Feds to Offer 77MM Barrels of Oil Storage to Producers | Rigzone
The U.S. Department of Energy (DOE) reported Thursday that it will make storage capacity in the federal Strategic Petroleum Reserve (SPR) available to struggling U.S. oil producers.
DOE stated that it has issued a solicitation to immediately make 30 million barrels of SPR oil storage capacity available to producers and subsequently make another 47 million barrels of capacity available thereafter. The agency noted that President Trump has directed the DOE secretary to fill the SPR to its maximum capacity.
“Filing the SPR with crude oil, produced by American companies that are facing catastrophic losses and increasingly financial hardship, is a logical action for the federal government to take as we work to overcome the economic disruptions caused by COVID-19 and intentional, global oil market disruptions,” remarked U.S. Energy Secretary Dan Brouillette in a written statement.
According to DOE’s website, total authorized SPR capacity is 713.5 million barrels. A DOE report states that SPR inventory totaled 635 million barrels of crude – stored in four salt caverns along the Gulf Coast – as of March 27, 2020.
“The Department continues to work with Congress to find ways to make funding available for DOE to buy American oil,” Brouillette stated. “However, we must move with a sense of urgency to support an industry that underpins the U.S. economy and supports our national security. Making some of the SPR’s storage capacity available to industry, without purchasing the oil, provides this immediate benefit to the industry and its hard-working employees.”
As a Bloomberg article posted to Rigzone on Thursday notes, the increasingly tight oil storage situation has prompted some North American producers, refiners and traders to contemplate leasing rail cars for storage. Moreover, the increasingly dire storage challenge is not limited to North American producers.
“We expect the first crude oil deliveries to arrive in late-April or early May depending on producer logistics,” noted Steven Winberg, assistant secretary for DOE’s Office of Fossil Energy, which manages the SPR. “The SPR will be ready to receive up to 685,000 barrels per day. With its extensive storage, pipeline and marine infrastructure along the Gulf Coast, the SPR will help relieve oil-related disruptions to our economy.”
An American Petroleum Institute (API) official applauded the Trump administration’s SPR action.
“As American energy producers navigate uncertain market conditions, we welcome the Administration’s announcement that they will make millions of barrels of SPR’s oil storage capacity available for private leasing and look forward to reviewing the details of the solicitation,” Frank Macchiarola, API’s senior vice president of policy, economics and regulatory affairs, told Rigzone at midday Friday. “Congress gave the President and the Department of Energy broad authority to manage the SPR and DOE has historically leased SPR capacity to the private sector.”
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