SPR gets 285,000 bbl of Russian oil through exchange program

The US Department of Energy confirmed that it is getting 285,000 bbl of Russian oil through a commercial exchange for the US government's royalty-in-kind crude from Gulf of Mexico production.

By OGJ editors

HOUSTON, Oct. 4 -- The US Department of Energy confirmed Friday that it is getting 285,000 bbl of Russian oil to be placed in the Strategic Petroleum Reserve, through a complicated commercial exchange for the US government's royalty-in-kind crude from Gulf of Mexico production.

Although it is the first Russian crude to go into the emergency US oil stockpile, it is not a part of a government-to-government program, and there is no special plan to obtain Russian oil for SPR, officials told OGJ Online.

The Urals sour crude just happens to be among the oil furnished by Koch Supply & Trading LP, Wichita, Kan., in an exchange for royalty-in-kind oil from offshore operations in the Gulf of Mexico, said a DOE spokesman.

US Sec. of Energy Spencer Abraham earlier this week mentioned the pending arrival of Russian oil during a tour of SPR's Bryan Mound, Tex., facility with Russian Minister of Energy Igor K. Yusufov. The two participated in a 2-day US-Russia energy summit in Houston (OGJ Online, Oct. 2, 2002).

DOE announced in August that Koch, a large oil trading company, submitted the winning bid to provide 8 million bbl of crude to the SPR. Deliveries of that oil were to have begun Tuesday and are scheduled to continue through April 2003.

The program is carried out cooperatively with the US Department of Interior's Minerals Management Service, which earlier awarded contracts for a similar amount of royalty oil, which was "not of sufficient quality" for SPR, to be delivered from designated GOM production platforms to designated market centers.

Koch will receive that gulf crude at those market centers and deliver acceptable replacement oil to SPR. Actual volumes arriving at the SPR are adjusted to account for transportation and quality differentials.

Koch's offer was selected on the basis that its exchange ratio provided the best value to the government.

The SPR currently holds 580 million bbl of crude oil deep in salt caverns created along the Texas and Louisiana coastlines.

More in General Interest