More U.S. condensate export requests on the horizon but no avalanche expected

WASHINGTON, July 14 Mon Jul 14, 2014 2:39pm EDT

WASHINGTON, July 14 (Reuters) - The U.S. Commerce Department will likely approve a new round of permits to export a lightly processed form of crude oil, but it is unlikely that there will be an avalanche of barrels that can be exported, a lawyer representing oil companies said.

Jacob Dweck, a partner at law firm Sutherland, Asbill & Brennan, who represented Enterprise Product Partners LP in its successful application to export light oil known as condensate that was made public last month, said he represents other companies that have applied for a license. He said he could not disclose the details of their requests.

Enterprise wrote a letter to the Commerce Department's Bureau of Industry and Security (BIS) in February to clarify whether condensates they produced in Texas can be exported if they undergo minimal processing, and received a decision from the agency a month later, Dweck said. Pioneer Natural Resources also got a ruling allowing it to export minimally processed condensate.

Enterprise and Pioneer were among the first oil firms to ask BIS for the clarification, but others have made similar requests.

If other companies with similar products, access to infrastructure and export recipients file a similar clarification request, they are likely to get a green light from the BIS, Dweck said.

"If you are far off the parameters of the ruling you are better off requesting on your own," he told reporters on the sidelines of a conference by the Energy Information Administration (EIA).

This will likely limit the amount of condensate that can be exported after light distillation.

"We are not going to see an avalanche of processed condensate being exported out of this country. It is going to be an evolutionary process and it's going to be limited by production, logistics and markets abroad," he said.

For example, the Utica shale in the northeastern U.S. has condensates, but they face different transportation issues, which may make them more difficult to export, he said.

Its distance from export ports means that the condensate could potentially be intermixed with other domestic crude, making it ineligible for export.

In Eagle Ford, which is closer to export terminals, the situation is different.

Dweck said there was an overreaction to the Enterprise decision, with people rushing to say that the BIS decision marked a major change in the way the administration views crude exports.

"I don't think the rulings were intended to be a 90-degree turn in the Obama administration's ban on the export of crude oil. I think the reaction was overblown," he said.

He said estimates point to a volume of around 1.2 million barrels of lease condensate, with up to 1.8 million by the end of the decade. (Reporting By Valerie Volcovici; editing by Jessica Resnick-Ault, Bernard Orr)

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