Few segments of the energy market have experienced the roller-coaster ride that U.S. condensates have been on over the past five years. Prior to 2011, U.S. condensates were a forgotten backwater of the hydrocarbon complex, mostly blended off into crude oil. Then condensates rapidly transitioned from obscurity to an oversupplied, price-discounted growth market, then to a driver of massive infrastructure investment, then to the star of the show as the only member of the U.S. crude oil family that could be exported. By mid-2014, producers and midstreamers were in love with condensates. Exports were legal and growing. New pipeline, splitter, stabilizer and export dock infrastructure was coming online. U.S. condensate markets were tightening and condensate prices were increasing. Then in one fell swoop in December 2015, Congress swept away all export restrictions on crude oil, potentially relegating U.S. condensates back to the obscurity from whence they came.
All of this turmoil in U.S. condensates has played out within the much broader context of international condensate markets. The natural gas production of many countries yields substantial volumes of condensates. These volumes are traded in robust markets, with the epicenter of demand in the Asia/Pacific region, supplied mostly by producers in the Middle East, Asia and Africa. These markets are also in transition, though not with the level of turmoil being experienced by U.S. condensates. The key to condensates in the global market is the relationship between condensate production growth, export volumes and the major market for these exports – condensate splitters and refineries. Prior to lifting of the export ban, these markets were gearing up for significant volumes of U.S. condensates. Now things have changed.
If you’ve followed the RBN blogosphere for a while, you know we’ve been deep into the condensate markets for years, including our “Fifty Shades of Condensate” series (“Which One Did You Mean?”, “What Should be Done With Condensates?” and “Where is All This Condensate Going?”). We looked at condensates outside the U.S. in Through The Looking Glass. In Like A Box of Chocolates we examined the quality issues associated with U.S. condensates (“You never know what you are going to get.”) and did our January 2014 Drill Down report on the subject, covering a forecast of production and a description of new condensate infrastructure. More recently, at the end of last year (2015) we dissected Corpus Christi infrastructure including condensate splitters and export facilities in our Walk This Way series.