Crude Export Ban No Match for Lightest US Shale Oil
From Fuel Fix
A glut of shale oil in fields from Texas to North Dakota is forcing producers to find ways around the U.S.’s three-decade-old ban on crude exports in order to seek higher prices in foreign markets.
Kinder Morgan Energy Partners LP is among companies setting up mini-refineries to process certain grades of crude just enough to qualify them as refined fuels, which are legal to export.
The industry’s best hope is ultra-light oil, which is so abundant in shale rock that it has flooded the Gulf Coast and traded for a record discount to global benchmark Brent crude last quarter. Potential revenue for exports is $40 billion a year based on global prices, or about $9.7 billion more than what the same oil fetches in the U.S.
“It’s going to get exported in one way, shape or form or another,” said Ed Hirs, a professor of energy economics at the University of Houston who also runs a small production company in Texas. Producers will sell it abroad “as a product in its own right, or it’s going to be exported as a finished good, having become diesel, plastic or fertilizer.”
Ultra-light oil, known as condensate, is pure enough that it was poured directly into the gas tanks of California cars in the 1920s. It may make up as much as 14 percent of U.S. crude production in 2013, or almost 1 million barrels a day, about 66 percent more than its level three years ago, the Houston-based energy consultant RBN Energy LLC estimated.
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