US Energy Secretary Rick Perry said on Friday that Australia was still in negotiations with the United States to lease space in America’s Strategic Petroleum Reserve, S&P Global Platts reported on Friday.
Australia has been looking to fall in line with the crude storage guidelines set by the International Energy Agency which require countries to hold enough oil in reserve to cover 90 days of oil imports. But as of the beginning of August, Australia only held 28 days of crude oil and gasoline. Australia has argued, however, that it actually carries quite a bit more than that if you count what is currently on the way to Australia.
So while stocks are low, Australia is not only looking to lease space to store its oil reserves, it is also looking to purchase some of US crude oil in what will likely amount to a transfer in name and title only, with no physical barrels exchanged except for in case of an emergency. Still, it would take weeks for any US oil to reach Australia, and once it got there, it would still need to be refined.
But the risks of Australia’s low reserve are real. Much of Australia’s refined products come from Asia. While this seems a reasonably safe bet on the surface, most of those Asian countries get their crude oil to refine from the Middle East. So a disruption in the Strait of Hormuz, for example, would send a ripple to Asia that would eventually make its way to Australia.
The United States has been studying the possibility of leasing its spare space in the SPR for a while, with the final results still yet to come. It was originally planning on closing some of the unused sites.
The United States just sold earlier this week 9.88 million barrels of crude oil from its SPR, leaving 644.8 million barrels of crude in the US SPR.
There has been no indication as to how long the negotiations will take.
By Julianne Geiger for Oilprice.com
