(SOURCE:
http://www.fossil.energy.gov/programs/reserves/spr/spr-facts.html )
The Strategic Petroleum Reserve is a U.S. Government complex of four sites with deep underground storage caverns created in salt domes along the Texas and Louisiana Gulf Coast that store emergency supplies of crude oil.
Inventory
- Current inventory: Click to open inventory update window
- Highest inventory - On April 2, 2008, the SPR inventory exceeded 700 million barrels, the highest level ever previously held. The former record was reached in late August 2005, just days before Hurricane Katrina hit the Gulf Coast, causing the SPR to conduct emergency releases. Repayment of the Katrina loans and resumption of the RIK program (in 2007) has restored the inventory to its former level and beyond.
- Current storage capacity - 727 million barrels
- Current days of import protection in SPR - 58 days (Maximum days of import protection in SPR - 118 days in 1985)
- International Energy Agency requirement - 90 days of import protection (both public and private stocks)
(SPR and private company import protection - approximately 118 days) - Average price paid for oil in the Reserve - $28.42 per barrel
Drawdown Capability
- Maximum drawdown capability - 4.4 million barrels per day
- Time for oil to enter U.S. market - 13 days from Presidential decision
Past Sales [click on link for more details]
- 2005 Hurricane Katrina Sale - 11 million barrels
- 1996-97 total non-emergency sales - 28 million barrels
- 1990/91 Desert Shield/Storm Sale - 21 million barrels
(4 million in August 1990 test sale; 17 million in January 1991 Presidentially-ordered drawdown) - 1985 - Test Sale - 1.1 million barrels
Past Exchanges [click on link for more details]
- June 2006 - exchanged 750 thousand barrels of sour crude with ConocoPhillips and Citgo due to the closure for several days of the Calcasieu Ship Channel to maritime traffic. The closure resulted from the release of a mixture of storm water and oil. Action was taken to avert temporary shutdown of both refineries.
- January 2006 - exchanged 767 thousand barrels of sour crude with Total Petrochemicals USA due to closure of the Sabine Neches ship channel to deep-draft vessels after a barge accident in the channel. Action was taken to avert temporary shutdown of the refinery.
- Sep/Oct 2005- exchanged 9.8 million barrels of sweet and sour crude due to disruptions in Gulf of Mexico production and damage to terminals, pipelines and refineries caused by Hurricane Katrina.
- Sep/Nov 2004 - exchanged 5.4 milliion barrels of sweet crude due to disruptions in the Gulf of Mexico caused by Hurricane Ivan.
- Sep/Oct 2004 - exchanged 5.4 million barrels in response to physical shortages of crude oil supplies in the Gulf of Mexico following Hurricane Ivan.
- Oct 2002 - exchanged 296,000 barrels with Shell Pipeline Co. to secure Capline storage tanks in advance of Hurricane Lili.
- Sep/Oct 2000 - exchanged 30 million barrels in response to concern over low distillate levels in Northeast.
- July/August 2000 - exchanged 2.8 million barrels of crude oil for 1st-year tank storage and stocks for 2 million barrel Northeast Home Heating Oil Reserve.
- June 2000 - exchanged 500,000 barrels each with CITGO and Conoco, due to blockage of the ship channel that allowed incoming crude oil shipments to those refineries. Action taken in order to avert temporary shutdown of both refineries.
- August 1998 - exchanged 11 million barrels of lower quality Maya crude in SPR with PEMEX for 8.5 million of higher quality crude (more suitable for U.S. refineries)
- April/May 1996 - exchanged 900,000 barrels of SPR crude with ARCO to resolve company's pipeline blockage problem.
Financial
- Investment to date - About $22 billion ($5 billion for facilities; $17 billion for crude oil)
Frequently Asked Questions
Question: When will President Bush's 2001 fill initiative be completed?
Answer: The President's November 2001 directive to fill the SPR to 700 million barrels at a moderate rate using royalty-in-kind crude oil from U.S. Outer Continental Shelf leases was completed on August 27, 2005. However, Hurricane Katrina hit the region on August 29, 2005 and the resulting emergency loans of 9.8 million barrels and sale of 11 million barrels reduced the inventory to about 680 million barrels.
The SPR's 700-million barrel milestone was again reached on April 2, 2008, using a combination of repayments of the Katrina loaned volumes plus accompanying premium barrels and resumption of the royalty-in-kind transfer program in 2007.
Of the Katrina loans and associated premium barrels, 4.2 million barrels were repaid during October and November 2005, an additional 4.4 million barrels were repaid between February and May 2006, and the remaining 1.7 million barrels owed were repaid in April and May 2007. The 11 million barrels of oil sold were replaced through royalty-in-kind transfers.
Subsequent to the 2001 directive, the Energy Policy Act of 2005 directed the fill of the SPR to one billion barrels and the SPR is currently acquiring oil to reach its physical capacity of 727 million barrels using royalty-in-kind transfers.
Question: What are royalty-in-kind transfers?
Answer: A royalty-in-kind (RIK) transfer refers to crude oil that is produced from federal leases in the Gulf of Mexico and paid to the U.S. Government in lieu of cash royalty payments. The "in kind" payment of a percentage of the lease's production is paid to the Department of the Interior; ownership is then transferred at the market center to the Department of Energy for SPR fill. The SPR frequently solicits to exchange the royalty oil in place (at the market center) for crude oil that meets the quality specifications of the SPR. The exchange contracts include adjustments to the volume to be delivered to the SPR due to quality differences in the crude oil and the transportation costs. The RIK program is authorized by the Outer Continental Shelf Lands Act and the Energy Policy and Conservation Act.
Question: What are deferrals and premium barrels?
Answer: The Department of Energy has occasionally agreed to delays in scheduled deliveries to the SPR due to tight markets or disruptions in the marketplace that lead to, or contribute to, a backwardated market, i.e., prices in the future are lower than current prices. Deferrals are a means of acquiring oil for the SPR at no cost to the taxpayer.
Deferrals are requested by the contractor and, if agreed to by the Department of Energy, are negotiated to provide premium barrels (similar to interest) to the SPR, along with the contracted volumes, at a later date. Both the contractor and the Government benefit from the arrangement.
Question: How and when will the oil that was released after Hurricane Katrina in 2005 be replaced?
Answer: The volume of crude oil that was released after Hurricane Katrina was restored to the SPR at moderate rates over time. Repayments of loaned oil began during late Fall 2005 and concluded in the final repayment delivery in May 2007. Replacement of the sold oil was managed through the royalty-in-kind program. The pre-Katrina inventory level was reached in April 2008.
Replacement of the sold crude oil was attempted in 2007 using both direct purchase and the royalty-in-kind program. Solicitations for crude oil acquisition by direct purchases were issued in April and May 2007; funds for the purchases were to be from the Fall 2005 emergency sale receipts. However, neither solicitation resulted in award because the Department determined that the prices proposed were too high, and not a reasonable value for the taxpayer. There are no plans at this time to resolicit for purchases of crude oil. Had the purchase offers been successful, it would have been the first direct purchases of crude oil for the SPR since 1994.
Prior to releasing the solicitations for both the direct purchase exchange contracts, an economic analysis was prepared in accordance with the Procedures for the Acquisition of Petroleum for the Strategic Petroleum Reserve.
Question: What actions are being taken in response to the Energy Policy Act of 2005 that requires fill of the SPR to its authorized size of one billion barrels?
Answer: The August 2005 EPACT directs fill as expeditiously as practicable, without incurring excessive cost or appreciably affecting the market price of petroleum products to consumers. It also requires that procedures for acquisition of crude oil be promulgated, an action that was completed with publication of the final rule on November 8, 2006.
Further, in order to fill to one billion barrels, the capacity of the SPR must be increased from its current size of 727 million barrels. The expansion will require increasing the size of two current SPR sites (identified as Bayou Choctaw in Louisiana, and Big Hill in Texas), a process that may take 3-5 years, and constructing a new site (near Richton, Mississippi) that will store 160 million barrels, a process that is expected to take 10-12 years.
The selection of the sites for expansion followed a 16-month long proceeding that included extensive public involvement. It resulted in release of the Final Environmental Impact Statement for Selection of Sites for Expansion of the Strategic Petroleum Reserve on December 8, 2006. The Secretary of Energy signed the Record of Decision on February 14, 2007, and the Department published a Plan for Expansion of the SPR to One Billion Barrels in June 2007.
In January 2008, DOE issued a Notice of Intent to prepare a Supplemental Environmental Impact Statement and to solicit additional public comments. For more information, visit the SPR Expansion Web Page.
Question: How will the acquisition procedures ensure that oil is acquired "without incurring excessive cost or appreciably affecting the market price of petroleum products to consumers"?
Answer: DOE will strive to avoid incurring excessive cost or appreciably affecting the price of petroleum products to consumers by analyzing market activity for crude oil and related commodities and prices of oil for delivery in future months, as well as the perceived availability of near term and forward supplies.
In doing so, DOE will consider the current level of the SPR and private inventories; national and regional import dependency; the outlook for international and domestic production levels; oil acquisition by other stockpiling entities; the extent to which the SPR fill rate and prices paid will impact supply availability and prices in the marketplace; incipient disruptions of suppply or refining capability; the level of market volatility; the demand and supply elasticity to price changes; logistics and economics of petroleum movement; and any other considerations that may be pertinent to the balance of petroleum supply and demand.
The timing of DOE entry into the market, its sustained presence, and the quantities sought will all be sensitive to these factors.
Question: When can the Reserve be used?
Answer: The circumstances that might require the use of the Strategic Petroleum Reserve are defined in the Energy Policy and Conservation Act (EPCA). Generally, there are three possible types of drawdowns envisioned in the Act:
- Full drawdown: The President can order a full drawdown of the Reserve to counter a "severe energy supply interruption." EPCA defines this as "a national energy supply shortage which the President determines -
(A) is, or is likely to be, of significant scope and duration, and of an emergeHncy nature
(B) may cause major adverse impact on national safety or the national economy; and
(C) results, or is likely to result, from (i) an interruption in the supply of imported petroleum products, (ii) an interruption in the supply of domestic petroleum products, or (iii) sabotage or an act of God.
EPCA also states that a severe energy supply interruption "shall be deemed to exist if the President determines that -
(A) an emergency situation exists and there is a significant reduction in supply which is of significant scope and duration;
(B) a severe increase in the price of petroleum products has resulted from such emergency situation; and
(C) such price increase is likely to cause a major adverse impact on the national economy."
- Limited drawdown: If the President finds that -
(A) a circumstance, other than those described [above] exists that constitutes, or is likely to become, a domestic or international energy supply shortages of significant scope or duration; and
(B) action taken....would assist directly and significantly in preventing or reducing the adverse impact of such shortage"
then the Secretary may draw down and distribute the Strategic Petroleum Reserve, although in no case:
"(A) in excess of an aggregate of 30,000,000 barrels....
(B) for more than 60 days....
(C) if there are fewer than 500,000,000 barrels....stored in the Reserve."
- Test Sale: The Secretary of Energy is authorized to carry out test drawdowns and distribution of crude oil from the Reserve. If any such test drawdown includes the sale or exchange of crude oil, "then the aggregate quantity of crude oil withdrawn from the Reserve may not exceed 5,000,000 barrels during any such test drawdown or distribution."
Question: Can oil be withdrawn from the Reserve for other reasons?
Answer: Yes. The Department of Energy has the authority to exchange oil from the Reserve. These exchanges have been used in the past to replace less suitable grades of crude oil with higher-quality crudes and for limited, short-duration actions to assist petroleum companies in resolving oil delivery problems. In 2000, crude oil from the Reserve was exchanged for storage capacity and stocks to create the Northeast Heating Oil Reserve. During Fall 2005, an exchange was was conducted at the request of refineries in the Gulf Region when Hurricane Katrina caused disruptions to scheduled deliveries. During 2006, small exchanges occured in January and June when accidents in shipping channels disrupted marine deliveries to refiners.
Question: How fast can oil be released from the Reserve?
Answer: Should the President order an emergency sale of Strategic Petroleum Reserve oil, DOE can conduct a competition, select offers, award contracts, and be prepared to begin deliveries of oil into the marketplace within 13 days. Oil can be pumped from the Reserve at a maximum rate of 4.4 million barrels per day for up to 90 days, then the drawdown rate begins to decline as storage caverns are emptied. At 1 million barrels per day, the Reserve can release oil into the market continuously for nearly a year-and-a-half.
Question: What type of crude oil is stored in the Reserve?
Answer: During the 30 years that the Strategic Petroleum Reserve has existed, crude oil has been acquired from 25 countries. The oil is categorized as either "sweet" (with a sulfur content not exceeding 0.5 percent by weight) or "sour" (with a sulfur content greater than 0.5 percent but less than 2.0 percent). The SPR accepts only crude oil that meets its quality specifications and it is co-mingled in caverns designated as either sweet or sour.
Question: Why is only crude oil stored in the Reserve?
Answer: The SPR is authorized by law to store both refined products and crude oil. However, in preparing the 1977 SPR Plan for development of the Reserve, an analysis of the U.S. refining industry indicated that the industry was robust and had the refining capacity to satisfy the major portion of the nation's demand for petroleum products. This continues to be true today--30 years later. The U.S. petroleum import dependency is overwhelmingly crude oil, not refined products. In addition, crude oil, is cheaper to acquire, store and transport than refined products. Crude oil quality does not degrade over time as do refined products and crude oil provides flexibility in responding to fluctuations in refined product market needs; whereas, refined products are expensive to maintain and are subject to changes in specifications mandated by environmental legislation.
Question: What is the ratio of sweet and sour crudes in the SPR? How was the ratio determined?
Answer: Crude oil stored in the SPR is currently about 40% sweet and 60% sour. The ratio was established to meet the needs of the U.S. refining industry, particularly those in the districts most likely to take SPR crude in the event of a drawdown. Sweet crude oil can be processed by nearly all refiners; the same is not true for sour crude.
Question: Why is the crude oil stored in salt domes?
Answer: Salt formations offer the lowest cost, most environmentally secure way to store crude oil for long periods of time. Stockpiling oil in artificially-created caverns deep within the rock-hard salt costs historically about $3.50 per barrel in capital costs. Storing oil in above-ground tanks, by comparison, can cost $15 to $18 per barrel - or at least five times the expense. Also, because the salt caverns are 2,000-4,000 feet below the surface, geologic pressures will seal any crack that develops in the salt formation, assuring that no crude oil leaks from the cavern. An added benefit is the natural temperature difference between the top of the caverns and the bottom - a distance of around 2,000 feet; the temperature differential keeps the crude oil continuously circulating in the caverns, giving the oil a consistent quality.
Question: How were the caverns created?
Answer: Salt caverns are carved out of underground salt domes by a process called "solution mining." Essentially, the process involves drilling a well into a salt formation, then injecting massive amounts of fresh water. The water dissolves the salt. In creating the SPR caverns, the dissolved salt was removed as brine and either reinjected into disposal wells or more commonly, piped several miles offshore into the Gulf of Mexico. By carefully controlling the pressure and direction of the freshwater injection process, salt caverns of very precise dimensions can be created.
Question: How is the salt able to contain the oil? Doesn't it dissolve or allow the oil to seep?
Answer: Rock salt has a combination of characteristics that makes it highly attractive for cavern construction and petroleum storage. If relatively pure and not interbedded with significant quantities of other types of rock, it is generally impervious to liquid and gas and inert to petroleum, has a compression strength comparable to concrete under the weight of the overlying and surrounding rock, moves like plastic to seal incipient fractures, and can be mined easily by dissolving (leaching) with water.
Question: How was the authorized one billion barrel size of the Reserve determined?
Answer: Prior to Congress authorizing a crude oil national security storage system, studies were conducted to determine the optimum amount of crude oil that should be stored. Based upon the level of imports at that time (1974-1975), a reserve of 500 million barrels was recommended. Congress, however, foresaw that consumption of petroleum in the United States would increase over time and that import levels would also increase. Therefore, when the Energy Policy and Conservation Act passed in late 1975, the SPR size was authorized up to one billion barrels, with an initial size target of 500 million barrels.
Question: How is days of import protection determined?
Answer: The number of days of import protection are based on the SPR's current inventory level and the EIA's reported net petroleum imports.
Question: How many people work at the Strategic Reserve?
Answer: The Project Management Office (in New Orleans) and the SPR storage sites operate with a federal workforce of approximately 100 full-time equivalents. Major contractors and subcontractors provide services that support the SPR's program, as it relates to overall management and operations, security, design, construction management, and technical and business management activities. Contractor employees total approximately 950 full-time equivalents.
