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Reuters: Shell to deliver 8.7 mln bbls to U.S. oil reserve

Thu May 10, 2007 8:48 PM BST

WASHINGTON, May 10 (Reuters) – The U.S. Energy Department said on Thursday it awarded Royal Dutch Shell Plc’s (RDSa.L: Quote, Profile , Research) Shell Trading unit a contract to deliver 8.7 million barrels of royalty-in-kind oil to the Strategic Petroleum Reserve.

The Bush administration wants to boost the reserve to have a bigger oil cushion that could handle supply emergencies. The oil will come from energy companies that turn over a portion of the crude they drill on federal offshore leases as royalty fees in lieu of making cash royalty payments.

The oil will be delivered to the emergency stockpile over six months beginning in August at a “modest rate” of about 50,000 barrels a day, the Energy Department said.

The oil will go to two of the reserve’s locations, the West Hackberry site near Lake Charles, Louisiana and the Bryan Mound site at Freeport, Texas.

The reserve, which was created by Congress in 1975 after the Arab oil embargo, now stores 690 million barrels of crude underground at four sites in Texas and Louisiana.

The department is in the process of filling the stockpile to its current capacity of 727 million barrels and will then expand it to 1 billion barrels.

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