Koch submits winning bid to supply additional oil to strategic reserve

Petroleum News Alaska Staff

The U.S. Department of Energy said Aug. 8 that Koch Supply & Trading LP will become the newest supplier of crude oil to the Strategic Petroleum Reserve under President Bush’s plan, announced last November, to fill the nation’s emergency oil stockpile to its full capacity by 2005.

Secretary of Energy Spencer Abraham said Aug. 8 that the Wichita, Kansas-based company — one of the world’s largest crude oil trading companies — had submitted the winning bid to provide approximately 8 million barrels of crude oil to the petroleum reserve beginning Oct. 1 and continuing through April 30, 2003.

“With each contract like this, Americans gain another measure of energy security,” Abraham said. “The SPR provides the nation with an energy resource that can be used as directed by the President to protect Americans against future supply disruptions.”

DOE said the contract to Koch is part of the administration’s “royalty-in-kind” exchange program in which crude oil from federal leases in the Gulf of Mexico is exchanged for oil to be stored in the SPR for emergency protection against future supply disruptions.

Deliveries nearly 100,000 bpd

The program is carried out cooperatively with the U.S. Department of Interior’s Minerals Management Service. MMS recently awarded contracts for a similar amount of royalty oil to be delivered from designated Gulf of Mexico production platforms to “market centers.” Koch will receive the crude oil at the market centers and deliver “in-kind” crude to the SPR. Actual volumes arriving at the SPR are adjusted to account for transportation and quality differentials. Koch’s offer was selected on the basis that its exchange ratio provided the best value to the government.

The SPR currently holds 580 million barrels of crude oil deep in salt caverns created along the Texas and Louisiana coastlines.