Export Regulation

Last Friday (August 14, 2015) the Department of Commerce (DOC) revealed to the press that they would approve a handful of applications to export U.S. domestic light crude to Mexico under a Licensed “swap” arrangement that involves importing the same volume of heavy crude to the U.S. from Mexico. The Licenses are likely to be awarded to Mexican national oil company PEMEX or its affiliates and will last for a year starting at the end of this month (August 2015). Today we update our earlier analysis of Mexican crude swap exports.

Average margins for a Gulf Coast condensate splitter have been about $5/Bbl better in 2015 than they were in 2014 but are still about $4.75/Bbl worse than an equivalent Gulf Coast 3-2-1 crack spread. The economics of condensate splitters have also yet to be tested in an environment if – as could happen later this year – crude production begins to decline. Are condensate splitters a better investment than just exporting lightly processed condensate under relaxed export regulations? Two companies considering projects seem to have reached different conclusions recently. Today we continue our update on splitter projects with a look at economics.

During the last week of September, reports surfaced that Alaskan oil producer ConocoPhillips (COP) has recently exported an 800 MBbl cargo of Alaska North Slope (ANS) crude to South Korea. This is the first such export since 2006 and marks a new development in the evolving debate over US crude oil exports that are heavily restricted by regulations that date back to the 1970’s. Today we look at the fundamentals behind COP’s export shipment.