Newspaper article THE JOURNAL RECORD

Bush Interested in Leasing Saudi Oil for U.S. Stockpile

Newspaper article THE JOURNAL RECORD

Bush Interested in Leasing Saudi Oil for U.S. Stockpile

Article excerpt

WASHINGTON (AP) - The Bush administation is pursuing talks with Saudi Arabia on leasing Saudi crude oil for the U.S. emergency oil stockpile, a government source disclosed Monday.

Such leases would be expected to amount to a U.S. option to buy the Saudi crude in an emergency.

Leasing would be a major shift from the Energy Department's policy of buying oil for the Strategic Petroleum Reserve. Mexico currently supplies all the oil for the U.S. stockpile under a contract expiring Nov. 30.

The main reason for leasing would be to reduce the cost of filling the oil reserve. The government currently is paying Mexico a market-based price for the roughly 60,000 barrels a day. In mid-August the price was $17.17 a barrel.

Congress earlier this year ordered the Energy Department to study leasing and to assess interest among foreign suppliers. Congress earlier ordered the department to work toward a 750-million barrel reserve.

The stockpile currently holds 575 million barrels of crude, about 73 days worth of imports, in underground salt caverns in Louisiana and Texas. It was created by Congress in 1975 in response to the 1973 Arab oil embargo led by Saudi Arabia.

The interest of Saudi Arabia, No. 1 supplier of imported crude to the United States, was first expressed in a private meeting last Thursday between Saudi Oil Minister Hisham Nazer and Energy Secretary James D. Watkins, said the source, who spoke on condition of anonymity.

``They're very interested,'' the source said, adding that leasing was the first subject raised by Nazer in the meeting at Energy Department headquarters.

No details of a possible leasing deal were discussed, and Watkins told Nazer the next step could be a meeting of the two sides' technical experts, the source said.

Penny Adams, a department spokeswoman, confirmed that the leasing idea was discussed in the meeting, but she declined to say whether the Saudis expressed interest. …

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