Energy Technology and Research

While ConocoPhillips invests billions of dollars each year to develop the conventional oil and natural gas supplies that consumers need today, we also are stepping up our research and development programs and investments intended to develop new sources of energy that will be increasingly needed in the years ahead. For example, during 2007, we plan to invest $150 million on projects to develop alternative and renewable sources of energy.

Additionally, part of our work focuses on improving the recovery of existing oil resources. Typically, as much as 50 percent of the oil originally in place in a reservoir is left behind when production ends, trapped in pores in the rock because it cannot be economically recovered. We currently are implementing and developing improvements to a number of technologies to address this issue, including the use of horizontal drilling (which offers greater penetration of oil-bearing formations); multilateral drilling (many wellbores branching off from the main well); and injection of water, steam and carbon dioxide (all of which help wash oil from the rock and sweep it toward producing wells).

We also are addressing the challenges and opportunities posed by the fact that oil and natural gas occur in many different “unconventional” forms, including oil sands, heavy oil, coalbed methane, oil shale and gas hydrates. In many cases, these unconventional hydrocarbons have been uneconomical to produce and bring to market. Now, we are developing successful new technologies to better extract these resources.

Much of our research and development is focused on projects which build on our strengths and complement existing businesses. For example, we are using our carbon upgrading expertise to develop a new anode material, CPreme™ Graphite Powder, for more efficient, cost-effective lithium-ion batteries for use in hybrid and all-electric vehicles. We applied our petroleum coke experience to engineer the material to meet vehicle battery manufacturers’ requirements for a product that can be rapidly charged and discharged. A pilot plant at our Ponca City refinery in Oklahoma manufactures several metric tons of the material each month from a petroleum coke by-product and supplies a number of battery manufacturers worldwide.

The use of hydrogen as a fuel has long-term potential to reduce the environmental impact of transportation, if the energy intensity of the manufacturing process – and by association, greenhouse gas emissions – can be reduced. We are continually evaluating alternative methods to generate hydrogen to help meet current and future refinery needs. We also participate in the Department of Energy’s FreedomCAR and Fuel Partnership, in which the U.S. government, the energy industry and automakers are working together to determine the feasibility of, and possible ways to introduce, a hydrogen-based transportation system in the United States.

Our lubricants group is working with the auto industry to develop low-viscosity motor oils and driveline oils to improve auto fuel economy and supportthe introduction of more fuel-efficient vehicles.

Having led the way in developing fuel-saving 5W-20 grade motor oils in the early 2000s, we continue to investigate even lower-viscosity engine oils, as well as low-viscosity gear lube formulations to improve the energy efficiency of vehicle transmissions and axle drive mechanisms. We also are evaluating alternative lubricant additives to extend the durability of catalytic converters in vehicle exhaust systems. As auto manufacturers strive to reduce the weight of vehicles, we are developing new oil formulations better suited to lighter engine metallurgies, such as aluminum alloys.

We are responding to customer demand for energy-saving lubricants for other applications, such as synthetics lubricants and blends of synthetics and oil for off-highway construction, mining and earth-moving equipment, and lubricants which allow industrial equipment to run more efficiently. In 2006, we launched a lubricant specifically designed to meet the special demands of wind turbine gearboxes. We also are developing a range of lubricants for recreational vehicles such as motorcycles, snowmobiles, outboard motors and jet skis, which in order to reduce exhaust emissions are being powered increasingly by four-stroke engines, rather than two-stroke engines.

In the United States, our gasoline qualifies as a “Top Tier” product under voluntary standards which recognize its superior engine-cleaning and emissions-reduction qualities. This gasoline detergent standard was developed by BMW, General Motors, Honda and Toyota (and now also is sponsored by Volkswagen and Audi) to promote development and production of fuels with enhanced detergency for cleaner engines, better fuel economy and reduced emissions.

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