Rise in ultralight oil exports could be looming

Domestic demand for the light, sweet oil resulting from current hydraulic production methods remains low, as  U.S. refineries often struggle to process condensate. However, the oil has received a warm welcome in Asian markets, largely as a replacement for naphtha, a petrochemical feedstock, the Houston Chronicle reports. 

As this demand continues to grow, Pioneer Natural Resources CEO Scott Sheffield predicts that Texas could soon be exporting as much as 1 million barrels per day of the ultralight oil. Three cargoes have already been shipped offshore, to South Korea, Europe and Singapore, with a fourth planned for Japan. 

So far, Pioneer and Enterprise remain the only two organizations that have been approved by the Commerce Department to export the lightly distilled petroleum product. The reasoning behind this decision is still unclear, causing the industry news source Fuel Fix to estimate that the other half-dozen applications are being stalled due to political fears. 

According to the source, roughly half of the 1.5 million barrels of oil flowing daily out of the Eagle Ford can be considered condensate, and Sheffield expects that number to continue to swell. 

"But Eagle Ford is still growing — that 1.5 will go to 2 million barrels a day over the next three to five years," Sheffield told reporters at an Aspen Institute panel discussion. "So condensate could grow there to up to a million barrels a day."

According to Sheffield, exportation adds $15 to $30 per barrel of condensate, as domestic demand continues to be limited. The decision to allow unrestricted exportation could have a dramatic effect on the industry. 

Considering the rate of change in the market, organizations may benefit from oil and gas strategy consulting to be better prepared for any eventuality.