A 5mn bl test sale from the US' Strategic Petroleum Reserve (SPR) earlier this year revealed potential problems with pipeline capacity, storage space and availability of US-flagged vessels if an emergency drawdown were required.
The US Department of Energy (DOE), in a report to Congress released today, said the test sale showed how "extremely limited" pipeline capacity is on Shell's Ho-Ho pipeline because of crude being shipped from Texas' Eagle Ford shale formation to Louisiana.
DOE on 17 March awarded contracts to five companies – Phillips 66, Marathon, Shell, ExxonMobil and Mercuria – to purchase light, sweet crude from the reserve's West Hackberry and Big Hill storage facilities. Deliveries began on 31 March and were completed on 16 May.
But the companies had trouble finding capacity on the Ho-Ho line for preferred deliveries and had to ship the crude to the Sun Nederland terminal until pipeline capacity became available.
But storage capacity at Sun Nederland is fully subscribed, the report said. "SPR distribution capability had may be impacted during a drawdown if a purchaser does not have access to storage capacity at this terminal."
New pipeline construction in Port Arthur, Texas, is increasing the volumes of crude being shipped to storage terminals in that area. "The additional volumes are causing an increase in dock utilization rates at these terminals, which can impact dock availability in the event of a drawdown," the report said.
Sun Nederland plans to convert one of its five tank ship docks from crude to LPG.
During the test sale, DOE officials lowered the minimum delivery quantities for tank barges and tank ships, to expand the number of US-flagged vessels that could be used. The oil purchasers used barges for nine deliveries but no tank ships. It was unclear whether the availability of larger US flagged vessels was the reason no tank ships were used.
The report noted that if a supply disruption were to occur in the US storage capacity concerns could be eased by private companies releasing large volumes of oil, freeing up space for oil from the SPR.
Senate Energy and Natural Resources Committee ranking Republican Lisa Murkowski (Alaska) said that "while there should always be a legitimate reason for tapping our strategic oil stockpiles, ensuring the infrastructure works when needed is a worthy endeavor."
She encouraged DOE to follow through on the lessons learned from the sale.
The SPR as of 28 November held 261.9mn bl of sweet and 429.1mn bl of sour crude.
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