The Energy Department said late Friday it will purchase a total of 1 million barrels of ultra-low sulfur diesel fuel in October and November for shipment to the government's heating oil reserve in the Northeast.

The move follows the awarding of the final two contracts for storage of 350,000 barrels of oil for the reserve.

Hess Corp. (HES) received a contract to store 100,000 barrels of ultra-low sulfur distillate at its Groton , Conn. , terminal. The new $359,000 contract is valid for a year with three one-year extensions. Hess previously received a contract, and now accounts for 500,000 barrels of the storage at the reserve.

Global Companies LLC in Revere , Mass. , received a contract to store 250,000 barrels, after an earlier contract for a similar volume. The new one-year contract, worth $2.085 million, has three one-year renewal options.

The move will complete the conversion of the government's Northeast Heating Oil Reserve from a 2- million-barrel facility designed to cover emergency winter needs for heating oil, to a 1-million-barrel facility containing the cleaner burning fuel that is used in diesel engines. The cleaner fuel increasingly is being required for use as heating oil in states throughout the Northeast, the world's biggest market for heating oil. Of the U.S. homes that rely on heating oil, 69% are in the Northeast.

Several Northeastern states have switched to more stringent fuel standards that will require replacement of high-sulfur (2000 parts per million) heating oil with ultra-low sulfur distillate, containing now more than 15 parts per million of sulfur.

The Energy Department said earlier, when it sold the heating oil in reserve, that a declining market for the fuel meant it didn't need to again have a 2-million-barrel reserve. The reserve will provide "supplemental supplies to New England , the area most vulnerable to a supply disruption," the department said.

In awarding the earlier storage contracts in late August, the Energy Department said the remaining 350,000 barrels of storage space to be leased will be north of the New York Harbor area. That area "has abundant commercial stocks and connections to local refineries and a major pipeline for resupply," the department said.

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