Strategic Petroleum Reserve

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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 petroleum store maintained by the United States Department of Energy. The US SPR is either the largest or second largest emergency supply in the world with the current capacity to hold up to 727 million barrels (116 million m³) of crude oil.

The current inventory is displayed on the SPR's website.

The purpose of the reserve is to mitigate temporary supply disruptions. According to the World Factbook, the United States imports a net 12 million barrels of oil a day (MMbd), so the SPR holds about a 57 day supply. However, the maximum total withdrawal capablility from the SPR is only 4.4 MMbd.

1 Facilities
2 History
3 Limitations
4 SPR drawdowns
- 4.1 Petroleum sales
- 4.2 Petroleum exchanges and loans
5 See also
6 External links
7 References

[edit] Facilities

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. (Note: Capacity numbers may be out of date.)

Bryan Mound - located near Freeport, Texas. Has a capacity of 226 million barrels (36,000,000 m³).
Big Hill - located near Winnie, Texas. Has a capacity of 160 million barrels (25,000,000 m³).
West Hackberry - located near Lake Charles, Louisiana. Has a capacity of 219 million barrels (35,000,000 m³).
Bayou Choctaw - located near Baton Rouge, Louisiana. Has a capacity of 72 million barrels (11,000,000 m³).

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 30 million barrels (1 to 5 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.

A fifth site, Weeks Island in Iberia Parish, Louisiana, had a capacity of 72 million barrels (11,000,000 m³), but was decommissioned in 1999. Unlike the other facilities, the Weeks Island caverns were a conventional near-surface salt mine, formerly owned by Morton Salt. In 1993, a sinkhole formed on the site, allowing fresh water to intrude into the caverns.

Because of the caverns' construction in salt deposits, fresh water would erode the walls, potentially causing the structure to fail. The caverns were 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.

[edit] History

[edit] 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 4.4 million barrels per day (8 m³/s). Oil could begin entering the marketplace 13 days after a Presidential order. The Dept. of Energy says that it has about 7 to 8 weeks worth of inventory protection in the SPR. This, combined with private sector inventory protection, is estimated to total 150 days worth of emergency supply.

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 billion barrel (159 million m³) reserve. 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.

[edit] Filling 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."[1] 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 727 million barrel 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 refilling is completed, future royalties will be paid into the Federal treasury.

[edit] Emergency sales and loans

Oil has been released and sold in the open market under emergency conditions just twice, in 1991 and 2005. However, oil has also been temporarily loaned out or exchanged to private oil companies on several occasions, then returned to the reserve after the specified loan period including "premium barrels". These oil exchanges include an ARCO pipeline disruption in April 1996; an exchange of 11 million barrels (1,800,000 m³) of Maya crude oil for 8.5 million barrels (1,400,000 m³) of higher value crude oil in 1998; a dry dock collapse in June 2000 just north of the Intracoastal Waterway near Lake Charles, Louisiana used by CITGO and Conoco refineries; and temporary loans in response to supply disruptions following Hurricane Lili in 2002, Hurricane Ivan in 2004, and Hurricane Katrina in 2005.

On August 31, 2005, President George W. Bush authorized the SPR to loan oil to help refineries whose operations had been affected by Hurricane Katrina. In addition, the President announced the sale of 30 million barrels to maintain supplies and calm markets. Katrina had shut down an estimated 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.

On April 25, 2006, President George W. Bush announced a temporary halt to petroleum deposits to the SPR in an attempt to alleviate high gas prices.

[edit] Limitations

The Strategic Petroleum Reserve is almost exclusively a crude oil reserve, not a stockpile for refined petrochemical products, such as gasoline, diesel and kerosene. Although there are small-scale (2 million barrels) heating oil reserves in Connecticut and New Jersey under the aegis of the Department of Energy, 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 has little to no protection 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 1 that the DOE should stockpile both gasoline and jet fuel, to rectify this weakness. However, since gasoline has a short shelf-life, any such reserve would require regular freshment of stocks, which would make it vulnerable to inappropriate drawdowns.

[edit] SPR drawdowns

[edit] 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)

[edit] 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 - 900,000 barrels lent to ARCO to alleviate pipeline blockage.
August 1998 - 11 million barrels lent to PEMEX in return for 8.5 million barrels of higher quality crude.
June 2000 - 1 million barrels lent to Citgo and Conoco in response to shipping channel blockage.
July-August 2000 - 2.8 million barrels to supply the Northeast Home Heating Oil Reserve.
September-October 2000 - 30 million barrels in response to a concern over low distillate levels in the North-eastern U.S.
October 2002 - 296,000 barrels lent to Shell Pipeline Company in advance of Hurricane Lili.
September-October 2004 - 5.4 million barrels lent to Astra Oil, ConocoPhillips, Placid Refining Company, Shell Oil Company, and Premcor after Hurricane Ivan.
September-October 2005 - 9.8 million barrels 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.^[1]
June 2006 - 750 thousand barrels 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.^[1] Repaid in early October 2006.