July 3, 2014 / 2:12 PM / in 3 years

Exclusive: First U.S. condensate cargo up for sale in Asia as ban eases

SINGAPORE (Reuters) - A U.S. energy company launched a broad effort this week to find buyers for the first ever U.S. exports of condensate, an ultra-light oil, signaling the start of what could be a growing trade as demand grows worldwide.

One week after U.S. authorities confirmed a ruling easing a 40-year ban on shipping lightly processed oil abroad, Enterprise Product Partners has sold its first cargo to a Japanese trading house and was seeking more buyers in Latin America, according to trading sources.

Two Singapore-based sources said Japanese trading house Mitsui & Co Ltd had bought a 400,000-barrel cargo of U.S. condensate that is expected to be loaded and sent to Asia later this month or in early August. The firm was marketing that cargo to refiners, they said.

“A lot of traders are asking us about it and telling us they’re trying to get more cargoes from Enterprise, especially this week and next week,” one of the trading sources said. “So far, I didn’t hear any end users in Asia bought.”

A Mitsui spokesman in Tokyo declined to comment. Enterprise was not immediately available for comment.

One trader at a major global oil company said Enterprise had offered to sell it condensate for export and asked about making potential sales to Latin America.

The preliminary marketing efforts are the strongest evidence yet that U.S. oil companies are on the verge of unleashing light, gaseous petroleum from the country’s massive oil and gas fields to markets overseas. By the end of the year, as much as 300,000 barrels could be exported each day, according to an analysis by Citibank last week.

The deal follows news last week that two companies - Enterprise and Pioneer Natural Resources - have approval from the U.S. Department of Commerce to export condensate that had been minimally processed to reduce volatility. U.S. condensate supply is estimated at about 1 million barrels per day.


The approvals represent a softening of a total ban on U.S. oil exports that has been in place since the Arab oil embargo of the 1970s, and they open up the United States to global oil consumers for the first time in a generation.

But the export issue is still sensitive in Washington as some want to keep the ban and ensure energy costs stay low in America. Advanced drilling technology to extract fossil fuels from shale rocks will boost U.S. oil production by another 1 million bpd this year, according to forecasts from the U.S. Energy Information Administration.

“I believe this is the first approved export of condensate outside of Canada (since the export ban)” said Al Troner, a condensate expert and president of Asia Pacific Energy Consulting. “It will become fairly regular now.”

Traders are rushing to ship condensate to Asia, the major condensate import market where new processing units, known as splitters, are expected to begin operating in the third quarter, sources said. Condensate is a type of light oil with an API gravity, a measure of how heavy or light petroleum is, of more than 50 degrees. It is mainly used to produce naphtha which is a major feedstock for the petrochemical industry.

“If the U.S. can export condensate it should have a good impact on Asia as supply is a bit tight at the moment and prices are expensive for refiners,” another Singapore-based trader at a North Asian firm said. “But the U.S. export volume is still a big question mark.”

Importers like China, Japan and South Korea have splitting capacity that can turn condensate into naphtha and other products. In Asia Pacific, splitters can process up to 900,000 barrels per day of condensate, according to a presentation by Facts Global Energy.

Japanese petrochemical producers Showa Denko and Asahi Kasei Chemicals Corp are checking if U.S. condensate is suitable to be processed at their plants, their spokeswomen said.

Other potential buyers lie on the doorstep of the United States in Latin America, where it could be used as a substitute for naphtha as a diluent for heavy crude oil.

Additional reporting by Julia Payne in London, Meeyong Cho in Seoul, Edward McAllister in New York, Marianna Parraga in Houston, Osamu Tsukimori and James Topham in Tokyo; Writing by Jessica Resnick-Ault and Edward McAllister; Editing by Marguerita Choy, Cynthia Osterman and Ed Davies

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