Feds Query Energy Firms Ahead of Export Rulings

Posted by Joseph Keefe October 6, 2014

The U.S. Commerce Department has taken a small step toward resolving some two-dozen pending requests to export lightly processed oil this summer, asking energy companies to fill out a one-page questionnaire about their plans, sources familiar with the document told Reuters.

The nine questions may help the department map out a further easing of the four-decade old ban on crude exports.

In August, the Commerce Department's Bureau of Industry and Security (BIS) sent a standard set of nine questions to companies that had requested rulings on whether they could export an ultra-light oil called condensate, people who had seen the questionaire told Reuters. Those requests have been "held without action" since July, effectively removing any time frame for a decision, Reuters has reported.

The survey included basic questions about the type of oil used for feedstock, distillation process required to transform it from raw 'crude' into oil products, and the specific characteristics of the output, they said.

"It's an attempt to get the same information from everyone so they are operating on the same basis," said one source, who spoke on condition of anonymity because the applications have not been made public. "It goes to how the (petroleum) products are produced and what products result," the source said.

The document arrived more than a month after Pioneer Natural Resources (PXD) and Enterprise Product Partners confirmed that the BIS said they could export condensate overseas after it had been lightly processing.

That news created a storm of confusion and generated questions from Washington to Houston, putting the BIS under scrutiny as speculation rose that the administration was changing its four-decade-old ban on crude exports.

Amid a six year U.S. drilling boom expected to soon make the country the world's top oil producer, energy companies are urging Congress and the Obama administration to fully lift the ban imposed amid the Arab oil embargo. Few expect that to happen soon, but many hope it may be relaxed in part.

Buoyed by shale, the U.S. now produces about 8.5 million barrels a day, according to the Energy Information Administration. Saudi Arabia, the world's biggest exporter, produces about 9.8 million barrels a day.

The questionnaire starts to look at how ultralight oil, known as condensate, might make it to the market. The first question asks for specifications about feedstock including its source, location, and API gravity, a measure of the oil's thickness that is a key variable for setting its price. The second question asks about what kind of processing or distillation is being done, according to the sources.

Additional questions probe what comes out of the distillation tower and how the product will be used abroad. The final question asks whether the company has ever sold condensate or crude oil to anyone overseas.

CONDENSATE FORUM

Many of those companies quickly returned the forms but have had no further response from the BIS since August, another industry source said. Only one firm, oil trader Trafigura, has publicly confirmed it has a request pending.

"Everybody in the government is looking over their (BIS') shoulder. They are being reasonably cautious but the clock will tell me whether it is more about due diligence on their part or political pressures," to slow the process down, the source said.

Energy experts in the Obama administration are turning their attention to resolving long lingering questions about condensates, which falls under a gray area under US regulations.

The Energy Information Administration, the independent statistics branch of the Department of Energy, held a closed-door "Condensate Workshop" with officials from multiple agencies and outside energy exporters on Sept. 26, one of its first efforts to define what exactly constitutes the ultralight oil.

To date, the EIA has not provided comprehensive data on condensate, and has never counted stabilizers as a type of refining, meaning it has failed to account for how much condensate has been processed for export.

"The focus of the EIA meeting was to try to understand the commercial parameters so they can capture (condensates) correctly in their reports," a source said.

Two participants in the meeting said it was likely that the Department of Commerce would not rule on any of the applications until a broader policy on condensates is determined.