Research and Development
DOE Could Enhance the Project Selection Process for Government Oil and Natural Gas Research Gao ID: GAO-09-186 December 29, 2008Although competitive oil and natural gas markets generally provide incentives for companies to invest in research and development (R&D), some industry experts believe these companies may underinvest in certain areas. A recent GAO report noted important criteria for the Department of Energy (DOE) to consider in evaluating its oil and natural gas R&D efforts--including the likelihood that industry would perform the research without federal funding. The Office of Management and Budget has raised similar concerns. In this context, GAO was asked to review (1) how much U.S. industry has invested in oil and natural gas R&D over the last 10 years, and the current focus of these activities; (2) how DOE's oil and natural gas R&D funding and activities compare with industry's; and (3) to what extent DOE ensures that its oil and natural gas R&D would not occur without federal funding. GAO reviewed DOE and U.S. industry data for oil and natural gas R&D spending, and interviewed DOE officials and representatives from various segments of the industry.
From 1997 through 2006, the U.S. oil and natural gas industry spent at least $20 billion on R&D, and currently focuses mostly on near-term (within about the next 2 years) production challenges. The nature of R&D varies by type of company. For example, major oil companies tend to have in-house R&D facilities, and though most of their projects are designed to meet near-term needs, they also conduct some longer-term research. Similarly, service companies, which specialize in providing technologies to facilitate exploration and production, focus their R&D primarily on their clients' immediate needs, but also conduct some longer-term research. In contrast, larger independent companies generally do not conduct in-house R&D; instead, they may buy new technologies from other companies and adapt them to meet their needs, and also may participate in research partnerships. Smaller independent companies do not generally conduct R&D, but some obtain or become aware of technology from other companies, trade publications, or professional associations. From 1997 through 2006, DOE's total funding for oil and natural gas R&D totaled significantly less than industry's--about $1 billion versus at least $20 billion--and, in contrast to industry's focus on near-term challenges, DOE's R&D focuses on both near- and longer-term challenges. Some examples of DOE's projects that have had a near-term focus include projects that develop more advanced drilling and imaging tools, and enhance oil recovery. An example of a DOE project that has had a longer-term, high-risk focus is evaluating the potential use of methane hydrates, which are molecules of methane trapped inside a lattice of ice, as a future energy source--an area that industry officials said was generally beyond their time horizon for R&D. DOE keeps abreast of industry R&D activities and uses a project selection process to ensure that its efforts support industry R&D; however, DOE does not formally assess whether industry would undertake this R&D without federal funding. Based on its awareness of industry needs gathered from its interactions with industry, DOE develops research priorities that drive its project solicitations. Individual oil and natural gas projects are screened to ensure that the applicant (1) explains the significance of the problem the proposal addresses, (2) demonstrates understanding of the current technology and information gaps, and (3) considers the likelihood that the project will advance the current state of technology. While these efforts help to ensure that DOE is informed about industry activities, DOE does not formally assesses the likelihood that industry would have conducted the R&D without federal funding, nor does it explicitly include such an evaluation in its screening criteria. For instance, GAO found that several of DOE's projects addressing challenges in advanced drilling and improved recovery of oil and natural gas were similar to activities conducted by industry. In this regard, in its review of DOE's oil and natural gas R&D budget, the Office of Management and Budget has challenged DOE to better justify the need for certain government research. By making a more formal evaluation in its screening process, DOE could better demonstrate that it selects projects that industry is unlikely to pursue.
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Director: Team: Phone:GAO-09-186, Research and Development: DOE Could Enhance the Project Selection Process for Government Oil and Natural Gas Research
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Report to the Chairman, Subcommittee on Energy and Water Development,
Committee on Appropriations, U.S. Senate:
United States Government Accountability Office:
GAO:
December 2008:
Research And Development:
DOE Could Enhance the Project Selection Process for Government Oil and
Natural Gas Research:
GAO-09-186:
GAO Highlights:
Highlights of GAO-09-186, a report to the Chairman, Subcommittee on
Energy and Water Development, Committee on Appropriations, U.S. Senate.
Why GAO Did This Study:
Although competitive oil and natural gas markets generally provide
incentives for companies to invest in research and development (R&D),
some industry experts believe these companies may under invest in
certain areas. A recent GAO report noted important criteria for the
Department of Energy (DOE) to consider in evaluating its oil and
natural gas R&D efforts”including the likelihood that industry would
perform the research without federal funding. The Office of Management
and Budget has raised similar concerns. In this context, GAO was asked
to review (1) how much U.S. industry has invested in oil and natural
gas R&D over the last 10 years, and the current focus of these
activities; (2) how DOE‘s oil and natural gas R&D funding and
activities compare with industry‘s; and (3) to what extent DOE ensures
that its oil and natural gas R&D would not occur without federal
funding. GAO reviewed DOE and U.S. industry data for oil and natural
gas R&D spending, and interviewed DOE officials and representatives
from various segments of the industry.
What GAO Found:
From 1997 through 2006, the U.S. oil and natural gas industry spent at
least $20 billion on R&D, and currently focuses mostly on near-term
(within about the next 2 years) production challenges. The nature of
R&D varies by type of company. For example, major oil companies tend to
have in-house R&D facilities, and though most of their projects are
designed to meet near-term needs, they also conduct some longer-term
research. Similarly, service companies, which specialize in providing
technologies to facilitate exploration and production, focus their R&D
primarily on their clients‘ immediate needs, but also conduct some
longer-term research. In contrast, larger independent companies
generally do not conduct in-house R&D; instead, they may buy new
technologies from other companies and adapt them to meet their needs,
and also may participate in research partnerships. Smaller independent
companies do not generally conduct R&D, but some obtain or become aware
of technology from other companies, trade publications, or professional
associations.
From 1997 through 2006, DOE‘s total funding for oil and natural gas R&D
totaled significantly less than industry‘s”about $1 billion versus at
least $20 billion”and, in contrast to industry‘s focus on near-term
challenges, DOE‘s R&D focuses on both near- and longer-term challenges.
Some examples of DOE‘s projects that have had a near-term focus include
projects that develop more advanced drilling and imaging tools, and
enhance oil recovery. An example of a DOE project that has had a longer-
term, high-risk focus is evaluating the potential use of methane
hydrates, which are molecules of methane trapped inside a lattice of
ice, as a future energy source”an area that industry officials said was
generally beyond their time horizon for R&D.
DOE keeps abreast of industry R&D activities and uses a project
selection process to ensure that its efforts support industry R&D;
however, DOE does not formally assess whether industry would undertake
this R&D without federal funding. Based on its awareness of industry
needs gathered from its interactions with industry, DOE develops
research priorities that drive its project solicitations. Individual
oil and natural gas projects are screened to ensure that the applicant
(1) explains the significance of the problem the proposal addresses,
(2) demonstrates understanding of the current technology and
information gaps, and (3) considers the likelihood that the project
will advance the current state of technology. While these efforts help
to ensure that DOE is informed about industry activities, DOE does not
formally assesses the likelihood that industry would have conducted the
R&D without federal funding, nor does it explicitly include such an
evaluation in its screening criteria. For instance, GAO found that
several of DOE‘s projects addressing challenges in advanced drilling
and improved recovery of oil and natural gas were similar to activities
conducted by industry. In this regard, in its review of DOE‘s oil and
natural gas R&D budget, the Office of Management and Budget has
challenged DOE to better justify the need for certain government
research. By making a more formal evaluation in its screening process,
DOE could better demonstrate that it selects projects that industry is
unlikely to pursue.
What GAO Recommends:
To better ensure that DOE selects oil and gas R&D projects that
industry is unlikely to pursue, GAO recommends DOE‘s project selection
process include a formal assessment of the likelihood that the R&D
would not have occurred without federal funding. DOE provided only
technical comments which we incorporated as appropriate.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-09-186]. For more
information, contact Mark E. Gaffigan (202) 512-3841 or
gaffiganm@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
DOE Works to Ensure That Its R&D Supports Industry, but Does Not
Formally Assess the Likelihood That Industry Would Conduct Research
Without Federal Funding:
Conclusions:
Recommendation for Executive Action:
Agency Comments:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Oil and Gas R&D Spending and Activities Conducted by
Selected Nations' Governments:
Appendix III: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: DOE Oil and Gas Investments, Fiscal Year 1997-2006 Dollars in
millions (2006 dollars):
Table 2: Canada's Total Energy R&D Spending:
Table 3: Breakdown of Canada's Oil and Gas R&D Spending by Research
Area:
Table 4: France's Total Energy R&D Spending:
Table 5: Breakdown of France's Oil and Gas R&D Spending by Research
Area:
Table 6: Japan's Total Energy R&D Spending:
Table 7: Breakdown of Japan's Oil and Gas R&D Spending by Research
Area:
Table 8: Norway's Total Energy R&D Spending:
Table 9: Breakdown of Norway's Oil and Gas R&D Spending by Research
Area:
Table 10: Switzerland's Total Energy R&D Spending:
Table 11: Breakdown of Switzerland's Oil and Gas R&D Spending by
Research Area:
Figures:
Figure 1: Oil and Gas Industry R&D Spending in Nominal and Real Terms,
Fiscal Years 1997-2006:
Figure 2: DOE and U.S. Industry Oil and Gas R&D Investments, Fiscal
Years 1997-2006:
Abbreviations:
DOE: Department of Energy:
EIA: Energy Information Administration:
EPAct 2005: Energy Policy Act of 2005:
FOA: Funding Opportunity Announcement:
FRS: Financial Reporting System:
IEA: International Energy Agency:
NETL: National Energy Technology Laboratory:
OMB: Office of Management and Budget:
R&D: research and development:
RPSEA: Research Partnership to Secure Energy for America:
SEC: Security and Exchange Commission:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
December 29, 2008:
The Honorable Byron L. Dorgan:
Chairman:
Subcommittee on Energy and Water Development:
Committee on Appropriations:
United States Senate:
Dear Mr. Chairman:
The United States is the world's largest consumer of oil and natural
gas, as well as the world's largest importer of these resources,
importing about one-fifth of the natural gas used and about two-thirds
of the oil.[Footnote 1] Although domestic resources are substantial,
they are increasingly concentrated in geologically challenging settings
that require innovative exploration and production technologies. The
U.S. oil and gas industry invests in research and development (R&D) to
develop new oil and gas technologies to explore for and produce these
resources, and its innovations make the United States more competitive.
The U.S. oil and gas industry comprises a variety of companies. The
largest oil and gas companies, referred to as "majors," are integrated
companies; they explore, develop, and produce oil and gas resources,
and refine them into products such as gasoline before selling them
through retail outlets. Service companies, which specialize in
providing equipment and delivering services to their clients that
facilitate oil and gas exploration and production, also expend
resources on R&D. Other oil and gas companies, both large and small,
referred to as "independents," typically concentrate only on
exploration and production activities.
Competition provides an incentive for these companies to invest in R&D
for new oil and gas technologies that can improve profitability.
However, companies may not undertake research in instances where they
incur all of the R&D costs but cannot capture most of the benefits. For
example, a successful innovator of a new technology may capture some
rewards, but because patent protection is inherently imperfect, those
rewards typically would be a fraction of the overall benefits to
society as other companies begin to use the same technology. As such,
some industry experts argue that the federal government is needed to
fill the gaps where industry may under invest in R&D.
Since its inception in 1977, the Department of Energy (DOE) has had
primary leadership responsibility for the federal government's energy
R&D. From 1997 through 2006, DOE spent over $8 billion on energy R&D.
DOE directs the National Energy Technology Laboratory (NETL) to
facilitate the development of new oil and gas technologies that can
help industry increase domestic supply, improve its efficiency, and
protect the environment as resources are explored for and developed.
NETL has received funding for these activities through annual oil and
gas R&D appropriations. More recently, NETL has received additional
funding through the Energy Policy Act of 2005 (EPAct 2005), section
999. To carry out its mission, NETL collaborates with industry,
universities, other national laboratories, foreign governments, and
other domestic government agencies. In doing so, NETL attempts to
leverage government R&D resources and complement industry efforts.
Over the years, we have completed a number of reviews related to
government energy R&D activities.[Footnote 2] Our most recent report
highlighted the importance of DOE considering certain criteria in
evaluating its R&D efforts, including the likelihood that industry
would perform the research without federal funding.[Footnote 3] In
recent years, similar questions have been raised by the Office of
Management and Budget (OMB), the executive office that assists the
President in evaluating the effectiveness of agency programs and
assessing competing agency funding demands, among other things.
In this context, you asked us to review industry and DOE R&D activities
for oil and gas, specifically: (1) how much U.S. industry has invested
in oil and natural gas R&D over the last 10 years, and the current
focus of these activities; (2) how DOE's oil and natural gas R&D
funding and activities compare with industry's; and (3) to what extent
DOE ensures that its oil and natural gas R&D would not occur without
federal funding. You also asked us to provide descriptive information
about the oil and gas R&D activities that other nations' governments
are conducting. We provide information on selected countries in
appendix II.
Our report is based on our analysis of prior GAO work, DOE budget data,
and discussions with industry and DOE officials.[Footnote 4] To gather
information about the U.S. oil and gas industry's funding, we used DOE
data from its sample of the largest U.S.-based oil and gas companies
for 1997 through 2006, the most recent year for which data were
available.[Footnote 5] Because these data do not capture R&D spending
by all U.S. companies, nor international companies that have a presence
in the U.S. but are based abroad, the resulting data may underestimate
U.S. industry R&D funding.[Footnote 6] To gather information about
service companies' R&D spending, we obtained data from the Security and
Exchange Commission (SEC) for five of the largest service companies.
[Footnote 7] The DOE data, as well as the data reported by the SEC,
reflect R&D as reported by industry. To gather information about U.S.
oil and gas industry R&D activities, including those of service
companies, we spoke with officials from oil and gas companies of
varying types and sizes, including majors, service companies, and large
and small independents. To compare DOE funding and activities to
industry's, we collected data about DOE's spending and activities for
1997 through 2006 and met with DOE officials. To determine the extent
to which DOE ensures that its oil and gas R&D would not occur without
federal funding, we reviewed DOE documents and discussed industry
interaction and the project selection process with DOE officials. For
purposes of this report, near-term R&D generally refers to funding and
activities that occur within about the next 2 years; longer-term R&D
refers to funding and activities that would generally occur beyond 2
years. We conducted this performance audit from January 2008 through
December 2008 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
Results in Brief:
From 1997 through 2006, the U.S. oil and gas industry spent at least
$20 billion on R&D, and currently focuses mostly on near-term
production challenges. According to DOE data, oil and gas companies
spent at least $9.6 billion on R&D during this period. In addition,
service companies spent at least $10.7 billion during this same period,
according to reports filed with the SEC by five of the largest service
companies. Industry officials told us that concern for immediate
business needs drives industry R&D to primarily address near-term oil
and gas production problems or challenges. Such challenges include, for
example, development of technologies to extract oil and gas from
difficult environments such as the Arctic and very deep waters. The
nature of R&D varies by type of company. For example, major oil
companies tend to have in-house R&D facilities, and though most of
their projects are designed to meet near-term needs, they also conduct
some longer-term, high-risk research, such as research into resources
that have yet to be developed. Similarly, service companies' R&D
primarily focuses on their clients' immediate needs, but they also
conduct some longer-term research. In contrast, larger independent
companies generally do not conduct in-house R&D; instead, they may buy
new oil and gas technologies from other companies and adapt them to
meet their immediate needs, and also may participate in research
partnerships. Smaller independent companies do not generally conduct
their own R&D, but some obtain or become aware of new technologies from
other companies, trade publications, or professional and state
associations.
From 1997 through 2006, DOE's total funding for oil and gas R&D totaled
significantly less than industry's--about $1 billion versus at least
$20 billion--and, in contrast to industry's primary focus on near-term
challenges, DOE's R&D focuses on both near-and longer-term challenges.
During this period, DOE's oil and gas R&D appropriations declined by
more than 60 percent--from about $162 million in 1997 to about $63
million in 2006. More recently, through its 2007 and 2008 oil and gas
R&D appropriations, DOE received an additional $161 million. Overall,
this funding has supported hundreds of R&D projects since 1997. While
industry's R&D activities are driven primarily by the need to address
near-term problems, DOE's activities include near-term projects as well
as research that is longer term and high risk in nature. Some examples
of DOE's projects that have had a near-term focus include projects
associated with developing more advanced drilling and imaging tools and
enhancing oil recovery. An example of a DOE project that has had a
longer-term, high-risk focus is evaluating the potential use of methane
hydrates, which are molecules of methane trapped inside a lattice of
ice, as a future energy source--an area of interest that industry
officials said was generally beyond their time horizon for R&D.
DOE keeps abreast of industry R&D activities and uses a project
selection process to ensure that its efforts address industry R&D
needs; however, DOE does not formally assess whether industry would
undertake this R&D without federal funding. According to DOE officials,
DOE participates in numerous consortia, conferences, technical
associations, and workshops with the oil and gas industry. Based on its
awareness of industry needs gathered from participation at these
events, DOE develops research priorities that drive its project
solicitations. Applications for individual oil and gas R&D projects are
then screened to ensure that the applicant (1) explains the
significance of the problem the proposal addresses; (2) demonstrates
understanding of the current technology and information gaps; and (3)
considers the likelihood that the project will advance the current
state of technology. In its review of DOE's oil and gas R&D budget, OMB
has challenged DOE to better justify the need for government research.
While DOE's efforts help to ensure that its efforts address industry
R&D needs, we found that DOE neither formally assesses the likelihood
that industry would have conducted the R&D without federal funding, nor
does it explicitly include such an evaluation in its screening
criteria. For instance, we found that several of DOE's projects
addressing challenges in advanced drilling and improved recovery of oil
and gas were similar to activities conducted by industry. We are
recommending that DOE include in its project selection process a formal
assessment of the likelihood that the R&D would not have occurred
without federal funding. DOE had no comment on our recommendation, and
provided only technical comments which we incorporated as appropriate.
From 1997 through 2006, the U.S. Oil and Gas Industry Invested at Least
$20 Billion in R&D and Currently Focuses Primarily on Near-term Needs:
From 1997 through 2006, U.S. industry oil and gas R&D totaled at least
$20.3 billion, and currently focuses mostly on near-term production
challenges. Data collected by DOE's Energy Information Administration
(EIA)--the statistical agency within DOE that provides independent
data, forecasts, and analyses--show that U.S. oil and gas company R&D
spending totaled at least $9.6 billion from 1997 through 2006. Our
analysis of service company R&D from SEC 10-K reports, which is not
included in EIA's data, indicates that five of the largest service
companies spent a comparable amount during this same period--about
$10.7 billion.[Footnote 8] This combined R&D spending fluctuated over
this period, but generally increased during the last 3 of these years.
Specifically, in 1997, industry R&D budgets were about $1.8 billion;
they fell to a low of about $1.7 billion in 1999, but have since
generally increased to about $2.6 billion in 2006. In 2006, industry
R&D spending peaked for this 10-year period, as depicted in figure 1.
Figure 1: Oil and Gas Industry R&D Spending in Nominal and Real Terms,
Fiscal Years 1997-2006:
[Refer to PDF for image]
This figure is a multiple line graph depicting the following data:
Fiscal year: 1997;
Nominal or current dollars: $1.838 billion;
Inflation-adjusted 2006 dollars: $2.24 billion.
Fiscal year: 1998;
Nominal or current dollars: $2.112 billion;
Inflation-adjusted 2006 dollars: $2.544 billion.
Fiscal year: 1999;
Nominal or current dollars: $1.699 billion;
Inflation-adjusted 2006 dollars: $2.02 billion.
Fiscal year: 2000;
Nominal or current dollars: $1.741 billion;
Inflation-adjusted 2006 dollars: $2.029 billion.
Fiscal year: 2001;
Nominal or current dollars: $2.132 billion;
Inflation-adjusted 2006 dollars: $2.427 billion.
Fiscal year: 2002;
Nominal or current dollars: $2.299 billion;
Inflation-adjusted 2006 dollars: $2.568 billion.
Fiscal year: 2003;
Nominal or current dollars: $1.868 billion;
Inflation-adjusted 2006 dollars: $2.045 billion.
Fiscal year: 2004;
Nominal or current dollars: $1.841 billion;
Inflation-adjusted 2006 dollars: $1.964 billion.
Fiscal year: 2005;
Nominal or current dollars: $2.119 billion;
Inflation-adjusted 2006 dollars: $2.191 billion.
Fiscal year: 2006;
Nominal or current dollars: $2.635 billion;
Inflation-adjusted 2006 dollars: $2.635 billion.
Source: GAO analysis of data provided by the EIA and the SEC.
Note: Nominal dollars reflect actual dollars according to EIA and SEC
data. Inflation-adjusted 2006 dollars reflect the same amounts adjusted
for inflation according to the fiscal year chain-weighted gross
domestic product price index.
[End of figure]
Industry officials told us that because of concern for meeting the
individual companies' immediate needs, their R&D primarily addresses
near-term production problems and challenges, although some also invest
in longer-term, high-risk research. The majors, which generally have in-
house R&D facilities, typically prioritize near-term research that
facilitates their operations and is likely to result in commercially
viable products or processes; for example, advanced drilling techniques
that will enable them to explore and drill in difficult environments,
such as Arctic and very deep waters, and improved oil and gas recovery.
[Footnote 9] However, the majors we spoke with also told us they
devoted some resources toward longer-term, more high-risk research,
such as applying nanotechnology, which could allow industry to build
and use microscopic devices, to improve oil and gas recovery and
developing oil shale resources--sedimentary rock that can contain oil
which may be recovered by heating these rocks--as a commercially viable
resource. Majors also participate in research partnerships or
consortia, but are more likely to do so when the research is very long
term or focused on issues such as compliance with environmental
regulations, where companies are less concerned about keeping the
resulting technology proprietary.
Service companies, like the majors, dedicate the majority of their
research to the immediate needs of their individual clients, although
the service companies we contacted also conducted some longer-term R&D
in anticipation of clients' future needs. For example, one service
company noted that it had begun to research carbon capture and
sequestration and gasification of petroleum coke as potential areas
that may be important to industry in the future.[Footnote 10] Service
companies may also participate in partnerships or consortia. While most
have in-house R&D facilities, they also may outsource some R&D to
national laboratories or universities.
The large independents we contacted did not conduct in-house R&D;
rather, they typically purchase new technologies and adapt these
technologies to meet their unique needs. Additionally, several larger
independents develop technology through partnerships with other
companies, universities, or DOE. Larger independents' R&D includes
efforts to enhance oil recovery, which involves increasing output from
maturing wells where the recovery rate of oil is declining, as well as
efforts to increase production of unconventional gas and oil.
The small independent producers we interviewed generally do not conduct
their own R&D. Small producers reported that they obtain or become
aware of new technology through interactions with other companies and
"word of mouth," industry-relevant publications and journals, and
professional and state associations like the Society of Petroleum
Engineers, the Kansas Independent Oil and Gas Association, and the
Petroleum Technology Transfer Council. While they do not conduct their
own, in-house R&D, several small producers told us they could benefit
from increased R&D in areas such as enhanced oil recovery.
DOE Invested Significantly Less in Oil and Gas R&D Funding Than U.S.
Industry and Currently Focuses on Near-and Longer-term Challenges:
From 1997 through 2006, DOE invested significantly less in R&D for oil
and gas than U.S. industry, and while U.S. industry primarily conducts
near-term oil and gas R&D to achieve immediate payoffs, DOE responds to
both near-and longer-term challenges. During this period, DOE's oil and
gas R&D investment was about $1.1 billion compared to at least $20.3
billion invested by U.S. industry. Furthermore, DOE's oil and gas R&D
appropriations declined by about 61 percent--falling from $162.4
million in 1997 to $62.6 million in fiscal year 2006--while industry's
R&D investment has generally increased, as shown in figure 2. More
specifically, annual appropriations for oil R&D decreased from $45.2
million in fiscal year 1997 to $30.8 million in fiscal year 2006, while
appropriations for gas R&D decreased from $117.3 million in 1997 to
$31.8 million in fiscal year 2006.[Footnote 11]
Figure 2: DOE and U.S. Industry Oil and Gas R&D Investments, Fiscal
Years 1997-2006:
[Refer to PDF for image]
This figure is a multiple line graph depicting the following data:
Fiscal year: 1997;
U.S. Industry in nominal or current dollars: $1.838 billion;
DOE R&D in nominal or current dollars: $0.16 billion.
Fiscal year: 1998;
U.S. Industry in nominal or current dollars: $2.112 billion;
DOE R&D in nominal or current dollars: $0.16 billion.
Fiscal year: 1999;
U.S. Industry in nominal or current dollars: $1.699 billion;
DOE R&D in nominal or current dollars: $0.12 billion.
Fiscal year: 2000;
U.S. Industry in nominal or current dollars: $1.741 billion;
DOE R&D in nominal or current dollars: $0.13 billion.
Fiscal year: 2001;
U.S. Industry in nominal or current dollars: $2.132 billion;
DOE R&D in nominal or current dollars: $0.11 billion.
Fiscal year: 2002;
U.S. Industry in nominal or current dollars: $2.299 billion;
DOE R&D in nominal or current dollars: $0.1 billion.
Fiscal year: 2003;
U.S. Industry in nominal or current dollars: $1.868 billion;
DOE R&D in nominal or current dollars: $0.09 billion.
Fiscal year: 2004;
U.S. Industry in nominal or current dollars: $1.841 billion;
DOE R&D in nominal or current dollars: $0.08 billion.
Fiscal year: 2005;
U.S. Industry in nominal or current dollars: $2.119 billion;
DOE R&D in nominal or current dollars: $0.08 billion.
Fiscal year: 2006;
U.S. Industry in nominal or current dollars: $2.635 billion;
DOE R&D in nominal or current dollars: $0.06 billion.
Source: GAO analysis of oil and gas investments made by U.S. industry
and DOE.
[End of figure]
When adjusted for inflation, these declines are even greater. For
example, as shown in table 1, DOE's total oil and gas appropriations
declined from about $198 million in 1997 to about $62.6 million in
2006--a 68 percent decline in real terms.
Table 1: DOE Oil and Gas Investments, Fiscal Year 1997-2006 Dollars in
millions (2006 dollars):
Fiscal year: 1997;
Oil: $55.08;
Gas: $142.93;
Total: $198.01.
Fiscal year: 1998;
Oil: $57.46;
Gas: $130.62;
Total: $188.08.
Fiscal year: 1999;
Oil: $56.28;
Gas: $82.44;
Total: $138.72.
Fiscal year: 2000;
Oil: $64.96;
Gas: $86.10;
Total: $151.06.
Fiscal year: 2001;
Oil: $74.10;
Gas: $50.00;
Total: $124.10.
Fiscal year: 2002;
Oil: $62.82;
Gas: $49.22;
Total: $112.05.
Fiscal year: 2003;
Oil: $44.87;
Gas: $50.21;
Total: $95.08.
Fiscal year: 2004;
Oil: $36.39;
Gas: $44.64;
Total: $81.03.
Fiscal year: 2005;
Oil: $34.10;
Gas: $45.11;
Total: $79.21.
Fiscal year: 2006;
Oil: $30.81;
Gas: $31.80;
Total: $62.61.
Fiscal year: Total;
Oil: $516.86;
Gas: $713.08;
Total: $1,229.94.
Source: GAO analysis of DOE oil and gas appropriations.
Note: Amounts may not always add due to rounding.
[End of table]
More recently, in fiscal years 2007 and 2008, DOE's oil and gas R&D
investments have generally increased from 2006 levels, primarily as a
result of funding from EPAct 2005, section 999. During these years, DOE
was appropriated a total of about $161 million for oil and gas R&D
activities, which includes $100 million provided by EPAct 2005, section
999.[Footnote 12] EPAct 2005, section 999 makes available $50 million
per year for 10 years for oil and gas R&D, to be split between DOE (25
percent) and a nonprofit corporation (75 percent) formed by a
consortium. The consortium, known as the Research Partnership to Secure
Energy for America (RPSEA), includes U.S. energy research universities,
industry, and independent research organizations.[Footnote 13] Among
other things, DOE is charged with maximizing the value of U.S. gas and
other petroleum resources by increasing supply, reducing the cost of
exploration and production of such resources, and minimizing
environmental impact.
Overall, since 1997, DOE's funds have supported hundreds of near-term
projects, as well as research that is longer term and high risk,
whereas industry R&D focuses primarily on near-term challenges. DOE
uses its non-EPAct 2005 funds for both near-and longer-term R&D
projects, including helping industry develop advanced drilling tools,
resource imaging devices, enhanced oil recovery technologies, and
environmental protection practices that reduce the impacts of oil and
gas. Near-term R&D projects include:
* Advanced drilling tools. These technologies provide industry with
ways to reduce costs, such as developing drill bits that increase the
efficiency of drilling operations. For example, DOE's work in microhole
drilling helps develop equipment that is smaller and more
transportable, reducing environmental impact.
* Resource imaging devices. These technologies assist industry in
identifying, locating, and economically recovering oil and gas by
providing imaging capabilities that are able to detect and estimate
available resources.
* Enhanced oil recovery. This technology involves injecting additives,
such as gases, chemicals, heat, or microbes, into maturing oil and gas
reservoirs to increase production as initial output begins to decrease.
Enhanced oil recovery technologies are important because about 400
billion barrels of oil discovered in the United States are
unrecoverable by conventional means.
* Environmental protection. Among DOE projects that reduce the
environmental impacts of oil and gas exploration and production are
those aimed at finding beneficial uses for produced water--large
volumes of water that may contain salt, chemical compounds, or other
contaminants that are trapped in underground formations and are brought
to the surface along with oil or gas.
DOE also conducts longer-term, high-risk research. For example, DOE is
conducting R&D projects focused on commercially producing gas from
methane hydrates.[Footnote 14] According to DOE, methane hydrates hold
more energy than all fossil fuels combined, and the United States has
an estimated 25 percent of all worldwide methane hydrate deposits. DOE
officials believe that NETL's projects hold tremendous potential to
improve the understanding of methane hydrates and increase the ability
to develop them. According to DOE officials, this R&D will help U.S.
industry overcome two major constraints with the development of methane
hydrates: (1) the need to detect and quantify methane hydrate deposits
and (2) the demonstration that methane from hydrates can be produced at
commercial volumes. Moreover, in our interviews with U.S. industry
officials, most reported that they did not conduct R&D on methane
hydrates; in fact, most said that R&D for methane hydrates was
generally beyond their research time horizon.
In addition, DOE manages the EPAct 2005, section 999 program and uses
25 percent of the appropriations to conduct R&D projects in four
principal areas: drilling under extreme conditions, environmental
impacts of oil and gas development, enhanced and unconventional oil
recovery, and resource assessment.[Footnote 15] RPSEA's share of these
appropriations is used to conduct projects related to ultra-deepwater
technology, unconventional gas exploration and production technology,
and the technology challenges of small producers. Because funding has
been distributed only in recent years, DOE and RPSEA projects are in
their initial stages.
DOE Works to Ensure That Its R&D Supports Industry, but Does Not
Formally Assess the Likelihood That Industry Would Conduct Research
Without Federal Funding:
DOE relies on its knowledge of industry's R&D and its project selection
process to ensure that its R&D supports industry; however, DOE does not
formally assess the likelihood that industry would independently
conduct this R&D without federal funding. DOE officials obtain
information about industry R&D by reviewing technical literature and
trade publications; supporting and participating in consortia where
industry members share information regarding cost-shared R&D projects;
and participating in or conducting conferences, technical association
meetings, and workshops. In the last 5 years, DOE has sponsored or
cosponsored 43 conferences, and participated in an additional 19. One
of the agency's primary means for obtaining first-hand information from
industry officials are the workshops DOE conducts with invited
stakeholders, including representatives from across the oil and gas
industry, as well as representatives from academia and other national
labs. These workshops give DOE officials opportunity to gain insight
and expertise from industry stakeholders regarding R&D needs, and serve
to identify key areas of concern that could potentially benefit from
federal R&D support.
In addition to staying abreast of industry's R&D, DOE uses a project
selection process that includes an assessment of several factors that
help ensure its R&D addresses industry R&D needs. Specifically, DOE
uses information it gathers in its workshops to prioritize research
areas and guide its Funding Opportunity Announcements (FOA)--requests
for proposals in specific research areas such as improving electronic
drilling equipment.[Footnote 16] According to DOE officials, the
department conducts more rigorous planning for its section 999 program
and its methane hydrates program. Specifically, they noted that for
these programs, DOE is required to develop annual or multiyear plans.
In addition, these programs also obtain input from panels of industry
professionals.
As part of its typical selection process, DOE examines the applications
submitted in response to its FOAs based on three weighted criteria:
scientific and technical merit, technical approach, and technical and
management capabilities.[Footnote 17] Scientific and technical merit,
which is weighted most heavily, requires applicants to discuss the
significance of the problem the proposal addresses, demonstrate an
understanding of the current technology and information gaps that
exist, and consider the likelihood that the proposed project will
advance the current state of technology, knowledge, or capabilities.
The technical approach criterion evaluates the planning and
administrative aspects of the proposed plan to ensure that the
applicant's planned approach will achieve the project's expected
benefits. The technical and management capability criterion evaluates
the credentials, capabilities, and experience of the applicant,
including whether the applicant can perform the proposed project tasks.
Once applications are received in response to an FOA, they are reviewed
by a Merit Review Panel. This panel, which is appointed by DOE, is
generally composed of at least three reviewers that are knowledgeable
in the subject area. The Merit Review Panel reads, scores, and ranks
the proposals based on the criteria stated above, and records their
judgments in a Board Report. This report contains the final consensus
scores, strengths, and weaknesses determined by the panel for each
proposal submitted. This report is then reviewed by a selected senior
DOE official who, to maximize the effectiveness of available government
funding, also may consider additional factors when selecting among
proposals, such as diversity of technological approaches and methods or
geographic region. As noted above, DOE officials told us that projects
selected under section 999 and the methane hydrates program are subject
to additional requirements, including regular peer review.
Over the last several years, OMB has evaluated DOE's R&D programs as
part of its goal to identify strengths and weaknesses and make federal
programs more effective. OMB has challenged DOE to better justify the
need for government research. It has found that DOE's oil R&D program
and part of its gas R&D program fund projects comparable to those
funded by private industry, and generally for the direct benefit of
private industry. However, OMB specifically acknowledged that the
methane hydrates program is an exception that can provide a unique
contribution, addressing longer-term research that industry will not
likely conduct. DOE officials told us they believe that the process
followed prior to OMB's analysis was successful in minimizing DOE
duplication of industry oil and gas research, and they have continued
to follow these same procedures despite subsequent funding reductions.
Based on our review, DOE's project selection process helps ensure that
DOE is informed about industry activities, but the process does not
formally assess the likelihood that industry would perform the research
without federal funding. Such an assessment is not made because DOE's
screening criteria do not explicitly require this type of evaluation.
Despite the lack of an assessment, DOE officials continue to believe
that DOE's oil and gas R&D activities only minimally duplicate
industry's R&D activities because of their extensive interaction with
industry. Nonetheless, in our examination of DOE's current projects, we
found instances where some--particularly near-term R&D on advanced
drilling and improved recovery of oil and gas--are similar to
industry's R&D activities. As a result, some of DOE's oil and gas R&D
might include activities that industry would conduct without federal
funding. On the other hand, we also found examples in which DOE
conducts near-term R&D that industry may lack incentive to perform
without federal funds. For example, we previously reported that the
Bureau of Land Management expressed the need for federal funding to
monitor the impact of oil and gas activities on wildlife, groundwater,
and surface water in the Powder River Basin in Wyoming and Montana, a
major gas producing area.[Footnote 18] In this regard, we found that
DOE partnered with the Bureau of Land Management on several projects
related to wildlife and water in the Powder River Basin, primarily
because industry has little incentive to conduct research necessary to
understand general impacts to wildlife from oil and gas activity.
Conclusions:
DOE plays an important role in conducting oil and gas R&D that U.S.
industry may have limited incentive to conduct, such as longer-term,
high-risk research. However, in some cases, DOE's near-term R&D may
address challenges that industry has an incentive to undertake on its
own, without federal funding. While DOE's project selection process
includes criteria that help it consider ongoing industry R&D, a more
formal and rigorous assessment of its efforts and those of industry
would help DOE ensure that it selects projects that industry is
unlikely to pursue. Moreover, this formal assessment could help it
better justify future funding for its oil and gas R&D.
Recommendation for Executive Action:
To better ensure that DOE selects oil and gas R&D projects that
industry is unlikely to pursue, we recommend that the Secretary of
Energy direct the Assistant Secretary for Fossil Energy to include in
DOE's project selection process a formal assessment of the likelihood
that the R&D would not have occurred without federal funding.
Agency Comments:
We provided a copy of our draft report to DOE for its review and
comment. DOE had no comment on our recommendation, and provided only
technical comments which we incorporated as appropriate.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time, we will send copies to interested
congressional committees and the Secretary of Energy. The report also
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) 512-3841, or gaffiganm@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 III.
Sincerely yours,
Signed by:
Mark E. Gaffigan:
Director, Natural Resources and Environment:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
The objectives of this report were to examine (1) how much U.S.
industry has invested in oil and gas research and development (R&D)
over the last 10 years and the current focus of these activities; (2)
how the Department of Energy's (DOE) oil and gas R&D funding and
activities compare with industry's, and (3) to what extent DOE ensures
that its oil and gas R&D would not occur without federal funding.
To determine how much the U.S. industry has invested in oil and gas R&D
over the last 10 years, we used DOE data from the Energy Information
Administration (EIA) for 1997 through 2006, the most recent year for
which data were available. These data are self-reported by individual
companies through a survey administered by DOE, and compiled using
DOE's Financial Reporting System (FRS). DOE collects these data from
U.S.-based publicly owned companies or U.S.-based subsidiaries that
have at least 1 percent of either production or reserves of oil or gas
in the United States, or 1 percent of either refining capacity or
petroleum product sales in the United States. The sample for 2006
included 27 companies; however, the number of companies included in the
survey may vary from year to year. Because these data do not capture
spending by service companies or all U.S. or international oil and gas
companies that have a presence in the United States but are based
abroad, the resulting data underestimate U.S. industry R&D funding. To
assess the reliability of these data, we reviewed EIA documentation and
interviewed EIA officials to discuss the data contained in the FRS. We
found no comprehensive sources of data for oil and gas R&D funding. To
gather information about service companies' R&D spending, we obtained
data from Security and Exchange Commission (SEC) 10-K Reports for five
of the largest service companies (Schlumberger, Halliburton, Baker
Hughes, Smith International, and Weatherford International) as
identified by various industry sources. These data therefore do not
reflect total service company R&D spending. We found the EIA and SEC
data to be sufficiently reliable for the purposes of this report.
To determine the current focus of U.S. industry R&D activities, we
spoke with officials from oil and gas companies of varying types and
sizes, including majors, service companies, and larger and smaller
independents. We spoke with 4 majors, 3 service companies, 4 larger
independents, and 25 smaller independents. In selecting these
companies, we considered a variety of information sources, including:
EIA's 2006 FRS, SEC 10-K Reports, and the Oil and Gas Journal's list of
top 200 companies in terms of total assets. To select the smaller
independents and obtain their contact information, we obtained a
database of U.S. oil and gas producers published by Midwest Publishing.
Using this database, we selected a geographically stratified,
judgmental sample of 25 oil and gas producers that produce less than
900,000 barrels of oil per year and/or 9.9 billion cubic feet of gas
per year. We contacted officials from these companies by phone and
conducted a semistructured interview to obtain consistent information
from each. Although the results may not be generalized to the industry
as a whole, we considered geographic factors that may be associated
with differences in R&D efforts in selecting this sample.
To determine how DOE's oil and gas R&D funding compares with U.S.
industry, we evaluated DOE's appropriations from 1997 to 2006 and
compared them to U.S. industry spending gathered via the EIA's FRS. We
obtained data about DOE's appropriations for oil and gas activities and
congressionally directed projects from available budget documents. We
also obtained information about additional funding included in the
Energy Policy Act of 2005 (EPAct 2005) by reviewing the legislation and
through discussions with DOE officials. In addition, we consulted
budget information to provide data for DOE's most recent oil and gas
appropriations for fiscal years 2007 and 2008. To assess the
reliability of DOE's data, we interviewed several key officials from
the EIA and from DOE's Office of Fossil Energy, including the National
Energy Technology Laboratory. We found the data sufficiently reliable
for the purposes of this report.
To determine how DOE's oil and gas R&D activities compare with U.S.
industry, we reviewed DOE's detailed project information and related
documents and interviewed key officials from EIA and from DOE's Office
of Fossil Energy, and the National Energy Technology Laboratory. We
compared these responses with those gathered from a judgmental sample
of U.S. industry representatives from majors, service companies, and
larger and smaller independent oil and gas companies. We also gathered
perspectives from organizations such as the Independent Petroleum
Association of America, the Research Partnership to Secure Energy for
America, the Society of Petroleum Engineers, the American Petroleum
Institute, the Petroleum Technology Transfer Council, and the American
Association of Petroleum Geologists.
To determine the extent to which DOE ensures that its oil and gas R&D
would not occur without federal funding, we discussed industry
interaction and the project selection process with DOE officials. We
also obtained examples of funding opportunity announcements and
workshop summary documents, and reviewed the project selection process
with DOE officials.
We also were asked to provide descriptive information about the oil and
gas R&D spending and activities other nations' governments are
conducting, which is contained in appendix II. To gather information on
other nations' government's oil and gas R&D expenditures, we used data
from the International Energy Agency (IEA) for 1997 through 2006, the
most recent year for which data are available. These data are reported
by the individual nations to IEA and compiled annually.[Footnote 19]
Data reported by IEA include total energy R&D expenditures, and oil and
gas R&D expenditures broken down into the following subcategories:
* Enhanced production, which includes secondary and tertiary recovery
of oil and gas;
* Refining, transportation, and storage, which includes strategic
storage of oil and gas, safety aspects of liquefied natural gas
transportation and storage, and pipeline evaluation;
* Nonconventional production, which includes advanced drilling
technologies for nonconventional oil and gas, heavy oil, deep-water
extraction, oil shale, and oil sands;
* Oil and gas combustion, which includes turbo engines, several types
of turbines, and certain types of flue gas cleanup research;
* Oil and gas conversion, which is gas-to-liquid technologies; and:
* Other oil and gas, which includes development of advanced exploration
methods, deep-drilling equipment and techniques, and alleviation of
environmental impacts of off-shore oil and gas.
To select the countries highlighted in appendix II, we used 2004
through 2006 oil and gas R&D expenditure data, and ranked the countries
with the highest average oil and gas R&D expenditures during those 3
years, with the exception of the United States. According to IEA, the
nations with the highest average oil and gas R&D expenditures for 2004
through 2006 were Japan, France, Canada, Norway, Italy, and
Switzerland. We attempted to contact officials from these six nations
to discuss their oil and gas R&D expenditures, but we did not receive a
response from Italy. Therefore, we include data for the remaining five
nations in appendix II. We found no comprehensive source of information
illustrating the R&D expenditures for all nations, and chose to use IEA
data, which we found to be sufficiently reliable for the purposes of
this report.
We conducted this performance audit from January 2008 to December 2008
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives.
[End of section]
Appendix II: Oil and Gas R&D Spending and Activities Conducted by
Selected Nations' Governments:
Canada:
Background and Energy R&D:
Canada is rich in energy resources, endowed with large reserves of
conventional and nonconventional oil and gas, coal, and uranium, and
potential for hydroelectric power. It is among the world's largest
producers of oil and is a significant energy exporter. According to
Canadian officials, the focus of Canada's R&D portfolio is directed in
large part by the diversity and abundance of the country's natural
energy resources; because these resources are so diverse, the
government does not focus its energy R&D efforts heavily in any one
area.
Canadian officials stated that one role of government is to fund long-
term, high-risk projects that industry is not economically motivated to
conduct. Officials also stated that, while the government avoids
pursuing research that benefits a specific company, or is duplicative
of what the private sector is already doing, government-supported R&D
should focus on technology that is relevant and beneficial to industry
as a whole. A key component of this objective is the government's
increased emphasis on helping move a newly developed product into
commercialization in order to accelerate innovation.
From 1997 through 2006, Canada's energy R&D spending totaled
approximately $3 billion, and has generally increased.[Footnote 20]
Spending for the 10-year period reached a low point of about $241
million in 1999, but increased in subsequent years with the exception
of a significant drop in funding in 2004. Energy R&D spending reached
its peak for the 10-year period in 2006, totaling nearly $433 million
(see table 2). The research area that received the greatest funding in
2006 was nuclear fission and fusion, followed by spending on fossil
fuels.
Table 2: Canada's Total Energy R&D Spending (U.S. dollars in millions):
Total Energy R&D:
Fiscal Year 1997: $261.0 million;
Fiscal Year 1998: $245.9 million;
Fiscal Year 1999: $240.9 million;
Fiscal Year 2000: $247.9 million;
Fiscal Year 2001: $269.6 million;
Fiscal Year 2002: $292.4 million;
Fiscal Year 2003: $320.7 million;
Fiscal Year 2004: $268.1 million;
Fiscal Year 2005: $413.1 million;
Fiscal Year 2006: $432.8 million;
Total: $2,992.3.
Source: International Energy Agency.
Note: Totals may not sum due to rounding.
[End of table]
Oil and Gas R&D Spending and Activities:
From 1997 through 2006, Canada's national oil and gas R&D spending
totaled nearly $565 million. Over the 10-year period, spending levels
fell as low as about $49 million in 2000, and peaked at about $71
million in 2005. In 2006, oil and gas R&D totaled over $62 million and
represented more than 14 percent of Canada's total energy R&D spending.
The majority of funding goes toward "other oil and gas" and
"nonconventional production" (see table 3).
Table 3: Breakdown of Canada's Oil and Gas R&D Spending by Research
Area (U.S. dollars in millions):
Research Area: Enhanced production;
Fiscal Year 1997: $1.9 million;
Fiscal Year 1998: $2.1 million;
Fiscal Year 1999: $12.0 million;
Fiscal Year 2000: $7.7 million;
Fiscal Year 2001: $10.3 million;
Fiscal Year 2002: $9.3 million;
Fiscal Year 2003: $3.5 million;
Fiscal Year 2004: $6.4 million;
Fiscal Year 2005: $10.6 million;
Fiscal Year 2006: $10.4 million;
Total: $74.1 million.
Research Area: Refining transportation and storage;
Fiscal Year 1997: $9.6 million;
Fiscal Year 1998: $7.2 million;
Fiscal Year 1999: $10.0 million;
Fiscal Year 2000: $5.9 million;
Fiscal Year 2001: $6.6 million;
Fiscal Year 2002: $8.0 million;
Fiscal Year 2003: $9.5 million;
Fiscal Year 2004: $4.8 million;
Fiscal Year 2005: $6.9 million;
Fiscal Year 2006: $4.6 million;
Total: $73.0 million.
Research Area: Nonconventional production;
Fiscal Year 1997: $31.3 million;
Fiscal Year 1998: $33.9 million;
Fiscal Year 1999: $15.7 million;
Fiscal Year 2000: $17.6 million;
Fiscal Year 2001: $21.4 million;
Fiscal Year 2002: $19.1 million;
Fiscal Year 2003: $23.5 million;
Fiscal Year 2004: $17.8 million;
Fiscal Year 2005: $25.2 million;
Fiscal Year 2006: $23.4 million;
Total: $228.8 million.
Research Area: Combustion;
Fiscal Year 1997: [A]
Fiscal Year 1998: [A];
Fiscal Year 1999: [A];
Fiscal Year 2000: [A];
Fiscal Year 2001: [A];
Fiscal Year 2002: [A];
Fiscal Year 2003: [A];
Fiscal Year 2004: $0.8 million;
Fiscal Year 2005: $0.6 million;
Fiscal Year 2006: $0.6 million;
Total: $1.9 million.
Research Area: Conversion;
Fiscal Year 1997: [A];
Fiscal Year 1998: [A];
Fiscal Year 1999: [A];
Fiscal Year 2000: [A];
Fiscal Year 2001: [A];
Fiscal Year 2002: [A];
Fiscal Year 2003: [A];
Fiscal Year 2004: $2.7 million;
Fiscal Year 2005: $0.3 million;
Fiscal Year 2006: $0.2 million;
Total: $3.1 million.
Research Area: Other oil and gas;
Fiscal Year 1997: $8.7 million;
Fiscal Year 1998: $9.4 million;
Fiscal Year 1999: $15.4 million;
Fiscal Year 2000: $17.5 million;
Fiscal Year 2001: $21.2 million;
Fiscal Year 2002: $17.5 million;
Fiscal Year 2003: $23.7 million;
Fiscal Year 2004: $19.8 million;
Fiscal Year 2005: $27.3 million;
Fiscal Year 2006: $23.4 million;
Total: $184.0 million.
Research Area: Total oil and gas;
Fiscal Year 1997: $51.4 million;
Fiscal Year 1998: $52.7 million;
Fiscal Year 1999: $53.1 million;
Fiscal Year 2000: $48.7 million;
Fiscal Year 2001: $59.4 million;
Fiscal Year 2002: $53.9 million;
Fiscal Year 2003: $60.1 million;
Fiscal Year 2004: $52.3 million;
Fiscal Year 2005: $70.8 million;
Fiscal Year 2006: $62.5 million;
Total: $565.0 million.
Source: International Energy Agency.
Note: Totals may not sum due to rounding.
[A] Data were not available for this year.
[End of table]
France:
Background and Energy R&D:
France has few domestic oil and gas resources, but is a large consumer
of energy. According to French officials, the French government has
encouraged the use of nuclear power as an alternative energy source
where possible, and the proportion of France's total energy consumption
derived from oil has decreased from 71 percent in 1973 to 36 percent in
2004.
French officials told us that the main objectives of its energy
strategy are to contribute to national energy independence and
guarantee security of supply; ensure competitive energy prices; protect
human health and the environment, in particular by fighting against
climate change; and guarantee access to energy for all. The French
government also has worked to redefine what is classified under
"research and development." A major study published in 2007 concluded
that more activities should be categorized as R&D for reporting
purposes, and that the country's previously reported R&D spending data
may be artificially low.
From 1997 through 2005, energy R&D spending totaled about $7.1 billion
and has fluctuated: it dipped as low as $543 million in 2001, and
peaked at about $965 million in 2002. In 2005, the most recent year for
which data are available, the French government devoted over $907
million to energy R&D (see table 4). The research area that received
the greatest funding in 2005 was nuclear fission and fusion, followed
by spending on fossil fuels.
Table 4: France's Total Energy R&D Spending (U.S. dollars in millions):
Total Energy R&D:
Fiscal Year 1997: $629.8 million;
Fiscal Year 1998: $671.7 million;
Fiscal Year 1999: $786.5 million;
Fiscal Year 2000: $736.5 million;
Fiscal Year 2001: $543.5 million;
Fiscal Year 2002: $965.1 million;
Fiscal Year 2003: $938.9 million;
Fiscal Year 2004: $876.9 million;
Fiscal Year 2005: $907.4 million;
Total: $7,056.3.
Source: International Energy Agency.
Note: Totals may not sum due to rounding.
[End of table]
Oil and Gas R&D Spending and Activities:
From 1997 through 2005, France spent about $917 million on oil and gas
R&D. France's oil and gas R&D spending increased suddenly and
dramatically in 2002 from about $42 million in the previous year to
about $210 million, but spending has declined since 2002. In 2005, oil
and gas R&D totaled over $151 million and represented more than 16
percent of France's total energy R&D spending (see table 5).
According to the oil and gas R&D spending data supplied by IEA for
2005, nearly all of current funding goes toward "enhanced production"
and "other oil and gas," which encompasses such research areas as
development of advanced exploration methods, deep-drilling equipment
and techniques, and alleviation of environmental impact of off-shore
oil and gas. French officials with whom we spoke corroborated this, and
also highlighted activities related to improvements in refining,
combustion, and diversification of energy sources. Their work is done
primarily for the benefit of the large French oil and gas industry. The
country aims to both improve basic understanding of resources, as well
as develop commercially viable products.
Table 5: Breakdown of France's Oil and Gas R&D Spending by Research
Area (U.S. dollars in millions):
Research Area: Enhanced production;
Fiscal Year 1997: $13.0 million;
Fiscal Year 1998: $12.8 million;
Fiscal Year 1999: $12.8 million;
Fiscal Year 2000: $5.8 million;
Fiscal Year 2001: $0.0 million;
Fiscal Year 2002: $147.7 million;
Fiscal Year 2003: $148.0 million;
Fiscal Year 2004: $119.2 million;
Fiscal Year 2005: $102.2 million;
Total: $561.4 million.
Research Area: Refining transportation and storage;
Fiscal Year 1997: $0.0 million;
Fiscal Year 1998: $0.0 million;
Fiscal Year 1999: $0.0 million;
Fiscal Year 2000: $3.8 million;
Fiscal Year 2001: $5.8 million;
Fiscal Year 2002: $0.0 million;
Fiscal Year 2003: [A];
Fiscal Year 2004: $0.5 million;
Fiscal Year 2005: $0.5 million;
Total: $10.5 million.
Research Area: Nonconventional production;
Fiscal Year 1997: $0.0 million;
Fiscal Year 1998: $0.0 million;
Fiscal Year 1999: $0.0 million;
Fiscal Year 2000: $0.0 million;
Fiscal Year 2001: $0.5 million;
Fiscal Year 2002:
Fiscal Year 2003: [A];
Fiscal Year 2004: [A];
Fiscal Year 2005: [A];
Total: $1.0 million.
Research Area: Combustion;
Fiscal Year 1997: [A]
Fiscal Year 1998: [A];
Fiscal Year 1999: [A];
Fiscal Year 2000: [A];
Fiscal Year 2001: [A];
Fiscal Year 2002: [A];
Fiscal Year 2003: $0.4 million;
Fiscal Year 2004: $0.4 million;
Fiscal Year 2005: $0.7 million;
Total: $1.5 million.
Research Area: Conversion;
Fiscal Year 1997: [A];
Fiscal Year 1998: [A];
Fiscal Year 1999: [A];
Fiscal Year 2000: [A];
Fiscal Year 2001: [A];
Fiscal Year 2002: [A];
Fiscal Year 2003: $0.5 million;
Fiscal Year 2004: $0.4 million;
Fiscal Year 2005: $0.4 million;
Total: $1.3 million.
Research Area: Other oil and gas;
Fiscal Year 1997: $24.2 million;
Fiscal Year 1998: $23.9 million;
Fiscal Year 1999: $23.9 million;
Fiscal Year 2000: $28.7 million;
Fiscal Year 2001: $35.3 million;
Fiscal Year 2002: $61.9 million;
Fiscal Year 2003: $50.6 million;
Fiscal Year 2004: $44.7 million;
Fiscal Year 2005: $47.6 million;
Total: $340.8 million.
Research Area: Total oil and gas;
Fiscal Year 1997: $37.2 million;
Fiscal Year 1998: $36.7 million;
Fiscal Year 1999: $36.7 million;
Fiscal Year 2000: $38.3 million;
Fiscal Year 2001: $41.6 million;
Fiscal Year 2002: $210.0 million;
Fiscal Year 2003: $199.5 million;
Fiscal Year 2004: $165.2 million;
Fiscal Year 2005: $151.4 million;
Total: $916.6 million.
Source: International Energy Agency.
Note: Totals may not sum due to rounding.
[A] Data were not available for this year.
[End of table]
Japan:
Background and Energy R&D:
Japan is the third-largest oil consumer in the world, but has virtually
no domestic oil or gas reserves and relies heavily on imports to meet
its consumption needs. Japan is the second-largest net importer of
crude oil and largest net importer of liquefied natural gas in the
world. Japan places a high priority on energy research, and has a
strong, government-supported, energy R&D program. The Japanese
government actively pursues energy resources development as well as
efficiency measures in an attempt to improve energy efficiency, reduce
dependence on oil, and maintain nuclear power generation.
From 1997 through 2006, energy R&D spending in Japan totaled about
$33.6 billion, and has followed a generally increasing trend. Total
energy R&D spending peaked in 2002, reaching a high point of about $3.9
billion for the 10-year period. A 2-year decline in spending followed
this peak in 2002, but spending resumed its upward trend in 2005. In
2006, Japan allocated nearly $3.4 billion toward energy R&D (see table
6). Nuclear fission and fusion research represented the bulk of R&D
spending in 2006, at about $2.1 billion dollars.
Table 6: Japan's Total Energy R&D Spending (U.S. dollars in millions):
Total Energy R&D:
Fiscal Year 1997: $3,147.3 million;
Fiscal Year 1998: $3,177.1 million;
Fiscal Year 1999: $3,157.7 million;
Fiscal Year 2000: $3,234.8 million;
Fiscal Year 2001: $3,256.3 million;
Fiscal Year 2002: $3,941.0 million;
Fiscal Year 2003: $3,600.6 million;
Fiscal Year 2004: $3,357.4 million;
Fiscal Year 2005: $3,372.9 million;
Fiscal Year 2006: $3,384.9 million;
Total: $33,629.9.
Source: International Energy Agency.
Note: Totals may not sum due to rounding.
[End of table]
Oil and Gas R&D Spending and Activities:
Despite representing less than 7 percent of the nation's total energy
R&D spending, Japan has spent more on oil and gas R&D than any other
IEA nation in recent years. From 1997 through 2006, total oil and gas
R&D spending totaled over $1.3 billion dollars. In 2002, spending
increased dramatically to almost $250 million, more than eight times
the amount spent in 2001. In 2006, oil and gas R&D totaled over $214
million (see table 7).
In 2006, Japan spread its oil and gas R&D among many activities. One
example is methane hydrate research. The nation has a large
accumulation of methane hydrates located just off its southeastern
coast. Despite methane hydrate research being a relatively new field,
Japan has undertaken a significant, multiyear program devoted to
researching this potential new energy source. Japan also cooperates and
partners with DOE for some of its methane hydrate research.
Table 7: Breakdown of Japan's Oil and Gas R&D Spending by Research Area
(U.S. dollars in millions):
Research Area: Enhanced production;
Fiscal Year 1997: $3.8 million;
Fiscal Year 1998: $22.6 million;
Fiscal Year 1999: $21.0 million;
Fiscal Year 2000: $15.2 million;
Fiscal Year 2001: $22.7 million;
Fiscal Year 2002: $0.0 million;
Fiscal Year 2003: $0.0 million;
Fiscal Year 2004: $0.0. million;
Fiscal Year 2005: $0.0 million;
Fiscal Year 2006: $29.4 million;
Total: $114.4 million.
Research Area: Refining transportation and storage;
Fiscal Year 1997: $105.8 million;
Fiscal Year 1998: $58.0 million;
Fiscal Year 1999: $2.5 million;
Fiscal Year 2000: $2.6 million;
Fiscal Year 2001: $2.0 million;
Fiscal Year 2002: $75.5 million;
Fiscal Year 2003: $50.2 million;
Fiscal Year 2004: $138.7 million;
Fiscal Year 2005: $155.2 million;
Fiscal Year 2006: $70.2 million;
Total: $660.5 million.
Research Area: Nonconventional production;
Fiscal Year 1997: $0.0 million;
Fiscal Year 1998: $0.0 million;
Fiscal Year 1999: $0.0 million;
Fiscal Year 2000: $0.0 million;
Fiscal Year 2001: $0.0 million;
Fiscal Year 2002: $0.0 million;
Fiscal Year 2003: $0.0 million;
Fiscal Year 2004: $0.0 million;
Fiscal Year 2005: $0.0 million;
Fiscal Year 2006: $32.0 million;
Total: $32.0 million.
Research Area: Combustion;
Fiscal Year 1997: [A]
Fiscal Year 1998: [A];
Fiscal Year 1999: [A];
Fiscal Year 2000: [A];
Fiscal Year 2001: [A];
Fiscal Year 2002: [A];
Fiscal Year 2003: [A];
Fiscal Year 2004: $0.0 million;
Fiscal Year 2005: $0.0 million;
Fiscal Year 2006: $0.0 million;
Total: $0.0 million.
Research Area: Conversion;
Fiscal Year 1997: [A];
Fiscal Year 1998: [A];
Fiscal Year 1999: [A];
Fiscal Year 2000: [A];
Fiscal Year 2001: [A];
Fiscal Year 2002: [A];
Fiscal Year 2003: [A];
Fiscal Year 2004: $0.0 million;
Fiscal Year 2005: $0.0 million;
Fiscal Year 2006: $23.6 million;
Total: $23.6 million.
Research Area: Other oil and gas;
Fiscal Year 1997: $4.9 million;
Fiscal Year 1998: $5.4 million;
Fiscal Year 1999: $5.7 million;
Fiscal Year 2000: $5.3 million;
Fiscal Year 2001: $5.0 million;
Fiscal Year 2002: $173.5 million;
Fiscal Year 2003: $157.3 million;
Fiscal Year 2004: $52.5 million;
Fiscal Year 2005: $31.7 million;
Fiscal Year 2006: $58.9 million;
Total: $500.0 million.
Research Area: Total oil and gas;
Fiscal Year 1997: $114.3 million;
Fiscal Year 1998: $86.0 million;
Fiscal Year 1999: $29.1 million;
Fiscal Year 2000: $23.1 million;
Fiscal Year 2001: $29.7 million;
Fiscal Year 2002: $248.9 million;
Fiscal Year 2003: $207.4 million;
Fiscal Year 2004: $191.2 million;
Fiscal Year 2005: $186.9 million;
Fiscal Year 2006: $214.0 million;
Total: $1,330.5 million.
Source: International Energy Agency.
Note: Totals may not sum due to rounding.
[A] Data were not available for this year.
[End of table]
Norway:
Background and Energy R&D:
Norway has vast proven offshore petroleum reserves, and is the fourth-
largest net oil exporting country according to EIA data. Norway's
economy is highly dependent on its offshore oil and gas sector, which
provides the government with its largest single source of revenue and
the largest contribution to gross domestic product. The country also
has extensively developed its hydroelectric power industry, and it
relies heavily on hydroelectric power as Norway's primary means of
domestic electricity generation.
From 1997 through 2006, Norway's energy R&D spending totaled about
$595.6 million, and followed a general upward trend, increasing
steadily since 2003. In 2006, the nation spent over $79 million on
energy R&D (see table 8). Within Norway's energy R&D portfolio, the
vast majority of spending is dedicated to fossil fuel R&D: the fossil
fuel line item represented over 60 percent of total R&D spending in
2006.
Table 8: Norway's Total Energy R&D Spending (U.S. dollars in millions):
Total Energy R&D:
Fiscal Year 1997: $50.2 million;
Fiscal Year 1998: $49.8 million;
Fiscal Year 1999: $62.5 million;
Fiscal Year 2000: $53.8 million;
Fiscal Year 2001: $55.2 million;
Fiscal Year 2002: $57.4 million;
Fiscal Year 2003: $54.7 million;
Fiscal Year 2004: $63.9 million;
Fiscal Year 2005: $68.7 million;
Fiscal Year 2006: $79.4 million;
Total: $595.6.
Source: International Energy Agency.
Note: Totals may not sum due to rounding.
[End of table]
Oil and Gas R&D Spending and Activities:
From 1997 through 2006, Norway spent a total of nearly $300 million on
oil and gas R&D, and in this time period, spending in Norway fluctuated
widely. Oil and gas R&D spending in 1997 was about $24 million, it
reached a low of about $22 million in 2002, and in 2006, the most
recent year included in our sample, Norway spent nearly $38 million on
oil and gas R&D. According to IEA data, "other oil and gas" makes up
the largest portion of oil and gas R&D spending, followed by spending
toward enhanced production (see table 9).
Norwegian government officials informed us that the government gives a
high priority to oil and gas research, and they spend accordingly. In
addition to the high cost of oil and the growing domestic demand,
focusing resources in this area serves to bolster the Norwegian
government's efforts to develop an international leadership role in oil
and gas R&D. Norway's national oil and gas R&D strategy focuses on
sustained profitability in the Norwegian petroleum industry;
optimization of domestic resources, primarily those occurring on the
Norwegian Continental Shelf; and increased technology and knowledge
exports that will bolster international competitive advantages to help
Norway achieve a leadership role in oil and gas R&D. These goals are
carried out through work in eight technology target areas established
by the OG21--the body that helps shape the nation's oil and gas
strategy. In addition to the OG21, Norway's attention to oil and gas
research is bolstered by another group, DEMO2000, a consortium of
public, private, and academic stakeholders conducting oil and gas R&D,
which is organized similarly to RPSEA in the United States.
Table 9: Breakdown of Norway's Oil and Gas R&D Spending by Research
Area (U.S. dollars in millions):
Research Area: Enhanced production;
Fiscal Year 1997: $10.3 million;
Fiscal Year 1998: $7.8 million;
Fiscal Year 1999: $9.6 million;
Fiscal Year 2000: $6.3 million;
Fiscal Year 2001: $5.4 million;
Fiscal Year 2002: $4.3 million;
Fiscal Year 2003: $5.5 million;
Fiscal Year 2004: $7.1 million;
Fiscal Year 2005: $5.4 million;
Fiscal Year 2006: $10.3 million;
Total: $71.9 million.
Research Area: Refining transportation and storage;
Fiscal Year 1997: $1.8 million;
Fiscal Year 1998: $1.8 million;
Fiscal Year 1999: $3.0 million;
Fiscal Year 2000: $2.5 million;
Fiscal Year 2001: $2.2 million;
Fiscal Year 2002: $1.8 million;
Fiscal Year 2003: $2.2 million;
Fiscal Year 2004: $2.7 million;
Fiscal Year 2005: $3.3 million;
Fiscal Year 2006: $4.3 million;
Total: $25.5 million.
Research Area: Nonconventional production;
Fiscal Year 1997: $1.7 million;
Fiscal Year 1998: $1.2 million;
Fiscal Year 1999: $0.5 million;
Fiscal Year 2000: $0.0 million;
Fiscal Year 2001: $0.0 million;
Fiscal Year 2002: $0.0 million;
Fiscal Year 2003: $0.0 million;
Fiscal Year 2004: $0.0 million;
Fiscal Year 2005: $0.0 million;
Fiscal Year 2006: $0.0 million;
Total: $3.5 million.
Research Area: Combustion;
Fiscal Year 1997: [A]
Fiscal Year 1998: [A];
Fiscal Year 1999: [A];
Fiscal Year 2000: [A];
Fiscal Year 2001: [A];
Fiscal Year 2002: [A];
Fiscal Year 2003: [A];
Fiscal Year 2004: $0.0 million;
Fiscal Year 2005: $0.0 million;
Fiscal Year 2006: $0.0 million;
Total: $0.0 million.
Research Area: Conversion;
Fiscal Year 1997: [A];
Fiscal Year 1998: [A];
Fiscal Year 1999: [A];
Fiscal Year 2000: [A];
Fiscal Year 2001: [A];
Fiscal Year 2002: [A];
Fiscal Year 2003: [A];
Fiscal Year 2004: $0.0 million;
Fiscal Year 2005: $0.0 million;
Fiscal Year 2006: $2.0 million;
Total: $2.7 million.
Research Area: Other oil and gas;
Fiscal Year 1997: $10.4 million;
Fiscal Year 1998: $12.4 million;
Fiscal Year 1999: $24.4 million;
Fiscal Year 2000: $20.3 million;
Fiscal Year 2001: $19.5 million;
Fiscal Year 2002: $5.7 million;
Fiscal Year 2003: $18.5 million;
Fiscal Year 2004: $22.2 million;
Fiscal Year 2005: $23.7 million;
Fiscal Year 2006: $21.3 million;
Total: $188.4 million.
Research Area: Total oil and gas;
Fiscal Year 1997: $24.2 million;
Fiscal Year 1998: $23.2 million;
Fiscal Year 1999: $37.5 million;
Fiscal Year 2000: $29.1 million;
Fiscal Year 2001: $7.1 million;
Fiscal Year 2002: $21.7 million;
Fiscal Year 2003: $26.1 million;
Fiscal Year 2004: $32.0 million;
Fiscal Year 2005: $33.1 million;
Fiscal Year 2006: $37.9 million;
Total: $292.0 million.
Source: International Energy Agency.
Note: Totals may not sum due to rounding.
[A] Data were not available for this year.
[End of table]
Switzerland:
Background and Energy R&D:
Switzerland imports all of its fossil resources, especially oil, and
produces renewable forms of energy domestically. Switzerland's energy
policy is guided by its federal constitution, which calls for
sufficient, reliable, diversified, cost-effective, and environmentally
sound energy supply. It also emphasizes the importance of energy
efficiency. To move toward these goals, Switzerland has made efforts to
reduce fossil fuel use and related carbon dioxide emissions.
From 1997 through 2006, energy R&D spending totaled nearly $1.1
billion, and has followed a generally declining trend with some
spending fluctuations. In 2006, the Swiss government devoted over $98
million to energy R&D (see table 10). The research area that received
the greatest funding in 2006 was nuclear fission and fusion, followed
by spending on renewable energy.
Table 10: Switzerland's Total Energy R&D Spending (U.S. dollars in
millions):
Total Energy R&D:
Fiscal Year 1997: $124.7 million;
Fiscal Year 1998: $1158 million;
Fiscal Year 1999: $113.4 million;
Fiscal Year 2000: $104.3 million;
Fiscal Year 2001: $107.4 million;
Fiscal Year 2002: $109.8 million;
Fiscal Year 2003: $111.2 million;
Fiscal Year 2004: $96.9 million;
Fiscal Year 2005: $93.8 million;
Fiscal Year 2006: $98.4 million;
Total: $1,075.8.
Source: International Energy Agency.
Note: Totals may not sum due to rounding.
[End of table]
Oil and Gas R&D Spending and Activities:
From 1997 through 2006, Switzerland spent over $76 million on oil and
gas R&D. Over the 10-year period, Switzerland's oil and gas R&D
spending generally followed a pattern of decline, with the exception of
a significant rise in funding in 2002 when funding reached a peak of
about $9 million. Despite a relatively steady decline since 2002,
spending rose slightly in 2006, the most recent year for which data are
available, to total nearly $7 million (see table 11).
Swiss officials told us that national oil and gas R&D spending is
currently focused on research to improve the efficiency and mitigate
the environmental impacts of combustion engines that run on fossil
fuels. EIA data on Switzerland confirms this: in 2006, over 95 percent
of oil and gas R&D funds were dedicated to the combustion line item.
Table 11: Breakdown of Switzerland's Oil and Gas R&D Spending by
Research Area (U.S. dollars in millions):
Research Area: Enhanced production;
Fiscal Year 1997: $0.0 million;
Fiscal Year 1998: $7.6 million;
Fiscal Year 1999: $7.3 million;
Fiscal Year 2000: $6.7 million;
Fiscal Year 2001: $6.9 million;
Fiscal Year 2002: $9.3 million;
Fiscal Year 2003: $8.8 million;
Fiscal Year 2004: $0.3 million;
Fiscal Year 2005: $0.2 million;
Fiscal Year 2006: $0.3 million;
Total: $47.5 million.
Research Area: Refining transportation and storage;
Fiscal Year 1997: $0.0 million;
Fiscal Year 1998: $0.0 million;
Fiscal Year 1999: $0.0 million;
Fiscal Year 2000: $0.0 million;
Fiscal Year 2001: $0.0 million;
Fiscal Year 2002: $0.0 million;
Fiscal Year 2003: $0.0 million;
Fiscal Year 2004: $0.0 million;
Fiscal Year 2005: $0.0 million;
Fiscal Year 2006: $0.0 million;
Total: $0.0 million.
Research Area: Nonconventional production;
Fiscal Year 1997: $0.0 million;
Fiscal Year 1998: $0.0 million;
Fiscal Year 1999: $0.0 million;
Fiscal Year 2000: $0.0 million;
Fiscal Year 2001: $0.0 million;
Fiscal Year 2002: $0.0 million;
Fiscal Year 2003: $0.0 million;
Fiscal Year 2004: $0.0 million;
Fiscal Year 2005: $0.0 million;
Fiscal Year 2006: $0.0 million;
Total: $0.0 million.
Research Area: Combustion;
Fiscal Year 1997: [A]
Fiscal Year 1998: [A];
Fiscal Year 1999: [A];
Fiscal Year 2000: [A];
Fiscal Year 2001: [A];
Fiscal Year 2002: [A];
Fiscal Year 2003: [A];
Fiscal Year 2004: $7.2 million;
Fiscal Year 2005: $6.4 million;
Fiscal Year 2006: $6.6 million;
Total: $20.2 million.
Research Area: Conversion;
Fiscal Year 1997: [A];
Fiscal Year 1998: [A];
Fiscal Year 1999: [A];
Fiscal Year 2000: [A];
Fiscal Year 2001: [A];
Fiscal Year 2002: [A];
Fiscal Year 2003: [A];
Fiscal Year 2004: $0.0 million;
Fiscal Year 2005: $0.0 million;
Fiscal Year 2006: $0.0 million;
Total: $0.0 million.
Research Area: Other oil and gas;
Fiscal Year 1997: $8.8 million;
Fiscal Year 1998: $0.0 million;
Fiscal Year 1999: $0.0 million;
Fiscal Year 2000: $0.0 million;
Fiscal Year 2001: $0.0 million;
Fiscal Year 2002: $0.0 million;
Fiscal Year 2003: $0.0 million;
Fiscal Year 2004: $0.0 million;
Fiscal Year 2005: $0.0 million;
Fiscal Year 2006: $0.0 million;
Total: $8.8 million.
Research Area: Total oil and gas;
Fiscal Year 1997: $8.8 million;
Fiscal Year 1998: $7.6 million;
Fiscal Year 1999: $7.3 million;
Fiscal Year 2000: $6.7 million;
Fiscal Year 2001: $6.9 million;
Fiscal Year 2002: $9.3 million;
Fiscal Year 2003: $8.8 million;
Fiscal Year 2004: $7.5 million;
Fiscal Year 2005: $6.7 million;
Fiscal Year 2006: $6.9 million;
Total: $76.5 million.
Source: International Energy Agency.
Note: Totals may not sum due to rounding.
[A] Data were not available for this year.
[End of table]
[End of section]
Appendix III: GAO Contact and Staff Acknowledgments:
GAO Contact:
Mark Gaffigan, (202) 512-3841 or gaffiganm@gao.gov:
Staff Acknowledgments:
In addition to the individual named above, Daniel Haas (Assistant
Director), Chuck Bausell, Ron Belak, Virginia Chanley, Emily Norman,
Alison O'Neill, Stuart Ryba, Barbara Timmerman, and Ignacio Yanes made
important contributions to this report.
[End of section]
Footnotes:
[1] For purposes of this report, we will refer to natural gas as "gas."
[2] GAO, Department of Energy: Oil and Natural Gas Research and
Development Activities, [hyperlink,
http://www.gao.gov/products/GAO-08-190R] (Washington, D.C.: Nov. 6,
2007); Advanced Energy Technologies: Budget Trends and Challenges for
DOE's Energy R&D Program, [hyperlink, http://www.gao.gov/products/GAO-
08-556T] (Washington, D.C.: Mar. 5, 2008); Cooperative Research:
Results of U.S.-Industry Partnership to Develop a New Generation of
Vehicles, [hyperlink, http://www.gao.gov/products/GAO/RCED-00-81]
(Washington, D.C.: Mar. 30, 2000); Renewable Energy: DOE's Funding and
Markets for Wind Energy and Solar Cell Technologies, [hyperlink,
http://www.gao.gov/products/GAO/RCED-99-130] (Washington, D.C.: May 14,
1999); and Department of Energy: Fossil Energy Programs, [hyperlink,
http://www.gao.gov/products/GAO/RCED-98-63] (Washington, D.C.: Jan. 30,
1998).
[3] [hyperlink, http://www.gao.gov/products/GAO-08-190R] also described
other key criteria, namely, whether the benefits exceed the costs, and
whether cost-sharing opportunities with companies exist. Determining
whether DOE's current projects meet these criteria was beyond the scope
of this report.
[4] Throughout our report, unless otherwise specified, dollar sums
indicate nominal sums that are not adjusted for inflation. When
adjusted for inflation, these dollar sums are larger than those we
report.
[5] Throughout our report we refer to U.S industry's funding based on
DOE's Financial Reporting System survey, which collects financial data
from the largest U.S.-based publicly owned companies or U.S.-based
subsidiaries that have at least 1 percent of either production or
reserves of oil or gas in the United States, or 1 percent of either
refining capacity or petroleum product sales in the United States. The
sample for 2006 included 27 companies; however, the number of companies
included in the survey may vary from year to year. We found no
comprehensive sources of data for oil and gas R&D funding.
[6] In commenting on our report, DOE officials noted that individual
industry R&D spending estimates may overstate reported industry
spending because individual companies may include activities which DOE
would not consider to be R&D. We could not independently corroborate
this view.
[7] These companies represent five of the largest service companies--
Schlumberger, Halliburton, Baker Hughes, Smith International, and
Weatherford International--in terms of total revenue as reported by
various industry sources. The data do not reflect total service company
R&D.
[8] Publicly traded companies are required to file 10-K reports
annually with the SEC to provide a comprehensive overview of their
business and financial condition.
[9] Improved oil and gas recovery refers to extraction of oil or gas by
any method other than those that rely primarily on natural reservoir
pressure, gas lift, or a system of pumps.
[10] Carbon capture and sequestration is a multistage approach for
managing produced carbon dioxide by capturing it from stationary point
sources such as fossil-fuel-fired power plants, and storing it
indefinitely--generally underground in geologic formations or in the
ocean. Petroleum coke is a residue with a high carbon content formed
during a process that breaks down complex hydrocarbon molecules into
simpler forms.
[11] Part of the decline for gas R&D was due to a transfer of the fuel
cell and advanced gas turbines projects out of the gas R&D budget.
[12] Under EPAct 2005, for fiscal years 2007 through 2017, $50 million
from federal royalty, rent, and bonus money from oil and gas leases is
to be deposited into a revolving fund available without fiscal year
limitation to DOE for activities involving ultra deepwater,
unconventional natural gas, technology challenges of small producers,
and complementary research performed by NETL.
[13] EPAct 2005, section 999 also authorized an additional $100 million
for fiscal years 2007 through 2016, but Congress has not appropriated
any of these additional funds.
[14] Methane hydrates are cage-like lattices of ice, inside of which
molecules of methane are trapped. Methane is the chief constituent of
natural gas.
[15] DOE's complementary activities also include program analysis and
planning.
[16] DOE also refers to these as "solicitations."
[17] According to DOE officials, weights of criteria depend on
objectives of a specific solicitation and specific needs of a program
such that development of optimal technical concepts is balanced with
diversity of participation and soundly planned R&D.
[18] GAO, Oil and Gas Development: Increased Permitting Activity Has
Lessened BLM's Ability to Meet Its Environmental Protection
Responsibilities, [hyperlink, http://www.gao.gov/products/GAO-05-418]
(Washington, D.C.: June 17, 2005).
[19] IEA is an organization of 28 industrialized member nations that
was established in the wake of the 1973-1974 Arab oil embargo. IEA acts
as an energy policy adviser to the member countries in their effort to
ensure reliable, affordable, and clean energy for their citizens.
Member countries include Australia, Austria, Belgium, Canada, Czech
Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland,
Italy, Japan, Republic of Korea, Luxembourg, the Netherlands, New
Zealand, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden,
Switzerland, Turkey, United Kingdom, and the United States.
[20] The data in this appendix are adjusted to 2006 U.S. dollars using
Purchasing Power Parity, which is a method that reflects foreign data
in national currencies converted into U.S. dollars, based on a
comparable level of purchasing power these data would have in the
United States.
[End of section]
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