* Petchem producers unlikely to buy due to impurities in oil
* Big middle distillates yield, less naphtha, LPG
* Wide variance in API gravities in assays, samples
By Florence Tan and Osamu Tsukimori
SINGAPORE/TOKYO, Sept 5 Tests on samples of the
same type of U.S. condensate now heading to South Korea and
Japan have raised questions about the ultra-light crude's
suitability for use in Asia, sources said, making some potential
buyers wary about taking the oil.
The uncertainty could delay a rapid build-up in the flow of
U.S. condensate to Asia after the arrival of the first exports
of U.S. crude in 40 years. Asian refiners and chemical producers
will have to first determine the best use for the ultra-light
oil before starting to buy in large volumes.
Two Japanese petrochemical makers - Showa Denko
and Asahi Kasei - told Reuters they do not plan to
process the condensate due to "impurities" that would make it
difficult to use as a feedstock at their plants.
Lab work has also shown that the specifications of the oil
from the Eagle Ford shale in southern Texas vary more than
expected, said sources who have received samples or seen assays,
making it difficult for refiners to determine how to use it.
"We don't know, that's the problem. The U.S. Eagle Ford is a
mixture of well heads, not just from a single wellhead," said a
source with a North Asian refiner that was considering buying a
cargo of the oil.
The multiple wellheads and suppliers mean there can be wide
variations in the oil's API gravity from cargo to cargo, the
source said. API gravity measures how heavy or light a crude is,
which determines whether it can produce more heavy products such
as fuel oil or more light products such as diesel and jet fuel.
In the Eagle Ford basin, nearly 300 rigs are in operation,
pumping 1.5 million barrels per day (bpd) of condensate in
September, up from around 200,000 bpd in 2010, according to the
U.S. Energy Information Administration (EIA).
Enterprise Product Partners LP, which has sold at
least six cargoes of condensate, said it had not received any
negative feedback from customers about quality.
Tests done in Asia and assays received from Enterprise have
shown that the bulk of the oil's output, or two-thirds of its
yield when run through a refinery, will be middle distillates,
and about a fifth will be naphtha and LPG, said the sources who
have received samples or seen the specifications.
The oil also contains at least 10 percent residue fuel and
impurities such as base metals and sediment, which cannot be
processed by petrochemical plants that are not integrated with
refineries, the sources said.
"It's nearer to crude than condensate," said a source at a
Condensate, a non-gas liquid produced from natural gas
fields, typically has API gravity of above 55 degrees and
contains a high proportion of naphtha and liquefied petroleum
gas (LPG) for chemical manufacture.
The API reading in one of the assays for some of the U.S.
condensate is as low as 40 degrees, said the source with the
North Asian refiner.
A lower API number means the crude is heavier.
South Korean refiner GS Caltex is expected to
receive the first condensate export cargo on Sept. 11, shipping
data on Reuters showed. Japanese refiner Cosmo Oil Co's
cargo is expected to arrive in October.
GS Caltex and Cosmo both declined to comment on their tests
of the U.S. condensate prior to the cargo arrivals.
The United States has softened a four-decade ban on crude
oil exports, by allowing the condensate to be sold overseas
without a license once it is put through a stabilizer to qualify
it as a refined product.
The bulk of Enterprise's six cargoes were supplied by U.S.
independent producer Pioneer Natural Resources Ltd.
"We have heard nothing negative from our customers about the
quality of the product and demand for processed condensate
continues," said Rick Rainey, a spokesman for Enterprise.
The condensate that Pioneer has sent to Enterprise from its
Eagle Ford processing plants has "very tight specs", said David
Leaverton, a spokesman for the producer.
"Pioneer isn't directly exporting our product in a single
batch like that. We sell to Enterprise. We can't speak to the
products exported by Enterprise," he said.
Other producers of condensate in Eagle Ford include Apache
Corp, EOG Resources Inc, BHP Billiton Ltd
and Marathon Oil Corp.
(Additional reporting by Catherine Ngai, Jessica Resnick-Ault
and Anna Louie Sussman in NEW YORK; Editing by Aaron Sheldrick
and Tom Hogue)