Following rulings disclosed this week, U.S. companies can now export
the light, gaseous petroleum known as condensate after a forty-year
ban, giving them access to needy markets in Latin America and Asia
and potentially threatening the dominance of other established
producers in the Middle East and Africa.
Companies are ready to ship condensate from some of the United
States' massive oil and gas fields within weeks. By the end of the
year, as much as 300,000 barrels could be exported each day,
according to analysts at Citi in New York, a timely event as Asian
countries increase capacity to import and exporters elsewhere face
"It could have an enormous impact," said Al Troner a condensate
expert and president of Asia Pacific Energy Consulting. "It could
happen within the next two weeks."
Up to one million barrels of condensate is produced each day in the
United States, all of which can be exported after some basic
refining to reduce volatility, known as stabilizing, according to
the U.S. ruling. That is double the amount exported by Qatar, the
world's leading condensate producer.
The amount exported and where it goes depends on the kind of
condensate that is produced and whether it is the right grade to
feed petrochemical plants in China or Japan or to dilute heavy crude
produced in Latin America.
Enterprise Products Partners and Pioneer Natural Resources this week
both said that they have received private go-ahead from the Commerce
Department to export condensate. Enterprise said it is ready to
start exporting anytime.
Exports of condensate, a major feedstock for the petrochemical
industry, will provide the first outlet for the vast amounts of oil
and gas now produced in the United States. It will also give an
inkling of the impact that a U.S. drilling boom could finally have
abroad if other types of crude are approved for export.
Buyers are already interested, not just in nearby Latin America -
the closest destination for U.S. condensate - but further afield in
India and east Asia, traders and sources said.
In Latin America, companies could use condensate as a substitute for
naphtha to lighten local heavy crude. Venezuela's state-run oil
producer PDVSA and firms operating in Colombia including Ecopetrol
and Pacific Rubiales, some of which already buy from West Africa,
are "lined up waiting to buy light crudes and condensates if the
price is right" said one trader working in crude purchases, speaking
on the condition of anonymity.
In India, Essar Oil's chief executive L K Gupta said "we will look
at buying condensate from the United States if the pricing is right.
We do buy condensate and if a new source is opening up that is good
It is unclear what the cost of U.S. condensates would be, given that
the price depends on the density and where it is produced. Some
condensate from the Eagle Ford play in Texas does appear to be
cheaper than some grades currently exported from Australia's North
West Shelf, according to traders and Reuters data.
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"According to an internal analysis at our company, the U.S.
condensate based upon (U.S.) WTI pricing appears to have cost
competitiveness compared with those from the Middle East based upon
Dubai crude," said one Seoul-based refining source, adding that
competitive U.S. exports could help bring down global prices.
LENGTH TO TIGHTNESS
The Middle East dominates supply of condensate. Qatar and Iran
export 760,000 barrels per day combined, about half daily global
supply, according to a presentation in November by analysts at Facts
Global Energy. Australia and Africa make up most of the rest.
The majority of supply heads to Asia, where importers like China,
Japan and South Korea have build processing plants known as
splitters that can turn condensate into naphtha and other
oil-related products. In Asia Pacific, splitters can process up to
900,000 barrels per day of condensate, according to Facts.
But as demand rises, production from existing exporters is
faltering. In Australia, where condensate is a by-product of
liquefied natural gas production, exports are already declining in
part because new gas produced is "drier" than before. In Qatar,
domestic demand is set to slow exports. Iranian output has been
hampered by sanctions.
"The condensate market East may move from length to tightness," the
Facts report said.
It remains to be seen if the United States can fill the gap, and it
is expected to take time to determine whether U.S. condensate is
compatible with Asian importers' needs. Some said that no moves have
been made to export condensate to Asia from the United States.
Sampling could take months, others said.
But with demand on the rise, the United States could offer
"What we hope is this (U.S.) export will help pull down prices of
shipments from the Middle East as overall supplies in the global
market increase," the Seoul-based refinery source said.
(Reporting By Edward McAllister in New York, Marianna Parraga in
Houston, Nidhi Verma in New Delhi, Meeyoung Cho in Seoul, Florence
Tan in Singapore, James Topham and Osamu Tsukimori in Tokyo; writing
by Edward McAllister; editing by Jessica Resnick-Ault, Bernard Orr)
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