Condensate exports without US federal ruling could become the norm

By DAN MURTAUGH
Bloomberg

No government approval for US condensate exports? No problem, says the lawyer who has been instrumental in poking a hole in the 39-year-old ban on most crude oil shipments.

By early next year, most companies will be following the lead of BHP Billiton and exporting processed condensate without explicit approval from the Bureau of Industry and Security, said Jacob Dweck, a lawyer with Sutherland Asbill & Brennan LLP. That would allow a larger chunk of the 650,000 bpd of US condensate to be exported.

The US banned most crude exports in 1975, with a few exceptions including shipments to Canada. Exports of refined products such as gasoline and diesel fuel are unrestricted. US policy makers are under pressure to lift the export ban as companies pull record volumes of oil and gas out of shale formations from North Dakota to Texas, boosting domestic crude output to the highest in three decades.

“Self-classification of condensate will become the norm, creating regulatory certainty on the ground with respect to allowed exports,” he said. “The industry now can be unleashed to address condensate logistics and markets, where its attention and competition should be focused.”

Dweck represented Enterprise Products when in March it became one of two companies to receive a letter from the BIS classifying condensate that was processed in a stabilizer with a distillation tower as a petroleum product.

BHP Billiton

The BIS hasn’t sent any other letters despite requests from about 20 companies, Dweck said. BHP said last week it had classified its processed condensate as a product itself and would export a cargo. More companies will soon follow suit, Dweck said at the Argus Condensate and Naphtha Markets conference in Houston today.

US crude production has jumped 65% in the past five years to 9.06 million bpd, driven by shale oil drilling in places like Texas and North Dakota. About 650,000 bbl of that is a super-light kind of crude known as condensate, with an API gravity above 50, according to the Energy Information Administration.

Crude oil is a brew of different kinds of hydrocarbons that evaporate into volatile gases at different temperatures. The lighter the molecule, the lower the temperature at which it evaporates. Condensate has more propane and butane that evaporate at normal, everyday temperatures.

Producers in shale fields like South Texas’s Eagle Ford built stabilizers to heat up the condensate enough to separate the volatile gases from the rest.

Distillation Tower

Enterprise and Pioneer Natural Resources Co. successfully lobbied the BIS to agree that putting condensate through a stabilizer with a distillation tower was the same as putting oil through a refinery’s distillation tower, meaning the resulting products should be exportable.

Pioneer asked the BIS to approve condensate that went through its own stabilizers, Dweck said. Enterprise did not. It can export any condensate that passes through any stabilizer with a distillation tower, so long as it keeps the product separated from unprocessed crude. That means everybody else can, too, Dweck said.

“You should be able to export your processed condensate,” he said yesterday. “That’s how the law works. Every time you see a 65 mph sign on the highway you don’t have to pull over and ask an officer if you can drive 65 mph.”

• Most Read
• Most Commented