Fifty Shades of Condensates – Where is All This Condensate Going?

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.

 [If you are new to condensates and you have not read the first three episodes in this series then reviewing them first will help, particularly Part 2 that covers definitions. Here are the links to Part 1 and Part 3.]

In our last blog on this subject, we identified the condensate export problem. The U.S. Commerce Department has long restricted the export of domestically produced crude oil thanks to America’s dependence on imported, foreign oil. Regulations (in place before today’s shale-oil boom) actually include “lease condensate” extracted from oil wells in the official definition of “crude oil,” because it remains liquid at atmospheric pressure.  (Generally speaking, “raw” condensates and lease condensates are the same thing).

Yet condensates, an ultra-light, volatile hydrocarbon mixture, are quite different from the crudes that feed most U.S. refineries, and they don’t yield the same mix of products in the refining process. Condensates generally have an API “gravity” of 45 to 75 degrees. By contrast, the NYMEX benchmark West Texas Intermediate (WTI) crude has an API gravity of 39.  Motor gasoline has an API gravity in the low 50’s.  So much of this stuff is lighter than the gasoline you use in your car. 

RBN contributor Brandon Bello with Texon (see Wasted Away in Butane Blendingville) recently provided a picture that demonstrates the wide range of API gravities and what that means for the color of the condensate (see below).  The clear condensates on the left are the lightest.  Off the picture to the right are condensates as black as any crude oil.  See where we get the title ‘Fifty Shades’?

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