Ann Davis Vaughan

One of the most exploited oil plays in history, the Permian Basin in West Texas and New Mexico has recently become ground zero for some of the most exciting new “unconventional” oil and gas development in North America. Horizontal drilling and vastly improved completion techniques have vaulted the Permian once again to the fastest-growing oil and gas production region of the U.S.  In today’s Permian-focused blog, we review key conclusions from RBN Energy’s latest “Drill Down” Report and Production Economics Model.

The surging production of condensate, or ultra-light crude oil, from America’s new shale-oil plays presents an opportunity that’s only just beginning to be recognized by much of the hydrocarbon market.  Historically U.S. condensates have been a tiny sliver of that market, usually blended into crude. Now there is just too much of the stuff, particularly in places that aren’t yet ready to process it in large quantities. In this next installment of Fifty Shades of Condensates we explore the constrained domestic demand for “raw” condensates at U.S. Gulf refineries and petrochemical plants, and the promising international outlets for condensate in Canada and Asia. Bottom line: unless the unlikely happens and the U.S. lifts restrictions on exporting “raw” condensate, producers, traders and other players will either be selling it here at a discount, or spending money to transform it to buy a little optionality. It’s all about spending the least they can to access pockets of demand, and first movers are already enjoying an advantage.

Growing condensate supplies from tight oil shale plays are sloshing up at Gulf Coast refineries and being discounted by refiners that don’t need more of the ultra-light crude.  Meanwhile there are established international markets for condensate. The resolution seems obvious – just export the surplus condensate and import the kinds of crude oil needed by Gulf Coast refineries.  That’s likely okay if the export destination is Canada for use as bitumen diluent, but there is a finite limit to that market.  However exporting raw condensate to destinations outside North America is particularly tricky under U.S. crude-oil export restrictions. Today we delve into the nuances of what the export rules say and what the market is doing to deal with these regulations.

The new domestic energy rush has supplied North America with a potent new cocktail of hydrocarbons. Not only are we producing more oil and gas here than we have in decades, but we are producing more of certain kinds of hydrocarbons than North America’s existing energy infrastructure is built to handle.

We’re talking about the “C” word: Condensates. Today we introduce a blog series on condensates.

As RBN Energy explained last February (see “neither fish nor fowl”), condensates are a highly volatile hydrocarbon mixture that is classified somewhere between crude oil and natural gas liquids. Condensates are showing up in abundance both in new “wet gas” plays, where they drop down as liquids from gas streams during the field production process, and in oil shale plays, where condensate is part of the liquid coming straight out of a wellhead.