COMMENTARY: US Condensate Export Decision Significant But Not Surprising

This commentary presents the opinions of the author.
It does not necessarily reflect the views of DownstreamToday.

The Obama administration’s decision to approve two U.S. companies’ exports of ultralight oil, or condensate, is significant but not surprising.

Administration officials have been suggesting for months now that the decades-old law restricting exports of U.S.  crude oil is outmoded. Among them, Energy Secretary Ernest Moniz, who first raised the topic at Platts Global Energy Outlook Forum in New York in December. The Commerce Department’s permission to Pioneer Natural Resources Company and Enterprise Products Partners to ship condensates abroad falls well within the administration’s existing authority under the law, but it’s still short of the extensive exports of crude oil sought by producers. That type of change is unlikely to happen without legislation.

That said, the moves give the administration the opportunity to test both the administrative process and the political climate for oil exports. After all, there is still considerable uncertainty and even outright opposition to shipping U.S. oil overseas, especially at a time when new violence in the Middle East raises public concerns over the security and price of oil.

Data analysis and forecasts from Bentek Energy, an analytics and forecasting unit of Platts, a leading global energy and commodities information provider:

U.S. crude oil production, including condensate, is expected to grow by 40% to 10.5 million barrels per day (b/d) in 2017 compared to 2013.  U.S. condensate production alone, however, will far outpace this and is expected to grow at least 70 percent in the same time period to 1.7 million b/d in 2017.

To date, the ban on exports of unrefined crude has forced U.S. refiners to absorb this domestic ultralight crude oil and displace imports of foreign-produced light, sweet crude into the United States.  A lift of the ban on condensate exports is likely to ease downward pressure on condensate prices across the country in the near term. Continued growth in the supply of U.S. sourced light and ultralight crude will likely overwhelm the U.S. refining market, even with these condensate exports. 

Bill Loveless is Platts' editorial director of U.S. energy policy.