Washington, D.C. - The U.S. Department of Energy today announced that it plans to take advantage of the recent large decline in crude oil prices, and has issued a solicitation to purchase approximately 12 million barrels of crude oil for the nation's Strategic Petroleum Reserve (SPR) to replenish SPR supplies sold following hurricanes Katrina and Rita in 2005.
In addition, DOE is also moving forward with three other SPR acquisition and/or fill activities in order to fill the SPR as Congress directed in the 2005 Energy Policy Act (EPAct): refiner repayments of SPR emergency oil releases following Hurricanes Gustav and Ike; the delivery of deferred royalty-in-kind (RIK) oil; and the solicitation of new RIK deliveries in the spring of 2009.
From May 2008 through the end of December 2008, DOE was prohibited by law from acquiring petroleum for the SPR. Now that the statutory moratorium on SPR oil acquisitions has expired, and in light of substantially lower crude oil market prices, DOE believes it is economically prudent and in the Nation's national security interest to move forward with filling the SPR.
Acquisitions in 2009 will fill the SPR to its current storage capacity of 727 million barrels and provide the U.S. with approximately 70 days of net import protection:
Approximate 12 Million Barrel Purchase:
DOE plans to take advantage of the recent sharp decline in crude oil prices to enter the market and, if it receives acceptable offers, purchase approximately 12 million barrels of crude oil. The approximately $600 million received from DOE in 2005 from the emergency sale of crude oil following hurricanes Katrina and Rita will be used for the purchase. Current crude oil prices provide an opportunity to replace the oil sold in 2005 and to acquire additional oil, adding to the energy security provided by the SPR. DOE is seeking offers for crude oil deliveries in February, March, and April 2009. View the solicitation.
Refiner Repayments of 2009 Hurricane Oil Releases:
From January through May 2009, the SPR will receive 5,395,000 barrels of oil that were released from the SPR to refiners in the fall of 2008 due to localized interruptions caused by Hurricanes Gustav and Ike, along with 120,000 additional "premium" barrels of oil that the refiners are required to pay to DOE in return for releasing this oil to the refiners.
Deferred RIK Deliveries to Resume and New Solicitation Planned:
The SPR will also receive 2,178,000 barrels of RIK oil, originally scheduled for delivery in 2008 and deferred until the spring of 2009. View the RIK solicitation.
In addition to these deferred deliveries, DOE plans to resume a modest RIK oil fill program with the Department of the Interior at a rate of about 25,000 barrels per day. DOE has issued a solicitation seeking contracts to exchange 25,000 barrels per day of Government-owned oil from Federal oil leases in the Gulf of Mexico for crude oil deliveries that meet the specifications of the SPR. The RIK deliveries to the SPR would begin in May 2009.
The SPR has been filling using the royalty-in-kind exchange program since 1999. Under this program, the Department of the Interior contracts for the delivery of Federal royalty oil to market centers along the Gulf Coast, where ownership of the oil is then transferred from the Department of the Interior to the Department of Energy. DOE awards contracts for the exchange of the Federal royalty oil at the market centers for physical oil deliveries to the SPR. Actual volumes delivered to the SPR take into account adjustments for quality differentials and transportation.
About the SPR:
Currently, the SPR has a storage capacity of 727 million barrels and an inventory of 702 million barrels (97%) stored in the SPR's underground salt caverns located along the Gulf Coast of Louisiana and Texas.
Activities to resume SPR fill are taken in accordance with the provisions of the Energy Policy Act (EPAct) of 2005, which directs that DOE fill the SPR to its authorized capacity of one billion barrels, and advances the President's agenda to increase the Nation's energy security.