Strategic Petroleum Reserve Crude Oil Exchange Solicitation Reissued

Offers Requested for the 7 Million Barrels of Crude Oil  the Department was Unable to Award Last Week 

New Orleans, LA - The U.S. Department of Energy has reissued its call for offers to exchange Strategic Petroleum Reserve crude oil. The new solicitation, issued today from the Reserve's New Orleans office, requests offers for the 7 million barrels of crude oil that the Department was unable to award last week when two companies which had previously submitted winning offers could not provide the necessary financial guarantees.

The Energy Department had offered a total of 30 million barrels of crude oil in exchange for that amount, plus additional oil, to be returned to the Strategic Reserve next year.

The new solicitation sets Monday, October 23, as the deadline for new offers. (The timeframe used in the previous solicitation would have set the due date for this coming Friday, but since that is the last day for trading for November oil contracts on the New York Mercantile Exchange, the Department opted to move the bid deadline to the following Monday.) In addition to the amount of crude oil, the Department made the following changes to the solicitation:

• Companies must take delivery of crude oil from the Reserve before the end of December although earlier deliveries could be arranged. The original solicitation specified the month of November for oil deliveries from the Reserve.

• A bid bond must accompany all offers. The bond must guarantee that, in the event the Department selects an offer but the offeror cannot produce the required letter-of-credit, the offeror must pay either 5 percent of the value of the offer or $3 million whichever is less. This upfront requirement had been waived in the initial solicitation. To ensure that small businesses continue to have the opportunity to participate, the Department reduced the dollar threshold from $10 million, the amount it would require in an actual emergency drawdown and sale of Reserve crude oil.

• The irrevocable letter of credit which the offeror must provide prior to actually acquiring crude oil from the Reserve is now set at 110% of the value of the Reserve crude oil on the day of the contract award. Previously, DOE had set the letter-of-credit requirement for 100% of the value of the crude oil; the change adds additional protection to the government should oil prices rise next year when the crude oil is to be returned, and the offeror fails to deliver the contractually required volume of oil.

As in the previous solicitation, successful offerors must agree to return a comparable quality of crude oil, plus a bonus percentage, to the government between August and November of 2001.