North Dakota oilman urges U.S. crude exports to Europe

WASHINGTON Wed Mar 26, 2014 12:09pm EDT

Related Topics

WASHINGTON (Reuters) - Ending the 40-year ban on U.S. crude exports is the fastest way the American drilling boom could bolster energy security in Europe and Ukraine, the CEO of the biggest operator in North Dakota's vast oil fields told lawmakers on Wednesday.

After Russia's invasion of the Crimean region of Ukraine, several U.S. lawmakers have introduced bills pushing the government to speed approvals of U.S. liquefied natural gas exports. They say the extra U.S. supplies would provide Europe with an alternative to supplies from Russia, from which it currently gets nearly a third of its fuel.

"While opening LNG exports is a noble goal and one that we as a country are actively working towards, the fact is the infrastructure to undertake large scale overnight LNG exports does not currently exist," Harold Hamm, the chairman and CEO of Continental Resources Inc said at a hearing of the House of Representatives Foreign Affairs Committee.

"If we want to have an overnight impact on today's global events, we can immediately begin exporting crude oil, which does

not have the same infrastructure constraints (as LNG)," he said.

Hamm could benefit from an easing of the export ban, by selling more of the crude from the Bakken North Dakota oilfields, where Continental is the biggest lease holder.

Representative Ed Royce, the chairman of the committee, said the United States "should end its self-imposed sanctions on energy exports." Lifting the oil export ban and approving LNG exports would "would advance our geopolitical interests, including by undermining the coercive leverage of Russia and others," he said.

The LNG export option faces several hurdles. The U.S. can already export LNG to nations with which Washington has free trade agreements, such as Canada. But the first U.S. project to export LNG to other countries would not launch until late next year. Other projects would take years, as billions of dollars of equipment to super cool gas for export needs to be built.

In addition, Ukraine lacks a port that can import LNG, and in any event Turkey currently does not allow LNG tankers to sail through the Bosphorus straits to the Black Sea.

A DROP IN THE SEA

The idea that U.S. crude oil exports could make a big difference in Europe is not shared by everyone.

Michael Levi, a fellow at the Council on Foreign Relations who testified at the hearing, said the ability of U.S. exports to weaken Russian President Vladimir Putin's hand is less powerful than many think.

"Oil exports are a fairly weak tool against Russia," he said. "Europe can already buy oil from elsewhere if Russian supplies are cut off."

And U.S. exports would be "a drop in an already large sea" of the global oil market, Levi wrote in a recent blog.

The United States, Russia and Saudi Arabia are the world's top oil producers.

While pressure is building on the administration of President Barack Obama to lift the ban that resulted from the oil price shocks of the 1970s, few analysts think an outright reversal will come anytime soon.

The United States still imports much of its oil, so it could be a few years before it has so much that most companies will need to find new markets. In addition, no major legislation to lift a ban currently exists, in part because few lawmakers in an election year want to support a measure that could be blamed for having the potential to raise domestic gasoline prices.

Still, President Obama could create a new category of export licenses as a matter of national interest, as has been done for segments of the market in the past. President Ronald Reagan did so with U.S. crude exports to Canada, while Bill Clinton allowed exports of Alaskan crude.

The administration could also allow export licenses on a case-by-case basis of batches, if it is in the national interest

and if a company is able to prove the oil could not be marketed in the United States.

Worries about higher fuel prices resulting from a reversal of the ban could be overdone, according to one analyst.

Elizabeth Rosenberg, director of the energy, environment and security program at the Center for a New American Security, told

the lawmakers that lifting the ban could raise some crude prices in line with global benchmarks.

But a broad hike in fuel prices at gasoline stations would be unlikely, and most U.S. motor fuel prices could even drop several cents per gallon, she told lawmakers, citing experts at Resources for the Future think tank.

If the ban is not overturned, it could push U.S. crude producers to eventually slow output, which could undermine global energy security. "Without the crude export relief valve, oil companies will pull back on what will be increasingly uneconomic production," she said.

(Reporting by Timothy Gardner, Editing by Ros Krasny and Stephen Powell)

FILED UNDER:
We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (12)
yurakm wrote:
It also would increase incomes of American oil companies: More revenues, higher prices.

Mar 26, 2014 8:07am EDT  --  Report as abuse
UrDrighten wrote:
If we have such a surplus of oil that we are looking for people to sell it to, perhaps we would be wise as a nation to cut back until production meets domestic demands.

What we have now is all we’re ever going to get.

Mar 26, 2014 8:17am EDT  --  Report as abuse
Oma wrote:
Our current oil boom comes from fracked oil — and fracking uses and pollutes huge amounts of water. The oil we frack today comes at the cost of water our children and grandchildren will need.
We should produce only the oil for domestic use, Europe and Ukraine should look for sources closer to home, namely Saudi Arabia and North Africa.
Oil is a twentieth century energy source. We should subsidize twenty first century energy technologies.

Mar 26, 2014 10:30am EDT  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.