The U.S. Department of Energy (DOE) has tapped nine U.S. companies to store their U.S. produced crude oil in the Nation’s Strategic Petroleum Reserve (SPR).
Due to a combination of factors, including the drop in demand due to COVID-129 related stay at home orders, and excess supply, the U.S. oil industry is faced with storage demand that exceeds availability. In response, the DOE issued a Request for Proposals in early April for companies to use 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,” U.S. Secretary of Energy Dan Brouillette said. “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, which are being negotiated, are for approximately 23 million barrels of crude oil storage. These barrels will be distributed across all four SPR sites. The deliveries are expected to be received mostly in May and June 2020. The oil can remain stored until March 2021. There is a small cost to cover the SPR’s cost of storage. The nine companies will be storing oil aggregated from numerous small, medium, and large U.S. producers.
Sen John Hoeven (R-ND) applauded the move.
“Oil and gas producers in North Dakota and across the nation are vital to our economic and national security,” Hoeven said. “We’ve been working with the Administration to support our energy industry and help them to weather the economic challenges from COVID-19, and we appreciate Energy Secretary Brouillette moving quickly to store U.S. crude in the SPR. At the same time, we’ll continue working to help U.S. producers during these historic times and to pass our legislation to fund the purchase of U.S. crude for the SPR.”
Hoeven, a member of the Senate Energy and Natural Resources Committee, is currently sponsoring legislation that would provide $3 billion to purchase U.S produced crude oil for the SPR.
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