DOE Issues Solicitation to Exchange  Strategic Petroleum Reserve Crude Oil

30 Million Barrels Slated to Move into Oil Market 

News Orleans, LA - The U.S. Department of Energy today released its call for offers to exchange up to 30 million barrels of crude oil from the Strategic Petroleum Reserve, setting into motion the process to release federally-stockpiled oil into the market to help avert possible fuel supply shortages this winter.

Last Friday, September 22, President Clinton directed the Energy Department to use the Strategic Reserve to boost supplies of oil moving to U.S. refineries. The expectation is that a temporary infusion of 30 million barrels of crude oil into the market will help bolster sagging domestic oil inventories, perhaps adding another 3 to 5 million barrels of heating oil to critically needed heating oil and other distillate stocks.

Companies have until Friday, September 29, to submit offers to exchange the crude oil for equivalent-quality oil that must be returned to the Reserve between August and November 2001. Because oil prices are expected to be lower during that period, companies must include in their bids the amount of additional oil they will agree to supply the Government.

The Energy Department will negotiate contracts with those firms that offer to return the most oil. Contracts are expected to be announced on Friday, October 6.

Under terms of the solicitation, the department has set the month of November for delivery of the oil released from the Reserve. If companies can arrange to take the crude earlier, however, the department is prepared to deliver it. After the oil is delivered, the Administration will assess the petroleum supply-demand situation and determine whether additional action is necessary.

The solicitation is being issued from the Department's New Orleans office which oversees the four sites in Texas and Louisiana where the federal government stores the emergency crude oil in deep, underground salt caverns. Currently, the Reserve has 571 million barrels in inventory, although it is using 2.8 million barrels to acquire storage capacity and stocks for a 2-million barrel Northeast heating oil reserve in another effort to prepare for the winter heating season.

The government will offer crude oil from three of its Reserve sites - the Bayou Choctaw site near Baton Rouge, LA, the West Hackberry site northwest of Lake Charles, LA, and the Bryan Mound site near Freeport, TX. The fourth site, Big Hill near Beaumont, TX, is not part of the exchange program because it is currently configured to receive incoming crude shipments from offshore producers as part of the "royalty-in-kind" program.

The government will offer both "sour" and "sweet" crude oil, the difference being the amount of sulfur contained in the oil. Sweet, or lower sulfur, crude will be offered from the West Hackberry site, while the higher sulfur sour crude will be offered from the Bryan Mound and Bayou Choctaw sites.

The government will select bids totaling up to 30 million barrels. Companies will have the option of obtaining all or some portion of the oil from either the West Hackberry or Bryan Mound sites, or a combination. Both have sufficient pumping capability to supply the entire quantity over a 30-day period. Also, as part of the 30 million barrel total, companies will be able to bid on 15 million barrels from the smaller Bayou Choctaw site which has a lower distribution capability. The minimum contract amount will be 1 million barrels.

- End of Techline -

For more information, contact:
Robert C. Porter, Office of Fossil Energy, 202-586-6503, e-mail: robert.porter@hq.doe.gov
or
John Shages, Office of Fossil Energy, 202-586-1533, e-mail: john.shages@hq.doe.gov