By the OGJ Online Staff
HOUSTON, Feb. 8 -- The US Minerals Management Service said Friday it awarded four contracts for 60,000 b/d of royalty oil from federal properties in the Gulf of Mexico as part of a joint initiative to fill the remaining capacity of the US Strategic Petroleum Reserve.
Last November, President George W. Bush ordered that the SPR be filled to its 700 million-bbl capacity as "an important element of our nation?s energy security." That will require adding 108 million bbl of crude to the SPR, officials said.
ChevronTexaco Corp., Equiva Trading Co., ExxonMobil Corp., and Williams Cos. Inc. each received 1-year term contracts to exchange seven packages of offshore royalty oil in return for delivery at Gulf Coast market centers of similar quantities of crude oil to the US Department of Energy.
In a coordinated two-phase contracting effort, the DOE also announced Friday its award of a single contract to exchange crude oil delivered by MMS under those four contracts for similar quantities of oil to be used to fill the SPR sites.
"These awards are the result of MMS and DOE successfully working together, and also reflect a close working partnership between government and industry to rapidly respond to the President's directive in an effective and efficient manner," said Acting MMS Director Lucy Querques Denett.
Under these agreements, MMS is taking its oil royalties in kind (RIK), rather than cash, from offshore federal lease operators and delivering it to onshore oil market centers where DOE takes custody of the oil. In turn, DOE is exchanging the RIK oil for oil of suitable quality delivered to three SPR sites located in Texas and Louisiana.
Initial deliveries of RIK oil in April will be at a rate of 60,000 b/d. The Department of the Interior and DOE are hoping to increase the flow rate later this year and would issue new solicitations for the additional volumes.