NEWS MEDIA CONTACT: FOR IMMEDIATE RELEASE
Phil Kief, 202/586-5806 January 17, 1990
DOE ISSUES SALES NOTICE FOR STRATEGIC RESERVE DRAWDOWN
The Department of Energy took the next step today to move more than
33 million barrels of supplemental crude oil into the U.S. market from
the Strategic Petroleum Reserve. Less than 12 hours after receiving
authorization from President Bush, the department issues a "notice of sale"
and formally began inviting prospective buyers to submit bids for the
government-owned crude oil.
The action is one of several precautionary efforts being taken
jointly by the U.S. and its allies to counter any possible disturbance in
oil supplies caused by the outbreak of Middle East hostilities.
Today's issuance of a "notice of sale" for Strategic Petroleum Reserve
oil sets into motion a rapid process for receiving bids, choosing successful
purchasers and beginning arrangements for delivery of government stockpiled
crude oil to pipeline terminals and vessels.
"The Strategic Reserve sales and delivery process is an orderly,
well-thought-out and tested sequence of steps that ensures that large
quantities of crude oil can be moved to market quickly and efficiently,"
Energy Secretary James D. Watkins said. "As our recent test sale showed, the
entire bid process -- from offering the oil to first contracts -- can be run
in just over two weeks."
"We can begin to deliver oil to the market in less than half the time
that it takes for a tanker from the Gulf to reach the United States," Watkins
added.
The Energy Department tested the Strategic Reserve's sales and distribution
process last October and November in an exercise conducted. with industry. This
test proceeded virtually flawlessly and increased industry's familiarity with the
drawdown and delivery process.
Bidders must turn in their offers to the Energy Department's Strategic
Petroleum Reserve Project Management Office in New Orleans, Louisiana, by
4 p.m. local time, January 25, 1991.
The first oil could be moved from the Reserve's Gulf coast storage caverns
into U.S. markets within the next 15 to 16 days. However, because the oil industry
normally schedules shipments on or around the 25th of each month, the bulk of the
sales contracts likely will call for delivery in late February and throughout March.
Any firm, organization or individual can submit an offer, although the Energy
Department will review the bids to assure that only responsible bidders are
considered. The department will not accept unreasonably priced offers.
Crude oil will be sold to the highest bidders that meet the department's
sales terms.
All of the crude oil to be sold will be light crude, suitable for virtually
any U.S. refinery. Approximately 11.25 million barrels will be "sweet" crude oil,
meaning that it has a relatively low sulfur content. The other 22.50 million
barrels will be a higher sulfur, or "sour," crude comparable to the majority of
petroleum imported by the U.S.
According to today's notice of sale, the department will offer oil from
four of its six storage sites:
- 3 million barrels of sweet crude and 8.25 million barrels of sour crude
oil from its Bryan Mound site near Texas City, Texas;
- 6 million barrels of sweet crude oil and 5.25 million barrels of sour
crude oil from its West Hackberry site near Lake Charles, Louisiana;
- 2.25 million barrels of sweet crude oil and 2.25 million barrels of
sour crude oil from its Bayou Choctaw site near Baton Rouge, and
6.75 barrels of sour crude oil from the Weeks Island site southwest of
New Orleans.
The Big Hill site near Beaumont, Texas, is just beginning to be filled and
will not be activated for the drawdown. A decision on the use of the Sulphur
Mines site, near Lake Charles, Louisiana, will be made later. Should the site
be used, its inventory will be sold as part of the sour crude oil stream from
West Hackberry.
The minimum amount of each type of crude oil that can be purchased by each
offeror will be 200,000 barrels if delivery is to a tanker, 120,000 barrels if
to a barge, and 200,000 barrels if the oil is to be transported by pipeline.
Each offeror will be required to submit an "offer guarantee" in the form
of a certified or cashier's check, a wire cash deposit, or a letter of credit
amounting to 5 percent of the total offer or $10 million, whichever is less.
The Energy Department published "standard sales provisions" in the Federal
Register on June 3, 1988, that will govern the process used to sell and
distribute the Reserve's crude oil.
- DOE -
R-91-010
