(Reuters) - The U.S. Department of Energy announced plans on Wednesday to release up to 5 million barrels of crude oil from the Strategic Petroleum Reserve (SPR), its first test sale since September, 1990, when world oil prices spiked after Iraq’s invasion of Kuwait sparked fear of possible global supply disruptions.
That 1990 sale, also of 5 million barrels, was meant to “demonstrate the readiness of the (Reserve) system under real life conditions”. Months later, the department held the emergency sale of about 21 million barrels of SPR oil while the U.S. military executed its Desert Shield and Desert Storm operations in Iraq.
This week, the Energy Department is offering sour crude from its West Hackberry and Big Hill sites on the U.S. Gulf coast. All bids are due by March 14.
“By law, the Department of Energy is required to conduct continual evaluation of the Strategic Petroleum Reserve system’s drawdown and sales procedures,” said DOE spokesman Bill Gibbons. “Due to the recent dramatic increase in domestic crude oil production, significant changes in the system have occurred - including pipeline expansion, construction of new infrastructure, reversed flow of existing pipelines and increased use of domestic crude oil terminals. In order to appropriately assess the system’s capabilities in the event of a disruption, today the Department of Energy authorized a test drawdown and sale of up to 5 million barrels of sour crude oil.”
The 696-million-barrel strategic reserves were initially designed for use during severe supply disruptions after the Arab oil embargo rocked U.S. energy markets.
The Energy Policy and Conservation Act of 1975 required the United States to have enough oil on hand to replace 90 days worth of imports. As of September 2013, the nation had some 210 days worth of oil stockpiled in both private and government-controlled reserves, according to calculations by the International Energy Agency.
Following are major crude oil sales and loans made by the U.S. government from the reserve:
* June 2011 Libya war - Sold 30.64 million barrels, as part of a 60-million barrel sale coordinated with the International Energy Agency. This followed Libya’s civil war that cut nearly 2 million barrels-per-day of light sweet crude supply from the North African nation.
* Sept 2005 Hurricane Katrina - Sold 11 million barrels after the hurricane shut down a large share of the U.S. oil producing and processing industry along the Gulf Coast.
* 1996-97 Non emergency sales - Sold 28.1 million barrels (5.1 million in Weeks Island sale to pay for decommissioning of storage site and transfer of its oil; 12.8 million to reduce the federal budget deficit; 10.2 million to pay for the cost of operating the SPR).
* 1990-91 Iraqi invasion of Kuwait - Sold 21 million barrels (3.9 million in Oct 1990 test sale; 17.2 million in Jan 1991 drawdown ordered by president).
* Nov 1985 Test sale - Sold 967,000 barrels to test drawdown and distribution capabilities.
* August 2012 - Loaned 1 million barrels to Marathon Petroleum Corp. (MPC.N) after Hurricane Isaac created shortages.
* Sept 2008 - Loaned nearly 5.4 million barrels of crude to five oil companies after hurricanes Gustav and Ike cut supplies.
* June 2006 - Loaned 750,000 barrels of sour crude to ConocoPhillips (COP.N) and Citgo PDVSAC.UL after the Calcasieu Ship Channel closed and deliveries stopped to Louisiana refineries.
* Jan 2006 - Loaned 767,000 barrels of sour crude to Total Petrochemicals USA (TOTF.PA) after the Sabine Neches ship channel closed and deliveries stopped to Texas refineries.
* Sept/Oct 2005 - Loaned 9.8 million barrels of sweet and sour crude after Hurricane Katrina disrupted Gulf of Mexico production and damaged terminals, pipelines and refineries.
* September 2004 - Loaned 5.4 million barrels of sweet crude due to disruptions in the Gulf of Mexico caused by Hurricane Ivan.
* October 2002 - Loaned 98,000 barrels to Capline Pipeline, then operated by Royal Dutch Shell (RDSa.L) to keep storage tanks full to withstand Hurricane Lili’s winds.
* October 2000 - Loaned 30 million barrels to boost winter heating oil supplies in the Northeast.
* August 2000 - Exchanged 2.8 million barrels of crude oil for 2 million barrels of heating oil to create Northeast Home Heating Oil Reserve.
* June 2000 - Loaned 1 million barrels each to Citgo PDVSAC.ULand Conoco (COP.N) after the Calcasieu Ship Channel closed and blocked crude oil shipments to Louisiana refineries.
* December 1998 to February 2000 - Exchanged 11 million barrels of Mexican Maya crude for 8.5 million barrels of light sweet oil to meet the reserve’s quality requirements.
* April 1996 - Loaned 900,000 barrels of SPR crude to the Seaway Pipeline system after the pipeline was blocked at the Cushing, Oklahoma storage hub.
Written by Selam Gebrekidan and Timothy Gardner