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Matt Smith

Matt Smith

Taking a voyage across the world of energy with ClipperData’s Director of Commodity Research. Follow on Twitter @ClipperData, @mattvsmith01

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Dodging The Export Ban: U.S Condensates Export Flourishes

Dodging The Export Ban: U.S Condensates Export Flourishes

After already writing about Indiana Jones this week, and kicking off this post with an homage to The A-Team’s Hannibal (George Peppard, of course), you may think that I am stuck in the eighties, but I assure you this is not the case. (Mostly).

The reason for the aforementioned Hannibal reference is because I was mulling over a post about oil exports when BAM!! The FT published this piece on the topic, complete with some ClipperData insight to boot. So this post simply serves to showcase the graphic used, along with some insights behind the data. Related: Are The E.U. And Asia Turning A Blind Eye To Russian Sanctions?

Here is the skinny on US oil exports: they are banned. The ban has been in place since December 1975 due the Energy Policy and Conservation Act. EPCA, as it is known, was in response to the 1973 Arab oil embargo, and the export ban in the US was to ‘protect U.S. consumers from volatility and price spikes‘ by essentially keeping as much oil in the country as possible to meet this need. As it turned out, domestic oil production had already peaked in 1970 at 9.6 million barrels per day, from where it descended to a lowly low of 5mn bpd over the next 38 years.

Nearly 40 years on from EPCA, and half a decade into the US shale oil boom, crude inventories now sit at an 80-year high. Given this glut, the US Commerce Department’s Bureau of Industry and Security (BIS) is increasingly siphoning off excess crude by issuing licenses to export it to Canada. These volumes have now surged to a record 492,000 bpd in April (as seen on the FT chart). Related: Carbon Emission Regulations Could Jeopardize Multi Billion LNG Projects

BIS has then provided additional guidelines so that US oil producers can export lightly processed crude, known as condensate. By lightly processing the crude – usually at the wellhead – its classification can be changed to become an exportable petroleum product. Accordingly, condensate exports are on the rise. The ultra-light crude needed for this minimal processing is coming exclusively from the Eagle Ford shale.
After the first cargo left US shores in July of last year, ClipperData numbers show condensate exports have steadily increased, up to nearly 150,000 bpd in the last month.

34 cargoes have left the US so far in 2015, and while the lion’s share have made their way to Europe – where they are used as feedstock in the petrochemical industry – new destinations are springing up each month. Latin America, and specifically Brazil, saw its first cargo arrive in May, while two shipments have made their way to the UK in the last month. Given the trajectory of exports over the last year, it would appear that going forward, the only way is up: Related: Not Deterred By Huge Risks, Shell Opts For Megaprojects

(Click to enlarge)

Condensate exports (source: ClipperData)

By Matt Smith

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