The Department of Energy will accept bids in a reoffering sale covering 53,400 b/d of Elk Hills field oil but later may exercise an option to cut sales volumes and ship 20,000 b/d to Strategic Petroleum Reserve sites in Texas.
DOE rejected all 19 bids submitted in an earlier semiannual sale of crude oil from the California naval petroleum reserve, saying they were too low (OGJ, Mar. 30, p. 23).
DOE said, "The unique combination of federal and state government policies affecting the movement of oil into and out of the California market has contributed to a situation in which it apparently is very difficult for the government to receive a price for Elk Hills oil that satisfies the minimum price tests that govern the sale of Elk Hills oil."
The 12 winning bids in the reoffering sale averaged $13.58/bbl, with bids for the higher quality Stevens zone crude averaging $13.92/bbl, about 67/bbl higher than bids rejected last month.
DOE said 20,000 b/d is all local pipelines can ship to the interstate All-American pipeline for transfer to Texas beginning in June.
It wants to move only Stevens zone crude to the SPR, leaving 23,460 b/d of Stevens crude and 9,940 b/d from other zones for sale on the local market.
In allocating Elk Hills crude among successful bidders, DOE exercised its option to sell 25% of the crude to small refiners.
DOE said it will continue to monitor the California oil market, as well as open market prices for SPR quality oil.
DOE has submitted contractual language to West Coast pipelines, laying the groundwork to ship Elk Hills crude to SPR sites in Texas.
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