The International Liquid Terminals Association (ILTA) has responded positively to the release by the US government of 30m bbl of storage capacity from the Strategic Petroleum Reserve (SPR) for commercial use. However, in a firm letter to the President, ILTA president Kathryn Clay warns that this must only be a temporary solution. Her letter reads as follows:
Dear Mr. President:
Thank you for your leadership during this unprecedented time. As you know, the COVID-19 pandemic has led to stay-at-home orders in the United States and internationally, resulting in a 30 percent drop in oil demand. Plummeting demand, along with oversupply by other nations, has caused a severe imbalance in the market.
Considering today’s exceptional circumstances, ILTA has no objection to the administration’s plans to lease storage capacity in Strategic Petroleum Reserve locations to commercial interests. On April 14, Energy Secretary Dan Brouillette announced his department had awarded contracts to store a total of 23 million barrels of the 30 million barrels initially offered in the reserve, with the first deliveries taken earlier this week.
Once normal market conditions are re-established, ILTA would oppose further government actions in commercial storage markets. Allowing government-owned storage into the market constitutes a subsidized storage service that could place private commercial storage operators at a competitive disadvantage.
Under normal market conditions, imbalances between oil supply and demand are readily addressed using above ground storage provided by crude oil terminals and tank farms located throughout the country. Our member companies own and operate liquid storage terminals, including crude oil storage, in all fifty states. Overall, the United States has over 250 crude oil storage terminal facilities with a net storage capacity of about 500 million barrels.
According to statistics published by the Energy Information Administration, the historical storage utilization rate of these crude oil terminals ranges from 45 to 55 percent. In a normal year, assuming last year’s peak rates for domestic production of 13 million barrels per day, the liquid storage industry has the flexibility to absorb nearly three weeks of domestic production. If not for the extreme circumstances the nation is now facing, the considerable amount of storage capacity provided by our industry would be ample to provide balancing and flexibility to oil markets.
However, we recognize that the effects on the oil market from the current global pandemic are no ordinary circumstances. Crude oil storage inventories are at record levels – at or very near capacity at commercial tanks across the country. Our members have taken every opportunity to consolidate existing stocks at storage facilities, but there is little to no extra availability beyond existing storage contracts. Moreover, expanding storage capacity is a lengthy process that varies by the size of tank and permitting jurisdiction. A typical aboveground storage tank in a petroleum product terminal would require 12-18 months to permit and construct.[post_title] => ILTA responds to SPR release [post_excerpt] => [post_status] => publish [comment_status] => open [ping_status] => open [post_password] => [post_name] => ilta-responds-to-spr-release [to_ping] => [pinged] => [post_modified] => 2020-05-01 10:26:46 [post_modified_gmt] => 2020-05-01 09:26:46 [post_content_filtered] => [post_parent] => 0 [guid] => https://hcblive.com/?p=20405 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw )