The U.S. departments of Energy and Interior have begun the second phase of their program to store federal royalty oil from the Gulf of Mexico in the Strategic Petroleum Reserve.
DOE issued a solicitation for offers to exchange up to 24 million bbl of royalty oil produced from federal offshore leases for crude to be delivered to the SPR. Offers are due May 25.
Energy Sec. Bill Richardson said, "For the first time in 5 years, oil is flowing into the SPR and adding to our nation's energy security. Now we are moving into the expanded, second phase of the initiative that will open the program to all leaseholders and take as much as 100,000 b/d."
DOE expects to take 28 million bbl of crude as payment of royalties due on oil produced from OCS leases, replacing SPR crude stocks sold in fiscal 1996 and 1997 (OGJ, Feb. 22, 1999, p. 24.)
In the first phase, agreements were reached with three large producers to deliver an initial 3.5 million bbl to the Bayou Choctaw SPR site in Louisiana (OGJ, Apr. 12, 1999, p. 37).
In the second phase, the initiative will expand to include most federal leases in the gulf. DOE and Minerals Management Service will conduct a competitive exchange in which royalty oil will be swapped for crude that meets SPR specifications and can be delivered to any of the four SPR sites. The other three sites are West Hackberry in Louisiana and Big Hill and Bryan Mound, both in Texas.
Contracts are to be awarded by July 1, and initial deliveries will begin on or after Aug. 1. DOE expects to complete the delivery of exchanged oil to the SPR no later than Mar. 1, 2000.
Copyright 1999 Oil & Gas Journal. All Rights Reserved.
