US Crude Oil Export Ban Lifts, Could Hit US Oil Industry

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A 40-year ban on US crude oil exports was lifted just last week as part of a massive federal budget deal, and on first blush the new policy looks like a giant step backwards for global climate change. However bad the optics are, some industry observers anticipate that the result will be more along the lines of a swap among different petroleum products than a significant upward spiral in US oil production, and it looks like things are starting to shake out along those lines.

Crude Oil Exports Replace Processed Petroleum Products

For the lowdown let’s hear from reporter Rhiannon Meyers at fuelfix.com (note for our overseas readers who know Latin and are mystified by the place name, Corpus Christi is major port city in the state of Texas):

The lifting of a decades-old ban on crude oil exports primes Corpus Christi to become a key oil hub in the coming years, but it also dampens interest in expensive projects to export condensate, an ultralight oil not subject to the long-standing restriction.

As Meyers explains, US oil producers have been ramping up their interest in condensate as a way to get around the now-defunct export ban. The problem is that when you factor in stabilizers — the infrastructure needed to process condensate — it’s a lot more expensive than simply loading crude onto a ship.

Stabilizing condensate for export made a lot of sense when the global oil market was high, but prices have tumbled since then.

Picking Energy Winners And Losers

The Obama Administration has been accused of “picking energy winners and losers” when it comes to favoring renewable energy over fossil fuels, and the lifting of the oil export ban is providing analysts with a chance to see how that dynamic plays out within the fossil industry.

In terms of the US oil industry’s Gulf Coast operations, it looks like Corpus Christi is the winner and Houston is the loser. Here’s RBN Energy explaining how lifting the crude oil export ban does the winner/loser thing on December 7, about a week before the oil export ban was lifted:

Over the past few years, midstream companies have responded to the boom in crude oil and lease condensate production in the Eagle Ford and the Permian by developing significant new pipeline capacity to, as well as storage and dock facilities in, both Houston and Corpus Christi. Now, with production in the Eagle Ford off its high and growth in the Permian slowing, these same midstreamers (and producers, marketers, refiners, and exporters of condensate and other refined products) are taking stock, and assessing not only what new infrastructure might still be needed in this period of lowered expectation, but whether shifting more of their attention (and liquids) towards Corpus instead of Houston might be warranted…

Now add the lifting of the crude oil ban into the mix, and here’s Meyers writing on the ripple effect on December 22, about a week after President Obama signed the new budget deal into law:

…exports could be transformative for Corpus Christi, Carr argued, pointing to a massive build-out of its marine dock facilities that primes the city to capitalize on the new rules once economics improve for oil shipments overseas.

The economics aren’t quite there yet, according to an analyst cited by Meyers, but over the long run “exports could be the key to Corpus’ future.”

That might be a rather long wait. Though new petroleum markets are available in emerging markets like Asia and Africa, the rapid rise of renewable alternatives is putting a damper on that growth.

To cite one example, one company is marketing small scale solar with energy storage in Africa under a lease arrangement that simply replaces the money a household would have spent on kerosene for lighting. The arrangement is also potentially less expensive than kerosene, and a household could use the savings to power other small appliances.

The advantage of an energy source for household lighting that does not generate hazardous indoor air pollution and create significant poison risks for children is pretty attractive. The low cost of the lease is due to the microgrid scale of the solar setup, which eliminates the need for new transmission lines and expensive grid hookups.

They Write Twitters

That brings us right around to ExxonMobil CEO Rex Tillerson. Tillerson has become somewhat famous for promoting fossil fuel as the only way to end “energy poverty” in Africa and other emerging regions, but that argument ignores the safety factor.

Oil export ban or not, ExxonMobil has also been ramping up its natural gas operations and leveraging that to market itself as a clean energy company (check out ExxonMobil Twitter feed and you’ll see some examples).

As for whether or not natural gas should be in the clean energy category, residents of the Porter Ranch community in California probably have some pretty strong opinions on that. And on this whole idea of energy winners and losers.

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Photo: via US Department of Energy.