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 fuel store of oil 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 727 million barrels (1.156E+8 m3). The second largest emergency supply of oil is Japan's with a 2010 reported capacity of 583 million barrels (92,700,000 m3). Also, China has begun construction and planning for an expansion of a SPR that will place their SPR at 685,000,000 barrels (108,900,000 m3) by 2020, surpassing Japan.

The current inventory is displayed on the SPR's website. As of August 31, 2009, the current inventory was 724 million barrels (115,100,000 m3). This equates to 34 days of oil at current daily US consumption levels of 21 million barrels a day. At current market prices ($65 a barrel as of Oct '08) 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).[1]

Purchases of crude oil resumed in January 2009 using revenues available from the 2005 Hurricane Katrina emergency sale. The DOE purchased 10,700,000 barrels (1,700,000 m3) at a cost of $553 million.[2]

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. According to the World Factbook[3], the United States imports a net 12 million barrels (1,900,000 m3) 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 4.4 million barrels (700,000 m3) per day, making it a 160 + day supply.

Contents

[edit] 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 Department 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.

[edit] Existing

[edit] Future

[edit] Retired

[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 (700,000 m3/d). 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.

[edit] 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."[2] 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 (1.156E+8 m3) 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.[citation needed]

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.[8]

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, Vermont) and 63 co-sponsors introduced the Strategic Petroleum Reserve Fill Suspension and Consumer Protection Act bill (H.R.6022), to suspend the acquisition of petroleum for the Strategic Petroleum Reserve [9].

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 [10].

On May 19, 2008, President Bush signed the Act passed by the Congress, which he previously opposed . So, the bill has become law [11]

On January 2, 2009, the U.S. Energy Department said that it will begin buying approximately 12,000,000 barrels (1,900,000 m3) of crude oil to fill the Strategic Petroleum Reserve, replenishing supplies that were sold after hurricanes Katrina and Rita in 2005. The purchase will be funded by the roughly $600 million received in 2005 from the emergency sales.

[edit] 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.[12]

[edit] Limitations

The Strategic Petroleum Reserve is exclusively a crude petroleum reserve, not a stockpile of refined petroleum fuels, such as gasoline, diesel and kerosene. Although there are small-scale (2,000,000 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.[citation needed] 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.[13] Some countries and zones, such as Australia, have a strategic reserve of both petroleum and petroleum products.[14]. In some cases, this includes a strategic reserve of jet fuel.

The former Secretary of Energy, Samuel Bodman, has said the Department will consider refined products as part of the expansion of between 1 billion and 1.5 billion barrels (240,000,000 m3).

[edit] SPR drawdowns

[edit] Petroleum sales

[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.

[edit] See also

Crystal energy.svg Energy portal

[edit] References

  1. ^ DOE - Fossil Energy: Quick Facts about the Strategic Petroleum Reserve
  2. ^ [1] DOE SPR site
  3. ^ CIA - The World Factbook - United States
  4. ^ http://www.chron.com/disp/story.mpl/front/5802887.html
  5. ^ a b c d e barrels (160×10^6 m3).pdf Strategic Petroleum Reserve Plan Expansion To One Billion Barrels Submitted To Congress (Page 5), United States Department of Energy
  6. ^ DOE - Fossil Energy Techline: DOE Takes Next Steps to Expand Strategic Petroleum Reserve to One Billion Barrels
  7. ^ Oil reserve site raises ire, Bush policy tested, Reuters, Retrieved on May 16, 2008
  8. ^ Bush, George W. (January 23, 2007). "President Bush's 2007 State of the Union Address". The Washington Post. http://www.washingtonpost.com/wp-dyn/content/article/2007/01/23/AR2007012301075_pf.html. Retrieved 2007-01-24. 
  9. ^ http://www.opencongress.org/bill/110-h6022/text
  10. ^ http://www.eere.energy.gov/news/news_detail.cfm/news_id=11779
  11. ^ Bush Will Sign Bill Halting Strategic Oil Stockpile
  12. ^ The Iranian Oil Crisis
  13. ^ Tejerina, Pilar (September 30, 2005). "Senators propose gasoline reserve". CNNMoney.com. http://money.cnn.com/2005/09/30/news/economy/gas_reserve/index.htm. Retrieved 2007-01-24. 
  14. ^ Australia - Plan to protect oil supply | EnergyBulletin.net | Peak Oil News Clearinghouse
  15. ^ DOE - Fossil Energy: Quick Facts about the Strategic Petroleum Reserve
  16. ^ Oil ends up after dip below $100 CNN, retrieved 12 Sept 2008

[edit] External links

Retrieved from "http://en.wikipedia.org/wiki/Strategic_Petroleum_Reserve"
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