Article content continued

Spurious Claims?

Analysts have pointed to the stockpile as a safeguard against tightening crude supplies after U.S. sanctions on Iran and Venezuela curbed their oil exports. But Exxon’s discovery, which follows complaints by Royal Dutch Shell Plc, Macquarie Group Ltd and PetroChina Co., suggest that the reserve may not offer refiners as much insurance against diminishing volumes of higher sulfur, or sour, crude as previously thought.

The Energy Department disputed claims that it repeatedly sold tainted crude, saying that some companies’ high hydrogen sulfide readings were “spurious” or the result of contamination during shipping. In PetroChina’s case, however, the agency acknowledged spending around $1 million to clean up a contaminated cargo.

The prospect of tainted crude in the reserve complicates future sales of U.S. oil, a key tool for funding government programs. A 5 million-barrel sale is planned for 2019, and 221 million barrels of oil are planned for sale from 2020 to 2027.

Safety Risks

While hydrogen sulfide occurs naturally in crude, producers often take pains to remove it because it can put workers at risk and corrode pipelines and refineries. Many pipelines have capped the permitted amount of hydrogen sulfide, or H2S, at 10 parts per million (ppm).

“Refineries don’t want high H2S in their plants for safety reasons, especially with personnel having to access storage tanks where the oil is stored,” said John Auers, executive vice president at energy consultant Turner Mason & Co.