Transportation DOE approves three sales of crude from SPR

The U.S. Department of Energy has approved three sales of crude oil from the Weeks Island, La., Strategic Petroleum Reserve site.

DOE is closing the 72 million bbl site because of a fracture in the salt formation above the oil storage chambers. Congress authorized the sale of 7 million bbl to provide $100 million to pay for decommissioning the site and moving the balance of the crude to other storage caverns on the Gulf Coast.

Philbro Energy U.S.A. Inc., Houston, bought 1.45 million bbl for $26.05 million, or $18.46-17.66/bbl per batch.

Marathon Oil Co. bought 720,000 bbl for $18.65-18.30/bbl per batch. And in the latest sale, Philbro bought another 775,000 bbl for $18.50-18.15/bbl per batch.

The Defense Fuel Supply Center, the Defense Department's fuel purchasing agency, is conducting the sales. The sour crude has an average gravity of 29.1 and a sulfur content of about 1.36 wt %.

DOE said, "Sales and delivery of all the oil being offered from the Weeks Island site will likely extend over several months, ensuring that the action will have no appreciable impact on the domestic oil market."

While sales are under way, DOE continues to transfer about 220,000 b/d of oil from Weeks Island. It already has moved more than 27 million bbl once stored at Weeks Island to other SPR sites.

DOE said, "Weeks Island is unique among the SPR storage sites, having once been a commercial salt mine. The other sites are much deeper caverns created by dissolving huge cavities in the salt domes along the Louisiana and Texas Gulf Coast.

"The deeper salt caverns are much less susceptible to the type of naturally occurring fracturing that has been experienced at Weeks Island."

Other assets

Separately, DOE said it will accept offers until Apr. 30 from companies interested in buying or leasing SPR facilities in South Louisiana.

DOE wants to sell a 67 mile, 36 in. pipeline connecting the Weeks Island site near New Iberia to the St. James marine terminal on the Mississippi River.

With closure of the Weeks Island site, DOE will no longer need the line, which can be used for oil or gas transport.

DOE wants to lease out the St. James terminal, which has six storage tanks, two docks, and connections to the Capline and Locap commercial pipelines. It also would consider purchase offers.

And it wants to lease out a 36 mile, 36 in. pipeline between the Bayou Choctaw SPR site near Baton Rouge and the St. James terminal.

DOE explained the Bayou Choctaw pipeline and the St. James terminal are underused because SPR oil purchases have been halted. It would retain rights to use them to draw down SPR crude during an energy emergency.