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DOE economist talks SPR exports, storage and sales

Public Policy

The presenter who arguably received the best questions at Wednesday’s Crude Oil Quality Association meeting in New Orleans was the US Department of Energy’s economist, Kenneth Vincent.

His presentation was part overview, such as the locations of the four salt caverns that hold the more than 700 million barrels of US oil – Texas and Louisiana, and the maximum drawdown capacity – 4.4 million b/d. But there were also some nuggets not found on factsheets such as the how the physical salt caverns are shrinking due to geological pressures and how “distribution issues are a major concern (for the DOE) currently and going forward.”

Following the presentation, the overflowing room of oil industry participants had plenty of questions for Vincent. And if they didn’t know the answers, and I didn’t know the answers, I reckon you might be interested too:

Q: Are there any restrictions on who you can sell to? Could you export oil anywhere?

A: Vincent said since the US oil export ban has been lifted, the office received a legal opinion that it can’t export but it can sell to anyone, who can then export it.

Q: Do you look at the type of oil you are storing so that it is what we need when the time comes?

A: “Yes,” Vincent said, which got some chuckles from the crowd.

After a brief pause he continued to say the strategic petroleum reserve stores about 60% medium sour and 40% sweet crudes that are amalgams from a bunch of different streams.

“Our goal is to have oil as fungible as possible and support as many types as possible.”

He said a common question is if the SPR should focus more on heavy oils, which account for a bulk of imports and are consumed by USGC refineries. However, he said no, that SPR isn’t focusing on adding more heavy oils. He said that heavy oil is “really hard” to store for long periods of time and that there is a lot more sweet oil going into the US refinery fleet.

“We ultimately decided we weren’t going to put a big stake in the ground for changing the type of oil in the reserve but that is something we follow very closely.”

Q: Do you consider the price of specific crude grades when making sales from the SPR?

A: “Yes. Absolutely.”

Vincent said there is a very rigorous process in place in trying to maximize returns for taxpayers.

Q: Does the DOE have any input on pipeline reversals?

A: “Absolutely not,” Vincent said. “We have no say.”

The post DOE economist talks SPR exports, storage and sales appeared first on The Barrel Blog.


2 Comments on "DOE economist talks SPR exports, storage and sales"

  1. BobInget on Fri, 10th Mar 2017 2:47 pm 

    NG pushing hard at $3.00. $4.00 by years-end.
    Why, one might ask?
    LNG Exports.
    Summer consumption like we’ve never experienced.

  2. rockman on Fri, 10th Mar 2017 3:25 pm 

    Jan 2017 Henry Hub NG futures today are running about $3.50. That’s because it is expected to be cold during the winter. June 2018 Henry Hub futures today are running about $2.90. That’s because it is expected to be warm in the summer.

    It would appear that consumption expectations are effecting NG prices more then the anticipation of meaningful LNG exports. The 2017 summer NG futures are currently running about just 6% higher then the HH NG prices during the summer of 2016.

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