Upside Down - Condensate Production Decline Hits Splitters and Neat Conde Exports

The sharp decline in U.S. condensate production since early 2015 and the end to the ban on U.S. crude oil exports a few months later were a one-two punch for the companies that made throughput commitments to condensate splitters and made other conde-related infrastructure investments. In what seemed like a flash, conde supply plummeted and the steep price discount to WTI and other light crude that made conde so attractive for splitting and exporting was gone. Holders of splitter capacity were paying top-dollar for what conde they could corral, and operators were forced to run their brand-new facilities at far less than capacity. And, when the general ban on crude exports was lifted in December 2015, the special status that conde had enjoyed since exports of lightly processed conde were permitted in June 2014 was a thing of the past. Today, we continue our review of a conde world in upheaval, this time with a focus on splitters and exports.

As we said in Part 1, superlight crude and conde sit side-by-side at the far end of the crude-oil spectrum. They’re both sweet (low-sulfur) and very pourable — superlight (using EIA’s API gravity breakdown, 50.1 to 55.0 degrees) is like iced tea, and conde (API gravity of 55.1 or more — also EIA’s breakdown) is like cream soda — and they can either be refined, exported, blended with heavier crudes, or (for conde) run through a splitter. A splitter uses atmospheric distillation to separate high-API-gravity conde into its component fractions to produce intermediate, semi-finished blend stocks like naphthas and distillates that are processed further at refineries. (More on splitters in a moment.)

Superlight crude and/or conde is produced in a number of U.S. shale plays, including the Permian, the Bakken, the Niobrara/Denver-Julesburg (DJ) and even the natural gas-focused Marcellus and Utica. But the King of Conde was and still is the Eagle Ford in South Texas, where at one point as much as 45% of the crude produced had an API gravity of 50 or more. From 2011 through 2014, U.S. production of superlight and conde rose steadily to a peak of about 1.1 MMb/d; conde was selling for several dollars a barrel less than light-crude benchmark WTI (API of just under 40 degrees); new splitters were being built to make fuller use of all that conde production and to provide refineries with more conde-derived blend stocks, and then in June 2014 the U.S. government approved the export of minimally processed condensate, 18 months before the ban for exports of crude to countries other than Canada was lifted.

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