US-Australia talks about Strategic Petroleum Reserve ongoing: Perry

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Highlights

Australia wants to store crude in US for international obligations

Perry open to commercial storage in SPR

US government continues to sell off SPR

Houston —
The US and Australia are still negotiating a proposal which would allow the Australian government to store millions of barrels of crude oil in the US Strategic Petroleum Reserve, US Energy Secretary Rick Perry said Friday.

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Perry declined to discuss details of those negotiations because they are ongoing, but a senior Energy Department official said Australia was still working out the technical details of the proposal before it could be approved by the US.

Australia wants to buy and store crude within the US SPR facilities along the Gulf Coast. The crude, which likely would never be shipped to Australia, would be used to meet International Energy Agency obligations to hold emergency oil stocks of at least 90 days of net oil imports.

As of June, Australia held oil stocks of 58 days of net import cover, including 56 days worth held by industry and two days held by the government, according to the IEA. By comparison, the US held 711 days worth of net crude import cover, including 432 days worth held by industry and 278 held by the government, according to IEA.

By law, foreign governments can store crude in the US SPR, although none currently do. No other country is in discussion with the US about leasing space in the SPR, Perry said.

Perry also said that, in addition to talks with Australia, he was open to leasing unused SPR space to private companies.

“I think it’s a conversation worth having,” Perry said. “We can discuss the pros and cons of it, but there’s certainly been no movement towards a declaration one way or another at this point in time.”

In September 2018, the US House of Representatives passed a bill which would have allowed DOE to lease unused portions of the SPR to private companies. The bill was never taken up by the Senate.

DOE officials said concerns remain about leasing to private companies because frequent additions and withdrawals from the reserve could degrade the salt caverns where the crude is stored.

On Monday, DOE announced it had sold 9.88 million barrels of SPR crude to four US companies, paying an average of $58.99/b and with deliveries set to take place in October and November, the latest in an estimated 290 million barrels of congressionally mandated sales from the SPR through fiscal 2027.

As of Friday, the SPR held 644.8 million barrels of crude in four sites in Texas and Louisiana, including 250.3 million barrels of sweet crude and 394.5 million barrels of sour crude, according to DOE.

During an appearance with Perry Friday, Fatih Birol, IEA’s executive director, said that volumes in the SPR need to be “sufficient enough to give a robust, strong and quick response to any supply disruption.”

— Brian Scheid, brian.scheid@spglobal.com

— Edited by Zac Aiuppa, newsdesk@spglobal.com


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