NEWS MEDIA CONTACT:
John Donnelly (Washington), 202/586-5806 FOR IMMEDIATE RELEASE
Mike Farley (New Orleans), 615/576-4374 April 3, 1991
ENERGY DEPARTMENT COMPLETES FIRST EMERGENCY SALE OF
17.3 MILLION BARRELS OF STRATEGIC RESERVE CRUDE OIL
The Department of Energy (DOE) has successfully completed the sale of
crude oil from the Strategic Petroleum Reserve ordered by President Bush at
the start of Operation Desert Storm.
The sale was the first to be run to counter the threat of an oil supply
disruption. Two sales were previously held under controlled test conditions.
On January 16, President Bush directed Secretary of Energy James D. Watkins
to begin releasing government owned oil stocks as part of an international effort
to minimize world oil market disruptions caused by Middle East hostilities.
Admiral Watkins immediately ordered the department to implement a drawdown of
33.75 million barrels of oil. In response to a notice of sale, DOE received
bids for nearly 45 million barrels of oil from 26 companies. After reviewing
the bids, DOE reduced the sales volume to 17.3 million barrels and adjusted
the types of oil offered to more accurately reflect the industry's needs.
On January 30, DOE selected bids from 13 companies for a total volume of
17.3 million barrels -- 14.35 million barrels of sweet (or low sulfur) crude and
2.95 million barrels of sour (or high sulfur) crude. The first delivery was made
to Crown Petroleum on February 5, just four days after that company's contract was
awarded. Because the oil industry typically schedules crude shipments on monthly
cycles, most of the Strategic Reserve crude was delivered to buyers during the
month of March. On March 31, the final delivery of 250,000 barrels of Bayou Choctaw
sweet oil was delivered to Phibro Energy Inc. through the Capline Terminal at
St. James, Louisiana.
Admiral Watkins said, "I am extremely pleased with the way the department,
in conjunction with the International Energy Agency, responded to a critical
international situation. We have sent an important message to the American people
that their $20 billion investment in an emergency supply of crude oil has produced
a system that can respond rapidly and effectively to the threat of an energy
disruption."
The 17.3 million barrels of crude oil sold were drawn from nearly 590 million
barrels stockpiled by the Department of Energy in the Strategic Petroleum Reserve.
The oil is stored in underground salt caverns along the Gulf of Mexico coastline which
are linked to terminals and docks that move crude oil into the nation's commercial
oil distribution system.
During the delivery phase of the drawdown, 67 separate shipments of crude oil
were made from three of the reserve's six storage sites along the Gulf of Mexico
coast.
Although actual payments will require a few more days to complete, the
average purchase price of the oil will likely be about $16.90 for sour
(or higher sulfur) crude to $18.60 for sweet (or low sulfur) crude. These
prices are about 33 percent below the average winning bid prices, due to
adjustments under a price indexing system DOE used to track changes in the
market price of various crude oils.
Approximately 9.8 million barrels of the 17.3 million barrels were
shipped by pipeline. Of the remaining 7.5 million barrels, about 7.1 million
were moved by tanker and 360,000 by barge.
The Energy Department will include a summary of the drawdown in its
May 1991 Quarterly Report for the Strategic Petroleum Reserve.
- DOE -
R-91-070
