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Techlines provide updates of specific interest to the fossil fuel community. Some Techlines may be issued by the Department of Energy Office of Public Affairs as agency news announcements.
Issued on:  March 31, 1999

First Contracts Signed for Royalty Oil Transfer to Strategic Petroleum Reserve

Richardson Says Fast Actions Signal Commitment To Make Energy Security Initiative Succeed

The first contracts to add federal royalty oil to the nation's Strategic Petroleum Reserve were signed today, opening the way for oil to begin moving into the Reserve by early May.

Energy Secretary Bill Richardson announced that the Departments of Energy (DOE) and Interior (DOI) have completed arrangements with three of the largest producers in the Central Gulf of Mexico - Texaco, Shell, and BP-Amoco - to begin transferring approximately 38,600 barrels per day of royalty crude oil to the federal government's emergency oil stockpile.

During the 3-month terms of the contracts, the companies will deliver nearly 3.5 million barrels of oil to the Strategic Petroleum Reserve's Bayou Choctaw site in Louisiana. The oil represents an adjusted amount provided as payment of royalties due on oil produced from leases on the federally-owned Outer Continental Shelf. Shell and Texaco were represented in the negotiations by Equiva Trading Company.

This is the initial phase of a program announced by Secretary Richardson and Interior Secretary Bruce Babbitt in February (Feb. 11 announcement) to take 28 million barrels of crude oil royalties paid in-kind to help fill the Strategic Petroleum Reserve.

"We wanted to get the royalty oil initiative off to a fast start - both for the American taxpayer and for our nation's energy security," Secretary Richardson said. "By moving quickly with these first contracts, we can get oil flowing into our Reserve and show other producers that this is a high-priority program that can succeed."

DOI Acting Assistant Secretary for Land and Minerals Management, Sylvia Baca added, "We are very pleased at the success of this first phase. The joint DOE/DOI team did a great job putting this program together quickly and effectively so we can add to the Strategic Petroleum Reserve while oil prices are relatively low."

In this initial phase of the initiative, the DOE/DOI team negotiated with some of the largest companies to arrange for the most amount of oil in the shortest time.

The second phase will use a competitive bid process, scheduled to begin in May, with deliveries planned to begin on August 1. In the second phase, the program will be expanded to take the maximum feasible volume and open the program up to potentially all of the approximately 140 companies holding leases in the Federal waters of the Gulf of Mexico.

The 3.5 million barrels to be received under today's contracts represent an adjusted amount negotiated with the companies to account for location or transportation expenses from the Federal lease and for quality differences. Much of the oil the companies have agreed to deliver will be of higher quality than the oil actually produced from the offshore tracts. The higher grade of crude oil will enhance the Reserve's capability to supply lighter, low-sulfur crude oil to a variety of refineries in the event of an energy disruption.

The Reserve currently holds 561 million barrels of crude oil in underground sites along the Texas and Louisiana coastline.

-End of TechLine-

For more information, contact:
Robert C. Porter, DOE Office of Fossil Energy, 202-586-6503 e-mail: robert.porter@hq.doe.gov
JoAnn Rochon, DOE Strategic Petroleum Reserve - New Orleans , 504-734-4731

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Page updated on: March 30, 2004 

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