Watford City, North Dakota - Natural gas is flared off as oil is pumped in the Bakken shale formation.
Jim West/AlamyNatural gas is flared off as oil is pumped in the Bakken shale formation near Watford City, N.D.
By Edward McAllister

NEW YORK -- After decades of isolation, the United States is set to become a major player in the global trade of ultra light oil as recent government export approvals attract interest across the world.

Following rulings disclosed this week, U.S. companies can now export the light, gaseous petroleum known as condensate after a 40-year ban, giving them access to needy markets in Latin America and Asia and potentially threatening the dominance of other established producers in the Middle East and Africa.

Companies are ready to ship condensate from some of the United States' massive oil and gas fields within weeks. By the end of the year, as much as 300,000 barrels could be exported each day, according to analysts at Citi (C) in New York, a timely event as Asian countries increase capacity to import and exporters elsewhere face headwinds.

"It could have an enormous impact," said Al Troner a condensate expert and president of Asia Pacific Energy Consulting. "It could happen within the next two weeks."

Up to one million barrels of condensate is produced each day in the United States, all of which can be exported after some basic refining to reduce volatility, known as stabilizing, according to the U.S. ruling. That is double the amount exported by Qatar, the world's leading condensate producer.

The amount exported and where it goes depends on the kind of condensate that is produced and whether it is the right grade to feed petrochemical plants in China or Japan or to dilute heavy crude produced in Latin America.

Enterprise Products Partners and Pioneer Natural Resources this week both said that they have received private go-ahead from the Commerce Department to export condensate. Enterprise said it is ready to start exporting anytime.

Exports of condensate, a major feedstock for the petrochemical industry, will provide the first outlet for the vast amounts of oil and gas now produced in the United States. It will also give an inkling of the impact that a U.S. drilling boom could finally have abroad if other types of crude are approved for export.

Buyers are already interested, not just in nearby Latin America -- the closest destination for U.S. condensate -- but further afield in India and east Asia, traders and sources said.

In Latin America, companies could use condensate as a substitute for naphtha to lighten local heavy crude. Venezuela's state-run oil producer PDVSA and firms operating in Colombia including Ecopetrol and Pacific Rubiales, some of which already buy from West Africa, are "lined up waiting to buy light crudes and condensates if the price is right" said one trader working in crude purchases, speaking on the condition of anonymity.

In India, Essar Oil's chief executive L K Gupta said "we will look at buying condensate from the United States if the pricing is right. We do buy condensate and if a new source is opening up that is good for us".

It is unclear what the cost of U.S. condensates would be, given that the price depends on the density and where it is produced. Some condensate from the Eagle Ford play in Texas does appear to be cheaper than some grades currently exported from Australia's North West Shelf, according to traders and Reuters data.

"According to an internal analysis at our company, the U.S. condensate based upon [U.S.] WTI pricing appears to have cost competitiveness compared with those from the Middle East based upon Dubai crude," said one Seoul-based refining source, adding that competitive U.S. exports could help bring down global prices.

Length to Tightness

The Middle East dominates supply of condensate. Qatar and Iran export 760,000 barrels per day combined, about half daily global supply, according to a presentation in November by analysts at Facts Global Energy. Australia and Africa make up most of the rest.

The majority of supply heads to Asia, where importers like China, Japan and South Korea have build processing plants known as splitters that can turn condensate into naphtha and other oil-related products. In Asia Pacific, splitters can process up to 900,000 barrels per day of condensate, according to Facts.

But as demand rises, production from existing exporters is faltering. In Australia, where condensate is a by-product of liquefied natural gas production, exports are already declining in part because new gas produced is "drier" than before. In Qatar, domestic demand is set to slow exports. Iranian output has been hampered by sanctions.

"The condensate market East may move from length to tightness," the Facts report said.

It remains to be seen if the United States can fill the gap, and it is expected to take time to determine whether U.S. condensate is compatible with Asian importers' needs. Some said that no moves have been made to export condensate to Asia from the United States. Sampling could take months, others said.

But with demand on the rise, the United States could offer unexpected respite.

"What we hope is this [U.S.] export will help pull down prices of shipments from the Middle East as overall supplies in the global market increase," the Seoul-based refinery source said.

Reporting by Edward McAllister in New York, Marianna Parraga in Houston, Nidhi Verma in New Delhi, Meeyoung Cho in Seoul, Florence Tan in Singapore, James Topham and Osamu Tsukimori in Tokyo.

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Can't really have any impact if it can't go anywhere economically. There is such irony that a fossil fuel Renaissance is happening on Barry's watch in the US, and the only way he can stop it, and pander to his Leftist base is to make it impossible to economically get to the market. This way, the Chuck Shumers in Congress get their wish, and leave us dependent forever on the Sharia-observing oil sheiks of the Middle East. This was a great country, once.

June 30 2014 at 9:47 PM Report abuse -1 rate up rate down Reply

Hey maybe Obama will use his phone and his pen to stop all shipping of American Petroleum products from the USSA, er I mean the USA, wouldn't that be great miltoon ? Call him up !
10 hours ago
Just imagine all the American jobs he could kill with that !

How many American jobs are being killed off because of our trade imbalance with the rest of the world? Doesn't it make more sense to prioritize being energy independent first, taking away any potential economic blackmail by countries who hate us, then export any excess energy production to even further reduce our trade imbalance?

June 30 2014 at 8:43 PM Report abuse rate up rate down Reply

I read all these comments about the devaluation of the US dollar. Even though I consider my self in the center leaning progressive I try to get to understand everyones point and oppinion providing it's not BS. The thing I can't get is how we can have the so called
Fed. Bank run by "civilians" printing money and controling monetary policy in this country and for that matter the world with impunity.
I really believe there a very few polititions who really have a handle on how to set monetary policy in this country..I witnessed that when LLoyd Blankinfein made monkees out of all of them at the congressional hearing during the banking crises that him and his cronies seemed to create.....

June 30 2014 at 6:05 PM Report abuse -2 rate up rate down Reply
1 reply to cvanac8550's comment

sorry I said
'tried to respond to my comment in an inteligent manner" I meant "did respond"

June 30 2014 at 7:26 PM Report abuse -1 rate up rate down Reply

We live in a regulatory-intensive country, but if any industry needed to be TIGHLY controlled its the energy industry.

June 30 2014 at 5:12 PM Report abuse +2 rate up rate down Reply

a dollar will now buy what 40 cents would have bought in 2002. let's regulate some more of our businesses, maybe we can get that dollar today to buy what 5 cents would have bought in 2002.

June 30 2014 at 2:04 PM Report abuse -3 rate up rate down Reply

But it won't reduce the price of gasoline, so who cares?

June 30 2014 at 12:26 PM Report abuse -2 rate up rate down Reply

Not gonna help the common americans with what we pay for fuel

June 30 2014 at 10:01 AM Report abuse +1 rate up rate down Reply

The USA will be able to ship out 300,000 barrels a day, while importimg 3 million barrels a day from foriegn countries.
If Obama's EPA would take it's foot off of the neck of drillers and producers right here in the USA, we could be energy independent in no time at all, plus, there would be jobs created right here, instead of companies running from our borders.

June 30 2014 at 9:36 AM Report abuse +3 rate up rate down Reply

Reduce the need to produce Heavy Crude. Require all Liberal Democrats to use the party mascot when applying for and picking up their Government Cheese logs.

June 30 2014 at 9:22 AM Report abuse +2 rate up rate down Reply

The fact is this is a surplus product here in the US and it dovetails neatly with a glut of heavy crude (not pipeline ready) elsewhere. It will neither add to or subtract from our own internal production of oil, it will not spark retaliation by other suppliers.

June 30 2014 at 9:14 AM Report abuse rate up rate down Reply