BIS condensates ruling galvanized crude exports debate, speakers say

Sept. 22, 2014
A US Department of Commerce agency’s controversial condensate exports decision in late June that purportedly dealt with distillation actually involved stabilization, a different upgrading process, a Turner Mason & Co. official said on Sept. 19.

A US Department of Commerce agency’s controversial condensate exports decision in late June that purportedly dealt with distillation actually involved stabilization, a different upgrading process, a Turner Mason & Co. official said on Sept. 19.

The US Bureau of Industry and Security’s June 24 ruling that Enterprise Product Partners LP (EPP) and Pioneer Natural Resources Co. (PNR) could begin exporting upgraded condensate to foreign customers did not involve crude oil per se, noted John M. Mayes, Director of Special Studies at Turner, Mason & Co. (OGJ Online, June 25, 2013).

“BIS surprised many people by issuing permits to [PNR] and [EPP] to export condensate which had gone through stabilizers,” he said during an Oil & Gas Journal webcast on US crude oil exports. “It thought allowing these exports of condensate would not have a big impact.”

Mayes said the original 1970s law that restricts US crude exports defines it as a mixture of hydrocarbons that has not been processed through a distillation tower, but does not include condensates. BIS seemed to say in its clarification soon after its late June decision that EPP and PNR would have received the same decision 20 years ago, he added.

The June ruling still focused new attention on the convoluted policy distinction between US crude and products, which face no export restrictions, the teleconference’s other speaker said. “We have a wholly inconsistent position related to both crude and products,” maintained D. Mark Routt, senior staff consultant at KBC Advanced Technologies Inc.

Converging forces

The US has received a number of requests from allies to ease its crude export restrictions, Routt said. “If this continues, US refining margins will continue to be strong. Light tight oils would continue to be produced, albeit at a lower rate and for a longer time. But if exports were allowed, it would encourage more production, and sooner,” he said.

Heavy oil from Canada, where production continues to grow, soon will reach the US Gulf Coast, which will reduce US heavy oil imports from other foreign suppliers, Routt said. “We have already seen a number of projects slow down or international companies divest their stakes. Our view is that frontier boundaries like the Brazilian subsalt and the Shetlands will be affected. It’s not happening with onshore light tight oil in the US,” he said.

Mayes said that while PNR and EPP are using stabilization to make condensate suitable for pipeline transportation, it would be more practical for BIS to allow the process to be moved to export terminals. Condensate splitters, which yield multiple products, are all being proposed at Gulf Coast refineries, but more stabilization in the field would seem to reduce export obstacles, he indicated.

Routt said growing US light oil production already is affected global markets despite export restrictions. Nigerian, West African, and Angolan imports into the US have come down dramatically, and Russian oil trade now flows east instead of west. The result is a US refining margin benefiting from significantly lower US natural gas prices that is higher not only than Europe’s but also the Asian Pacific’s, he said.

Warren R. True, OGJ’s Chief Technology Editor-LNG/Gas Processing, moderated the webcast, which was sponsored by Leidos Engineering and Iron Mountain Records Management Services. It will be archived at OGJ Online beginning Sept. 22.

Contact Nick Snow at [email protected].