The U.S. Department of Energy (DOE) announced on October 14th that it would open another round of bidding for 7 million barrels of oil from the Strategic Petroleum Reserve (SPR) on October 16th.
A new solicitation for bids will be opened for the oil after two energy firms failed to secure the necessary letters of credit to complete the SPR deal, with bids due on October 23rd.
The two firms, Euell Energy Resources and Lance Stroud Enterprises, were awarded three million and four million barrels, respectively, on October 4th in a move that surprised many in the industry. Euell and Lance Stroud, along with Burhany Energy Enterprises, were awarded one-third of the 30 million barrels of oil to be released from the SPR.
Burhany was granted an extension to the deadline and was able to transfer the title for its three million barrels to Hess Energy Trading. The DOE said that: “The letters (of credit) were required by the government for the value of oil, assuring taxpayers of no loss of oil or money in the SPR exchange.”
The Senate energy committee and the House energy and power subcommittee will hold hearings on October 19th focusing on why the DOE awarded oil to the three firms with no refining capacity or prior history in the industry and why the department did not require that heating oil produced from refining the crude be used for domestic consumption only.
The DOE began transferring the first half million barrels from the SPR’s Bryan Mound site in Texas to Morgan Stanley Dean Witter late on October 13th. The department also announced that the final delivery for the 2-million-barrel Northeast heating oil reserve had been received.