Selectively Reducing Offshore Royalty Rates in the Gulf of Mexico Could Increase Oil Production and Federal Government Revenue

摘要

The U.S. 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.