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DOE REJECTS ALL BIDS FOR ELK HILLS CRUDE OIL SALE, WILL ISSUE NEW SOLICITATION IN HOPES OF ATTRACTING HIGHER PRICES

 DOE REJECTS ALL BIDS FOR ELK HILLS CRUDE OIL SALE,


WILL ISSUE NEW SOLICITATION IN HOPES OF ATTRACTING HIGHER PRICES
 WASHINGTON, March 20 /PRNewswire/ -- The Department of Energy (DOE) has rejected all bids submitted earlier this month in the semi- annual sale of crude oil from the Elk Hills Naval Petroleum Reserve in California.
 DOE said today that none of the 19 bidders offered acceptable prices for the 53,740 barrels per day of crude oil the agency tendered for sale. The bids ranged from $11.71 per barrel to $14.06 per barrel, with the top bids for the highest quality oil -- the so- called "Stevens Zone" crude -- averaging $13.25.
 As a result, the department will exercise its unilateral right to extend current oil purchase contracts through April while it issues a second solicitation for new bids.
 At the same time, DOE said it will examine the possibility of shipping some or all of the Elk Hills crude oil by pipeline to the Strategic Petroleum Reserve in Texas and Louisiana.
 DOE said the Elk Hills bids received on March 5 for the six-month period beginning in April were abnormally low compared to recent history. Bid prices averaged below the department's published "base reference price" for only the second time in the last 14 bid openings, dating back to 1986.
 The only other time bids dropped below the reference price was in 1987 when they averaged about 10 cents per barrel lower; the current bids were nearly 76 cents per barrel below the reference.
 The "base reference price" is set by the department using a combination of Alaska North Slope crude and a blended crude, both sold in California. It is used to adjust Elk Hills crude oil contract prices to reflect market changes in California during the sales period.
 In recent bid openings, the average winning bids for Elk Hills Stevens Zone crude oil had ranged from 85 cents per barrel to as much as $1.86 per barrel above the base reference price, reflecting largely the high value placed by California buyers on the oil's relatively high quality. The Stevens Zone crude is typically lighter than most crudes produced in the state, making it easier to transport and refine. It is also a valuable blending agent for the heavier crudes in the area.
 During the next few weeks, DOE will explore with various pipeline companies all the alternatives for shipping Elk Hills oil to the Strategic Petroleum Reserve. DOE is examining this approach in case acceptable bids are not received from the second solicitation.
 Last month Secretary of Energy James D. Watkins announced that the department would begin acquiring crude oil again for the Strategic Petroleum Reserve, following a 19-month hiatus in oil fill that began when Iraq invaded Kuwait.
 The new solicitation is scheduled to be issued on March 23 with bids due on April 15.
 -0- 3/20/92
 /CONTACT: John Donnelly of the U.S. Department of Energy, 202-586-5810/ CO: U.S. Department of Energy ST: District of Columbia IN: OIL SU:


DC -- DC006 -- 0014 03/20/92 10:16 EST
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Publication:PR Newswire
Date:Mar 20, 1992
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