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Page added on June 15, 2016
A rare tour of the Strategic Petroleum Reserve
The world’s largest emergency stockpile of crude oil is quickly falling apart.
The stockpile’s infrastructure, which currently stores 695.1 million barrels at four sites along the US Gulf Coast, is nearing the end of its design life and in need of a roughly $2 billion makeover, US Department of Energy officials claim.
“We’ve had several significant equipment failures over the last couple years that have affected our operational capability,” said Bob Corbin, the DOE deputy assistant secretary who oversees the stockpile, formally known as the US Strategic Petroleum Reserve.
In April, a water pipe at the DOE’s Big Hill site in Winnie, Texas failed, less than a year after a crude oil storage tank failed at the Bryan Mound SPR site near Freeport, Texas.
Throughout the system, pipes are corroding, tank floors need to be replaced, wells are failing mechanical integrity tests and pump motors, after decades of dealing with harsh weather and salty air off the Gulf of Mexico, are breaking down beyond repair, DOE officials claim.
Corbin said these issues complicate the ability of DOE to both drawdown and distribute crude oil at times of severe supply distributions, which is the primary reason the SPR was created more than four decades ago. They also complicate US’ ability to meet obligations under international agreements and could endanger energy security.
Last week, Corbin led a media tour of the Bryan Mound SPR site, the largest of the four SPR sites in Texas and Louisiana.
Bryan Mound is a 500-acre site which currently holds 245 million barrels of crude (2.1 million barrels below its design storage capacity) in 19 operational storage caverns. The SPR has two types of caverns in salt domes: SPR-designed caverns (the long, green caverns in the model) and Early Storage Reserve-caverns (the flatter, reddish-colored caverns in the model). The ESR caverns are typically repurposed salt domes and have operational restrictions the more current SPR-designed caverns do not have. The ESR caverns at the Bryan Mound site were originally used by Dow Chemical to store magnesium. The entire SPR has 49 SPR-designed caverns and 11 ESR caverns.
Cavern 5 at Bryan Mound is the largest crude oil storage cavern in the world and can store up to 37 million barrels of crude. DOE claims that underground caverns, which are roughly 2,000 to 2,200 feet in depth and 200 feet in diameter, can be built for about 1/5 of the cost of conventional surface tanks and have operating costs of less than 30 cents/barrel. The SPR primarily holds light crude, but has 75 million barrels of medium sour, roughly 10.8% of its total inventory. It currently hold 266.1 million barrels of light sweet crude, 38.3% of its inventory, and 354 million barrels of light sour, or 50.9%.
Bryan Mound currently holds 68.6 million barrels of sweet crude in six caverns and 176.4 million barrels of sour crude in 13 other caverns. The site has 45 operational wells and connects to four crude oil distribution sales points: Freeport terminal ship docks; Jones Creek pipeline; Texas City terminal ship docks; and Texas City terminal pipeline.
Congress has approved sales of millions of barrels of SPR crude to help pay for unrelated transportation plans and a modernization effort for the SPR. These sales, which will continue through fiscal 2025, could take the SPR from its current inventory of 695.1 million barrels to 530 million barrels, a threshold DOE needs to stay above in order for the President to maintain statutory authority to approve emergency releases from the stockpile.
“If you get below 530 million barrels…that would basically take away the authority of the president to conduct limited drawdowns, which means small disruptions, not even huge disruptions, would be difficult, if not impossible to respond to as a result,” Corbin said.
Corbin (pictured above) said while millions of barrels of SPR crude will be sold off over the next nine years, he’s not sure if that crude will ever be replaced.
“Buying and selling oil at the same time, from a net inventory result, I think is counterproductive, but you just don’t know what’s going to happen,” he said.
In a report Corbin authored, DOE is expected to recommend an ideal size for the SPR, in light of the ongoing growth of US shale oil. Corbin declined to comment on that recommendation, but said the SPR will be “smaller than it is today” but its exact size is yet to be determined. The report is expected to be released within a month.
The SPR’s drawdown rate, the pace at which crude can be pushed out of storage caverns to pipelines, is designed to be 4.415 million b/d over 90 days before the rate begins to fall. But a smaller SPR could reduce that rate dramatically, hindering the ability of DOE to bring crude to a distressed global market.
“As you reduce your inventory levels, and reduce the number of caverns that oil is stored in, because of flow hydraulics, it changes both the drawdown rate and the maximum duration that you can sustain that rate,” Corbin said.
At the same time, the SPR is also losing as much as 2.4 million barrels of storage space per year by both natural creep, caused by the force of the earth pushing on the caverns, and induced creep, which occurs when a cavern needs to be depressurized for maintenance, he said.
“The creep issues will continue going forward, there is nothing anybody can do about those,” Corbin said. “The question becomes, from a planning perspective how does creep impact your storage capacity going forward and how does it impact your requirements for storage capacity going forward?”
Each SPR site uses a system where water is injected into caverns, displacing stored oil and brine and pushing it into crude pipes and eventually sent into pipelines and ships to the Gulf of Mexico.
The ability of that system to work, however, has been complicated both by the SPR’s aging infrastructure and changes to how crude oil now moves in the US. DOE is pushing for dedicated marine terminals in order to ship out crude at times of supply shocks so that crude which would otherwise be sent out from existing marine facilities would not be displaced. Details of this request will be featured in DOE’s upcoming report, Corbin said.
The SPR was established through the Energy Policy & Conservation Act of 1975 and is beginning to show its age. The floor of this tank (pictured above) has corroded and needs to be replaced.
During the tour, a crew worked on repairing a well of one cavern which had failed a state-mandated mechanical integrity test.
The Bipartisan Budget Act of 2015 calls for sales between fiscal 2017 through 2020 totaling $2 billion from the SPR to pay for the effort to address many of these issues. But Congress still needs to appropriate the funding for this effort.
DOE warns that if sales do not take place over the next four fiscal years additional, larger volumes will need to be sold in later years when other sales are already scheduled to take place.
23 Comments on "A rare tour of the Strategic Petroleum Reserve"
Boat on Wed, 15th Jun 2016 12:37 pm
Never sell oil unless the price is high. Avoid buying oil unless prices are low. Use those holes in the ground to make money. Capitalism 101.
penury on Wed, 15th Jun 2016 1:58 pm
I suppose that DOE like all state and federal agencies has found that it is easier (and more rewarding) to skip routine upkeep and just go for the complete replacement every so often. Its just not satisfying to do routine work. Its so routine.
ghung on Wed, 15th Jun 2016 2:18 pm
Meh,, whine to Congress. I’m sure they’ll be right on it like everything else; highway bridges, the VA, healthcare, the railroads….
Maybe they can sell off the reserve to fund repairs. They can fill it back up when oil prices go up; make their big energy sponsors happy.
ghung on Wed, 15th Jun 2016 2:21 pm
BTW, penury, energy (incl. DOE) and environment are less than 1% of the total federal budget. Maybe they can borrow a few billion from the military.
PracticalMaina on Wed, 15th Jun 2016 2:25 pm
Ghung, I think something will get done on this only because the military will stress its importance.
rockman on Wed, 15th Jun 2016 4:41 pm
Practice – Right in the nose even if you don’t know the details: “If you get below 530 million barrels…that would basically take away the authority of the president to conduct limited drawdowns, which means small disruptions, not even huge disruptions, would be difficult, if not impossible to respond to as a result…”
Did that slip by everyone? Do you think they are telling you we can’t recover more than half the oil in the SPR? IOW half a BILLION BBLS OF OIL IS LOST FOREVER? First, you have to understand how the oil is produced. The caverns have a pressurized cap of NG. Which means all they need do is open the wells and the oil flows. Of course as they oil is produced the pressure declines. Oh my Dog…what to do, what to do? LOL.
What you do is pump more NG into the cap to maintain the pressure. Kinda a basic law of physics. Even if there’s only 100 million bbls it can still flow at the same rate as it could if there were 700 million bbls.
So where does that magic 530 million bbls number come from and why doesn’t the POTUS have the authority to draw down from that level? He actually does have the authority to producer it. What the Congressional law doesn’t allow him to do is distribute it to the public: it belongs to the Department of Defense. That was the primary reason the SPR was built: the DOD is THE largest single consumer of oil on the planet.
Really? No one had a question about the statement that the POTUS isn’t allowed to pull oil out of the SPR when it got down to 530 million bbls? Really? Really? LOL.Somehow that seemed logical?
Want to see the details of the actual CONGRESSIONAL LAW? Schedule a lot of time: it is very difficult…intenational IMHO. Years ago I found some summaries but can’t now. Many of the regs were obviously designed to minimize political considerations.
No one questioned why there was a 530 million bbl limit? Really? LOL.
makati1 on Wed, 15th Jun 2016 6:18 pm
The military always has 1st rights to the oil, but in the next hot war, it will not matter. The war will be over before the order to use it will be needed.
I want a tour of Fort Knox to see the gold painted lead bars stored there. I don’t care about the oily stuff.
Go Speed Racer on Wed, 15th Jun 2016 8:45 pm
Sorry Makita, I tunneled into Knox in 1994, and carted away all those gold bars. There was not that many left anyway.
makati1 on Wed, 15th Jun 2016 9:05 pm
Probably didn’t even break a sweat carrying the one that they left so they could claim that there is gold there. LOL
I hope you kept it for future needs. ^_^
ghung on Wed, 15th Jun 2016 10:21 pm
Rock; “No one questioned why there was a 530 million bbl limit? Really?”
Give it up Rock. It’s not whether or not we missed it. It’s whether or not the infrastructure can do all the things you drone about without another SoCal Aliso Canyon mess. If the SPR begins leaking like a sieve it won’t matter how much gas you pump in. Seems Porter Ranch springs leaks as fast as they plug ’em. I’m betting the SPR isn’t in much better shape. Who has (or doesn’t have) the “authority” is a strawman argument.
theedrich on Thu, 16th Jun 2016 4:03 am
The SPR is simply following the path of general decline. The costs of national infrastructure repair and replacement are exceeding the ability of mathematics to keep up with them. Politicians always pretend that the current state of affairs is permanent and any problems are “externalities,” so a little more corruption and deterioration won’t matter. Moreover, the electorate demands more freebies and unicorns. Add all this to the general psychological decline (partly induced by the narcotics pandemic) and the genetic defilement by ThirdWorldification, and you have a perfect picture of impending and irreversible civilizational collapse.
rockman on Thu, 16th Jun 2016 7:28 am
Ghung et al – You’re talking about standard (and relatively cheap) oil field maintenance. And the system isn’t dependent upo a few wells but hundreds. And it’s not one storage facility but many dozens. Not sure what his hidden agenda was behind pissing on the infrastructure but if one understands the dynamic of the ENTIRE system there’s no real problem.
So you really bought into a system degradation forcing us to leave $25 BILLION in oil in the SPR. Really? LOL.
PracticalMaina on Thu, 16th Jun 2016 10:05 am
A few hundred oil wells is a few hundred times as likely to experience some sort of issue. More possibility of lack or proper maintenance, more chance of hickups, or gas leaks.. Also storing oil in such a manner, (with a pressurized explosive vapor for a cap) for a strategic reserve seems a little dangerous…
rockman on Thu, 16th Jun 2016 11:26 am
Practical – No more dangerous then the hundreds of thousands of wells that have produced hundrerds of billions of bbls of oil from natural reservoirs. Perhaps I should have explained that the SPR essential duplicates a very common reservoir drive mechanism.
I don’t want waste more time on this. If folks want to buy into this alarmest bullish*t have at it. Personally it wouldn’t hurt my feelings if the entire SPR system crumbled before our eyes: the oil patch would make a lot more money. Y’all do understand the SPR was built to specifically prevent us from taking advantage of an oil crunch, don’t y’all?
So have at it: run around like your hair is on fire…it’s amusing. LOL.
And Practical: BTW every cubic foot of NG consumed in the US comes from a storage system that’s pressurized exactly how the SPR is designed. Something else to keep you awake at night. LOL.
geopressure on Thu, 16th Jun 2016 1:55 pm
the mineral owners of SPR sites make so much money that it does not matter if there are leaks (which are rare)…
& the land owners were bought out decades ago by the federal government…
natty gas has to be compressed, which makes it more prone to leakage…
geopressure on Thu, 16th Jun 2016 1:56 pm
storing oil or natural gas is one of the more profitable businesses there is… it’s up there with manufacturing/selling cocaine
Boat on Thu, 16th Jun 2016 3:43 pm
geo,
You got links?
ghung on Thu, 16th Jun 2016 5:05 pm
I always enjoy checking in to witness the Rock go hyperbolic. Who TF is “running around like their hair is on fire” Rock? Just askin”.
Signed: Truly Amused.
Practicalmaina on Thu, 16th Jun 2016 6:51 pm
Rockman you don’t need to tell me about dangerous storage all around, Lac-Megantic and a development leveled by a shitty propane install are 2 fairly recent events in my relative neck of the woods.
It was made to keep you guys honest Rock? I thought it was strategic for war time or disaster needs. Not to keep the greedy bastards we already subsidize from screwing us worst. Large concentated pressurized storage in a flat open prarie seems like a bad strategic set up if the Russians felt frisky.
Boat on Thu, 16th Jun 2016 9:27 pm
Practicalmaina
As opposed to what. Storing FF downtown in a large city?
ghung on Thu, 16th Jun 2016 10:20 pm
Boat: “As opposed to what. Storing FF downtown in a large city?”
As opposed to maintaining your shit. Producing a product that everyone needs doesn’t give the industry a pass.
News bulletin: A lot of folks are getting tired of reading about ruptured pipelines, exploding off-shore wells, leaking storage facilities, bankrupt service companies that borrowed too much from somebody’s pension plan, state taxes going to plug old wells that weren’t done right in the first place, fouled ground water from fracking, earthquakes in Oklahoma, Middle Eastern assholes who think they have the world by the balls and the trillions of tax dollars going to support those Middle East assholes, “petro dollars”……, I could go on, but fact is, the oil patch has a big freakin’ PR problem and at some point Joe Sixpack is going to make other arrangements or crash the economy trying (already happening, that).
It doesn’t take a rocket scientist to figure out what a Faustian bargain fossil fuels have been. Society may be slow on the uptake, but it’ll get there sooner or later, come hell and high water. Seems those who’ve been in service their whole lives to a dying industry, on a dying planet, can’t afford to show any humility in light of their predicament.
Boat on Thu, 16th Jun 2016 10:58 pm
ghung,
I don’t disagree with anything you said but nothing will ever happen unless the alternative is cheaper. Capitalism 101.
Apneaman on Thu, 16th Jun 2016 11:27 pm
Boat here’s some more FF mess in your back yard.
Massive sinkholes in Texas could combine to form even massiver sinkhole
http://grist.org/living/massive-sinkholes-in-texas-could-combine-to-form-even-massiver-sinkhole/