The lucky companies: Pioneer Natural Resources (Soros) and Enterprise Products Partners...."The move, which came in private classification orders issued by the Commerce Department’s Bureau of Industry and Security, effectively confirms that hydrocarbon known as condensate qualifies as a petroleum product once it has been processed in a distillation tower, and therefore is not barred by the 39-year-old ban on crude exports."
10/7/14, "In the U.S., a Turning Point in the Flow of Oil," NY Times, Clifford Krauss, Houston
"The Singapore-flagged tanker BW Zambesi set sail with little fanfare from the port of Galveston, Tex., on July 30, loaded with crude oil destined for South Korea. But though it left inauspiciously, the ship’s launch was another critical turning point in what has been a half-decade of tectonic change for the American oil industry.
The
400,000 barrels the tanker carried represented the first unrestricted
export of American oil to a country outside of North America in nearly
four decades. The Obama administration insisted there was no change in
energy trade policy, perhaps concerned about the reaction from
environmentalists and liberal members of Congress with midterm elections
coming. But many energy experts viewed the launch as the curtain raiser
for the United States’ inevitable emergence as a major world oil
exporter, an improbable return to a status that helped make the country a
great power in the first half of the 20th century. “The
export shipment symbolizes a new era in U.S. energy and U.S. energy
relations with the rest of the world,” said Daniel Yergin, the energy
historian.
.
“Economically, it means that money that was flowing out of the United States into sovereign wealth funds and treasuries around the world will now stay in the U.S. and be invested in the U.S., creating jobs. It doesn’t change everything, but it certainly provides a new dimension to U.S. influence in the world." Like just about everything else in the oil and gas business, petroleum exports are contentious. The oil bounty is thanks to modern production techniques including hydraulic fracturing, or fracking, which involves injecting water and chemicals into the ground to crack oil-saturated shale. Exports would mean more of that. Many environmentalists say fracking operations endanger water supplies or create other hazards, including air pollution. Ramping up exports of fossil fuels, critics will surely note, is inconsistent with the Obama administration’s push for a global climate deal.
.
“Economically, it means that money that was flowing out of the United States into sovereign wealth funds and treasuries around the world will now stay in the U.S. and be invested in the U.S., creating jobs. It doesn’t change everything, but it certainly provides a new dimension to U.S. influence in the world." Like just about everything else in the oil and gas business, petroleum exports are contentious. The oil bounty is thanks to modern production techniques including hydraulic fracturing, or fracking, which involves injecting water and chemicals into the ground to crack oil-saturated shale. Exports would mean more of that. Many environmentalists say fracking operations endanger water supplies or create other hazards, including air pollution. Ramping up exports of fossil fuels, critics will surely note, is inconsistent with the Obama administration’s push for a global climate deal.
Independent
refiners argue that exports could mean more expensive domestic oil for
them, which they say could mean higher prices for American consumers.
Oil
companies, and many independent economists, say just the opposite is
true, because American exports would add to global supplies and lower
international oil benchmark prices that ultimately determine the rise
and fall of American gasoline prices. And with Russia causing mischief
in Europe and the Middle East in turmoil, many analysts say allies would
be happy to have a dependable supplier of oil. The oil companies appear
to be grinding out a road to victory just as they have gained momentum
in promoting natural gas exports against the opposition of some chemical companies and
environmental groups that want to curb drilling and fracking. The Energy
Department has begun a major study on the merits of exports, and how
they would affect American consumers and United States energy security.
Their previous study on gas exports backed the industry position.
A
global oil price collapse, as unlikely as that might seem, is a wild
card that could change the equation and stem momentum toward exports.
Low prices, because of either excess supplies or reduced demand, would
discourage investments and drilling worldwide.
Whatever
the merits, the prospect of the United States becoming a major oil
exporter was unthinkable as recently as 2008, when the conventional
wisdom had it that the country was “addicted” — a word that even
President George W. Bush famously used — to imported oil from unstable
or unfriendly countries. Domestic production had been in free fall for
decades as repeated presidential promises of “energy independence”
echoed hollowly. But then came the frenzy of drilling in shale oil and
gas fields across the country.
Domestic
oil production has rocketed by roughly 70 percent over the last six
years to 8.7 million barrels a day, and imports from members of the
Organization of the Petroleum Exporting Countries have already been cut
roughly by half. With domestic oil production growing month after month,
many oil experts predict that the country’s output will rise to as much
as 12 million barrels a day over the next decade, which would mean the
country will be swimming in oil the way it is currently dealing with a
surplus of natural gas.
Analysts
at Turner, Mason and Company, a Dallas engineering consulting firm,
say the country could hit a saturation point when production hits 10
million to 10.5 million barrels a day, at which point large exports will
become necessary or drilling and production may have to slow.
“A
flood is upon us,” John Auers, a Turner, Mason senior vice president,
recently told energy executives at a Houston oil conference. “We are
getting close.”
The
country will continue to import some grades of oil for years to come,
but energy experts says oil exports should rise significantly over the
next few years because of a mismatch in the type of oil the country now
increasingly produces and the mix of oil its refineries were designed to
process. Shale oil is predominately light, sweet oil, meaning it is low
in sulfur content and flows freely at room temperature. American
refineries can refine only so much of it because they were structured to
process abundant amounts of much heavier crudes imported from Mexico,
Venezuela and Canada.
That is leading to a crude-oil glut in parts of
the country’s midsection already — which has pushed oil companies to
lobby for expanded exports and directly led to that recent shipment from
Galveston.
The
Galveston sailing was historic because the United States has strictly
limited exports since the era of the Arab oil embargo, when President
Jimmy Carter wore a cardigan sweater to encourage lower thermostats and
other measures to limit the country’s dependence on foreign oil. In
sweeping legislation, Congress in 1975 directed the president to
prohibit the export of oil as “consistent with the national interest,”
although broad exemptions were allowed. Various administrations since
then have permitted limited exports, including shipments from Alaska’s
Cook Inlet and to Canada, but the issue rarely came up because the
country was seemingly running out of oil.
Then
suddenly the energy world changed, and parts of the Midwest and the
Gulf of Mexico regions were overflowing with light grades of crude,
leading to a slump in prices and a gap of as much as $15 between the
United States oil benchmark and the prevailing Brent world price. Unable
to export the excess light crude, the industry exported refined
products like gasoline and diesel instead. In 2011, the country pivoted
from being the world’s largest importer of petroleum products to
becoming one of the leading exporters.
But
the buildup in light crude has continued to outpace the capacity of
refiners to process and export it, and that has spurred new thinking in
Washington. In what appeared to be a trial balloon, Energy Secretary
Ernest Moniz last December suggested to reporters at a New York energy
conference that it may be time for the administration to reconsider the
export ban. “There are lots of issues in the energy space that deserve
some new analysis and examination in the context of what is now an
energy world that is no longer like the 1970s,” Mr. Moniz said at the
time.
The
first baby step toward a new policy came in June when the Commerce
Department approved applications from two Texas energy companies,
Pioneer Natural Resources and Enterprise Products Partners, to export
light liquid hydrocarbons known as condensates that are normally
characterized as crude oil even though they share attributes of both oil
and natural gas and normally are found in gas form in the ground. The
government ruled that since the companies had minimally processed the
condensates through a simple oil processing unit that separates the gas
and makes it safe for transport, the result was now considered a refined
product.
Since
refined products like gasoline and diesel are legal to export, the
Obama administration said that the decision did not signal a reversal of
the crude oil trade limits. Nevertheless, oil company executives and
many Wall Street analysts who follow the oil industry interpreted the
move as being a fundamental shift in direction. The country can now
potentially export 300,000 barrels a day of condensates, most of which
come out of the Eagle Ford shale oil field of South Texas, easing some
of the glut of a product refiners cannot absorb and thus improving the
profitability of drilling in the zone.
But
the wording of the Commerce Department ruling means oil producers can
potentially export much more than just condensates, since the department
said it covered all crude oil that is processed through a distillation
unit. Basic distillation can occur at the wellhead at minimal cost, and
the new interpretation is likely to unleash investment in basic
processing of oil in the field to meet the export requirements.
“It was another crack in a process that is historic,” said Eric G. Lee, a commodities strategist at Citigroup.
Oil
exports (including condensates) remain small, but they have already
surged from 67,000 barrels a day in 2012 to 120,000 barrels a day in
2013 to more than double that currently. Citi Research estimates that
under the new condensates ruling, exports could hit a million barrels a
day by next year.
Last
month, the first tanker since 2004 loaded with Alaskan North Slope
crude for export set sail — 800,000 barrels purchased by South Korea.
While Alaskan crude is excluded from the current ban, the shipment
showed that West Coast refineries that normally buy the Alaskan oil have
ample supplies from the Lower 48. Much of the additional exported oil
is expected to go to Canada and Mexico, also allowable under current
restrictions, but the export growth will probably not be enough to dent
the continuing upsurge in domestic production for more than a few years
at most.
Another
way the country is easing some of the glut is by exporting more refined
products like gasoline and diesel. Exports of refined petroleum
products have already soared to 3.4 million barrels a day from 2.3
million barrels a day in 2010. But most oil experts say that growth in
such exports will be limited by United States refinery capacity and
available export markets, especially if refineries planned in Latin
America — a major market for American products — are completed.
That
will leave exports of crude to soak up the excess production, but there
are still political hurdles. United States exports of oil could reach
three million to four million barrels a day in a few years, more than
most OPEC producers currently provide world markets.
But politicians are afraid they will be targets of broadsides that a
reversal of the 39-year-old policy to export domestic production could
risk American energy security, or raise gasoline prices. Republican
members of Congress from oil-patch states like Texas and Louisiana might
be expected to support exports, but many are also dependent on the
campaign support of independent domestic refiners like Tesoro and Valero
and their workers, who want to keep the price of American oil low to
bolster profit margins.
Most
oil experts say that a loosening of the export limitations will have to
wait until at least the midterm elections and maybe even until after
the 2016 presidential election campaign, when the issue will probably be
amply discussed.
“The
politics are hard,” said David L. Goldwyn, the State Department’s
coordinator for international energy affairs in the first Obama
administration. But he added, “When the economics become overwhelming,
the politics will shift.”
For
Mr. Goldwyn, American oil exports would increase Washington’s
credibility in global trade talks, where the nation typically argues
that countries with excess supplies should export them. They would allow
China and India to diversify their supplies from the Middle East, and
Europe to diversify from Russia, the Middle East and North Africa.
Adding United States oil to world supplies would bring down the global
Brent oil price benchmark, which would bolster the world economy, they
argue.
The refiners disagree that American consumers would benefit, especially those who live in the Northeast and along the West Coast, who get their fuels from local refineries. Those coastal refineries depend on low domestic prices to offset high transport costs since they are so far from the Texas and North Dakota shale oil fields. With insufficient pipelines, coastal refineries are obliged under current maritime laws to transport domestic oil in a most expensive fashion — by barges that must be American-built and flagged; majority American-owned and manned by crews that are predominately American.
More
United States exports would almost certainly raise domestic oil prices
to the higher levels on the world market, refiners argue, forcing the
coastal refineries to raise their gasoline prices and making it more
difficult for them to compete against foreign refiners on world markets.
For Bill Day, a Valero vice president, those who argue for free trade
in oil are missing the point that the international oil business is
inherently not free because prices are largely controlled by OPEC and
others who do not believe in free trade. “To us this should be a
question of economics, pragmatism and good business sense rather than
ideology,” Mr. Day said.
The
refiners are joined in an unlikely alliance by congressional liberals
like Senator Edward Markey, Democrat of Massachusetts, who argue that an
extra couple of million barrels a day of American production will not
bring down global oil prices as long as OPEC remains in a dominant
position to manipulate prices by increasing or decreasing output at
will. Senator Markey noted that the United States still imports a third
of the oil it uses, about the same proportion as when Congress limited
exports 39 years ago.
Many
oil experts say that the debate will be settled when American oil
production rises to such a high level that there are no longer adequate
domestic markets for the sweet crude oil produced in the shale fields.
That could happen as soon as 2017, some oil executives say. The telltale
sign of a glut will be a collapse in the West Texas Intermediate price,
the principal American oil benchmark price, which is currently about $3
below the world Brent price. That differential has been as high as $28
in recent years, but has been relieved by additional pipelines bringing
American production to domestic markets and refineries for export of
finished products.
If
the spread cracks open, the economic arguments for free export of
domestic crude will probably win the day, many energy experts say, while
a narrower spread would keep the debate going. Many oil experts say it
is only a matter of time before a much steeper spread emerges — leading
to trouble for an industry that has done much to keep the national
economy afloat in recent years. Gluts of domestic oil are already
mounting in West Texas.
“You
would see a significant reduction in drilling, resulting in a
significant reduction in production, a significant reduction in
employment in the industry,” predicted Scott Sheffield, chief executive
of Pioneer Natural Resources, one of the two companies that won the
initial condensate export approvals.
The White House and Congress would not let that happen, oil executives say.
Not
surprisingly, Senator Markey took a different view: “They claim that
exporting American oil to China will be good for oil companies and there
will be no impact on American consumers and industries and our national
security. If something sounds too good to be true, it probably is.”
======================
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12/26/13, "Soros buys Pioneer stake," petroglobalnews.com
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"Billionaire fund manager George Soros now owns 964,000 shares of Pioneer Natural Resources (NYSE: PXD), one of the biggest players in the Texas Permian Basin.
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Soros’s stake is worth about $180 million.
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Other investors including Stanley Druckenmiller and John Paulson are buying Pioneer stock as well, the Motley Fool said."...
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====================
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"The move, which came in private classification orders issued by the Commerce Department’s Bureau of Industry and Security."...
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6/24/14, "US challenges oil export ban with approvals for two Texas companies," fuelfix.com, Jennifter Dlouhy .
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"The Obama administration has cleared the way for two energy companies to sell an ultralight variety of oil overseas after minimally processing it, a decision that tests the limits of a long-standing ban on exporting U.S. crude.
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The move, which came in private classification orders issued by the Commerce Department’s Bureau of Industry and Security, effectively confirms that hydrocarbon known as condensate qualifies as a petroleum product once it has been processed in a distillation tower, and therefore is not barred by the 39-year-old ban on crude exports.
.
Unlike unprocessed crude, companies can freely sell gasoline, diesel and other petroleum products overseas.
.
The decision falls far short of what oil producers and some of their allies in Congress have been urging — including a wholesale repeal of the trade limits on crude. But it could provide a new avenue for the ultra-light condensate that flows along with crude out of many Texas wells tapping the Eagle Ford Shale and effectively delay a broader, deeper debate about broader crude exports."...
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Ed. note: Please excuse big gaps in text which I'm unable to fix. It's vandalism by my longtime hacker who's not happy about this post.
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