Low Oil Price Raises Question: Should U.S. Add More Crude to Reserve?
Thousands of feet below the swamp slime and cypress of the Louisiana marsh lies what Doug Pulliam considers a $1-billion defense asset crucial to national security.
Pulliam is keeper of the cavern here, but he is not in the military, and what is stored below, in a silo 13 times the size of the Washington Monument, isn’t a missile.
It is oil. Expensive oil.
Since 1978, the Department of Energy has been trying to protect the country from a foreign oil embargo by purchasing $15-billion worth of crude oil at an average cost of $30 a barrel and piping it into caverns carved out of immense underground salt domes.
By this month, the U.S. Strategic Petroleum Reserve is expected to exceed 500 million barrels of crude.
“This is an insurance policy we did not have in 1975. We can thumb our noses at the Arabs now,” said Pulliam, who manages the Bayou Choctaw site for Boeing Petroleum Services Inc., the contractor.
Accumulation Will Stop
By July, however, with the oil price half what it was six months ago, the faucet will be turned off.
The Reagan Administration has decided that 502 million barrels--about a 120-day supply--is enough of an oil reserve, even though Congress has already made appropriations to store as much as 750 million barrels.
Far from the 36-inch pipes and gray wellheads of the salt dome storage caverns, debate over what to do with the reserve supply in these days of cheaper oil has continued in Congress.
The Administration has said that the country is better off using the money set aside for the reserve to reduce the national debt. Besides, since less oil is being imported now than during the 1970s, a smaller reserve meets the original goal of a 90-day supply, officials say.
With depressed oil prices in an international market that is sometimes unstable, some congressmen have argued that now is the time to take advantage of the favorable conditions and buy more crude for storage. Recently, the congressional auditing agency, the General Accounting Office, agreed.
Bill Would Release Funds
“It makes no sense that the U.S. forgo this opportunity to increase our long-run security and add to the reserves,” Sen. Bill Bradley (D-N.J.) said in introducing a bill that would direct President Reagan to release the funds already appropriated for adding to the reserves.
The Department of Energy said, however, that it has “no plans . . . to increase the fill rate.”
Meanwhile, the lower prices have prompted the department to lift an embargo on new well construction imposed in January, according to John Wagoner, the department’s reserve project manager, in New Orleans.
“We decided to do that so we’d have options,” Wagoner said. “Personally, I’d certainly like to see the reserve completed to 750 million barrels, but at the same time, we have to recognize broad budget considerations.”
The oil reserve required a massive, secure storage place, and officials found it under ground in southern Texas and Louisiana.
Millions of years ago, domes of pure, clear salt two to five miles wide and 15,000 feet deep formed beneath the Earth’s surface.
Domes Flushed Out
Over the years, industry has exploited this unique geology to make everything from table salt to hot sauce, and oilmen have known for decades that land on the outskirts of a dome could be rich in oil.
Until the last 10 years, no one thought of putting oil back into a dome, Pulliam said.
“It’s a new technology, but mostly because no one ever thought of it,” he said.
The principles that allow engineers to store oil in cylindrical caverns 200 feet wide and 2,000 feet deep are no more complicated than those taught in junior high school science class.
A well is drilled several thousand feet deep into the dome. Water is pumped in to dissolve the salt and the brine is pumped out, to be discarded in the Gulf of Mexico. When the cavern is emptied, the oil is pumped in.
“The oil itself will be there for millions of years without changing” because it doesn’t react with the salt, Pulliam said.
To draw the oil out when it is needed, reserve officials will simply turn on the water again and let the oil, which floats, come out the wellhead on the top.
Invisible on Surface
At Bayou Choctaw, 12 miles southwest of Baton Rouge, 46 million barrels of oil worth $1 billion are stowed in four caverns, each larger than New York’s World Trade Center. Not a drop of oil can be seen on the surface; the only whiff of petroleum comes from a weed killer used at the site.
Two 12-foot-high wellheads, standard equipment on rigs in the region, top each cavern, and a huge pipeline connects the site with tanker docks 37 miles away and a freshwater lake that was formed nearby when an old salt dome collapsed.
Swamp waters full of crawfish and alligators encircle the site, and a dike protects the buildings and grounds.
The only hint of the enormous asset that lies below the surface is the security in evidence: concrete barriers form a slalom course for approaching vehicles, all of which are thoroughly searched by armed guards. An automatic rifle hangs on the guard shack wall.
Pressure in each cavern is checked constantly, to make sure that there are no leaks or thefts, and federal officials check nearby drilling rigs from time to time, to make sure no one is trying to drill diagonally, Pulliam said.
Sixth Site in Making
The reserve project, begun in 1975 after the Arab oil embargo, has five storage sites for its $15-billion worth of oil-- four in Louisiana and one in Texas--with a capacity of 509 million barrels. A second site in Texas is under construction.