Seaway to lease SPR crude for 30 in. line fill

The U.S. Department of Energy has agreed to lease Seaway Pipe Line Co. as much as 1 million bbl of sweet crude from the Strategic Petroleum Reserve to help fill a 30 in. Seaway pipeline.

Coincidentally, Seaway was recommissioning a 30 in., 270,000 b/d crude line from Freeport, Tex., to a terminal at Cushing, Okla., when a parallel 20 in., 160,000 b/d line from Texas City to Cushing became blocked.

The smaller line was blocked between Galena Park and Teague, Tex., while moving waxy Nigerian crude with a high pour point. A spokesman said the cause of the blockage was not known. Seaway injected nitrogen to push 600,000 b/d north of the blocked site to Cushing.

Seaway needed to fill the 30 in. line with about 2.5 million bbl of crude. It approached DOE to borrow up to 1 million bbl from the Bryan Mound SPR site near Freeport, Tex.

The Seaway lines to Cushing can supply crude to 32 major refineries in Texas, Oklahoma, Kansas, Illinois, Indiana, Ohio, Michigan, and Kentucky (OGJ, Apr. 29, p. 27).

Supply crucial

DOE said, "Maintaining an adequate supply of crude oil to these refineries at this time of year is especially crucial to meeting higher summer demand for gasoline and avoiding additional upward pressure on gasoline prices."

Seaway must replace the crude it uses with an equivalent grade within 6 months. It will pay a 20/bbl/month fee, or the amount that crude grade has dropped on world markets, whichever is higher.

DOE said, "The temporary arrangement will not interfere with the use of the SPR should an emergency drawdown be necessary during the lease term."

Karen Caldwell, president of ARCO Seaway Inc., said, "This is a good example of how the government can work with industry to meet the needs of consumers. This can result in earlier deliveries to refineries in the Midwest in time for rising summer demand. It is the right thing to do in this volatile market.

"We fully expect to have both lines operational in the near future, but access to this additional source of crude oil to Seaway reinforces a vital link in the supply system and demonstrates the government's ability to respond to the nation's needs."

A spokesman said crude should arrive through the 30 in. line at Cushing about May 16-20.

ARCO Pipe Line Co. operates Seaway, a venture of ARCO Inc. and Phillips Petroleum Co.