The US government plans to sell up to 8 million barrels of light, sweet crude from three of the Strategic Petroleum Reserve's four sites later in January, with first deliveries planned for as early as February, a Department of Energy official said Friday.
DOE plans to sell 3 million barrels from its Bryan Mound SPR site and 3 million barrels from its Big Hill site, both in Texas, and 2 million barrels from its West Hackberry site in Louisiana, according to the official, who spoke on the condition of anonymity.
The crude will be sold at multiple delivery points throughout the SPR system.
"Companies could make offers for oil coming out of one site only, for all three sites, for pipeline deliveries only for marine vessels or combinations of both," the official said.
The agency plans to issue a notice of sale by mid-January, according to the official, beginning the process for what is expected to be the first of 18 expected SPR sales through fiscal 2026 that would put nearly 200 million barrels of government-owned crude up for auction.
The US SPR, the largest government stockpile of crude in the world, currently holds 695.1 million barrels of crude, including 266.1 million barrels of sweet crude.
The estimated 8 million barrels to be sold this month are part of an appropriation by Congress to sell up to $375.4 million of SPR crude to partially fund an effort to modernize the SPR and add marine terminal capacity.
Once the notice of sale is issued, companies will have eight days to submit bids. In order to bid, companies need to be registered in the SPR's Crude Oil Sales Offer Program and must submit an offer guarantee of $10 million or 5% of maximum potential contract amount, whichever is less.
"That's what prevents just anybody from throwing a bid out there," the DOE official said.
DOE, which can reject any offer made, will notify companies with successful bids 11 days after the notice of sale is released, expected to be by late January, and contracts are expected to be awarded by early February.
The official said regular deliveries of the crude, once contracted, will be made between March 1 and April 30, but said February deliveries will be accommodated.
"Purchasers must make their own transportation arrangements and make sure that terminal and pipeline availability is sufficient for its volumes," the official said.
The official said additional sales could be held in the future if the agency does not receive the $375.4 million it was authorized to sell from the SPR.
"If we don't get enough good bids in this sale cycle, we will go out with a second sale cycle," the official said.
In addition to the $2 billion Congress has authorized for paying for the SPR modernization and new marine capacity, Congress over the past year has approved a biomedical research bill, federal budget and transportation bill that are all partially funded by sales of a combined 149 million SPR barrels.
On Thursday, in his cabinet exit memo, Secretary Ernest Moniz called the SPR a "critical federal energy security asset," and indicated it was being endangered by many of the crude sales approved by Congress.
Moniz wrote that through these sales, the SPR was "being used by Congress to cover costs of programs not related to energy security, a shortsighted use of long-term security assets to meet short-term budget goals."
