Enterprise Contracts to Boost U.S. Crude Exports

Enterprise bumps up exports through annual contracts; signs 2015 contracts with PDS, Vitol; seeks one more term buyer.

U.S. exports of condensate have been given an important boost after pipeline company Enterprise Products Partners LP agreed annual contracts with at least two major trading companies to sell the light crude, trade sources said.

Oil producers have been pressing to lift a 40-year-old U.S. ban on crude exports and the Department of Commerce broke its year-long silence in December and began approving a backlog of requests to sell processed light oil abroad.

Enterprise is selling 40,000 barrels per day (bpd) under the contracts, which should give it a headstart before other firms get the nod to export condensate produced from shale operations.

It has contracts with Petro-Diamond Singapore (PDS), the oil trading arm of Mitsubishi Corp, and independent oil trader Vitol, for 1.2 million barrels of U.S. condensate per month in 2015, according to the trade sources, who declined to be named because of company policy.

"The U.S. has too much high-API material and exports of stabilized condensate will provide an important, albeit minor, outlet over 2015," said analysts at JBC Energy.

API refers to the crude's density. Crude tends to yield more light products such as naphtha and gasoline if the API is high.

NO EASY TRADES

Traders have pounced on the new cargoes in the hope of exploiting arbitrage opportunities between Asia and Europe.

PDS has extended a term deal with Enterprise into 2015 after its contract ended last year, a person close to the matter said, adding it would mean lifting a 600,000-barrel cargo every month this year.

Enterprise has also awarded Vitol a tender for a cargo every month this year, trade sources said.

Vitol lifted two cargoes between the end of December and January, one of which was unloaded in France while the other is expected to arrive in early February, shipping data showed.

In February, Vitol will be lifting two cargoes which are also likely to head to Europe as the arbitrage window to Asia had been closed, traders said.

Last week, Enterprise closed another annual tender offering a 600,000-barrel cargo every month from March.

The tender, if awarded, could take Enterprise's total exports to about 60,000 bpd, more than the 50,000 bpd that its partner Pioneer Natural Resources (PXD) had projected this year.

Enterprise, Mitsubishi Corp and Vitol declined to comment.

Despite an easing of U.S. export rules, it is not easy to sell cargoes abroad as American supplies compete with Middle East cargoes being offered at steep discounts.

PDS and Vitol are bound by the Enterprise contract to take the oil regardless of whether they find a buyer.

The gap between Brent and West Texas Intermediate <CL-LCO1=R> has narrowed which may also discourage European refiners from buying U.S. oil.

Royal Dutch Shell (RYDAF) also has approval to export U.S. light crudes while ConocoPhillips (COP) is seeking a licence.

BHP Billiton Ltd has also sold at least two cargoes.

By Florence Tan