31 December 2014, News Wires – The Obama administration on Tuesday took two long-awaited steps that could increase the amount of processed light crude that can be shipped under the 40-year-old ban on exports of most domestic crude.
The Bureau of Industry and Security (BIS) released the guidance in the form of frequently asked questions (FAQ) in the first effort by the administration to clarify an issue that has caused confusion and consternation in energy markets for more than a year, Reuters reported.
It also gave permission to “some” companies to ship treated light oil called condensate, but did not give details about the private applications that it approved.
The new guidelines were seen as a big step in opening the door for more crude exports, particularly the light oil produced from major shale formations such as the Bakken and the Eagle Ford.
According to the guidelines, energy companies must process crude in distillation towers in order to export it and not simply treat it with pressure reduction alone through the use of flash drums that have so-called heater treaters, or separators.
“Crude oil processed through such equipment remains classified as crude oil,” and is not allowed for export, according to the government guidance, which has been in the works for nearly a year.
Uncertainty about what kind of petroleum can be shipped abroad has frustrated oil market players since BIS, an office of the Commerce Department, quietly gave permission in 2013 to a small company, Peaker Energy, to export minimally treated light oil called condensate.
Last spring BIS gave permission to export treated condensate in private letters to two other companies, Pioneer Natural Resources and Enterprise Products Partners.
The private nature of the communications between the government and the three energy companies left a wide range of other drillers in the dark about investing in expensive infrastructure to process condensate.
Jamie Webster, the senior director of oil markets at research firm IHS, said the new information was a positive sign for the industry, as it “takes the leash off of Commerce” and signals it may take additional action on crude exports, which has largely been frozen for the past several months.
The American Petroleum Institute, a oil lobby group, praised the guidelines but warned that restrictions still in place “limit” the US’ potential to grow as “an energy superpower”.
Last summer BIS put a hold on applications for permission to export lightly treated condensate.
The domestic drilling boom of the past six years has led to a build-up of light oil in Texas and Louisiana, which many refiners find difficult to process. Also, pressure has grown on the Obama administration to relax the export ban that Congress passed after the 1970s Arab oil embargo led to fears of energy shortages.
Several lawmakers in both the House of Representatives and Senate have said that unless energy companies can export oil to Asia and Europe, the drilling boom will eventually choke on its own output.