05 February 2014 – The US government has reportedly granted permits for crude exports to European countries for the first time in years as lobbying pressure grows to reverse a decades-long export ban amid a tight oil glut due to the shale boom.
The Department of Commerce has issued two licences for exports to the UK and another two to Italy since last year for crude sales worth a total of nearly $5 billion, with an application filed last month for German exports worth $2.6 billion still pending, Reuters reported, citing official data.
These would be the first US crude shipments to the UK since at least 2000, and the first to any European country since 2008, according to data from the Bureau of Industry & Security (BIS).
The agency is responsible for reviewing requests to export crude under a 1975 law that bans most shipments with a few exceptions, including sales to Canada and re-export of foreign oil.
US oil producers are calling for an end to the export ban, imposed when the Arab oil embargo led to high gasoline prices, as the shale boom has pushed oil output to a 25-year high and led to supplies saturating the domestic market.
At the same time, European refiners would welcome increased access to cheaper, high-quality US shale oil that could revive their flagging margins.
US refiners, on the other hand, are keen to keep the export ban in place as they are benefiting from cheaper domestic crude supplies.
The International Energy Agency has forecast that the US will become the world’s biggest crude producer by 2016 as a consequence of the exploitation of so-called tight oil from shale rock, with the country also expected to become a net energy exporter by the end of the decade.
Granting of the licences is likely to fuel the growing debate in Washington over the pros and cons of lifting the ban, with President Barack Obama’s administration expected to allow companies to use provisions in the existing regulation to slowly increase exports rather than scrapping the moratorium.
A handful of licences have also been regularly approved over the past decade for countries in Central America or Asia, either for export of heavy crude or re-export of foreign oil such as that from Canada, according to an earlier BIS statement.
The current law allows re-export of foreign-produced oil it is not commingled with US crude, an option that some Canadian producers are said to be using.
*Steve Marshall – Upstreamonline