ENERGY BRIEFING : Strategic Oil Reserve

The Strategic Petroleum Reserve, established in 1975 to avoid a repetition of the the 1973-74 oil crisis, has become a focus of attention since the Iraqi invasion of Kuwait. At the moment, the United States has 580 million barrels of oil in storage. President Bush has ordered the sale of 5 million barrels of crude to test how the sale and distribution system would work in the event of an emergency oil shortage.

BACKGROUND: Over the last 40 years, there were a number of suggestions that the United States should stockpile oil in case of emergency, but all were rejected as unfeasible or unnecessary until President Jimmy Carter created the Strategic Petroleum Reserve. He wanted to provide a buffer against supply disruptions, which at the time caused long lines at gas stations. Since then, the United States has spent $16 billion to buy and stockpile crude oil along the Texas and Louisiana coasts. Of late, there have been questions about how efficiently the oil can be transferred to refineries in this, the worst threat to American oil supplies since the stockpiling began.

HOW IT WORKS: All of the oil is stored underground in vast salt domes that are as much as 5 miles wide and 10 miles deep. The domes have been hollowed out to form 65 cavities, each large enough to hold more than 10 million barrels of crude oil, equivalent in size to the World Trade Center.

The hollowing-out is accomplished by what is known as “solution mining,” in which a well is drilled to the salt and fresh water is injected. The water dissolves the salt, and the brine is then pumped out. Each of these cavities requires as much as 90 million barrels of water and more than two years to complete.

“It’s no new technique,” said Mike Farley, a spokesman for the Strategic Petroleum Reserve office in New Orleans. “Private industry has been storing vaporous and liquid hydrocarbons in them for the last 40 years. It’s cheap, about a third the cost of above-ground storage.”

Farley said that, once the oil is injected, the salt stops dissolving and the cavity is like a huge underground bottle.

The process of recovering the oil from the earth is, in theory, relatively simple. Water is pumped into the cavity, where it begins to fill the bottom of the hole. The oil, by displacement, is pushed upward and into pipelines, which carry the crude to refineries, barges or tankers, depending on how it is going to be used.

OUTLOOK: John Donnelly of the Department of Energy said that the first of the crude could be shipped to successful bidders as early as Saturday. A number of experts have expressed some concern that distribution difficulties could lead to spot shortages.

But Farley said a test in 1985 went without a hitch and that his office has been on “drawdown alert” since the Aug. 2 invasion, which means all equipment has been thoroughly checked.

“It really should go smoothly,” he said. “Everything is up and running.”

The chance that the exercise will go well is further enhanced by the fact that only 167,000 barrels a day will be shipped for a 30-day period. At full capacity, 3.5 million barrels a day can be pumped from the reserve.

Dale Steffes of Planning and Forecasting Consultants in Houston said he did not think there would be any major hitches in the logistics of getting the oil to the refineries and then on the market in the form of such necessities as gasoline and heating oil.

“I don’t see that as a problem because that’s what crude oil traders and refiners do for a living,” he said.