New Contracts Awarded for Planned Spring Acceleration of Oil Fill for Strategic Petroleum Reserve

ChevronTexaco, Shell, Exxon Mobil Submit Best Offers

New Orleans, LA - The U.S. Department of Energy has awarded three new crude oil delivery contracts in preparation for accelerating fill of the Strategic Petroleum Reserve this spring.

Chevron Texaco Global Trading, Houston; Shell Trading (US) Company, Houston; and Exxon Mobil Oil Corporation, Fairfax, VA, submitted the best offers and were awarded six-month contracts to begin delivering approximately 116,000 barrels per day of crude oil to the government's emergency stockpile in May.

As with all recent oil delivery contracts to the Reserve, the crude oil will come from exchange arrangements the companies make for "Royalty in Kind"" crude produced from federal offshore leases in the Gulf of Mexico.

In a separate action scheduled to begin in April, the Energy Department also plans to begin receiving approximately 15,000 barrels per day of crude directly from producers off the Texas coast that ship through the Hoover Offshore Pipeline System. The Department of Interior's Minerals Management Service (MMS) will instruct producers to deliver this oil directly to the Bryan Mound site near Freeport, TX, for eight months, at which point the site will reach its authorized storage capacity.

The combined shipments will boost the Strategic Petroleum Reserve's fill rate to approximately 131,000 barrels per day - the fastest since President Bush announced plans in November 2001 to fill the Reserve to its full 700-million barrel capacity using the "Royalty in Kind" program.

Under the "Royalty in Kind" program, MMS contracts with offshore operators to deliver royalty oil owed to the U.S. government to designated "market centers" along the Gulf Coast. Companies receiving contracts from the Energy Department take possession of the offshore oil at the "market centers" and provide oil that meets the Strategic Reserve's specifications. As in past competitions, the department awarded contracts to companies offering the highest exchange value of specification-grade oil for the Reserve.

When President Bush announced his intent to fill the Reserve using the "Royalty-in-Kind" program, the Energy Department and MMS initially began contracting for deliveries of 60,000 barrels per day. Last October, the rate was increased to 100,000 barrels per day. Since December, with the U.S. oil market tightening due to the drop off in Venezuelan crude, the department deferred delivery of oil bound for the Reserve in December 2002 through March 2003. That oil is now slated to arrive at the Reserve later this year and early in 2004.

The Strategic Reserve currently has 599 million barrels stored in its underground salt caverns along the Texas and Louisiana Gulf Coast.

- End of Techline-

For more information, contact:
Robert Porter, DOE Office of Fossil Energy, 202-586-6503, or
JoAnn Rochon, DOE SPR-Project Management Office, 504-734-4731