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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(80)219 final
Brussels /30th April 1980
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COMMUNICATION FROM THE COMMISSION TOTHE COUNCIL
ONTHE PRINCIPLES TOBEAPPLIED TOFINANCIAL SUPPORT
OFCOMMUNITY PROJECTS INTHE HYDROCARBONS SECTOR
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COM (80)219 final

COMMUNICATION FROMTHECOMMISSION
ontheprinciplestobeappliedtofinancialsupportof
Communityprojectsinthehydrocarbons sector.
(Regulation (EEC)oftheCouncilNo.3056/73of9.11.1973*).
Introduction -■
*
DuringtheCouncilexamination ofthefifthroundofCommunityprojects,
«
theCommission announceditsintentiontoreviewthewholeprogrammeof
Communitysupportinthehydrocarbons field.
Thereviewaimsatthefollowingpoints:
(a)thenatureoftheprojects,someofwhichareinfactrefinements of
earliertechnological developments ratherthantrueinnovations inthe
senseofCouncilRegulation 3Cb6/73;
(b)thelackofsufficient information fortheassessment oftheseprojects
asregardstheprogressofworkonprojectsgrantedCommunitysupportin
* -earlierfinancialyears;
(c)thechangeswhichmayhavetobemadeeithertoRegulation No.3056/73
itselfortothewayinwhichitisimplemented,inordertoensurethat
Communitysupportisaseffective aspossible.
TheCommissioninitiativefollowedconclusions whicharoseduringtheLuxembourg
Symposium onnewoiltechnologies inApril1979.Atthattime,theresults
from75Communitydevelopment projectswerepresented anddiscussed by
representatives fromtheoiIandtheequipmentindustry.
Presentlythe'ommissionissubmittingtotheCouncilandtheParliament reports
dealingwiththeresultsobtainedinimplementing Regulation 3056/73,witha
aparticular focusontheverypositivecontribution ofthisschemetothe
development ofnewtechnologies inthehydrocarbons sector.
Thispresentdocumenthasbeenproducedincooperation withnationalexpertsin
the*ield,duringmeetingsheldinBrusselsonSeptember6thandDecember11th,
1979.Theiroutcomeisgivenbelow.

REASONS FOR THE PROGRAMME
Traditional sources ofoilsupplies canbeexpected todecrease rapidly
following thedecision bytheoilproducing countries tocutback orat
least put aceiling ontheir output inorder toprolong theperiod ofproduction .
Theevents ofthe last fewmonths have removed anydoubts inthis respect .
Inorder tomeet their essential needs ,theindustriali sedcountries ,
particularly intheCommunity ,will have tolook fornew fields andunder­
take amajor exploration programme innew areas ,particularly offshore .
Encouraged byanimprovement intheir profit margins ,oil companies are
already spending rapidly increasing amounts onthese activities .Before they
undertake newexploration programmes ,however ,they must frrst master the
required new ,production techniques .
These techniques are notbeing developed orperfected solely bytheoil ,
companies themselves butalso byspecialised service companies ormanufacturers
ofequipment forthepetroleum industry ,whose financial resources are not so
extensive .The aimoftheCommunity 'ssupport programme istohelp these
companies develop advanced technology bygiving financial support fordesign
anddevelopment work and thetesting ofprototype equipment ..Intheevent that
projects become commercially exploitable ,thesubsidy must bere-paid in
principal andinterest bythebeneficiaries . -
Experience over the last five years has shown theeffectiveness oftheCommunity
support programme .Wemust now continue along this path and,within the frame­
work ofplans todevelop newenergy resources ,make further financial commit­
ments appropriate tothe size ofthe requirements tobemet .
Many ofthetechniques supported inthepast have nowbeen fully developed and,
although further work may beneeded onsome ofthem ,newguidelines must be
worked out fortheprogramme ifitistoremain fully effective .
PRIORITY AREAS
"rtici.es 1and 2ofRegulation (EEC)No.3056 /73state that theCommunity may
grant financial support for thecarrying outofprojects "which are offundamenta
importance inensuring theCommunity 'ssupply ofhydrocarbons ".These projects

3.
"shall concern technological developments directly connected with
exploring for,producing ,"storing ortransporting hydrocarbons ".
8.Theworking party ofexperts considers that ,because ofadvances made
inoiltechnology since 1973 ,>theprogramme should beredirected totake
account oftheCommunity 'slong term requirements ,tothis end,priority
should begiven totheprojects having thefollowing aims :
(a)ensuring thecontinuity ofsupplies bydeveloping new improved
techniques and equipment inthe fields of :
-geophysi cs ' .
-oiIand gas recovery
-drilling
-optimum use ofnatural gas,including associated gas
-the improvement ofinspection andmaintenance techniques ;
(b)maximising theyield /bytheuse ofenhanced recovery techniques ,
from known fields andparticularly from reservoirs where thenatural
drive isweak ,soasto :
-increase their flow rate and total production
-make marginal fields viable ; ,
v •
(c)developing techniques forexploiting reservoirs located indifficult
areas (e.g. deep water ,intheArctic ,etc.)andmaking systematic
advances intechniqes forexploiting deep seafields (500 "metres and
beyond );
(d)cutting down the lead times forexploiting newly discovered fields .
9.Theprojects tobesupported should beconsidered notonly from thepoint
ofview ofthis order ofpriority butalso with regard to cost effect­
iveness .
10.Construction andrunning demonstration plants canalso besupported ifitwas
tobeseen that newly developed methods orequipments could not beintroduced
into themarket before being tested .

4.
11.Thislistofpriorities isgivenasaguideandisbasedonthepresent
attit*efteehfii^uesa ThtCommissionwillhavetochangeitastimegoes
on,inparticularinthelightoftheopinionssoughtfromtheoilindustry.
Inthreeorfouryears,anothersymposiummightbeorganisedtoexamine
theprogressmadeand,ifnecessary,todrawuppossiblenewguidelinesfor
theprogrammeifitistobecontinued.
CRITERIA FORSELECTING PROJECTS
12.Theworkingpartyconsidersthat,irrespective oftheorderofpriorities
listedabove,strictercriteriashouldbeusedforselectingprojectsth'art
thoseusedinthepast.
Supportshould,inthisconnection,notgenerally begrantedtoprojectswhich
(a)aresimplyengineering studiesinvolving notechnicalrisks;
(b)areconcernedsolelytoimproveequipmentwhich,althoughitrepresents
atechnical advance,hasontyverylimitedprospectsofapplication inth
hydrocarbon sector;
(c)represent astagein^thedevelopment ofanexistingtechnique,butdonot
provideasuitableanswertofuturerequirements ;v-
(d)aresimplyroutineindustrial investments .
13.Infuture,thefollowingpointsshouldbeemphasised aboveall
(a);projectsshouldbeconcernedlesswithpureinnovation thanwiththe
application oftechniques whicharealreadyavailablebutrotyet
economically viable;
(b)projectsinareaswherethemarginalutilityoffundingislowreceive
lowpriority.Severalareasarealreadysaturated andnewresearchcould
~leadonlytorefinements ofno.directpracticalvalue;
(c)selection mustcontinuetobepractised soastoavoiduselessduplication
confirming supportforthoseprojectswhichhavethebestchanceofbeing
realisedasindustrial developments .
14.Theworkingpartyhasexaminedandapprovedthecriteria-givenintheAnnex •
whkf~theCommissionisplanningtoapplyinfuturefortheselectionof
projects.

5.
InitsproposalstotheCouncil,theCommissionwillindicatethe
importance attachedtoeachofthecriteriawhentheselection wasmade.
Theamountofsupportproposedforeachprojectwilldependontheextent
towhicheachofthesecriteriahasorhasnotbeenmet.
ν ι -
CO-OPERATION WITHNON-MEMBER COUNTRIES
15.AnumberofprojectssupportedbytheCommunity havebeencarriedoutwiththe
co-operation offirmsinnonmembercountries.Forexample,severalprojects
havebeencarriedoutjointlywithNorwegianfirms.Moreover,oilcompanies
fromnonmembercountries havepurchasedtherightofaccesstotheresults
<ofcertainprojects,whichhashelpedtospeeduptheircommercialapplication
16.Thiskindofco-operation mightbeencouraged totheextentthatithastens'
thedevelopment ofnewoilresources and/oropensupoutsidemarketsto
Communityoilequipmentmanufacturers . ~
It.isimportant,however,thattheindustrial ownershipof*thesenewly
developedtechniques shouldbeprotected,andthatthesearrangements should
simplyensurethatthenewlyacquiredknowledgeismorewidelydisseminated
andto.avoidanytransferoftechnology tothirdcountrieswithoutacounter­
parttobeestablished casebycase.^
SUMMARY ANDCONCLUSION "
17.Tosumup,theCommission considersthattheriskswhichcontinuetobeset
theCommunity'soilsuppliesfullyjustifythecontinuation oftheprogramme
ofsupportfornewoiltechnology .
Thereisnoreasontoamendthebasicregulation No.3056/73butitsapplic­
ationshouldbeadaptedtotakeaccountofnewproblemswhicharise.
Newpriorities shouldbeadoptedtotakeaccountoftechnicaldevelopments
andnewcriteriashouldbeusedforselectingprojects.

ANNEX
CRITERIA FOR ASSESSING PROJECTS
Three types ofcriteria should beconsidered when selecting projects ; ■ v
1.Technical reasons for theproject
(a)Degree ofpriority ofproject according totheprinciples ,setout inpara 8ofthe document .
(b)Importance oftheproject totheCommunity (Community interest ).
(c)Does theproject fit inwith theprogramme strategy ?
(d>Howfardoes theproject break newground inrelation toexisting
technology :
-within the compass ofpresent technology
–stage -by-stage development
-comptete innovation
-rdanger ofduplication :(i>ofother existing techniques
(ii)of'techniques under development
.research
.development
.field tests
.pilotplant .
(e)Istheproject concerned with theproduction ofequipment orisit
merely aconceptual study ?
(f)Will itremove bottlenecks ?(Yes orno).
(g)Technical feasibility oftheproject andchances ofsuccess .
(h)Number orrange *ofpossible applications ofthe results ofthe
project : . -
-within one year
,-within 5years
-within 10years .
(i)Possibilities forco-operation with simiIanprojects .
Cj)Justification ofthemanpower andother resources tobecommitted ;
,their relationship tothe foreseeable results .
(k>Assessment ofthe technical risks
-rngfr
-average
-low
./.

-2–2–2 -
(I)Could theproject easily beclassified under oneofthefollowing
headings : -
~economic recovery indeep waters
-adapting technology tohostile environments
-making marginal fields viable
-rapid recovery system .
-reducing thecapital cost perbarrel
-reducing thetransport cost per barrel .
(m)Are there limitations because ofthe depth ofthe water ?
(n)Feasibility oftheproject from thepoint ofview ofhealth and
environmental protection standards .
2.Capabilities ofcontractors -
(o)Are thetechnical capabilities andfinancial situation ofthose
undertaking theproject adequate ? -
(p>Arethose undertaking theproject genuinely capable ofcompleting
theproject within thegiven time limit andwithin thebudget ,and
ofapplying the results ?
(q)Theability ofthose undertaking theproject todevelop itcommercially ,
(r)What results have they already obtained inthis field ?
(s)Possibility oftheperson undertaking theproject working in
association with partners inthe oil industry as
-main contractor
-sub-contractor
-fee-paying participant
-advi ser .
(t)Extent ofcommitment ofcompanies based innon-Community countries .
3.Reasons forfinancial support
(u)Method offinancing theproject :
-self-financed
-contributions byassociates
/ ~ '■
-bank loans
-future customers
./.

3·*ν
(v)Financial risks involved .
(w)Need forCommunity supper !farthe projects
Without Community support would theproject bedelayed :
-byone year ?
-byone tofive years ? 1
-byfive toten years ?
-indefinitely ?