Baku, January 27, AZERTAC
The U.S. will begin selling its strategic petroleum reserves (SPR) to generate revenue to modernize its SPR infrastructure, the country's Department of Energy announced Wednesday, according to Anadolu Agency.
The department is set to sell up to 8 million barrels of crude oil from SPR, which currently stands at 695.1 million barrels.
A total of 21 companies submitted 157 bids for the sale, and the department awarded contracts to Shell Trading, and U.S. international energy company Phillips 66, which will buy a total of 6.4 million barrels of crude oil.
Deliveries from SPR will take place in March and April.
Given that the current price of American benchmark West Texas Intermediate is around $53 per barrel, the sale of 6.4 million barrels is expected to generate around $340 million.
“Section 404 of the Bipartisan Budget Act of 2015 authorized the sale of SPR crude oil, over the course of four years, to generate the $2 billion needed to carry out an SPR Modernization program,” the Department of Energy said in a statement.
“The revenue from this sale will fund necessary operational improvements to ensure the long-term integrity of the SPR infrastructure, as part of the SPR Modernization program,” it added.
Another bipartisan act that was enacted in December 2015, allows 66 million barrels of SPR sales from fiscal years 2023 through 2025, to fix the U.S.' highway infrastructure.
And, another act that was enacted in December 2016 allows the sale of 25 million barrels of SPR crude for fiscal years 2017 through 2019.
SPR is seen as an insurance to avoid supply shortages if the U.S.' crude imports are disrupted for any reason, from geopolitical developments to natural causes.
In addition, as a member of the International Energy Agency, the U.S. is obligated to maintain crude stocks to provide at least 90 days of net import coverage.
“Based on October 2016 levels of net crude oil and petroleum product imports, the SPR alone holds crude oil stocks equivalent to 145 days of import coverage. Private (commercial) stocks of crude oil provide another 489 million barrels, equivalent to another 102 days of import coverage,” the U.S.' Energy Information Administration said Thursday.