data and
interviewed officials at DOE and the Departments of State and Commerce.
We also reviewed relevant reports and studies, including past GAO
reports, and discussed them with energy experts. We developed a list of
three key emerging issues and verified them with agency, forum, and
energy industry officials. We did not seek to independently verify the
nature and extent of these energy market changes but rather relied on
analysis by energy experts, officials, and key market studies, as well
as prior GAO work. Our report discusses various reliability concerns
with international oil and gas data. While data improvement is
required, we believe key international data, such as that from the
DOE's Energy Information Agency is sufficiently reliable to indicate
broad trends in world demand and supply.
To determine how the United States is addressing these emerging energy
market issues through its participation in these forums, we reviewed
documents and interviewed officials at DOE and the Departments of State
and Commerce, as well as at IEA, the APEC Energy Working Group, and
their business advisory groups, and private sector energy experts.
We conducted our work from January 2006 to November 2006 in accordance
with generally accepted government auditing standards.
[End of section]
Appendix II: July 2006 G-8 Summit and Bilateral Energy Cooperation
Forums:
In addition to the international energy cooperation forums discussed
previously, we also reviewed the July 2006 Group of Eight (G-8) Summit
held in St. Petersburg, Russia, which functioned as an ad hoc forum
focused on energy security, and U.S. participation in several selected
bilateral energy cooperation forums, which comprise an important part
of U.S. energy security and cooperation efforts. We focused on
bilateral energy cooperation with five key nations: Canada, China,
India, Mexico, and Russia.
July 2006 G-8 Summit, Hosted by Russia, Was Focused on Energy Security:
The G-8 is an unofficial forum of the heads of the leading
industrialized democracies--Britain, Canada, France, Germany, Italy,
Japan, Russia, and the United States, where the European Commission is
also represented and fully participates. One of the priority themes of
the July 2006 G-8 Summit, hosted by Russia, was to formulate political
commitments of the member states toward enhancing global energy
security.
The G-8 is not an international organization based on an international
agreement and does not have formal admission criteria, a charter, or a
permanent secretariat. G-8 summit meetings are held regularly in the
partner states, and the host country acts as the Chair of G-8 for a
calendar year. Russia has chaired the G-8 during 2006. The Chair
organizes the summit and ministerial meetings and the expert and
working meetings, manages the agenda, and coordinates the routine work
of the group. At the summit meetings, discussions of the heads of state
and government are held behind closed doors with decisions adopted by
consensus.
In preparation for the July 2006 G-8 Summit, the G-8 Energy Ministers
met in March 2006 to discuss issues such as global energy security,
energy efficiency, and energy saving. This meeting also included Energy
Ministers from Brazil, India, China, Mexico, and South Africa, as well
as representatives of the World Bank, the Organization of Petroleum
Exporting Countries, the International Atomic Energy Agency, IEA, and
the International Energy Forum. The July 2006 G-8 Summit resulted in
the St. Petersburg Plan of Action, which is a high-level commitment on
behalf of the G-8 members to enhance global energy security through
efforts across several related issue areas, such as increasing the
transparency and stability of global energy markets, improving the
investment climate in the energy sector, and ensuring physical security
of critical energy infrastructure.
Bilateral Energy Cooperation Forums Allow Focused Attention on Issues
of Interest:
The United States participates in many bilateral energy cooperation
forums; we reviewed five selected bilateral forums--those with Canada,
China, India, Mexico, and Russia. According to a DOE official,
bilateral energy cooperation forums tend to address focused issues that
may be of specific interest to the two parties. DOE and the Departments
of Commerce and State play a role in the bilateral energy cooperation
forums, with DOE personnel often co-chairing many of the working groups
involved in the efforts. In some bilateral energy cooperation forums
private industry is included in the discussion of certain issues,
whereas other bilateral energy cooperation forums mainly focus on high-
level dialogue between government representatives on energy policies
and initiatives. The following are examples of some of the main
bilateral energy cooperation forums:
* The DOE official responsible for managing U.S. participation in the
U.S.-China Energy Policy Dialogue stated it was established in 2004 for
high-level dialogue between the two countries on energy issues such as
energy policy, energy efficiency measures and related technologies,
renewable energy, and energy sector reforms. Other areas of focus have
included shared concern over supply security and energy transport
issues. The U.S.-China Oil and Gas Industry Forum, established in 1998,
is a public-private bilateral relationship involving government and
industry representatives from both countries. The forum is driven by
consensus-based dialogue on commercial policy and on common goals such
as development of secure, reliable, and economic sources of oil and
natural gas while facilitating investment in the energy
industry.[Footnote 37]
* The DOE official responsible for managing U.S. participation in the
U.S.-India Energy Dialogue stated it was established in 2005 with the
primary goal of promoting energy security, increasing trade and
investment in the energy sector, and deploying clean energy
technologies. This forum consists of a steering committee and five
working groups focused on oil and gas, power and energy efficiency,
coal, new technology and renewable energy, and a civil nuclear
initiative. Negotiations on a memorandum of understanding on energy
information exchange began in 1996 and it was signed in February 2006.
* According to DOE, the U.S.-Canada Energy Consultative Mechanism was
established in 1979 as a means for discussing key energy issues of
interest or concern to the United States and Canada. The two federal
governments meet annually to share policy positions, identify areas of
potential dispute, and clarify understanding on energy issues without
requiring commitments regarding future actions. Subject areas usually
covered include world oil market developments; domestic policy
developments; and bilateral oil, natural gas, electricity, and nuclear
issues.
* According to DOE, the U.S.-Mexico Binational Commission[Footnote 38]
Energy Working Group was established in 1996 as one of 16 working
groups under the commission and includes issues of bilateral interest
such as energy policy and legislative developments in each country,
cross-border natural gas and electricity issues, science and technology
cooperation, and world oil market developments. The Energy Working
Group meets as requested by either country, but, in recent years,
bilateral energy issues have been taken up under the auspices of the
North American Energy Working Group.
* The DOE official responsible for managing U.S. participation in the
U.S.-Russian Energy Dialogue stated it was established in 2002 and
brought under its umbrella the U.S.-Russian Energy Working Group that
had been established in 2001. The goal of this forum is to promote
energy efficiency, alternative energy, data exchange, energy technology
initiatives, and energy trade between the two countries while reducing
barriers to investment in the energy sector. The bilateral energy forum
originally met two times each year but, in 2005, reduced this to one
meeting each year.
[End of section]
Appendix III: Role of Natural Gas Is Increasing in Tight Energy Market:
While the tightening of the world energy market in recent years has
mostly been the story of the world petroleum market, there have also
been important developments in the natural gas market. Many countries
have increasingly relied on natural gas. For instance, while the
European Union's dominant fuel in 2003 was oil, accounting for 40
percent of energy demand, natural gas has been the fastest growing fuel
over the past decade and accounted for 24 percent of energy demand in
2003, according to the Energy Information Administration (EIA).
Historically, natural gas has not been a major fuel in China, but its
share in the country's energy market is rapidly increasing, almost
doubling from 1997 to 2004, according to EIA. While natural gas only
accounted for about 3 percent of total energy consumption in China in
2004, this share is expected to increase.
The natural gas market has long been dominated by pipelines that
deliver the natural gas from producers to consumers. For instance, 85
percent of U.S. natural gas imports were provided through natural gas
pipelines from Canada in 2005. Much of Europe is served by pipelines
from Russia, which provides around two-thirds of its imports. However,
a gas supply pricing conflict between Russia and Ukraine in late
December 2005 resulted in Russia's Gazprom shutting off gas supplies to
Ukraine on January 1, 2006, resulting in an energy crisis for all of
Europe. Although Russia had threatened a cutoff to demand higher
natural gas prices in recent years, this was the first time that a
supply disruption had affected flows to Europe. While the immediate
crisis was soon resolved, the incident deeply undercut Europe's sense
of energy security.
The United States was the largest consumer of natural gas in 2004, with
about 23 percent of world demand. Russia had the second largest demand.
Germany, in third place, had about a quarter of Russia's level of
demand. Figure 6 shows the top world natural gas consumers in 2004.
Figure 6: Top World Dry Natural Gas Consumers, 2004:
[See PDF for Image]
Source: GAO analysis of EIA data.
Notes: Dry natural gas is also known as consumer-grade natural gas.
Figure 6 includes all countries that consumed more than 2 trillion
cubic feet in 2004. Total world demand was 99.7 trillion cubic feet.
[End of Figure]
However, as figure 7 shows, Germany's net imports accounted for 80
percent of its natural gas demand in 2004, while this share was only 15
percent for the United States. Of the seven top natural gas importers,
six depended on imports for more than 75 percent of their demand--
including Ukraine, which met about 78 percent of its natural gas demand
through imports.
Figure 7: Top World Dry Natural Gas Net Importers, 2004:
[See PDF for Image]
Source: GAO analysis of EIA data.
Notes: Dry natural gas is also known as consumer-grade natural gas.
Figure 7 includes all countries whose net imports were more than 1
trillion cubic feet in 2004.
South Korea's net imports were more than 100 percent of its natural gas
demand because it was increasing its natural gas inventories.
[End of Figure]
In terms of natural gas production, Russia was the largest producer,
with about 23 percent of total world production, as shown in figure 8.
The United States accounted for 19 percent of total production. Canada,
in a distant third place, produced about 7 percent of total production.
Figure 8: Top World Dry Natural Gas Producers, 2004:
[See PDF for Image]
Source: GAO analysis of EIA data.
Notes: Dry natural gas is also known as consumer-grade natural gas.
Figure 8 includes all countries that produced more than 2 trillion
cubic feet in 2004. Total production was 98.6 trillion cubic feet in
2004.
[End of Figure]
Until recently, as long as most natural gas was delivered by pipelines
that required geographic proximity, there was not the possibility of
developing a global market in which gas could be shipped to customers
not connected with a pipeline. This has changed recently with the
growing development of a liquefied natural gas (LNG) market, which is
made possible because LNG can be shipped via LNG tankers that can go
anywhere in the world where there is an LNG regasification terminal.
LNG technology is not new--it had declined by the 1980s in the United
States, for example, in part because it could not compete with lower
priced domestic natural gas provided through pipelines. However,
interest in LNG imports has been renewed due to higher U.S. natural gas
prices in recent years, along with increased competition, and advances
in LNG technology that have lowered its costs, according to EIA. LNG is
expected to be particularly valuable for so-called "stranded" natural
gas reserves, which are located in areas too remote from major demand
centers to affordably be developed using pipelines.
In 2005, Japan was by far the largest importer of LNG, with about 42
percent of total world LNG imports.[Footnote 39] Its major suppliers
included Indonesia, Malaysia, Australia, Qatar, Brunei, and the United
Arab Emirates. South Korea, in second place, accounted for about 16
percent of total world LNG imports, from some of the same suppliers and
Oman, while Spain, ranked third, imported about 11 percent of the
total, mainly from Algeria, Nigeria, Qatar, and Egypt. The United
States ranked fourth, with about 9 percent of the total, mostly
imported from Trinidad and Tobago. While China is not yet an important
consumer in the LNG market, it is taking steps to significantly
increase its LNG profile. With its natural gas use increasing rapidly,
and uncertainties surrounding the potential of piped Russian natural
gas, China is increasingly considering LNG. Its first LNG import
terminal received its first shipment in May 2006, and over a dozen new
terminal projects are either under way or being considered, according
to EIA.
[End of section]
Appendix IV: Comments from the Department of Energy:
Note: GAO comments supplementing those in the report text appear at the
end of this appendix.
Department of Energy:
Washington, DC 20585:
December 12, 2006:
Ms. Loren Yager:
Director:
International Affairs and Trade:
United States Government Accountability Office:
Dear Ms. Yager:
On behalf of the Department of Energy, I am pleased to respond to your
email dated November 28, 2006, transmitting a copy of the GAO's
proposed report entitled "International Energy: International Forums
Contribute to Energy Cooperation Within Constraints (GAO-07-170)." We
appreciate the opportunity to review the report before it is issued in
its final form and would expect this letter and attachments to be
included in the final report. We would also ask that where there are
incorrect statements in the text of the report, GAO make the changes
directly to the final report rather than just referencing them in DOE's
comments.
We would like to emphasize that the United States Government has been
actively engaged in international energy fora to advance the United
States energy security objectives. The report makes many valuable
points regarding the nature and the potentials of various international
fora in which we participate, and adds to the greater understanding of
the U.S. commitment to international energy cooperation.
DOE is concerned however, that GAO asserts that more data and more
timely data will resolve energy market and security issues. Further,
DOE is concerned that GAO has not captured the scope and strength of
ongoing cooperation by the U.S. in international fora. Also, we are
concerned that the role of the Energy Information Administration in
international cooperation efforts seems mischaracterized.
The attached comments include further discussion of DOE concerns with
the report and provides recommendations that GAO can use for a more
accurate report. We believe that the clarification of the nature of
energy data sharing would even more effectively illuminate the dynamics
of international energy cooperation.
Sincerely,
Signed by:
Katharine A. Fredriksen:
Principal Deputy Assistant Secretary:
Office of Policy and International Affairs:
U.S. Department of Energy:
Comments on Draft GAO Report "International Forums Contribute to Energy
Cooperation Within Constraints"
1. Cover Page: We suggest updating the graphic at bottom based on
suggested changes to Figure 3 below (refer to Comment 24).
2. GAO Highlights page, "What GAO Recommends" In the Highlights section
of the Draft Report, the GAO recommends that U.S. data submissions to
the International Energy Agency (IEA) be made timelier. However, in the
Results in Brief section (page 4, 1st Paragraph, Last Sentence), GAO
correctly acknowledges that the reason for the delay in U.S.
submissions is primarily due to differing data collection and reporting
schedules. While EIA is trying to improve its timeliness, it is
unlikely that EIA would ever be in a position to satisfy all of the IEA
scheduled due dates because EIA's survey cycles (and the associated
data releases) are not consistent with IEA's schedule. (Please see
additional discussion of this point below.)
3. GAO Highlights page, paragraph 3, line 5: It is an over
simplification to say that the groups only focus on non controversial
issues like energy efficiency and technology sharing-a statement
repeated throughout the document. The benefit of the groups is that all
issues of concern are tabled and then areas of mutual interest are
pursued. In the NAEWG there have been nine key areas of focus thus far
identified as being of mutual interest for the three countries: natural
gas, nuclear energy, hydrocarbons technologies (including oil and gas),
oil sands technology, electricity, regulatory cooperation, energy data
and modeling, energy efficiency standards and technologies, and science
and technology development. This cooperative body of work has increased
awareness of market opportunities, research, and technology gains as
well as allowing for better understanding of regulations and data which
encourage better planning and could lead to greater investment
opportunities.
4. Highlights page, paragraph 3, line 9: EIA has been consistently a
part of international cooperation activities directed at data exchange.
However, funding issues constrain their ability to assist other
countries in collection and modeling efforts and this is an area where
additional funding would be very useful and would be embraced by the
countries involved.
5. Page 4, 1st Paragraph, 2"a to Last sentence, and Page 30, 1st
Paragraph, Last Sentence: "EIA involvement in initiatives to improve
international data has been indirect and ad hoc according to a senior
EM official. " This is not fully accurate and requires additional
clarification or the readership will be misinformed. First, EIA's
involvement in bilateral data sharing agreements has been indirect in
the sense that data sharing agreements often arise out of policy
dialogs not initiated by EIA, and until recently, EIA did not
independently pursue bilateral data sharing agreements. For the record,
EIA currently has two bilateral data sharing agreements; one with India
and one with Russia. EIA notes that data sharing agreements, which are
not discussed in detail in the GAO report, can suffer from the same
constraints that affect multilateral efforts, which can limit their
effectiveness. For EIA, data sharing agreements have not been
particularly effective, primarily because EIA's data are already
publicly available and because countries are often unable to release
collected data or do not have the data to share. EIA's focus for
bilateral agreements will continue to be on: a) obtaining data
collected but not publicly available; b) addressing best practices for
statistical organizations; and c) encouraging adherence to
international data standards. At times, EIA has found that countries
are often more interested in creating the ability to produce forecasts,
not collect and disseminate data.
Second, EIA is active in the four multilateral fora that are the focus
of the GAO report. EIA is a member of the IEA Energy Statistics
Workgroup, which develops the reporting standards for IEA data
submissions. EIA is actively involved in the APEC Expert Group on
Energy Data and Analysis, which provides energy information to APEC
bodies and the wider community through collecting energy data. EIA has
been an active member of the Joint Oil Data Initiative (JODI) since its
inception. Finally, EIA has contributed significantly to the efforts of
the North American Energy Working Group, in effect co-leading the
effort that resulted in the two editions of North America: the Energy
Picture, which provided detailed energy data and information for the
three countries.
Certainly at issue for EIA is determining to what extent its resources
can be most effectively used to foster the goal of increased data
collection and dissemination and access to country-specific data
whether through the bilateral or multilateral route. A better
characterization for the GAO to use would be to say that EIA's
involvement in bilateral initiatives to improve international data has
been limited and indirect. If GAO wants to recommend that EIA needs to
expand its multilateral role it could recommend that EIA consider
leveraging its resources to expand its role in multilateral fora that
are focused on data collection, dissemination, and transparency.
6. Page 4, 1" Paragraph, Last Sentence. "Furthermore, due to differing
reporting schedules, U.S. data submissions to the IEA have lacked
timeliness and contributed to the 18-month lag for which published
international data is available"' The lag in IEA published data is
approximately 18 months for all countries, based on the release dates
of the annual IEA fuel reports. The IEA deadline for submission of
annual data is September 30 when countries submit data for the previous
year. So, in 2005 countries submitted revised 2003 data and preliminary
2004 data that were published by the IEA in June 2006. This year
countries submitted revised 2004 data, and preliminary 2005 data for
publication in 2007. The U.S. is typically not in a position to report
annual questionnaire data by the September 30 date because of differing
reporting schedule constraints. [The IEA could consider using the data
reported by EIA in the mini questionnaires, and the monthly
electricity, natural gas, and oil survey submissions to generate the
prior year preliminary annual data. The mini questionnaires are
submitted to the IEA in May of each year, which is five months after
the close of the prior reporting year.] For the 2005 data reporting
cycle, EIA submitted 67 percent of our annual data four months later
than requested, and the renewable and oil questionnaires were submitted
in February and March respectively. But even if all countries met the
September deadline, it is difficult to understand how IEA could release
the annual data at the same time the data is due from member countries.
So additional explanation is needed to understand how the IEA plans to
reduce the 18 month lag to a 9 month lag in the release of annual
publications. Further, it is unclear how more timely responses to the
IEA will address the GAO's concerns about tight markets and access to
resources. (Please see additional discussion of this point below.)
We suggest that the recommendation on timeliness of U.S. data
submissions be removed from the Highlights section, as this is, at
most, a limited impediment to advancing energy security through
international cooperation. Alternatively GAO might instead use language
from page 44 (with additional wording, underlined), "While the United
States has provided important leadership in international emergency
preparedness and the establishment of energy information systems, and
with the increased importance of reliable energy market information in
a tight market, a greater effort may be needed to improve more timely
annual energy statistics.
7. Page 5, Figure e 1: We suggest GAO include historical data through
2005 and updated projections for 2010-2030 from the recently released
Annual Energy Outlook 2007 Reference Case, Table Al 1, available at:
[Hyperlink, http://www.eia.doe.gov/oiaf/aeo/index.html]:
8. Page 6, Figure 2: Units are trillion cubic feet not billion cubic
feet. We suggest that GAO include historical data through 2005 and
updated projections for 2010-2030 from the recently released Annual
Energy Outlook 2007 Reference Case, Table Al 3, available at:
[Hyperlink, http://www.eia.doe.gov/oiaf/aeo/index.html]:
9. Page 8 Table 1 under "Forum Objectives for the North American energy
working Group" "harmonization" is incorrect. The three countries have
agreed to "optimal integration" of the North American Energy market as
a key forum objective.
10. Page 10, 5th line from bottom: could read "such as Russia and
Indonesia".
11. Page 11, suggest: "Asia Pacific Energy Research Centre, an
international organization based in Tokyo that receives the bulk of its
financial support from the Japanese government." Reason: Australia also
makes a small contribution, and some other economies are considering
this.
12. Draft, page 12, first full paragraph under NAEWG, last line: This
sentence unnecessarily simplifies the broad focus of NAEWG. Rather than
examining only natural gas trade and interconnections the group has
also explored electricity trade, as well as trade, markets and
technologies to enhance all energy areas from hydrocarbons to nuclear
energy. The group has also looked at standardizing and harmonizing
standards and regulations where it benefits all three nations as well
as exploring ways to enhance energy production and reduce energy
consumption.
13. Draft, page 12 second full paragraph under NAEWG, first line: The
group was inaugurated by the three energy ministers and is still led by
them. Day to day leadership (line 4) is at the Assistant Secretary
level but the group has only increased in importance since its
inauguration in 2001. This year its work has been raised to a
presidential level with all three nations leaders identifying energy
security as a key trilateral initiative for 2006-2007 and a meeting of
the three ministers in May 2006.
14. Page 15, 15` Full Sentence: We suggest changing "almost tripling
from about $29 a barrel at the start of 2004 to a peak of about $78 in
July 2006." to "more than doubling from about $34 a barrel at the start
of 2004 to a peak of about $77 in July 2006." (This is based on the
NYMEX Light Sweet Crude, Contract 1 (or Near Month) settlement prices
for January 5, 2004, and July 14, 2006, from: [Hyperlink,
http://www.eia.doe.gov/emeu/international/crude2.html]):
15. Page 15, l" Full Paragraph, 3rd sentence: We suggest that GAO
change "consume about half of annual global oil output." to "account
for about half of annual global oil consumption."
16. Page 15, 1S` Full Paragraph, Last Sentence: We suggest that GAO
change percent for OECD Europe from 3 to 2 based on our most recent
data.
17. Page 16, Table 2: We suggest that GAO change data in Percent
Change, 2000-04 column, as follows, based on our most recent data:
Japan (-4); Canada (14), France (0.3), and Mexico (-2).
18. Page 16, Footnote 16: We suggest that GAO change 20.7 to 20.8 and
83.8 to 84.0, based on our most recent data.
19. Page 17, Full Paragraph, 1 st Sentence: We suggest changing "almost
9" to "8.7" and "about 12" to "12.1 ".
20. Page 17, Full Paragraph, 2nd Sentence: We suggest changing "45"
to"43" to match revised data for Figure 3.
21. Page 17, Full Paragraph, 4th Sentence: We suggest changing "10 to
"9" to match revised number of countries shown in Figure 3.
22. Page 17, Full Paragraph, Last Sentence: Change the order of
suppliers to the U.S. so the line reads: "The largest net oil exporter
to the United States was Canada, followed by Mexico, Saudi Arabia and
Venezuela."
23. Page 17, Footnote 17: We suggest adding a first sentence stating
something like "Oil production is defined here as crude oil (including
lease condensate), natural gas plant liquids, other liquids, and
refinery processing gain." Also, EIA suggests changing "about 10" to
"10.5" and "about 9" to "9.3".
24. Page 18, Figure 3: We suggest that GAO update the two charts with
ETA's most recent data as provided below (Net Oil Imports, Net Oil
Imports as Share of Total Country Consumption). This eliminates Taiwan
whose revised net oil imports are less than 1 million barrels per day.
* United States (12.097, 58); Japan (5.340, 101); China (2.765, 43);
Germany (2.459, 92); South Korea (2.201, 102); France (1.906, 95);
Italy (1.671, 93); India (1.606, 66); and Spain (1.537, 98).
* Also, in Note 2 change "using the extra oil in" to "adding the extra
oil to".
25. Page 19, 2nd Paragraph, 1st Sentence: We suggest deleting "crude"
and changing "about 84" to "84 to 85".
26. Page 19, 3rd Paragraph, 1st sentence: We suggest adding "refinery
capacity," before "pipelines".
27. Page 21, lines 15-18: Can the GAO cite its source for Secretary
Bodman's statement (testimony, speech, press conference) or put it in
quotes?
28. Page 25, 1sT Paragraph 2nd Sentence: We suggest changing "and a
result can" to "and, as a result, there can".
29. Page 26, 1st bullet: We request removing "and India" from the end
of both the first sentence and the fourth sentence. Second, we suggest
rewording the first sentence to read something like "Uncertainty
results from successive revisions of data; lack of timeliness in
reporting; questionable reliability of data; and incomplete data
(including the lack of inventory data), particularly from rapidly
growing non-OECD countries." Third, we request that GAO remove the
fourth sentence because the points are captured in the paragraph.
30. Page 27, 1st bullet. 5th sentence: We suggest changing sentence to
"For Russia, it is difficult to accurately convert production from
metric tons to barrels because the data are not broken out between
crude oil and gas condensate."
31. Page 27, 1St bullet, 6th sentence: We suggest adding "changes in"
before "oil stocks".
32. Page 28, Projections Bullet: While EIA does assume that OPEC is the
swing supplier, we don't assume OPEC will increase production by over
50 percent in the EE02006 projection. In fact, OPEC conventional
production increases by 40 percent between 2003 and 2030 in our
reference case. When unconventional OPEC production is added, we do
show a 47 percent increase in production, so even total OPEC liquids
supply growth doesn't exceed 50 percent (albeit, it's getting close).
EIA is also concerned about the last sentence in the bullet point,
which implies that EIA is not transparent on our assumptions regarding
the impact of high oil prices on future production. EIA does run high
and low world oil price scenarios, and we outline our assumptions,
including publication of the price paths themselves.
33. Page 30, lines 10-14: Although the report contains comments on pg.
40 from an EIA office regarding EIA's involvement in international data
sharing efforts, we may want to caveat the statement in this section,
since EIA's participation in the NAEWG work was neither ad hoc nor
indirect. They may want to edit line 12 as follows: ".standardization,
and capacity building - through EIA involvement has, for the most part,
been indirect."
34. Page 32, last sentence in first paragraph: should refer to "DOE's
policy and international affairs office and strategic reserve office
also worked." since it was the policy and international affairs office
who organized the July 2005 workshop.
35. Page 32, last sentence: China is building petroleum reserve tanks
and has begun filling some of them.
36. Page 33, paragraph 3 Typo: " . the APEC Energy Technology" should
be corrected to.read the "APEC Energy Working Group."
37. Page 35, paragraphs 1 & 2: The report may consider providing the
exact wording of the IEA's reserve requirement. This requirement is
"the commitment to holding the stockpile equivalent to at least 90 days
of net imports of the previous calendar year." This could be quite
different from the simple "90 days of oil reserves", depending on one's
degree of reliance on oil imports.
38. Draft, page 37, first line: This is incorrect and represents a
mischaracterization of the support offered by the NAEWG to LNG
development in Mexico. The line should read, "NAEWG efforts to
demonstrate the benefits of open markets and expose the tight nature of
gas supplies in North America, limiting the amount and affecting the
price of pipeline supplied gas that would be available to Mexico
supported the development of the LNG market, as a significant private
investment opportunity."
39. Page 39, 1st Line: We suggest adding "of" after "review".
40. Page 40, 1st full Paragraph: "EIA has not been directly involved
with international forum initiatives to improve international data. "
This is incorrect and we suggest GAO make the distinction between
involvement in establishing standards and guidelines and reporting data
from involvement in hands-on training. As stated above, EIA is involved
in several international fora devoted to data and data transparency.
EIA has been less involved in hands-on training activities such as the
recent JODI training workshops, though over the years EIA has conducted
workshops for those interested in EIA data and forecasting. It is
unlikely that EIA will have the resources to take a lead in delivering
hands-on training, something that international agencies are more in a
position do to, though EIA experts could be a part of an international
effort, pending resource availability.
GAO might mention that EIA's data, methods, documentation, survey
forms, etc. are all in the public domain, which is unique among non-
U.S. statistical agencies; EIA sets the international standard for
transparency.
41. Page 41, 1" Paragraph, Fifth Sentence: "For the 2004 annual data,
for example the United States submitted its data to the IEA on March
17, 2006, although the data was requested by September 30, 2005. " The
US (through EIA) submitted 67 percent of its data at the end of January
2006. The renewable and oil questionnaires and energy were submitted in
February and March, respectively. The statement in the report is
misleading, and should be addressed. Below is EIA's response to the IEA
regarding the timeliness issue on the Report Card:
'IEA Concern: IEA gave the United States a poor rating for timeliness
for its annual submission for all five 2064 questionnaires.
EIA Response: The United States could not meet the reporting date of
September 30, due to various internal and external constraints:
* EIA normally releases annual data after the IEA questionnaire
submission date of September 30, e.g., Natural Gas Annual, Electric
Power Annual, Annual Energy Outlook, Fuel Oil and Kerosene report etc.
EIA does not release data prior to the official release date.
* Release dates for external data needed for the questionnaires, for
which EIA is not responsible, are not consistent with IEA deadlines.
For example, the Federal Highway Administration's Highway Statistics,
the National Petrochemical and Refiners Association lubricant data, and
the American Petroleum Institute (API) NGL/LRG data are released after
IEA deadlines.
The IEA is aware of the U.S. reporting schedules and constraints.
During the IEA Energy Statistics Working Group Meeting, held during
November 2004, EIA and IEA staff established a realistic date that EIA
could meet to submit U.S. data. The date determined was January 2006
for reporting year 2004. EIA submitted four of six questionnaires by
the end of January 2006; the renewable questionnaire was submitted
February 7; the oil questionnaire was submitted March 17. EIA improved
its reporting performance compared to previous years; however this was
not reflected in the report card based on the IEA reporting criteria.
Unfortunately, if we continue with our current process for reporting
the U.S. annual data, EIA will not be able to improve the rating for
timely submission on the IEA report card, because the IEA uses a
benchmark that is not achievable by EIA. "
42. Page 41, 1 st Paragraph, Last Sentence: GAO states that the IEA
reported that EIA would submit the 2005 annual data by December 2006.
This date is incorrect. EIA contacted IEA in August and established a
goal of having its submission ready for delivery by February 2007.
43. Page 41, Footnote 32: The GAO comment on the natural gas inquiries
needs further clarification. While the IEA Report Card gave the United
States a poor timeliness rating for the natural gas survey, GAO did not
mention that EIA took issue with this characterization in its response
to IEA on the Report Card. EIA responded to approximately 98 percent of
the supplemental natural gas questionnaires within one week after
receipt. Some questions required additional data generated by EIA staff
outside the regular IEA-response team, or required inquiries to other
agencies (such as the Census Bureau). During the period the
supplemental questions were sent, EIA was in the process of performing
annual calibration and updating the sample included in the Monthly
Natural Gas Report. The responses to some of the IEA inquiries were
delayed because of workload constraints. One IEA question ("Use of
natural gas as feedstock in food production - Hydrolyzed protein")
required research with the Census Bureau and natural gas manufacturers
although EIA concluded there was insufficient information to make an
assessment. EIA responded as such to IEA.
44. Page 41, Footnote 32, Second Sentence: The implication is that the
U.S. received the lowest rating among all countries for timeliness. EIA
cannot verify this as we have not seen other countries' report cards;
none of the report cards have been published to our knowledge. We think
the GAO meant to say "The United States was rated `poor' for
timeliness, the lowest rating achievable." The GAO might mention that
the U.S. received high ratings in other areas.
US 2004 Reporting Cycle IEA Report Card.
1. Timeliness.
Section: 1.1;
Questionnaire and Rating: Submission dates;
Oil: Poor;
Natural gas: Poor;
Coal: Poor;
Renewables: Poor;
Electricity: Poor.
Section: 1.2;
Questionnaire and Rating: Average response time;
Oil: Very good;
Natural gas: poor;
Coal: Very good;
Renewables: Good;
Electricity: Very good.
2. Completeness.
Section: 2.1;
Questionnaire and Rating: Improvement in data coverage;
Oil: Very good;
Natural gas: Very good;
Coal: Very good;
Renewables: Very good;
Electricity: Very good.
Section: 2.2;
Questionnaire and Rating: Share of non-specified in totals;
Oil: Fair;
Natural gas: Good;
Coal: Good;
Renewables: Good;
Electricity: Fair.
3. Data Quality.
Section: 3.1;
Questionnaire and Rating: Overall quality of the answers;
Oil: Good;
Natural gas: Good;
Coal: Good;
Renewables: Good;
Electricity: Good.
Section: 3.2;
Questionnaire and Rating: Size of the statistical differences;
Oil: Very good;
Natural gas: Good;
Coal: Fair;
Renewables: Good;
Electricity: Fair.
Section: 3.3;
Questionnaire and Rating: Breaks in the time series;
Oil: Good;
Natural gas: Good;
Coal: Fair;
Renewables: Good;
Electricity: Good.
Section: 3.4;
Questionnaire and Rating: Internal consistency;
Oil: Fair;
Natural gas: Very good;
Coal: Good;
Renewables: Very good;
Electricity: Good.
Section: 3.5;
Questionnaire and Rating: Cross-questionnaire consistency;
Oil: Poor;
Natural gas: Very good;
Coal: Poor;
Renewables: Good;
Electricity: NA.
[End of table]
EIA is not aware of pressure to publish data with a nine month lag and
doing so does not seem possible under the deadlines established by the
IEA.
45. Draft, page 43, lines 1-6: International fora do more than provide
a place to discuss "concerns". International fora provide a vehicle to
identify areas of mutual interest, encourage better energy planning,
share information on supply, demand, regulation, markets, and
innovative technology gains and prevent misunderstandings that affect
economic growth and energy security.
46. Draft, page 43, lines 7-9: Fora also provide technical advice on
regulatory streamlining, data collection and implications for energy
imports that are important to energy security and supply demand
balance.
47. Draft page 44, first full paragraph, last line: A greater effort to
improve energy statistics is not something the US can do alone. The US
can increase its support for the development of each country's
individual independent (rather than politically driven) data collection
modeling and dissemination efforts so that all nations have a more
accurate picture of actual supply demand balances.
48. Page 46, 2nd Paragraph, 4th Sentence: We suggest changing "the
bulk" to "about 60 percent"
49. Draft page 49, Bilateral Energy Cooperation Forums, listing of
"main cooperation forums," this does not represent an accurate
accounting of our "main" bilaterals; bilaterals with key producers like
Saudi Arabia, Kuwait, Nigeria, Norway, the United Kingdom, and Brazil
among others should be accounted for.
50. Pages 49 (bullet paragraph) and 50 (footnote 1) "The U.S.-China
Energy Policy Working Group" It should be corrected to read the U.S.-
China Energy Policy Dialogue. This Dialogue does not have working
groups underneath it (although this might change in the future). Also,
this Dialogue is not subservient to other bilateral consultations.
51. Draft page 50, under "Bilateral Energy Cooperation Forums Allow
Focused Attention on Issues of Interest," 2nd bullet point, last
sentence: Last sentence should read "Negotiations on a memorandum of
understanding on energy information exchange began in 1996 and it was
signed in February of 2006."
52. Appendix II, List of Bilaterals: the list is incomplete; DOE holds
bilateral energy policy dialogues, information exchange efforts, or
PASAs with Africa, Angola, Argentina, Australia, Azerbaijan,
Bangladesh, Brazil, Canada, China, Equatorial Guinea, Kazakhstan,
India, Indonesia, Italy, Iraq, Mexico, Norway, Pakistan, Peru, Russia,
Saudi Arabia, the United Kingdom, Ukraine, Venezuela, and West Africa/
Nigeria.
53. Page 52, l" Paragraph, 41h Sentence: We suggest changing "its share
in the country's energy market is rapidly increasing, almost doubling
from 2000 to 2004" to "consumption increased by almost 50 percent from
2000 to 2004".
54. Page 52, 1st Paragraph, 5tH Sentence: We suggest changing "this
level is expected to increase significantly." to "this share is
expected to increase."
55. Page 52, 3rd paragraph, 1st Sentence: We suggest adding "in 2004"
after "natural gas".
56. Page 53, Figure 6, Note 2: We suggest changing "2,000 billion" to
"2 trillion" and "99,665 billion" to "99.665 trillion".
57. Page 54, Figure 7: We suggest that GAO revise this Figure to show
net imports rather than gross imports because Russia is a net exporter
and should not be included and because the net import position of
Germany is less than its gross imports position. The natural gas net
import data and net dry natural gas imports share of that country's dry
natural gas demand are provided below (Natural Gas Net Imports, Net Dry
Natural Gas Imports as Share of Dry Natural Gas Demand):
* United States (3.404, 15); Germany (2.871, 80); Japan (2.868, 97);
Italy (2.384, 84); Ukraine (2.373, 78); France (1.554, 97); and South
Korea (1.022, 104):
* Change title of Figure 7 to "Top Dry Natural Gas Net Importers,
2004". Change title of top chart to "Dry natural gas net imports
(trillion cubic feet)". Change Note 2 to read "Figure 7 includes all
countries whose net imports were more than 1 trillion cubic feet in
2004." Add "Note 3: South Korea's net imports were more than 100
percent of its natural gas demand because it was increasing its natural
gas inventories."
58. Page 52, Full Paragraph: We suggest a change to read "However, as
Figure 7 shows, Germany's net imports accounted for 80 percent of its
natural gas demand in 2004, while this share was only 15 percent for
the United States. Of the 7 top natural gas net importers, 6 depended
on net imports for more than 75 percent of their demand - including
Ukraine, which met about 78 percent of its natural gas demand through
net imports."
59. Page 55, Figure 8: We suggest adding data for Turkmenistan
(Production 2.068, Share 2%). Also, in Note 2 change "2,000 billion
cubic feet" to "2 trillion cubic feet" and "98,620 billion cubic feet"
to "98.620 trillion cubic feet".
60. Page 55, Full Paragraph, 2nd Sentence: We suggest changing "is
shipped via tanks that can go anywhere in the world." to "can be
shipped in LNG tankers that can go anywhere in the world where there is
an LNG regasification terminal."
61. Page 56, 1" Sentence: We suggest adding "Brunei" after "Qatar".
62. Page 56, 2nd Sentence: We suggest changing "from many of the same
suppliers" to "from some of the same suppliers and Oman".
63. Appendix III, Figures 6, 7, and 8: Units in Figures 6, 7, and 8 are
trillion cubic feet not billion cubic feet.
64. General Comment: GAO incorrectly asserts that more data and more
timely data will solve a wide range of challenges in the policy arena,
far beyond the data realm. The only two recommendations made by GAO
focus on U.S. efforts to improve international data collection and
dissemination, and the timeliness of U.S. data reporting to the
International Energy Agency. While EIA agrees that participation in
fora that focus on improved data collection and dissemination is
important as is timely international data, more energy data alone will
not resolve the energy market and security issues identified by GAO in
the report. Addressing these two concerns will not result in
significant progress in addressing our energy challenges.
The following are GAO's comments on DOE's letter dated December 12,
2006.
GAO Comments:
DOE's cover letter and comments 2, 4 to 6, 40, 41, 47, and 64 generally
addressed our key findings and recommendations. We considered the
technical comments provided in comments 1, 3, 7 to 39, 42 to 46, and 48
to 63 and incorporated them where appropriate.
1. GAO does not assert that more data and more timely data will resolve
energy market and security issues. Rather, our findings highlight the
increased importance of reliable energy market information for
mitigating market instability and facilitating investment and,
therefore, we recommend that DOE give greater priority to improving
energy information efforts within the international forums. We agree
that achieving improved international energy statistics is not
something the United States can do alone. However, we specifically
recommend that DOE address two relevant areas in which we saw
opportunities for U.S. improvement, by examining how EIA expertise can
be better leveraged and by examining how U.S. data submissions to IEA
can be made more timely. Improving energy statistics is one important
way in which the international forums can enhance the impact of
international cooperation.
2. We have clarified and modified language in the report to reflect
EIA's support for international data exchange, particularly through
efforts such as the Joint Oil Data Initiative (JODI) and the APEC
Expert Group on Energy Data and Analysis. However, EIA expertise has
not been consistently leveraged for efforts to improve the quality of
international data through, for example, assisting other countries in
data collection and modeling or training workshops. Consistent with
DOE's comment emphasizing the role of funding constraints in EIA's
ability to assist with such efforts, we acknowledged that EIA's
participation has been dependent on staff availability. Further, while
we acknowledge in our report that international cooperation is a small
part of EIA's overall mission, we maintain that DOE should examine how
EIA expertise can contribute to international forum data efforts.
3. GAO's recommendation states that DOE should examine how U.S. data
submissions to the IEA can be made more timely. In our report, we
acknowledge that the current EIA survey schedule does not correspond
with IEA's current scheduled due dates. Nonetheless, we maintain that
DOE should examine whether there are options for addressing the
timeliness of U.S. data submissions to the IEA. One consideration could
include the suggestion provided in DOE's comments to this report that
the IEA use EIA miniquestionnaires and monthly submissions to generate
preliminary U.S. data.
4. In our report, we recognize that other IEA member countries also do
not submit their data within the requested IEA time frames. We have
modified language regarding U.S. data submissions to reflect additional
information DOE has provided.
[End of section]
Appendix V: Comments from the Department of Commerce:
The Deputy Secretary Of Commerce:
Washington, D.C. 20230:
December 13, 2006:
Mr. Loren Yager:
Director:
International Affairs and Trade:
U.S. Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548:
Dear Mr. Yager:
Thank you for the opportunity to review and comment on the U.S.
Government Accountability Office's report, "International Energy:
International Forums Contribute to Energy Cooperation Within
Constraints." Ensuring access to reliable, affordable energy supplies
for U.S. businesses and consumers is a high priority for the Commerce
Department.
The Department of Commerce participates in many multilateral and
bilateral forums that are designed to improve international energy
cooperation, including the North American Energy Working Group, one of
the forums studied in detail in the report. We also participate in some
of the forums described in Appendix 2, including the U.S.-China Oil and
Gas Industry Forum, the U.S.-India Energy Dialogue, and the U.S.-Russia
Energy Working Group. We ask that the language on page 49 of the report
be changed to reflect that.
We highly value the work of the U.S. Energy Information Administration
(EIA). We believe that the recommendations that the report makes
regarding the EIA's data collection and information reporting practices
will enhance the ability of the United States to participate in
international energy data collection efforts. The availability of good
international data is important to U.S. energy companies in making
investment decisions, and to governments working together to improve
global energy security and stability.
Thank you again for the opportunity to review and comment on this
important report.
Sincerely,
Signed by:
David A. Sampson:
[End of section]
Appendix VI: Comments from the Department of State:
United States Department of State:
Assistant Secretary for Resource Manage and Chief Financial Officer:
Washington, D.C. 20520:
DEC 1 2 2006:
Ms. Jacquelyn Williams-Bridgers:
Managing Director:
International Affairs and Trade:
Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548-0001:
Dear Ms. Williams-Bridgers:
We appreciate the opportunity to review your draft report,
"International Energy: International Forums Contribute to Energy
Cooperation Within Constraints," GAO Job Code 320397.
The enclosed Department of State comments are provided for
incorporation with this letter as an appendix to the final report.
If you have any questions concerning this response, please contact Jeff
Izzo, Economic Officer, Bureau of Economic, Energy and Business Affairs
at (202) 647-1291.
Sincerely,
Signed by:
Bradford R. Higgins:
cc: GAO - Virginia Hughes:
EB - Elizabeth Dibble:
State/OIG - Mark Duda:
Department of State Comments on GAO Draft Report:
International Energy: International Forums Contribute to Energy
Cooperation Within Constraints (GAO-07-170, GAO Code 320397):
Thank you for the opportunity to comment on the draft report entitled,
International Energy: International Forums Contribute to Energy
Cooperation within Constraints. Secretary Rice believes that
international cooperation on energy issues is vital to the United
States' energy security goals. As your report shows, the Department of
State, under Secretary Rice's leadership, has placed and will continue
to place a high priority on securing U.S. energy security through
mutually beneficial exchanges with key energy producing and consuming
countries.
The State Department has made organizational changes to address the
critical issue of global energy challenges. These changes are reflected
in the Secretary's decision to change the title of the Under Secretary
for Economic, Business and Agricultural Affairs to the Under Secretary
for Economic, Energy and Agricultural Affairs and the title of the
Assistant Secretary for Economic and Business Affairs to the Assistant
Secretary for Economic, Energy and Business Affairs, to reflect the
Department's increased attention to energy matters.
Additionally, Secretary Rice has appointed Gregory Manuel to serve as
Special Advisor to the Secretary and International Energy Coordinator.
This new position, at the critical nexus of energy, diplomacy and
national security, will enhance the State Department's ability to work
in partnership with the Department of Energy and other agencies to
address the many foreign policy-related energy challenges we face. It
also will enhance our ability to help implement the President's
Advanced Energy Initiative for a clean and secure energy future.
Reporting through the Under Secretary for Economic, Energy, and
Agricultural Affairs to the Secretary, this new position will provide
strategic oversight, develop new policy approaches and initiatives, and
fully integrate energy issues into the decision-making process at
senior levels. Toward that end, the Special Advisor to the Secretary
and International Energy Coordinator will work closely with the
Department's regional and functional bureaus, and others responsible
for energy issues.
[End of section]
Appendix VII: GAO Contact and Staff Acknowledgments:
GAO Contact:
Loren Yager, (202) 512-4347, yagerl@gao.gov:
Staff Acknowledgments:
In addition to the individual named above, Virginia Hughes, Assistant
Director; Leyla Kazaz; Kendall Schaefer; Hugh Paquette; and Michelle
Munn made key contributions to this report. Other contributors include
Godwin Agbara, Karen Deans, Mark Dowling, Amanda Miller, and Anne
Stevens.
FOOTNOTES
[1] For recent GAO evaluations of related energy activities, see GAO,
National Energy Policy: Inventory of Major Federal Energy Programs and
Status of Policy Recommendations, GAO-05-379 (Washington, D.C.: June
10, 2005); GAO, Energy Security: Issues Related to Potential Reductions
in Venezuelan Oil Production, GAO-06-668 (Washington, D.C.: June 27,
2006); GAO, Natural Gas: Factors Affecting Prices and Potential Impacts
on Consumers, GAO-06-420T (Washington, D.C.: Feb. 13, 2006); and GAO,
Energy Markets: Factors Contributing to Higher Gasoline Prices, GAO-06-
412T (Washington, D.C.: Feb. 1, 2006).
[2] The "National Energy Policy" report contained over 100
recommendations that it stated, taken together, provide a national
energy plan that addresses the energy challenges facing the nation. In
a 2005 report, GAO-05-379, GAO found it is difficult to fully assess
the status of progress made in implementing the National Energy Policy
recommendations because the information reported by DOE has been
limited, some recommendations are open-ended and lack measurable goals,
and the National Energy Policy recommendations do not reflect all
federal energy-related efforts.
[3] For this recommendation, the "National Energy Policy" report
specifically encourages the United States to work closely with Asian
economies, especially through APEC.
[4] The members of IEA are: Australia, Austria, Belgium, Canada, Czech
Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland,
Italy, Japan, Korea, Luxembourg, Netherlands, New Zealand, Norway,
Portugal, Spain, Sweden, Switzerland, Turkey, United Kingdom, and
United States.
[5] IEA was established pursuant to the Agreement on an International
Energy Program. All IEA members must be OECD members. However, not all
OECD members are IEA members. OECD nonmembers of IEA are Iceland,
Mexico, Poland, and the Slovak Republic.
[6] The Governing Board is supported in policy development by a
structure of Standing Groups and Committees, also composed of member
government energy officials, that each separately meet two to five
times a year and focus on the oil market, emergency preparedness, long-
term cooperation, nonmember countries, and energy research and
technology.
[7] These are: Australia; Brunei Darussalam; Canada; Chile; People's
Republic of China; Hong Kong, China; Indonesia; Japan; Malaysia;
Mexico; New Zealand; Papua New Guinea; Peru; Republic of the
Philippines; Republic of Korea; Russian Federation; Singapore; Chinese
Taipei; Thailand; United States of America; and Vietnam. Members of
APEC are called "economies" rather than "nations" in order to avoid the
issue of the status of Taiwan, which is not recognized by China as a
separate nation. The compromise was to refer to all members as
economies and to refer to Taiwan as "Chinese Taipei," according to a
DOE official.
[8] LNG is natural gas, primarily methane, which has been cooled to its
liquid state at -260 degrees Fahrenheit. Liquefying natural gas reduces
the volume it occupies by more than 600 times, making it a practical
size for storage and transportation.
[9] The formation of NAEWG was one of 105 recommendations for action in
the U.S. "National Energy Policy" report, released in May 2001. With
support from the heads of state from each of the three countries
regarding cooperation in the energy sector, Natural Resources Canada
Minister Goodale, Mexican Secretary of Energy Martens, and U.S.
Secretary of Energy Abraham established NAEWG in March 2001.
[10] These comprise the electricity, energy efficiency, energy picture,
hydrocarbons, natural gas trade and interconnections, nuclear
collaboration, oil sands, regulatory, and science and technology
working groups.
[11] The "Producer-Consumer Dialogue" was originally designed to be a
dialogue and informational bridge between OPEC and IEA countries. U.S.
representatives originally had concerns about this dialogue and
possible price collusion resulting from the discussions that have been
allayed in the past several years.
[12] The other international organizations include the Statistical
Office of the European Communities (EUROSTAT), Organization
Latinoamericana de Energia (OLADE), OPEC, and the United Nations
Statistics Division (UNSD). These organizations began an assessment of
the quality of world oil statistics in April 2001 under an initiative
called the "Joint Oil Data Exercise." This exercise was transformed
into JODI after the 8th IEF in 2002.
[13] Prices are based on daily spot prices of West Texas Intermediate
crude oil at Cushing, Oklahoma, as reported by EIA. The spot price of
crude oil never dipped below $30 per barrel again after December 1,
2003, when it was $29.98 per barrel. It peaked on July 14, 2006, at
$77.03.
[14] The spot price for West Texas Intermediate crude oil dropped to a
low of $56.27 per barrel on November 14, 2006, and as of December 1,
2006, was back up to $63.44.
[15] OECD Europe consists of Austria, Belgium, Czech Republic, Denmark,
Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy,
Luxembourg, the Netherlands, Norway, Poland, Portugal, Slovakia, Spain,
Sweden, Switzerland, Turkey, and the United Kingdom.
[16] Daniel Yergin, Chairman, Cambridge Energy Research Associates,
before the Government Reform Subcommittee on Energy and Resources and
the Subcommittee on National Security, Emerging Threats, and
International Relations, U.S. House of Representatives, May 16, 2006.
[17] 2004 is the latest year for which data is available for all
countries. The term "demand" is used interchangeably with
"consumption."
[18] In 2005, oil demand data for the United States and China were 20.7
and 6.9 million barrels per day, respectively. Total world demand was
83.8 million barrels per day, and the U.S. and Chinese share of total
world demand remained at 25 and 8 percent, respectively.
[19] Oil production is defined here as crude oil (including lease
condensate), natural gas plant liquids, other liquids, and refinery
processing gain. Saudi Arabia was the largest producer, with about 10
million barrels per day, while Russia was second, with about 9 million
barrels per day, in 2004, according to EIA data.
[20] Refers to "conventional" crude oil reserves. According to the EIA,
conventional crude oil reserves are reserves produced by a well drilled
into a geologic formation in which the reservoir and fluid
characteristics permit the oil to readily flow.
[21] "Oil" includes crude oil, as well as natural gas liquids and
condensates. Natural gas liquids are hydrocarbons in natural gas that
are separated from the gas as liquids through the process of
absorption, condensation, adsorption, or other methods in gas
processing or cycling plants. Condensates are a natural gas liquid
recovered from gas wells from lease separators or field facilities.
[22] The IEA's World Energy Outlook and the EIA's International Energy
Outlook are published annually and, according to energy experts, are
widely considered industry standards for world oil market projections.
Both agencies prepare a "reference" scenario that forms the basis for
their expected projections, as well as various "high-price" scenarios.
In addition to these publications, both agencies are working to expand
their analysis of energy market volatility in the future through other
studies and analytical tools.
[23] Both the reliability of estimates on Chinese net imports and
Chinese economic growth have also been questioned.
[24] The EIA defines crude oil as a mixture of liquid hydrocarbons in
natural underground reservoirs that remain liquid after passing through
surface separating facilities. Gas condensate is a mixture of heavier
hydrocarbons recovered as liquids from natural gas.
[25] See GAO, International Energy Agency: How the Agency Prepares Its
World Oil Market Statistics, GAO/RCED-99-142 (Washington, D.C.: May 7,
1999).
[26] This debate is in part related to uncertainty over Saudi Arabia's
spare capacity level.
[27] These terms reflect the degree of certainty to which estimated
reserves exist and the likelihood that such reserves can be profitably
extracted. Other uncertainties have arisen from recent announcements by
major oil companies that they have lowered their reserve estimates.
[28] In their long-term strategy, OPEC examined various rates of
projected oil demand to 2020 and estimated that their needed investment
could vary from $230 billion to $470 billion.
[29] IEA's workshops and seminars with China addressed energy
efficiency, energy modeling and statistics, coal and investment, and
electric power reform. IEA also jointly held a conference on Northeast
Asia energy security and cooperation with the Korean Energy Economics
Institute in Seoul, Korea. IEA also held workshops with India on
efficiency standards, coal and electricity, and energy indicators.
[30] These projects are self-financed through voluntary contributions
by the countries that decide to sponsor the research and, as such, are
financed outside the IEA budget process.
[31] The commitment is to hold at least 90 days of net imports of the
preceding calendar year. Apart from the technical difficulties of
building and managing a strategic petroleum reserve, it would be very
expensive at current oil prices, and it could potentially further
increase oil prices by putting greater demand pressure on the market.
[32] Adopted by IEA Ministers in 1993.
[33] The JODI world database was opened to the public in 2005 and is a
relatively new data effort.
[34] The United States submitted around two-thirds of its data by the
end of January 2006 and the remaining one-third of data by March 17,
2006. The IEA prepares report cards for each of its members that record
data timeliness, completeness, and overall quality. On its most recent
report card, the United States was rated "poor" for timeliness--the
lowest rating achievable--due to submissions provided more than 2
months after requested. The United States received high ratings in
other areas.
[35] According to energy experts, the Securities and Exchange
Commission system for reserve disclosure is based on outdated
definitions of reserves and technology such that there is a growing
divergence between what is reported under the Securities and Exchange
Commission and how companies, using more modern technologies and tools,
assess their own reserve position.
[36] To support continued data improvement, the organizations are
preparing a JODI manual and JODI training sessions.
[37] The U.S.-China Energy Policy Dialogue is led by DOE. The U.S.-
China Oil and Gas Industry Forum is led by DOE in conjunction with the
Department of Commerce.
[38] The U.S.-Mexico Binational Commission was established in 1981 by
then-Presidents Reagan and Lopez-Portillo to serve as a forum for
regular meetings at the cabinet level on a wide range of issues
critical to U.S.-Mexico relations.
[39] The EIA data on LNG imports do not provide a number for total LNG
imports but rather provide it as apparent world exports of LNG, which
the data show totaled 6,828 billion cubic feet in 2005. Japan imported
2,858 billion cubic feet, South Korea imported 1,075 billion cubic
feet, Spain imported 769 billion cubic feet, and the United States
imported 631 billion cubic feet.
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