US eases limits on oil exports to Mexico

14 August 2015, News Wires – The Obama administration will reportedly allow limited sales of US crude to Mexico for the first time, marking another milestone in loosening a contentious ban on exporting domestic oil.

mexicoThe Commerce Department is “acting favorably on a number of applications” to export US crude in exchange for imported Mexican oil, a senior administration official told Reuters. Such oil swaps are one of several possible exemptions allowed in the four-decade-old law that otherwise bans most overseas shipments.

US oil and gas advocacy organisation the American Petroleum Institute welcomed the news, which has yet to be formally announced.

“Trade with Mexico is a long-overdue step that will benefit our economy and North American energy security, but we shouldn’t stop there,” said API executive vice president Louis Finkel.

“America is now a global energy superpower, and lifting ‘70s-era restrictions on US oil exports will help bring the benefits of trade home to US workers and consumers.”

The approvals come eight months after Mexico formally sought permission for a swap, a historic step for a nation where oil self-sufficiency has long been a source of pride. The shipments, likely to be lighter, high-quality shale oil, will help Mexico’s aging refineries produce more premium fuels. US refiners will continue to get Mexican heavy oil, a better match for them than the deluge of light oil coming from Texas and North Dakota.

The licenses, good for one year, will be formally issued by the end of August, the official said. He declined to offer further details on volumes, saying only that the number of approvals was “a handful.”

Mexico’s state oil company Pemex said in January it was seeking an exchange of about 100,000 barrels per day, equivalent to only about 1% of current US output.

The department also denied several applications for swaps with other countries in Asia and Europe, which are not afforded the same special consideration as Canada and Mexico in the 1975 energy law, the official, who declined to be named, said.

Although limited in scope, the move toward freeing up trade will please US oil producers such as Pioneer Natural Resources and ConocoPhillips, which say the restrictions force them to sell oil at below global market rates as shale oil boom created a glut of light crude.

It may also add momentum to efforts mostly by Republicans to repeal what they see as a relic of the 1970s Arab oil embargo era and fears of energy insecurity.

Repealing the overall ban would be a blow for refiners such as PBF Energy, which have benefited from a sudden abundance of discounted domestic shale oil that their foreign rivals cannot buy.

Critics say a full repeal could raise US gasoline prices, although a slew of research studies suggest liberalizing trade would more likely lower the costs for US consumers.

Environmentalists say crude exports would encourage more oil production and boost carbon emissions they seek to curb.

– Upstream

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