UPDATE 1-US sells 16.1 mln bbl royalty-in-kind oil -MMS

(Adds background on royalty sales program)

WASHINGTON, May 16 (Reuters) - The U.S. government said on Friday it has sold 16.1 million barrels of oil produced on federal land to four energy companies, putting more supply on the market at a time of record high prices.

The four companies - units of Chevron Corp. (CVX.N: Quote, Profile, Research), ExxonMobil Corp. (XOM.N: Quote, Profile, Research), Sempra Energy Trading (SRE.N: Quote, Profile, Research), and Royal Dutch Shell plc (RDSa.L: Quote, Profile, Research) - will pay $1.9 billion for the oil based on current oil prices near $127 a barrel, the Interior Department said.

The oil will be delivered to the companies over 6 months beginning on July 1.

The move by the department's Minerals Management Service (MMS) is not a release of oil from the Strategic Petroleum Reserve, an action reserved for severe supply disruptions like the hurricanes that hit the Gulf Coast in 2005.

Instead, the MMS occasionally sells oil turned over to the government by energy companies as royalties that were due on the crude they drilled on federal leases in lieu of paying cash royalties.

The department's royalty-in-kind program, which is a decade old, allows the MMS to directly sell oil produced on federal lands to raise funds for the U.S. Treasury.

Separately, the U.S. government on Friday said it would not sign contracts with energy companies to deliver up to 13 million barrels of crude oil to the U.S. emergency stockpile.

The Energy Department's decision comes after Congress this week approved legislation ordering the Bush administration to stop putting oil into the emergency stockpile until crude prices fall below $75 per barrel, far lower than current levels. (Reporting by Chris Baltimore; Editing by David Gregorio)