SPR To Resume Royalty-in-Kind Fill Program

Solicitation to Exchange Royalty Oil From Offshore U.S. Leases

Washington, DC - The U.S. Department of Energy has issued a solicitation seeking contracts to exchange up to 9 million barrels of royalty oil from Federal leases in the Gulf of Mexico for crude oil that meets the specifications of the Strategic Petroleum Reserve (SPR).  Bids are due by May 8, 2007.

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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, and advances the President's agenda to increase the Nation's energy security.  It allows for a modest fill rate of approximately 50,000 barrels per day for a period of six months.  The royalty-in-kind contracts will begin July 1, 2007, and deliveries of crude oil will begin in August 2007. 

Under the royalty-in-kind exchange program, crude oil producers deliver royalty oil owed to the U.S. Department of the Interior to market centers along the Gulf Coast.  Ownership of the oil is transferred from the Department of the Interior to the Department of Energy.  Contractors are required to take the full contracted amount from the market centers and deliver exchange oil to the SPR.  Actual volumes delivered to the SPR take into account adjustments for transportation and quality differences.

In addition, the Department of Energy will continue to periodically solicit bids, as it did last month, to purchase and replace the nearly 11 million barrels of oil sold in the aftermath of Hurricane Katrina.  The solicitations over the next several months will be staggered so as not to substantially affect the market price.  The Strategic Petroleum Reserve will use the proceeds from the Hurricane Katrina emergency sale totaling $584 million to complete the purchases.

The Strategic Petroleum Reserve has a capacity of 727 million barrels, and currently holds 689 million barrels in inventory. 

-End of Techline

For more information, contact: John Grasser, FE Office of Communications, 202-586-6503