Some perplexing problems have simple solutions.
A problem perplexing US producers and regulators is the status of condensate relative to the longstanding ban on exporting crude oil.
The Department of Commerce office that licenses oil exports proposed a clarification in a Dec. 30 move hailed in early press reports as an opening of gates to a flood of exports.
That interpretation goes too far.
What Commerce’s Bureau of Industry and Security did was publish guidelines—“not intended to be categorical or exhaustive”— that it will use in determining whether lease condensate has been processed enough to become a petroleum product eligible for export. Without such processing, lease condensate is considered crude oil subject to the ban.
Under current regulations, hydrocarbon liquids, including lease condensate, become exportable products after having been “processed through a crude oil distillation tower.”
Processes that use pressure reduction to separate vapors from liquid or that use pressure changes at uniform temperature don’t qualify, according to the bureau.
So what processes qualify?
Under the new guidelines, the answer seems to be those that look more like refining than stabilization.
For example, a factor the bureau said it will use in determining whether condensate has passed through a distillation tower will be “whether the distillation process materially transforms the crude oil, by using heat to induce evaporation and condensation, into liquid streams that are chemically distinct from the crude oil input.”
The bureau listed other factors, including whether the process uses towers more complex than typical lease equipment, having, for example, “significant internal structures, such as trays or packing, and differentiated output streams.”
This might represent less an opening of the export floodgate and more a clearer description than was available before about how the lock works. The guidelines address one problem, confusion, without solving it while a larger problem, light-oil supply exceeding nearby need, remains in place.
The simple solution? Make tricky distinctions irrelevant by allowing the export of all liquid hydrocarbons.
(From the subscription area of www.ogj.com, posted Jan. 2, 2015; author’s e-mail: [email protected])