WASHINGTON, D.C. - The U.S. Department of Energy (DOE) today announced it is negotiating contract awards with nine U.S. companies for the purpose of storing their U.S. produced crude oil in the Nation’s Strategic Petroleum Reserve (SPR).
Hit with the combined effects of COVID-related demand destruction and excess supply, the U.S. oil industry is faced with storage demand exceeding availability. Responding quickly to this emerging storage crunch, on April 2, 2020, DOE issued a Request for Proposals to use available storage capacity at the SPR for temporary storage.
“When producing oil you have two options – you either use it or you store it. With the impacts caused by the COVID-19 pandemic, we are seeing an enormous decrease in demand as our country works to contain the virus,” said U.S. Secretary of Energy Dan Brouillette. “This is why making storage capacity available in the SPR is so important. Providing our storage for these U.S. companies will help alleviate some of the stress on the American energy industry and its incredible workforce.”
The awards under negotiation are for approximately 23 million barrels of crude oil storage, which will be distributed into all four SPR sites. Most of these deliveries will be received in May and June 2020, with possible early deliveries in April. Awardees can schedule return of their oil through March 2021, minus a small amount of oil to cover the SPR’s cost of storage.
In combination, these nine companies will be storing oil aggregated from numerous small, medium, and large U.S. producers at the SPR.
The pending awards are the initial step toward filling the SPR to its capacity as directed by the President. The Department continues to view purchasing oil, contingent on federal appropriations, and providing storage opportunities to industry as priorities.