DOE confirms it is in negotiations to loan SPR crude after Ivan

Washington (Platts)--23Sep2004

The US Department of Energy Thursday said it is in negotiations to loan "a
limited quantity" of crude oil from the Strategic Petroleum Reserve to help
relieve physical Gulf of Mexico supply shortages caused by Hurricane Ivan. A
DOE spokesman said the agency would provide no specifics on the number of
loans it was considering, the volumes being considered, or when the loans
would be announced. 

The agency, in a statement, said the loans would be short-term contractual
agreements, and companies would be required to return the crude to the 700-mil
bbl-capacity SPR once supply conditions returned to normal. "I have authorized
these negotiations in response to the physical disruption of offshore oil
production and imports in the Gulf Region caused by Hurricane Ivan's
destruction," Energy Secretary Spencer Abraham said. "As this administration
has stated consistently, the SPR was designed to protect American consumers
against supply disruptions, including natural disasters." The SPR currently
contains 670-mil bbl.

Negotiations are being conducted following specific requests from refineries
that have been affected by recent hurricanes, DOE said, noting it followed a
similar procedure in October 2002 when it released 300,000 bbl of crude from
the SPR to Shell Oil so the company could keep supplies flowing to a refinery
in Memphis, Tennessee. DOE pointed out that when commercial oil deliveries
returned to normal the week after that loan, the crude was returned to the
SPR. DOE statistics as of Sep 17 showed a crude inventory drawdown of some
11-mil bbl in the Gulf region over the past three weeks, which has been
attributed largely to disruptions in production and imports because of a
series of hurricanes. Damage from the storm and continued production shut-ins,
combined with the inventory report, lifted crude oil prices to a high of
$49/bbl Thursday. DOE said results of the negotiations will be announced "in
the near future."

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