US SPR exchange contracts awarded

More than 100,000 b/d of royalty crude oil will continue to be delivered to the US Department of Energy, supporting the fill of the nation's Strategic Petroleum Reserve (SPR).

Aug. 13, 2004

2 min read

By OGJ editors
HOUSTON, Aug. 13 -- More than 100,000 b/d of royalty crude oil will continue to be delivered to the US Department of Energy, supporting the fill of the nation's Strategic Petroleum Reserve (SPR).

The Department of the Interior's Minerals Management Service (MMS) awarded exchange contracts in late July. These exchange contracts involve aggregation of crude oil royalties taken in the form of oil, rather than in cash, from federal lease operators in the Gulf of Mexico.

That oil is delivered to market centers where DOE officials take custody, pending its exchange for crude oil of suitable quality that is then delivered to SPR sites in Texas and Louisiana.

"The Royalty in Kind program provides an efficient and cost-effective means to continue filling the nation's Strategic Petroleum Reserve to maintain emergency oil stocks and support national objectives for energy security," said MMS Director Johnnie Burton.

Contracts in the latest exchange sale were awarded to ChevronTexaco Products Co. and Shell Trading US Co. Delivery on the 6-month contracts is scheduled to begin Oct. 1 and to conclude Mar. 31, 2005.

The goal of the current initiative is to fill the SPR to its capacity of 700 million bbl. Last month, the current inventory was 663 million bbl. The MMS began the current fill initiative in April 2002 and anticipates that the capacity will be reached in mid-2005.