U.S. DOE to lease crude storage space in SPR to private firms

The U.S. Energy Department has offered to let private companies store crude in unused space at its Strategic Petroleum Reserve sites on the Texas/Louisiana Gulf Coast.

DOE said that, rather than paying a storage fee, companies would transfer a portion of the stored crude oil to the government. "As a result, the total petroleum stocks available to the nation in the event of an energy emergency could be increased without requiring additional funding."

It said the storage offer would take advantage of the current situation in the oil market in which many companies are buying oil at relatively low prices with the expectation of selling the oil when prices rise later.

DOE said the private storage option potentially could increase the emergency stockpile by up to 2 million bbl.

The U.S. has not bought oil for the SPR since 1994, largely because of federal budget constraints. The SPR currently has 563 million bbl of crude in storage but has 117 million bbl of unused capacity.

Solicitations

The current proposal would make available up to 20 million bbl of space at the West Hackberry site near Lake Charles, La. DOE's first solicitation offers 5 million bbl of the unused capacity. Initial offers are due on Aug. 6, and the first oil could be delivered in September.

Three more 5 million bbl solicitations will be issued in the next 3 months.

DOE said, "The initiative is likely to prove especially attractive to companies that currently are encountering difficulties finding commercial storage space for surplus oil. Private storage has reached capacity, and some companies have expressed interest in leasing storage capacity in the SPR."

DOE anticipates awarding 6-month storage contracts with possible extensions. Awards will be based on the quantity of oil a company offers and the amount of oil the company would transfer to the government in lieu of a fee.

DOE would take title to its portion of the oil upon delivery. When the privately owned oil is removed, the oil transferred to the government would remain in the SPR.