Planning Paved Way for Tapping US Oil Reserve
CHICAGO — AS it prepares to deliver oil, the United States Strategic Petroleum Reserve continues to function smoothly, reflecting the months of planning and practicing that preceded this first ever emergency drawdown, according to the Department of Energy, which manages the reserve. The SPR is physically capable of commencing shipments this week. However, the oil won't likely flow until the middle of the month, because of oil industry scheduling practices, DOE says.
The results of the auction of SPR oil, announced last week, underscore the industry's preference for ``sweet'' or low-sulfur crude in a well-supplied market. DOE accepted bids for 128 percent of the amount of sweet crude it offered, but just 13 percent of its high-sulfur ``sour'' crude.
Energy Secretary James Watkins said the sales balance DOE's need to respond to market demand, obtain a fair price, and fulfill international supply commitments. Admiral Watkins added that the sale ``worked well.''
Even before Kuwait was invaded, DOE had been planning its annual drawdown exercise for the SPR, the nation's $20 billion insurance policy against a disruption of foreign oil supplies.
Usually this involves pumping oil out of saltdome caverns, down to a loading terminal, and back again. This time DOE had decided to add a test auction, in which the oil industry would bid but not actually buy SPR oil.
By late August, when oilmen met with SPR staff in Houston to hear the process explained, Iraq had taken Kuwait. Watkins announced that the test auction, scheduled for October, would actually involve buying SPR oil.
Meanwhile, in early August the SPR had gone to a status called drawdown alert level one, the first time it had responded to a potential emergency. The SPR project office in New Orleans stopped creating and filling storage caverns, and prepared instead to move oil out.
The SPR remained at alert level one until the October test auction. Then it moved to level two, standing by for a drawdown order. The order to commence the test moved the SPR to alert level three. Eleven of the 33 bidders were successful in buying 3.9 million of the offered 5 million barrels of oil.
On Dec. 2, after the last delivery and with 43 days until the United Nations deadline for Iraq's withdrawal, the SPR relaxed only to alert level two, rather than level one.
``An energy emergency was imminent,'' says drawdown manager William Gibson, adding that it was ``prudent'' to remain at the heightened state of readiness.
Mr. Gibson meanwhile requisitioned a television and cable service for his New Orleans office. On Jan. 16 ``I got a telephone call from someone in the office who said, `Turn on your television. The war's started.' So I walked into my next office and turned on CNN.''
IN Washington, SPR director John Bartholomew had only been home for 15 minutes when his TV brought the sound of Iraqi antiaircraft fire. Robert Gentilly, the assistant secretary for fossil energy, soon called to advise Mr. Bartholomew to stand by while department executives met. In two hours Mr. Gentilly called back: President Bush had signed the order for the first emergency release of oil from the reserve. Alert level three.
Bartholomew relayed the order Gibson, then called several staff members back to DOE headquarters. They communicated with New Orleans via fax, telephone, and direct computer link until 2 a.m.
The New Orleans office's communications center, manned round the clock for several days, called 20 key managers by telephone and pager back to the project office. Gibson outlined to them Washington's response plan calling for 34 million barrels of oil to be offered.
A team of 20 worked through the night preparing 246 bid packages, which were shipped out at six the next morning. A week later, 45 people worked until 1 a.m. reviewing the bids received from 26 companies. All but four bids came back on computer disks, greatly expediting the evaluation process, Gibson says.
As a result of the months of work, the drawdown has been ``very smooth, very efficient.'' Gibson, who has worked at the SPR for 13 years, adds that ``a lot of people, including myself, have spent a good portion of their career creating the SPR and preparing for this.''