DOE - Fossil Energy Techline - Issued on:  March 8, 1996

DOE Okays Second Awards for Sale of Oil From Weeks Island Strategic Reserve Site


Washington, DC - The U.S. Department of Energy (DOE) has authorized two more sales contracts for crude oil from its Weeks Island Strategic Petroleum Reserve site, bringing in an additional $27.5 million to help pay for the decommissioning of the site.

On Friday, March 8, the Department gave its sales agent, the Defense Fuel Supply Center, approval to sell about 1.5 million barrels of crude oil to:

  • Marathon Oil Co. of Houston which will buy three batches of crude totaling 720,000 barrels; and

  • Phibro Energy U.S.A., Inc, of Houston which will buy three batches totaling 775,000 barrels.

The contracts bring to $53.57 million the total amount of revenue received by the Energy Department from the sale of Weeks Island crude oil. Last month Phibro Energy bought 1.45 million barrels of the crude oil for $26.05 million (press announcement).

The Energy Department wants to sell up to $100 million worth of Strategic Petroleum Reserve crude oil to pay for the Weeks Island decommissioning and other upgrades to the nation's emergency oil stockpile. The Weeks Island site is no longer suitable to store oil due to geologic problems in the salt formation above the 600-foot deep storage chambers.

As in last month's sale, the crude oil is being bought in batches. The contracts are for the following bid prices and delivery terms:

Company

Quantity (bbls)

Price ($/bbl)

Total

Delivery

Marathon Oil

240,000

$18.65

$4,476,000

April - Pipeline

 

240,000

$18.50

$4,440,000

Mar/Apr - Pipeline

 

240,000

$18.30

$4,392,000

Mar/Apr - Pipeline

Phibro U.S.A

150,000

$18.50

$2,775,000

Mar/Apr - Pipeline

 

475,000

$18.35

$8,716,250

Mar/Apr - Tanker

 

150,000

$18.15

$2,722,500

Mar/Apr - Pipeline

Total

1,495,000

 

$27,521,750

 

Meanwhile, the Department continues to transfer oil out of the Weeks Island site. Since November, the Department has removed more than 27 million barrels of the original 72 million barrels of oil stored at Weeks Island. The agency is currently transferring nearly 220,000 barrels per day to other storage sites in the Strategic Reserve complex.

The sale of a small portion of crude oil from the Weeks Island site -- the total is expected to be 7 million barrels or less -- will raise sufficient funds for the corrective actions without adding to the Federal budget deficit.

The Defense Fuel Supply Center is the oil purchasing arm of the Department of Defense and is acting as the Energy Department's agent in this non-emergency sale of crude oil. In the event of an energy emergency requiring oil to be drawn from the Strategic Petroleum Reserve, the Energy Department would handle the sales process directly.

Since the sales process began, market bids for Weeks Island oil have been evaluated at two-week intervals. The next bid cycle would normally close on March 18, however, the Energy Department's authority to carry out the sales is effective only until March 15 when the current "stopgap" spending bill is due to expire. Should Congress pass further spending measures and renew the authority to sell Weeks Island oil, the sales process would be resumed.

-End of TechLine-