Strategic_Petroleum_Reserve

Strategic Petroleum Reserve

This article refers to the United States Strategic Petroleum Reserve. For other countries see global strategic petroleum reserves

The Strategic Petroleum Reserve (SPR) is an emergency fuel store of petroleum maintained by the United States Department of Energy.

The US SPR is the largest emergency supply in the world with the current capacity to hold up to of crude oil. The second largest emergency supply of petroleum is Japan's with a 2003 reported capacity of .

The current inventory is displayed on the SPR's website As of July 15, 2008, the current inventory was . This equates to 33 days of oil at current daily US consumption levels of 21 million barrels a day. At current market prices ($121 a barrel) the SPR holds over $34.3 billion in sweet crude and approximately $51.2 billion in sour crude (assuming a $15/barrel discount for sulphur content). The total value of the crude in the SPR is approximately $85.5 billion USD. The price paid for the oil is $20.1 billion (an average of $28.42 per barrel).

On May 13, 2008, the United States Senate and House of Representatives voted nearly unanimously to temporarily suspend the 70,000 barrel per day shipment of petroleum to the nation's emergency reserve. A temporary halt to SPR stockpiling is hoped to increase oil supplies and thereby reduce the cost of oil, although analysts are divided on whether it will have a meaningful effect to consumers. Shipments to the Strategic Oil Reserve would resume at the end of 2008. On May 16, 2008, the Department of Energy announced it was canceling oil shipments into the SPR beginning in July 2008 when the current purchase contract expires. On May 19, 2008, the White House signaled President Bush's intent to sign the legislation passed by the Congress.

The United States started the petroleum reserve in 1975 after oil supplies were cut off during the 1973-74 oil embargo, to mitigate future temporary supply disruptions for example fallout with Relations dealing in oil or World War. According to the World Factbook, the United States imports a net of oil a day (MMbd), so the SPR holds about a 58-day supply. However, the maximum total withdrawal capability from the SPR is only per day, making it a 160 + day supply.

Facilities

The SPR management office is located in New Orleans, Louisiana.

The reserve is stored at four sites on the Gulf of Mexico, each located near a major center of petrochemical refining and processing. Each site contains a number of artificial caverns created in salt domes below the surface.

Individual caverns within a site can be up to 1000 m below the surface, average dimensions are 60 m wide and 600 m deep, and capacity ranges from 6 to 37 million barrels (1 to 4.3 million m³). Almost $4 billion was spent on the facilities. The decision to store in caverns was taken to reduce costs; the Dept. of Energy claims it is roughly 10 times cheaper to store oil below surface with the added advantages of no leaks and a constant natural churn of the oil due to a temperature gradient in the caverns. The caverns were created by drilling down and then dissolving the salt with water.

Existing

  • Bryan Mound - Freeport, Texas. 20 caverns with a storage capacity of with a drawdown capacity of per day..
  • Big Hill - Winnie, Texas. Has a capacity of with a drawdown capacity of per day. This facility is planned to be expand by with a new drawdown capacity of per day.
  • West Hackberry - Lake Charles, Louisiana. Has a capacity of with a drawdown capacity of per day.
  • Bayou Choctaw - Baton Rouge, Louisiana. Has a capacity of with a maximum drawdown rate of . This facility is planned to be expand to with a new drawdown capacity of per day.

Future

  • Richton, Mississippi. This facility, if built as planned, will have a capacity of with a drawdown capacity of per day. In February 2007, Secretary of the Energy Department Samuel Bodman announced the creation of this site. This new site is currently facing some opposition.

Retired

  • Weeks Island - Iberia Parish, Louisiana (Decommissioned 1999) Capacity of . This facility was a conventional room and pillar near-surface salt mine, formerly owned by Morton Salt. In 1993, a sinkhole formed on the site, allowing fresh water to intrude into the mine. Because of the mine's construction in salt deposits, fresh water would erode the ceiling, potentially causing the structure to fail. The mine was backfilled with salt-saturated brine. This process, which allowed for recovery of 98% of the petroleum stored in the facility, reduced the risk of further freshwater intrusion, and helped prevent the remaining oil from leaking into the aquifer that is located over the salt dome.

History

Background

Access to the reserve is determined by the conditions written into the 1975 Energy Policy and Conservation Act (EPCA), primarily to counter a severe supply interruption. The maximum removal rate, by physical constraints, is . Oil could begin entering the marketplace 13 days after a Presidential order. The Dept. of Energy says that it has about 59 days of import protection in the SPR. This, combined with private sector inventory protection, is estimated to equal 115 days of imports.

The SPR was created following the 1973 energy crisis. The EPCA of December 22, 1975, made it policy for the U.S. to establish a reserve up to one billion barrels (159 million m³) of petroleum. A number of existing storage sites were acquired in 1977. Construction of the first surface facilities began in June 1977. On July 21, 1977, the first oil—approximately 412,000 barrels (66,000 m³) of Saudi Arabian light crude—was delivered to the SPR. Fill was suspended in FY 1995 to devote budget resources to refurbishing the SPR equipment and extending the life of the complex. The current SPR sites are expected to be usable until around 2025. Fill was resumed in 1999.

Filling and Suspending the SPR

On November 13, 2001, President George W. Bush announced that the SPR would be filled, saying, "The Strategic Petroleum Reserve is an important element of our Nation's energy security. To maximize long-term protection against oil supply disruptions, I am directing the Secretary of Energy to fill the SPR up to its 700 million barrel [111,000,000 m³] capacity." The highest prior level was reached in 1994 with 592 million barrels (94 million m³). At the time of President Bush's directive, the SPR contained about 545 million barrels (87 million m³). Since the directive in 2001, the capacity of the SPR increased by 27 million barrels (4.3 million m³) due to natural enlargement of the salt caverns in which the reserves are stored. The Energy Policy Act of 2005 has since directed the Secretary of Energy to fill the SPR to the full 1 billion barrel authorized capacity, a process which will require a physical expansion of the Reserve's facilities.

On August 17, 2005, the SPR reached its goal of 700 million barrels (111,000,000 m³), or about 96% of its now-increased capacity. Approximately 60% of the crude oil in the reserve is the less desirable sour (high sulfur content) variety. The oil delivered to the reserve is "royalty-in-kind" oil—royalties owed to the U.S. government by operators who acquire leases on the federally owned Outer Continental Shelf in the Gulf of Mexico. These royalties were previously collected as cash, but in 1998 the government began testing the effectiveness of collecting royalties "in kind" - or in other words, acquiring the crude oil itself. This mechanism was adopted when refilling the SPR began, and once filling is completed, revenues from the sale of future royalties will be paid into the Federal treasury.

On April 25, 2006, President Bush announced a temporary halt to petroleum deposits to the SPR as part of a four point program to alleviate high fuel prices.

On January 23, 2007, President George W. Bush suggested in his State of the Union speech that Congress should approve expansion of the current reserve capacity to twice its current level.

In April 2008, Speaker Pelosi called on President Bush to suspend purchases of oil for the Strategic Petroleum Reserve (SPR) temporarily.

On May 12, 2008, Rep. Peter Welch (D, VT-0) and 63 Co-Sponsors introduce the Strategic Petroleum Reserve Fill Suspension and Consumer Protection Act bill (House Resolution 6022), to suspend the acquisition of petroleum for the Strategic Petroleum Reserve .

On May 16, 2008, The U.S. Department of Energy said it will halt all deliveries to the Strategic Petroleum Reserve sometime in July. This announcement came days after Congress voted to direct the Bush administration to do the same. The U.S. Department of Energy did not state when the shipments would resume .

On May 19, 2008, the President Bush signed the Act passed by the Congress, which he previously opposed. So, the bill has become law

Emergency sales to Israel

According to the 1975 Second Sinai withdrawal document signed by the United States and Israel, in an emergency the U.S. is obligated to make oil available for sale to Israel for up to 5 years.

Limitations

The Strategic Petroleum Reserve is exclusively a crude petroleum reserve, not a stockpile of refined petroleum fuels, such as gasoline, diesel and kerosene, nor vegoil or biofuels. Although there are small-scale (2 million barrels) heating oil reserves in Connecticut, Rhode Island and New Jersey under the aegis of the Department of Energy (DOE), the Federal government maintains no gasoline reserves on anything like the scale of the SPR. Consequently, while the US enjoys some protection from disruptions in oil supplies, it would have to depend on other stockpiling members of the International Energy Agency for relief from any major disruption to refinery operations. Since no new refineries have been constructed in the US for thirty years, there is little reserve capacity. This was illustrated during Hurricane Katrina, when many of the Gulf coast oil refining complexes were disrupted for some time.

There have been suggestions that the DOE should stockpile both gasoline and jet fuel, to rectify this weakness. Some countries and zones, such as Australia, have a strategic reserve of both petroleum and petroleum products.. In some cases, this includes a strategic reserve of jet fuel.

The Secretary of Energy, Samuel Bodman, has said the Department will consider refined products as part of the expansion of between 1 billion and .

SPR drawdowns

Petroleum sales

  • 1985 - Test sale - 1.1 million barrels (175,000 m³)
  • 1990/91 - Desert Storm sale - 21 million barrels (3.3 million m³)
    • 4 million in August 1990 test sale
    • 17 million in January 1991 Presidentially-ordered drawdown
  • 1996-97 total non-emergency sales for deficit reduction - 28 million barrels (4.5 million m³)
  • 2005 - Hurricane Katrina sale - 11 million barrels (1.7 million m³) Katrina shut down 95% of crude production and 88% of natural gas output in the Gulf of Mexico. This amounted to a quarter of total U.S. output. About 735 oil and natural gas rigs and platforms had been evacuated due to the hurricane.

Petroleum exchanges and loans

Note: Loans are made on a case-by-case basis to alleviate supply disruptions. Once conditions return to normal, the loan is returned to the SPR with additional oil as interest.

  • April-May 1996 - lent to ARCO to alleviate pipeline blockage.
  • August 1998 - lent to PEMEX in return for of higher quality crude.
  • June 2000 - lent to Citgo and Conoco in response to shipping channel blockage.
  • July-August 2000 - to supply the Northeast Home Heating Oil Reserve.
  • September-October 2000 - in response to a concern over low distillate levels in the North-eastern U.S.
  • October 2002 - lent to Shell Pipeline Company in advance of Hurricane Lili.
  • September-October 2004 - lent to Astra Oil, ConocoPhillips, Placid Refining, Shell Oil Company, and Premcor after Hurricane Ivan.
  • September-October 2005 - lent to ExxonMobil, Placid Refining, Valero, BP, Marathon Oil, and Total S.A. after Hurricane Katrina.
  • January-February 2006 -767 thousand barrels lent to Total Petrochemicals USA due to closure of the Sabine Neches ship channel to deep-draft vessels after a barge accident in the channel.
  • June 2006 - of sour crude lent to ConocoPhillips and Citgo due to the closure for several days of the Calcasieu Ship Channel caused by the release of a mixture of storm water and oil. Repaid in early October 2006.
  • September 2008 - loaned to Citgo because it could not secure crude oil in the aftermath of Hurricane Gustav.
  • September 2008 - loaned to Placid Refining's Port Allen refinery and loaned to Marathon Oil due to disruptions from Hurricane Gustav.

See also

References

External links

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