Naval Petroleum Reserve-1:

Data Inaccuracies Complicate Production and Ownership Issues

RCED-87-105BR: Published: Mar 24, 1987. Publicly Released: Apr 14, 1987.

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In response to a congressional request, GAO examined: (1) whether the rate of oil production at the Naval Petroleum Reserve (NPR-1) meets the requirements of the Naval Petroleum Reserves Production Act; and (2) the effects of production data inaccuracies and omissions on the Department of Energy's (DOE) final settlement of each owner's account.

GAO found that production data for NPR-1 showed that: (1) the allocation of oil, gas, and water produced from commingled wells was inaccurate; (2) computer-generated reports were inaccurate because of programming and data entry errors; (3) DOE made unexplained changes to records; (4) since production data were inaccurate, production rates may not have met statutory requirements; and (5) there was an absence of effective internal controls that could have prevented or limited the impact of these problems. In addition, the methods that DOE used to determine the production of various pools and strata in commingled wells compounded production inaccuracies and added to the uncertainties about oil production from each pool and computation of owners' shares. Although DOE acknowledged its production data problems and took action to correct its data entry and computer program errors and allocation factors for commingled wells, it was not concerned about the potential effects of these problems on divestiture of the government's share of NPR-1 or the ability to produce at the maximum efficient rate.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DOE staff believe they now have higher quality data to use in managing the field. In addition, the data correction activity will be an ongoing activity. GAO plans to followup to determine whether the actions are responsive to the recommendation.

    Recommendation: The Secretary of Energy should give priority attention to correcting the production data inaccuracies, establishing an allocation system that more accurately reflects the source of petroleum production in commingled wells, and developing a system to better define production ownership.

    Agency Affected: Department of Energy

  2. Status: Closed - Implemented

    Comments: DOE initiated actions to improve its internal controls by establishing a committee made up of DOE, Chevron, and unit contractor officials. Standard written procedures designating responsibilities for review and evaluation were issued.

    Recommendation: The Secretary of Energy should establish an effective internal control program to: (1) prevent problems similar to those identified in this report from recurring; (2) provide the necessary assurances that corrective actions are, and will be, fully implemented; and (3) provide continuous oversight of NPR-1 operations.

    Agency Affected: Department of Energy

  3. Status: Closed - Not Implemented

    Comments: Congress has shown no inclination to authorize a sale of NPR-1 reserves and DOE has dropped its proposal.

    Recommendation: The Secretary of Energy should ensure that the government's interests concerning the allocation of past production and remaining recoverable reserves are protected in any proposed sale of NPR-1.

    Agency Affected: Department of Energy


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