Three firms that bought crude oil last year from U.S. 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 U.S. 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 barrels.
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 U.S. government established its reserve in 1975 following the Arab oil embargo.
The U.S. 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 uncovered by Reuters.
The three firms that raised concerns about high H2S levels were Royal Dutch Shell Co (RDSa.L), Australian bank Macquarie Group and PetroChina International America, the U.S. trading arm of state-owned energy firm PetroChina Co Ltd [601857.SS], 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.
The Freeport facility is owned by Houston-based Enterprise Products Partners LP (EPD.N). Enterprise knew about higher levels of H2S in a small number of cargoes traded between private firms that passed through its terminal, Enterprise Senior Vice President Brent Secrest told Reuters in an interview.
“Of the hundreds of cargoes we’ve loaded across Freeport and other Enterprise terminals, we’ve only had a handful of customers give us feedback regarding high levels of H2S,” he said.