Selectively reducing offshore royalty rates in the Gulf of Mexico could increase oil production and federal government revenue

Technical Report · Fri May 10 00:00:00 EDT 1985

OSTI ID:5550580

Bowsher, C A

The US government leases large areas in the Outer Continental Shelf in the Gulf of Mexico for the development of oil resources and receives royalties on the oil produced. Conventional methods of oil recovery have recovered or are expected to recover about half of the 16 billion barrels of oil discovered in this area. Other oil recovery methods, collectively known as enhanced oil recovery (EOR), could potentially increase production by about 1 billion barrels of oil. EOR in the Gulf is expensive and does not appear to be economically justified in most cases. Under existing economic conditions and federal policies, GAO's review indicates that utilizing EOR methods will probably produce only about 10 percent of the additional recoverable oil. However, financial incentives in the form of royalty reductions could increase both oil production and federal government revenue if applied on a project-by-project basis. Universal applications of royalty reduction for EOR, however, while achieving increased oil production, would not increase federal government revenue. GAO recommends that the Department of the Interior's Minerals Management Service initiate action that would allow for selective royalty reductions for EOR projects in the Gulf in instances where both total oil production and federal government revenue will increase. 6 figs., 1 tab.

• Research Organization: General Accounting Office, Washington, DC (USA). Office of the Comptroller General
• OSTI ID: 5550580
• Report Number(s): GAO/RCED-85-6; ON: TI85901756
• Resource Relation: Other Information: Report to the Chairman Committee on Energy and Natural Resources, United States Senate
• Country of Publication: United States
• Language: English

Related Subjects

02 PETROLEUM
29 ENERGY PLANNING
POLICY AND ECONOMY
CONTINENTAL SHELF
PETROLEUM DEPOSITS
GULF OF MEXICO
LEASING
RESOURCE DEVELOPMENT
FINANCIAL INCENTIVES
ROYALTIES
REDUCTION
ENHANCED RECOVERY
PETROLEUM
PRODUCTION
ATLANTIC OCEAN
CARIBBEAN SEA
CHEMICAL REACTIONS
CONTINENTAL MARGIN
ENERGY SOURCES
FOSSIL FUELS
FUELS
GEOLOGIC DEPOSITS
INCOME
MINERAL RESOURCES
RECOVERY
RESOURCES
SEAS
SURFACE WATERS
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