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Expanding SPR to 1-bil bbl could take years: DOE source

This can only help the price of oil, but by what extent? Am


Washington (Platts)--5Oct2001

It could take the better part of decade to increase the storage capacity of the US Strategic Petroleum Reserve from 700-mil to 1-bil bbl using existing and newly developed sites, a source at the Department of Energy said Friday. A non-binding resolution approved by a House subcommittee Thursday urged DOE to expand SPR capacity to 1-bil bbl. There currently are 544-mil bbl of oil in the SPR, stored in salt caverns along the Gulf of Mexico in Texas and Louisiana. Salt caverns are the most economical way to store SPR oil, the DOE source said. Potentially, the most immediately available storage facilities are two existing caverns owned by Williams and adjacent to the Bayou Choctaw SPR site in Louisiana. Each cavern can hold about 10-mil bbl.

Williams has inquired about DOE's interest in obtaining the caverns, the source said. In order to ready the sites, DOE would have to prepare the surface infrastructure, including piping, and likely have to do an environmental review. The entire process could take two-three years, he said. A second option would be to expand an existing facility. The Big Hill, Texas, site does have land adjacent to it that might be available. "Early estimates are that we could create eight additional caverns, each with capacity of 10-mil bbl, which would add another 80-mil capacity," he said. The caverns are created by leaching the salt with fresh water and woudl take about three years to create. "You would probably do multiple caverns but not all eight at the same time," the DOE source said.

The completed caverns can be filled as the others are being created, and it could take as long as seven years before all eight caverns are used for storage, the DOE source said. In total between Bayou Choctaw and Big Hill, SPR would have additional storage capacity of 100-mil bbl, still 200-mil bbl short of what the House resolution seeks. For that, DOE believes it would have to develop entirely new sites. The DOE source noted that the 170-mil capacity Big Hill facility took nine years to develop. "That's probably not a bad estimate as to how long it will take" to develop a new "grass roots" facility, he said. As for possible locations, the Gulf Coast is "dotted with massive salt domes," he said.