(Adds Breakingviews link)
By Valerie Volcovici and Timothy Gardner
WASHINGTON, June 25 U.S. officials have told
energy companies that they may export a variety of ultra-light
oil if it has been minimally refined, an apparent marginal
loosening of a decades-old ban on selling U.S. crude abroad.
The U.S. Department of Commerce's Bureau of Industry and
Security told Pioneer Natural Resources Co that putting
light oil, known as condensate, through a stabilizer was
sufficient processing to qualify it as a refined product,
eligible for export without a license.
"The stabilization process at Pioneer's Eagle Ford Shale
central gathering facilities involves a distillation unit that
lowers vapor pressure and removes volatile lighter
hydrocarbons," Pioneer said in a statement. This process
qualifies the crude as a product that can be exported, Pioneer
The Wall Street Journal previously reported that the
Department of Commerce, which has come under growing pressure to
ease restrictions amid a resurgence in domestic production, had
given approval via a private ruling to Pioneer and Enterprise
Product Partners LP to export the so-called condensate.
Enterprise didn't respond to requests for comment.
A Commerce spokesman did not comment on the specific rulings
but told Reuters that there had been "no change in policy"
toward crude oil exports, a topic that has emerged as one of the
most contentious energy policy issues this year.
Condensate may be exported if it has been run through a
distillation tower, a type of refining unit, because the process
"results in the crude becoming a petroleum product (that) is no
longer defined as crude oil," said Commerce spokesman Jim Hock.
Refined products such as gasoline and diesel are not restricted.
"Existing statutes provide both specific restrictions and
allowances regarding crude oil exports," Hock said. Some energy
experts also agreed that the ruling appeared consistent with
existing interpretation of the 40-year-old law.
Still, U.S. oil prices rose more than $1 to $107.05 a
barrel after the report, highlighting the intensifying scrutiny
of a gray area in regulations that prohibit export of condensate
that has been produced directly from an oil field but allow it
if the same type of oil emerges from a natural gas plant or a
Energy-hungry Asian countries, which get most of their oil
from the Middle East, would welcome extra U.S. supplies. Three
new condensate splitters, a type of refinery, are due to open
this year in the region able to process a total of 350,000
barrels per day.
Some oil traders in Asia, however, predict it will be a few
years before U.S. supplies hit the market, given the time needed
to pin down details such as specifications and freight costs.
Reuters reported in May that U.S. oil producers, including
Pioneer, had met with the Department of Commerce's Bureau of
Industry and Security (BIS), which oversees exports, and were
hopeful of some form of easing on condensate limitations.
The U.S. shale oil boom of recent years is expected to soon
make the country the world's top crude producer, surpassing both
Saudi Arabia and Russia. It has also led to a glut of light oil
in Texas and Louisiana that is difficult to process there
because refiners have invested billions of dollars to process
heavier oils from Mexico and Venezuela.
Some ultra-light oil could be reclassified as fuel after it
has been minimally processed, putting it in a regulatory gray
area that has been seen by some export backers as a way to ease
the ban on exports.
Senator Lisa Murkowski, a Republican from Alaska, said the
move on condensate was "a reasonable first step that reflects
the new reality of our energy landscape."
Murkowski, the top Republican on the Senate Energy
Committee, urged the White House to fully lift its ban on crude
A Senate aide said the shipments that will be allowed are
limited because they are "stabilized" condensates, or crude that
has been processed to remove light ends like butane gas so that
it can be sent through pipelines for shipping.
It was not immediately clear how much condensates the
companies would be able to ship though exports could begin as
soon as August. Pioneer Chief Executive Officer Scott Sheffield
said in March that recent U.S. oil production includes some
800,000 barrels per day of condensate.
Congress is not expected to pass legislation lifting the ban
on crude exports before the Nov. 4 elections, as no lawmaker
wants to be blamed for a move that could boost U.S. oil prices.
Senator Edward Markey, a Massachusetts Democrat, blasted the
export approvals saying it puts America on a "slippery slope" to
send more oil abroad when the Middle East is in disarray and
tensions are high with Russia.
"Congress put this oil export ban in place. It should be
Congress that decides when and how to change it, not through a
private ruling by the Commerce Department without public
debate," he said.
(Reporting by Ros Krasny, Timothy Gardner and Valerie
Volcovici; Editing by Sandra Maler, Cynthia Osterman, Lisa
Shumaker, Jessica Resnick-Ault and Lisa Von Ahn)