This view, which has not been previously reported, will add to
intense speculation over how much of the U.S. shale oil boom will
reach overseas markets and how quickly loopholes will be opened in
the 40-year-old ban on exporting domestic crude.
The Department of Commerce determined this week that two companies
that handle condensate can export it after treatment by so-called
stabilizers, which use heat to shave off volatile natural gas
liquids and remove contaminants such as hydrogen sulfide in order to
meet pipeline specifications.
Texas-based companies Pioneer Natural Resources <PXD.N> and
Enterprise Product Partners <EPD.N> had sought clarity from the
government over whether stabilized condensate could be exported as a
petroleum product without a special license, which is needed to
export unprocessed domestic crude.
The Commerce Department said yes.
But importantly, sources in industry and government emphasized, that
determination just focused on how crude is treated. That means other
types of crude that undergo similar minimal processing could
potentially be exported as well.
"Under the definition of crude oil, the API level doesn't matter," a
Commerce Department source said, referring to the American Petroleum
Institute's scale for measuring oil’s density.
Heavy crude like that in Venezuela or Canada would be a 22 on the
scale, while London’s Brent is about a 38 and typical West Texas
Intermediate produced in the nation’s midsection generally is around
40. Ultra-light condensate usually rates 50 or higher.
U.S. law has traditionally defined processed oil as having passed
through distillation towers, key pieces of refinery equipment that
turn crude oil into finished products.
But the U.S. oil boom has created a glut of light oil and condensate
that Gulf Coast refineries, largely built to run heavy crudes, have
been unable to fully absorb.
Some companies have responded by building so-called splitters that
turn condensate into naphthas and distillates that can be exported
or sold domestically.
They have also expanded stabilizers.
[to top of second column]
Stabilizers, originally used to ensure crude and condensate meet
pipeline specifications, now fall into the same rubric as splitters
and distillation towers, according to the Commerce Department's
"We always knew that if it ran through a simple distillation unit or
a splitter it’s a (refined) product. This just moved it one step
down that a stabilizer that extracts (liquefied petroleum gases) is
equivalent to that," said John Auers, a refining consultant with
Turner & Mason, an energy consultancy in Dallas. "It’s a more
liberal definition of what distillation is."
Large U.S. oil producers in North Dakota’s Bakken shale and
Pennsylvania’s Marcellus shale fields told Reuters they had
suspected for months that they would be able to export crude oil or
condensate (after minimal processing), but resisted making such a
move due in part to the ambiguity then surrounding Commerce
Department’s public statements on the issues.
“It looked to us that it was a legitimate export if you take
condensate and put it through a stabilizer,” said one source, who
declined to be named, citing the sensitivity of discussions with
regulators. “The ruling itself wasn’t a surprise.”
Quantum Energy Inc <QEGY.PK>, a U.S. energy venture, said on Friday
it plans to build a network of stabilizers and refining equipment
that would produce fuel fit for export from North Dakota's Bakken
oil patch, which churns out light crudes.
(Reporting by Timothy Gardner in Washington and Kristen Hays in
Houston; Editing by Mohammad Zargham)
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