Firms Complain of Contaminated Crude From US Reserve

Credit: Richard Carson/Reuters.
An oil storage tank and crude oil pipeline equipment is seen during a tour by the Department of Energy at the Strategic Petroleum Reserve in Freeport, Texas, on 9 June 9 2016.

Three firms that bought crude oil last year from US emergency stockpiles raised concerns about dangerous levels of a poisonous chemical in the cargoes, according to internal Energy Department emails and shipping documents reviewed by Reuters.

Problems with crude quality would make the US Strategic Petroleum Reserve (SPR) less useful in an emergency because refiners would need to spend time and money removing contamination before producing fuel. The reserve is the world’s largest government stockpile, currently holding 665 million bbl.

Hydrogen sulfide (H2S) occurs naturally in crude and natural gas, but oil producers typically decontaminate such products before delivery to buyers. High levels of H2S can corrode refinery parts and pipelines—and can be lethal to humans in gas form.

Authorities in all major consuming countries keep oil in reserve to ensure that they do not run out of crude to refine into fuels if a natural disaster or war disrupts global supplies. The US government established its reserve in 1975 following the Arab oil embargo.

The US Department of Energy oversees the reserve and periodically sells some of its oil at times when there are no emergencies, as it did with the sales that sparked contamination concerns.

Department Spokeswoman Shaylyn Hynes declined to comment about the contamination complaints.

The three firms that raised concerns about high H2S levels were Royal Dutch Shell; Australian bank Macquarie Group; and PetroChina International America, the US trading arm of state-owned energy firm PetroChina, according to the shipping documents, emails provided by the Energy Department in response to a public records request, and a department official who declined to be identified.

The department took responsibility for cleaning the shipment to PetroChina with an additive after it determined in May of last year that levels of H2S were too high, according to the department official. The department disputes tests showing levels were too high in the other two cargoes, the official said.

All three firms bought cargoes of SPR oil stored in an underground salt cavern in Bryan Mound, Texas last year. The oil was pumped from Bryan Mound through pipelines to the nearest oil terminal at Freeport, Texas before being loaded onto ships, according to records reviewed by Reuters and the department official.

Safety Concerns
In November, Australian bank Macquarie Group bought the third shipment from the SPR and sold it to PetroChina, according to the shipping documents reviewed by Reuters.

The cargo was loaded at Freeport onto a ship called the Stena Sunrise, the documents show.

A testing company named Inspectorate tested a sample from the SPR cargo purchased by Macquarie, according to the documents, and found H2S levels of up to 9,000 ppm.

Inspectorate declined to comment and referred questions to the Energy Department. Macquarie declined to comment.

After the Inspectorate testing, the terminal operator refused to allow workers to perform additional tests out of concern about violating safety regulations, according to the shipping documents.

It is unclear if PetroChina or Macquarie decontaminated the cargo. PetroChina shipped the oil to China, where it arrived on 18 January, according to Thomson Reuters shipping data.

Read the full story here.


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