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Bids to be sought on 7 million bbl of U.S. SPR crude oil

Feb. 5, 1996

The U.S. Defense Fuel Supply Center (DFCS) is preparing to invite bids for as much as 7 million bbl of crude oil from the Strategic Petroleum Reserve. The sale, authorized by a short term spending bill, will raise funds to complete the transfer of crude from the SPR's Weeks Island site in New Iberia Parish, La., to other locations. A naturally occurring fracture in the salt formation above the Weeks Island storage chambers has compromised the site's structural integrity, creating an

The U.S. Defense Fuel Supply Center (DFCS) is preparing to invite bids for as much as 7 million bbl of crude oil from the Strategic Petroleum Reserve.

The sale, authorized by a short term spending bill, will raise funds to complete the transfer of crude from the SPR's Weeks Island site in New Iberia Parish, La., to other locations.

A naturally occurring fracture in the salt formation above the Weeks Island storage chambers has compromised the site's structural integrity, creating an environmental threat.

The Department of Energy, which owns the SPR sites and the oil in them, said no oil has escaped from the 600 ft deep storage chambers at Weeks Island, but it is concerned that water could enter the chambers and force out the oil.

DOE began transferring the 72 milllion bbl of oil at Weeks Island last November and so far has moved 19 million bbl to its nearby Bayou Choctaw site or to the Big Hill storage site near Beaumont, Tex.

After the Weeks Island site is emptied during the next 2-3 years, the caverns will be filled with brine to reduce surface subsidence.

The sale

DOE said the Weeks Island sale likely will last 1-3 months and raise as much as $100 million. DOE proposed the sale as an alternative to additional congressional appropriations because federal spending is being cut by deficit reduction efforts. A 7 million bbl sale would leave 585 million bbl of oil in the SPR.

DOE said DFSC is conducting the sale "because its extensive expertise in the oil market provides a basis for sound judgments as to when market conditions are most advantageous for a sale."

DFSC will offer the entire 7 million bbl for purchase with bids being opened at 1-2 week intervals. Depending on bid prices, DFSC will sell all, part, or perhaps none of the oil following each bid offering.

The bid process will remain open until the necessary funds are obtained or until the 7 million bbl are sold.

Delivery of the oil is expected to take place during several months. DOE will deliver the crude to designated points for pipeline or tanker transport.