Issued on: May 10, 2007
SPR Awards Exchange Contract to Shell Trading
Deliveries to Begin in August
Washington, DC - The U.S. Department of Energy (DOE) today awarded a contract to Shell Trading for exchange of 8.7 million barrels of royalty oil produced from the Gulf Coast for crude oil meeting the quality specifications of the Strategic Petroleum Reserve (SPR). The exchange oil will be delivered to two SPR sites, West Hackberry, Louisiana and Bryan Mound, Texas.
The offer submitted by Shell Trading represented the highest value of specification-grade oil for the Reserve. Deliveries are expected to begin in August 2007 at a modest rate of approximately 50,000 barrels per day for a period of six months.
The contract terms apply royalty-in-kind exchange provisions that require the contractor to take delivery of oil owed to the U.S. Government from offshore Gulf Coast locations and deliver a volume of crude oil to the SPR. That volume is adjusted for transportation and quality differentials that meet the SPR's quality specifications. This action is taken in accordance with the provisions of the Energy Policy Act of 2005, which directs that the SPR fill to its authorized size of one billion barrels.
The RIK program is managed by the Department of Interior's Minerals Management Service and represents a means of filling the reserve in a deliberate and cost-effective manner. The RIK exchange program does not involve cash payment, but rather an exchange of product already owned by the Government.
The RIK program is separate from the SPR's recent solicitations to purchase crude to replace oil sold on an emergency basis after Hurricane Katrina. Earlier this month, DOE suspended direct purchases of oil for the SPR until at least the end of the summer driving season.
The Strategic Petroleum Reserve has a capacity of 727 million barrels and currently holds 690 million barrels in inventory stored in the SPR's underground salt caverns located along the Gulf Coast of Louisiana and Texas.
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