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UpstreamOnline: US hawks royalty-in-kind crude

By Upstream staff

The US Interior Department said today it had sold almost 8.6 million barrels of crude oil the government collects from energy companies as royalties for drilling in federal offshore waters.

The crude should arrive in time to boost available US heating oil supplies this winter and may also help offset some of the crude that will be lost after BP shut down part of its giant Prudhoe Bay oil field in Alaska for pipeline repairs.

The oil, which will be delivered to seven energy companies at an average rate of 47,000 barrels per day over a six-month period beginning in October, will be processed into more than 350 million gallons of gasoline, diesel fuel, heating oil, jet fuel and other petroleum products, the department said.

The so-called royalty-in-kind oil was sold to ExxonMobil, Chevron, Shell Oil, ConocoPhillips, Marathon Petroleum, Citadel Energy Products and Plains Marketing, Reuters reported/

The oil will come from a government programme that allows energy companies to forgo paying cash royalties on the crude they drill on federal leases mostly in the Gulf of Mexico, and instead turn over a portion of oil they find as in-kind royalty payments.

The oil is then sold competitively in the open market.

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