NEWS MEDIA CONTACT: FOR IMMEDIATE RELEASE
Phil Kief 202/586-5806 January 30, 1990
John Donnelly 202/586-5806
DOE SELECTS 13 FIRMS OFFERING BEST PRICES
FOR CRUDE OIL FROM STRATEGIC RESERVE SALE
The Department of Energy today accepted bids from the 13 companies which
offered the highest prices for crude oil from the Strategic Petroleum Reserve.
The companies will purchase 17.3 million barrels of oil from the
government-owned crude oil stockpile. The total volume is just over half the
33.75 million barrels offered by the government two weeks ago immediately
following the start of Operation Desert Storm, but the amount of sweet crude
oil being sold is greater than the amount originally offered in response to
high industry demand.
The department said its decision to sell substantially less "sour" crude
oil than was originally offered was based on the lack of industry interest in
that oil at this time, as reflected in the lower bid prices for sour crude oil.
"We clearly must remain sensitive to the market by making available the
crude oil the industry is saying it really needs, and not allowing bargain hunters
to take advantage of the taxpayers, while at the same time, fulfilling our
commitment to the International Energy Agency's energy response plan," said
Energy Secretary James D. Watkins. "To balance these objectives, I determined
that the best approach would be to select only those bids that were above
97.5 percent of benchmark prices of comparable crude oils."
Watkins said that by selecting only those bids above this threshold price,
the sale would actually yield 99 percent of the department's benchmark value
for the crude oil and ensure that the only oil sold would be at market rather
than bargain prices.
Watkins added, "This decision is fully consistent with our IEA commitment
and with the announced SPR sales procedure. The sale has worked well, and we
are on schedule."
Watkins said that the decision should not be viewed as a reduction in
the U.S.'s commitment to support the IEA's plan to make additional oil
available as a hedge against supply disruptions caused by the war in the
Middle East.
"At this past Monday's meeting, the IEA Governing Board prudently
affirmed the flexibility that member countries should have in sharpening
their energy response actions to respond to market conditions," Watkins said.
"We have used that flexibility to ensure that our sale reflects genuine
market needs while at the same time, satisfying crude oil buyers that the
government is a reliable supplier at fair market prices."
"We have been in close consultation with our international allies at
each step of this process," Watkins said, "and we will continue to work
with them until the Middle East conflict is resolved and stability is
returned to world oil markets."
The department changed the mix of crude oil to be sold. The selected
companies will purchase 14.35 million barrels of "sweet," or low sulfur
crude oil and 2.95 million barrels of "sour," or higher sulfur, crude oil.
(Both the sweet and sour crudes are "light" oils.)
Originally about one third of the oil offered was sweet crude and
two-thirds was sour crude. Industry, however, displayed a strong preference
for sweet crude with the number of bids for the sweet crude nearly doubling
those for sour crude. Also, the department said, the prices offered for
sweet crude more closely approximated its estimate of benchmark prices for
those crudes than did the bids for sour crude.
The department had indicated previously, in the notice of sale, that
it might change the crude mix after reviewing the bids.
The oil will be withdrawn from huge underground salt caverns along the
Texas and Louisiana Gulf coast that make up the $20 billion emergency oil
stockpile. The reserve currently holds more than 585 million barrels
purchased over the last 13 years as a defense against oil supply disruptions.
The selected firms are termed "apparently successful offerors" until
they have submitted payment and performance guarantees. Once the guarantees
are received, the Energy Department can begin awarding contracts and arranging
delivery schedules.
"We'll be ready to move oil out of the SPR beginning next week if any of
the offerors can arrange for early transportation," Watkins said. "However,
because U.S. industry normally schedules oil shipments near the end of each
month for the next 30 days, it is likely that most of the crude oil will be
delivered to purchasers in late February and throughout March."
The bid prices will be adjusted when final payments for the oil are made
to reflect changes in the reference price. This indexing system, which ensures
that bid prices will track market fluctuations, received strong endorsements
from industry following last fall's test sale of oil from the Strategic
Petroleum Reserve. The indexing system also protects the government from
selling at too low a price in the event market prices increase.
Were the SPR oil to be delivered under current market conditions, the
department estimated that the average sale price would be about $20.00. The
five-year average purchase price for SPR oil from 1986-1991 (includes
100 million barrels) was $17.54 per barrel.
A listing of the "apparently successful offerors" is attached.
(DOE0
R-91-019
STRATEGIC PETROLEUM RESERVE CRUDE OIL SALE
SUMMARY OF APPARENTLY SUCCESSFUL OFFERS
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NOTE: Although some line items may appear to be identical in this listing
the bids actually differ in the mode of delivery (tanker, barge or
pipeline) and desired time period for delivery of the purchased oil.
--------------------------------------------------------------------------
Bid Price
Offeror's Name/Location Desired Ouantity/Type $/bbl)*
Amoco Oil Company 200,000 bbls/Bryan Mound Sweet 27.9033
Chicago, IL 200,000 bbls/Bryan Mound Sweet 27.6533
200,000 bbls/Bryan Mound Sweet 27.4033
120,000 bbls/West Hackberry Sweet 27.9033
200,000 bbls/Bayou Choctaw Sweet 28.4033
200,000 bbls/Bayou Choctaw Sweet 28.1533
Subtotal 1,120,000 bbls
BP Oil Company 500,000 bbls/West Hackberry Sweet 27.2194
Cleveland, OH 500,000 bbls/West Hackberry Sweet 27.7194
500,000 bbls/West Hackberry Sweet 27.4194
200,000 bbls/West Hackberry Sweet 27.3194
200,000 bbls/West Hackberry Sweet 27.5694
200,000 bbls/West Hackberry Sweet 27.8194
200,000 bbls/Bayou Choctaw Sweet 27.5194
200,000 bbls/Bayou Choctaw Sweet 28.0694
200,000 bbls/Bayou Choctaw Sweet 28.5194
Subtotal 2,700,000 bbls
Conoco Inc. 120,000 bbls/West Hackberry Sweet 27.6533
Houston, TX
Subtotal 120,000 bbls
Crown Central Petroleum 200,000 bbls/Bryan Mound Sweet 28.3033
Corp. 200,000 bbls/West Hackberry Sweet 27.9033
Bellaire, TX
Subtotal 400,000 bbls
Coastal States Trading Inc. 700,000 bbls/Bryan Mound Sour 26.0793
Houston, TX 700,000 bbls/West Hackberry Sour 25.9793
Subtotal 1,400,000 bbls
Exxon Supply Company 400,000 bbls/Bryan Mound Sweet 27.6533
Houston, TX 200,000 bbls/West Hackberry Sour 25.9093
400,000 bbls/West Hackberry Sweet 27.5033
Subtotal 1,000,000 bbls
Koch Refining International 120,000 bbls/West Hackberry Sweet 27.4033
Wichita, KS
Subtotal 120,000
Lyondell Petrochemical Co. 250,000 bbls/Bryan Mound Sweet 27.4100
Houston, TX 250,000 bbls/Bryan Mound Sour 25.6650
250,000 bbls/Bryan Mound Sour 26.0650
250,000 bbls/Bryan Mound Sour 25.8650
Subtotal 1,000,000 bbls
Marathon Oil Company 200,000 bbls/Bayou Choctaw Sweet 28.1533
Findley, OH 200,000 bbls/Bayou Choctaw Sweet 27.9033
200,000 bbls/Bayou Choctaw Sweet 27.6533
200,000 bbls/Bayou Choctaw Sweet 27.4033
Subtotal 800,000 bbls
National Cooperative Refinery 200,000 bbls/Bryan Mound Sweet 27.4633
Association
McPherson, KS
Subtotal 200,000 bbls
Phibro Energy, Inc. 200,000 bbls/Bryan Mound Sour 25.9193
Greenwich, CT 400,000 bbls/Bryan Mound Sour 25.6693
500,000 bbls/West Hackberry Sweet 27.6133
480,000 bbls/West Hackberry Sweet 27.3633
500,000 bbls/West Hackberry Sweet 27.3133
480,000 bbls/West Hackberry Sweet 27.9633
480,000 bbls/West Hackberry Sweet 27.6633
480,000 bbls/West Hackberry Sweet 27.3633
500,000 bbls/Bayou Choctaw Sweet 28.3133
500,000 bbls/Bayou Choctaw Sweet 28.0133
500,000 bbls/Bayou Choctaw Sweet 28.0633
500,000 bbls/Bayou Choctaw Sweet 27.7133
500,000 bbls/Bayou Choctaw Sweet 27.7633
500,000 bbls/Bayou Choctaw Sweet 27.4133
500,000 bbls/Bayou Choctaw Sweet 27.5633
500,000 bbls/Bayou Choctaw Sweet 27.2633
Subtotal 7,520,000 bbls
Sun Refining and Marketing 400,000 bbls/West Hackberry Sweet 27.6533
Company 200,000 bbls/West Hackberry Sweet 27.5533
Philadelphia, PA 200,000 bbls/West Hackberry Sweet 27.5033
Subtotal 800,000 bbls
Texaco Trading and 120,000 bbls/West Hackberry Sweet 27.9333
Transportation Inc.
Houston, TX
Subtotal 120,000 bbls
==============================================================================
TOTAL 17,300,000 bbls
* Bid prices will be adjusted for final payment to reflect changes in market
prices determined by a price indexing system described in the press
release.
