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Page added on July 18, 2014
Did the US Commerce condensate export rulings mean nothing?
Two US Commerce Department rulings giving a pair of Eagle Ford players legal backing to export processed condensate have been viewed as a dramatic loosening of America’s 40-year ban on crude exports, or at least a sign that long-awaited export policy changes were near.
But what if these private letter rulings really only impact the companies that received them and nothing more?
Is it possible that the much ballyhooed Commerce decisions permitting Enterprise Product Partners and Pioneer Natural Resources to export processed lease condensate will mean relatively nothing in the overall export debate?
According the lawyer for Enterprise, the effect of these decisions has been vastly overstated. The rulings impact a very specific type of condensate, processed through very specific facilities, and really nothing more.
And the idea that these rulings could open the door to the export of hundreds of thousands of barrels of very lightly processed crude oil to Asia and other foreign markets is debatable, but ultimately wrong.
Enterprise and Pioneer have declined to comment in detail on the rulings and Commerce has said little, outside of the fact that these rulings do not represent a shift in US crude export policy.
But at this week’s US Energy Information Administration conference in Washington, Jacob Dweck, a partner at Sutherland Asbill & Brennan who filed Enterprise’s request for the ruling, offered arguably the most detailed explanation of the decisions yet.
The effort to get this ruling was not a precedent-setting effort but a “technical and legal exercise” which merely confirmed that Enterprise’s reading of existing statute was correct.
“In short, the ruling was issued because we asked for it, and we happened to ask first,” Dweck said.
The issue centers on Commerce’s long-standing definition of crude oil, which stipulates that crude “has not been processed through a crude oil distillation tower.”
This caveat is central to the ongoing debate on the impact Commerce’s recent rulings since the agency has no definition of distillation tower and has offered no details on what technically needs to occur for crude to be deemed distilled.
Some engineers and analysts have argued that the rulings are ambiguous and could open the door for “lightly-touched” crude to be approved for export.
But Dweck asserts that the rulings only apply to lease condensate processed through condensate distillation facilities where it is fractionated into separate petroleum products. These products are not covered by US export restrictions.
In his presentation, Dweck indicated that Enterprise received its ruling because its distillation process was “substantial” and produced “separate and different streams” of petroleum products. In addition, the lease condensate which was fed into the distillation facility is “markedly different” from the processed condensate which would be exported and this different product can be sold, marketed and has potential uses, such as a petrochemical feedstock or diluent.
Dweck indicated that these three conditions–a substantial distillation process, different product streams and a different and marketable product from the condensate feedstock–are necessary to meet Commerce’s export approval.
Dweck’s views, however, set off a fiery debate (by EIA conference standards, obviously) over what needed to take place for a product to be deemed distilled and OK for export.
Finding out where the truth lies, however, may be a challenge.
The application process for export at Commerce is done largely in secret so if someone gets a different type of crude approved for export–distilled in a different way–few may know about it until it hits the market. At the same time, if a company wanting to export lightly distilled crude gets rejected, few may ever know.
15 Comments on "Did the US Commerce condensate export rulings mean nothing?"
rockman on Fri, 18th Jul 2014 7:06 am
Still
rockman on Fri, 18th Jul 2014 7:25 am
Still grossly misinforming. “And the idea that these rulings could open the door to the export of hundreds of thousands of barrels of very lightly processed crude oil…”. Hundreds of thousands of bbls? Could??? Currently almost 20 million bbls per year of the same lightly cracked EFS production is being shipped to Canadian refineries. All the Commerce Depot did was confirm that Enterprise was in compliance with the same law that allowed those millions of bbls to be exported.
And no mention of the fact that millions of bbls of uncracked oil have been exported with exception permits from the Commerce Dept. And then there’s the elephant in the room: does it really matter if we export crude since we are currently exporting more than 1 BILLION PER YEAR of refined products made from crude oil in US refineries?
All hype with no meaningful substance IMHO.
Plantagenet on Fri, 18th Jul 2014 9:11 am
Someone should determine how many Obama fund raisers these two companies attended before getting the OK to export their crude.
rockman on Fri, 18th Jul 2014 10:40 am
Given that dozen of companies have exported millions of bbls of same production without kissing anyone’s ass I doubt Enterprise had to grease anybody. LOL. That’s the nice thing about doing what the law allows. If I had to guess I suspect Enterprise thought this exception was so strange they wanted Commerce to confirm the loophole was really there.
Nony on Fri, 18th Jul 2014 10:44 am
Rock:
They said to European and Asian markets. Everyone knows that Canadian exports are allowed but not exports to the world market.
Plantagenet on Fri, 18th Jul 2014 10:49 am
Rock is right that waivers and workarounds are routinely granted for oil exports to canada. AND nony is right that the Obama administration decision to allow exports to Europe ans Asia is something new that guts the US law against exporting crude.
rockman on Fri, 18th Jul 2014 12:57 pm
There is nothing new about exporting US crude oil to Europe or Asia. In fact the Netherlands has been third in export volume behind Canada and México for years. The Dutch import almost half as much US as our Canadian cousins. The EFS producers are free, by US law, to ship their “refined products” to any country in the world. Separately we also ship unrefined US crude oil to at least 13 other countries by exemptions from the export ban. Canada and México get more of our exported crude oil but each only gets about 15% of the total exported.
And I’ll repeat the same point again: whether there’s a lifting of the PARTIAL BAN on US crude or not how does that effect the US consumer? The US consumer doesn’t buy oil so they aren’t competing with foreign for it. OTOH since we export a significant volume of refined products – refined products US consumers do buy – that’s where the competition increases cost for American citizens.
Given how simple and UNDENIABLE this fact is I find it true amazing to see so many folks buy into this MOARH…Mother Of All Red Herrings. LOL.
THE US CURRENTLY EXPORTS US CRUDE OIL TO MORE THAN A DOZEN COUNTRIES AND HAS DONE SO FOR MANY YEARS.
Sorry to yell but I’m getting very tired of repeating myself. And again it’s a relatively small volume of oil we export(about 150 million bbls/year) compared to the 1+ billion bbls/year of refined products we export to other countries. Refined products US consumers have to compete on a price basis with foreign consumers.
Nony on Fri, 18th Jul 2014 1:04 pm
Read the RBN article on splitters. That partial ban is restricting free trade. Metal ain’t going into the ground for no reason. There’s also a WTI to Brent spread. If the partial ban is no big deal, why not make it fully open? And why did refiner share’s sell off when the market thought the ban interpretation had changed? Answer, because this is not inconsequential.
Markets and industry right. Rock, wrong.
Nony on Fri, 18th Jul 2014 1:10 pm
Rock, I know you’re getting tired of explaining yourself. I feel ya on that, babe. 😉
But the problem is big frog in small pond syndrome. There’s a vast Internet out there and I can read all kinds of good articles on RBN and the like. Just because you are an upgrade to NWR or the like, doesn’t mean that you know it all…
rockman on Fri, 18th Jul 2014 3:59 pm
“That partial ban is restricting free trade.” Of course it is. Otherwise they would be able to export EFS production half way around the world. Oh wait, they are. And are doing so under the same law that is currently allowing almost 20 million bbls/year of EFS production to be exported to Canada:
Reuters – A condensate cargo for export is due to load in Texas at the end of this week, headed via the Panama Canal to Asia. Westport Petroleum chartered the BW Zambesi, a Panamax class vessel. Reuters previously reported that Mitsui had bought a 400,000-barrel cargo, and is said to be being marketed to refiners in Asia.
The $1.8 million one-way trans-Pacific trip is expected to take a month or more. Shipping industry sources said this was the first cargo of three purchased by Mitsui. By the end of the year, as much as 300,000 barrels could be exported each day, according to an analysis by Citibank.
{And for those without access to a calculator that would represent a tad more than 100 million bbls/year of EFS production being exported out of the country under the current “oil export ban”. And, again, being done under the laws that have existed for many years U.S. condensate supply is estimated at about 1 million barrels per day. IOW if Citibank is correct under the existing laws we could be exporting about 1/3 of our “new oil” without lifting the “oil export ban” in addition to the 3 million bbls/day of refined products we currently export.
Yes indeed…this “oil export ban” is really screwing up free trade. I mean the free trade besides the $9 billion in condensate production we might be exporting in a yet along with the $80+ billion in refined products we’re currently exporting. LOL.
Nony on Fri, 18th Jul 2014 4:16 pm
So if the ban has no impact,
1. why are splitters being built?
2. Why did refiners sell off with the private letter ruling news.
3. Why is there a Brent/WTI spread difference.
4. Why are refiners fighting the end of the restrictions.
5. Why do industry veterans and analysts report this differently than you?
Nony on Fri, 18th Jul 2014 4:30 pm
Explanation of crude export restrictions:
rbnenergy dot com/with-or-without-splitting-changing-lease-condensate-export-definitions
rbnenergy dot com/you-re-a-stabilizer-baby-eagle-ford-condensate-export-infrastructure
I guess this guy is just some dummy with no industry time. How can he compete with the Rockman of the peakoil forums fame.
“Sandy Fielden is an internationally accomplished professional with 25 years of management and communication experience in the European and North American energy industry, including ten years as a vice president at industry leading firms. He is a widely recognized expert at analyzing, processing, and communicating the value of a wide range of information in the energy industry. As Vice President of Data Services at Allegro Development, he was responsible for software and data solutions to meet the integration needs of oil, gas and power traders. As VP of Energy Products and Services at Logical Information Machines (now Morningstar Commodity Data), Sandy sourced, defined, and marketed energy market data from over 150 industry providers for analysts and risk managers using the LIM software. Prior to LIM Sandy helped build the NA operation of energy trading analytics provider Saladin Inc from 3 persons to 60 during the 1990’s. Started out at Fina in the UK – involved in all aspects of the company’s oil sector (downstream operation) as a business analyst. He has written for trade publications and spoken on a wide range of topics at conferences.”
[Oh wait, I bet he probably knows MORE about the industry economics than you do, Rock. You know more about the mudlogger. It’s one thing to correct random commenters like Pops or NWR. But there’s a whole industry out there and lots of people who can discuss it intelligently…who don’t hang out in peaker land. ;)]
toolpush on Sat, 19th Jul 2014 11:40 pm
Can anyone confirm, that exports to Canada and Mexico, if there are any, are exempt from the so called crude oil export ban, as they are covered by NAFTA? Or did the signatories write into NAFTA an exemption for the NON free trade of crude oil in North America.
Traditionally these international agreements over ride national laws, much to the unset of many affect people.
Nony on Sat, 19th Jul 2014 11:42 pm
The FTA countries are exempt. Transit to Canada happens all the time. Read the links I posted from RBN.
toolpush on Sun, 20th Jul 2014 1:34 am
Thanks Nony,
I thought that would be the case, but that little fine point seems to get missed on here from time to time, and i was just trying to bring peoples attention to it.
So crude oil/condensate trade to Canada can not be compared to trade with those other pesky non free trade countries.