The U.S. Strategic Petroleum Reserve once again has returned to headlines with a second offer to producers seeking a landing zone for their crude oil supplies. Following a congressional block of legislation earlier this month to buy 77 MMBbls of oil for the SPR—and help loosen the stranglehold on available storage—the Dept. of Energy demonstrated there was more than one way to skin a cat. Taking on the role as landlord, the DOE announced in early April it would lease an initial 30 MMBbls of storage at the SPR in exchange for a small amount of oil to cover the cost. Prospective tenants included small, medium and large companies. This week, that offer was upped by an additional 23 MMBbls of capacity at a time when storage levels are expected to climb to 85% before June. The SPR holds a maximum 713.5 MMBbls of crude.
Meanwhile, pipeline operators also are taking action to smite the ripple effects of oversupply in a sharply abbreviated demand environment. Plains All American and others aren’t just asking—they’re requesting—suppliers reduce production. Phillips 66 will lease tank storage to its Gray Oak Pipeline shippers. Enterprise Products this week said it will offer both storage and bi-directional shipping May 1 via its Seaway Pipeline to and from the Cushing, Okla., hub and Gulf Coast. Enterprise is currently converting some of its NGLs storage tanks to accommodate gasoline and diesel.
All of which brings us to bigger questions in a much larger debate on how the U.S. oil and gas industry adjusts for the interim and moves forward post-COVID-19. What do you think?