26 June 2014, News Wires – An Obama administration spokesman clarified a decision made by the Commerce Department that appeared to signal an easing of a ban on exporting oil, saying there had been no change to federal rules that forbid sending crude overseas.
Reports emerged on Tuesday saying the US had decided to allow two companies to export condensate, a light form of crude.
Many saw the ruling as a chink in the armour of a decades-old embargo on crude exports.
However, White House spokesman Josh Earnest said on Wednesday that there had been “some misunderstanding” about the implications of the decision.
“The fact is there has been no change to our policy on crude oil exports,” Reuters quoted Earnest as saing.
“As the Commerce Department has said, oil that goes through a process to become a petroleum product is no longer considered crude oil,” he said, adding that there are few restrictions on exporting refined products.
The two companies in question – Pioneer Natural Resources and Enterprise Products Partners – confirmed they had received approval from the Commerce Department to export condensate.
Both said they had submitted requests for clarification to the Commerce Department about their interpretation of the existing rules; both said they received confirmation that their interpretations were correct that condensate exports were allowed.
It was not clear when exports might start or how much.
Condensate is typically defined as light oil that has an API gravity of 50 degrees or higher, though some consider 45-degree API crude to be condensate. It is usually stablilised or lightly distilled to remove certain volatile compounds and make it safer to transport.
The distinction between crude oil and condensate has become more important as production of both has surged amid the shale boom. Top US shale plays like the Bakken and the Eagle Ford produce very light oil. Some estimates put daily US production of condensate at around 100,000 barrels.
While the rules on exports may not have changed, the new understanding of those rules could have a substantial impact on oil companies, with upstream players likely to reap rewards and refiners likely to be hit hard.
Energy investment bank Tudor Pickering Holt said the news is bad for the half-dozen or so companies planning light-oil refining projects, with potential investment of some $1.5 billion on the line.
It also remains to be seen how much light crude can be “lightly distilled” and how much export capacity there actually is in the US.
“More broadly, this may be a precursor/trial balloon to less restrictive condensate exports or even light crude oil over the longer term,” Tudor Pickering said.