US oil sale helps SPR to fight cavern shrinkage

* Company managing SPR routinely fights salt "creep"

* 2011 sale makes fight easier

WASHINGTON, Oct 2 (Reuters) - Last year's sale from U.S. emergency crude oil reserves has helped battle shrinking capacity or "creep" at the 62 salt caverns in Texas and Louisiana that form the Strategic Petroleum Reserve, the Energy Department's inspector general said on Tuesday.

A geological force known as creep causes the caverns, which hold up to 727 million barrels of oil, to shrink at a rate that can reduce capacity by 1 million to 2 million barrels a year.

The company that runs the SPR for the government, DM Petroleum Operations Company, which is majority owned by Jacobs Engineering Group Inc , conducts routine "leaching" -- or the blasting of fresh water at the caverns' walls to dissolve salt and maintain the capacity.

Last year the Obama administration sold 30 million barrels from the reserve in coordination with a broader international sale of petroleum to calm oil markets that had risen due to civil war in Libya.

"This reduction addressed the immediate capacity issues and permitted the Department to implement more aggressive leaching activities," the inspector general said in its report.

The report looked into an allegation that the death in 2010 of a worker at the SPR was caused by filling the reserve to its authorized capacity. The report found no evidence to support the allegation.

"We confirmed that the fatality occurred while a contractor was cleaning a crude oil storage tank, but we could find no relation to the storage capacity concern identified in the allegation," the inspector general said in the report.

A source at the Energy Department's Fossil Energy division confirmed that the release of 30 million barrels made work to maintain capacity easier. Crews also move oil from cavern to cavern to help fight creep, the source added.

The SPR currently holds about 695 million barrels after the 2011 sale and a loan of 1 million barrels to Marathon Petroleum Corp after Hurricane Isaac in August caused delays and outages at refineries and production facilities.

The Obama administration has said for months that tapping the SPR is one option on the table to dampen petroleum prices and prevent the high costs from undermining sanctions on Iran.

(Reporting by Timothy Gardner; Editing by Marguerita Choy)

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