The US Department of Energy is no longer considering adding marine capacity to help move government crude oil to domestic refineries during a potential supply emergency, Ken Vincent, chief of staff with the agency's Office of Fossil Energy, has told S&P Global Platts.
"I don't think that we need to put any steel on the ground to ensure [Strategic Petroleum Reserve's] capacity," Vincent said in an interview with the Platts Capitol Crude podcast.
Vincent told Platts that since US crude export limits were lifted midstream assets have been built and US oil marine distribution capacity has expanded extensively. Combined with existing contracts with commercial midstream operators to get SPR oil to market during a supply shock, this has eliminated the need for a government-owned or operated marine distribution facility, he said.
"I am less concerned about the distribution capability of the reserve," Vincent said.
In 2016, then-US Energy Secretary Ernest Moniz said that access to marine capacity was a "major challenge" to distributing oil out of government stockpiles during a supply emergency without disrupting commercial flows. "We need to build docks to help with distribution," Moniz said in September 2016.
At the time, DOE was even considering retaking operational control of the St. James marine terminal in Louisiana once a lease with Shell expired in 2017. DOE has since extended the lease for the St. James Terminal for two additional years. The current lease expires at the end of 2019, but DOE has "no plans to retake the terminal," an agency official said.
The SPR's drawdown capacity, the amount of oil the system's pipes and pumps can push out, remains at about 4.4 million b/d while it distribution capability, the amount it can get into the US midstream market, has improved, Vincent said.
Vincent's comments were made amid speculation the Trump administration may authorize a release from the SPR in an effort to reduce oil and gasoline prices and as DOE works to sell off millions of barrels of SPR crude over the next decade, part of multiple legislative mandates from Congress.
Even after these mandated sales, the SPR will still have roughly 400 million barrels of crude and remain the largest government-owned stockpile in the world, Vincent said.
"Even if we do have legislated inventory reductions ... this is still going to remain a massive energy security asset," he said.
While Vincent defended the SPR as an "asset" to respond to a global supply emergency, he declined to say if the government had an ideal size for the reserve.
"The SPR is an insurance policy and it is up to our elected officials to determine the exact amount of insurance that they want the country to have," he said.
