Skip to comments.Eagle Ford condensate producers win, refiners lose in oil export decision
Posted on 06/25/2014 5:12:18 PM PDT by shove_it
The decision to allow two Texas companies to export condensates looks like a win for Eagle Ford Shale crude producers at the expense of refiners and companies planning to build processing plants along the Gulf coast.
Today's selloff in refiners reflected concern that the groups will lose some of their competitive edge if condensate exports become common: Valero Energy (VLO), the largest U.S. refiner, dropped 8.3%, PBF tumbled 10.72%, PSX fell 4.2%, and HFC slid 6.7%.
Oppenheimer notes that Pioneer Natural Resources PXD, DVN, MRO, COP and MUR produce the most Eagle Ford condensate, and could benefit if U.S. condensate prices close some of the gap with European prices; EOG, the largest Eagle Ford producer, produces little condensate and likely benefits little from the lifting of the condensate ban.
Investor reaction toward Gulf Coast gathering and processing MLPs such as EPD, MMP, KMP and NGLS was more muted, since plans to build splitters in Texas may be undermined by even modest rule changes in the crude export ban that allow Eagle Ford producers to sell condensate after running it from the wellhead to their own nearby - and much cheaper - distillation towers.
(Excerpt) Read more at seekingalpha.com ...
I don’t REALLY know what this means except, we lose again.
I saw and took an opportunity to buy a refinery stock. It’s not like coal which we know will continue to be depressed under this administration and the next if the Dems stay in power.
There may be a short term loss, but cars will still need gasoline, trucks and trains diesel, jets kerosene, chemical plants feedstock, and roads asphalt. And an economic recovery (someday) will bolster demand for refined hydrocarbons.
I don’t follow refiners that closely but it may be an entry point due to a market overreaction. These refiners do pay small dividend yields.
Exports of ultra-light crude are being legalized. It’s made simply by distillation of heavier stuff. Much of it will be leaving for other nations.
So U.S. refineries will be competing with foreigners for it. That will be an added cost for refineries, the perception by investors causing investment prices for those refineries to go down.
But as we see, ultimately, fuel will go up more. And for the years to come, there are hundreds of millions of potential new drivers in Asia alone.
Not all refineries will be hurt by that, BTW, but mainly some of the refineries in south Texas that depend more on ultra-light crude.
Let’s just say the article lacks detail. I’m in the production business and my oil and gas are sold separately and what I call condensate or liquids coming from wet gas. This was called Drip Gas and back during it’s heyday people would steal it from your scrubber tanks and run it in their vehicles. It had a smell to it that was obvious and you could go to jail just for having it in your vehicle. What I suspect is going on is this allows the producers to strip fluids before it goes to the gas refinery’s reducing their profits but raising the producers.
How in the world does that become an added cost? Many of our refineries cannot even efficiently process that stuff. It is too light and there are limits too how much of it can be blended in.
This isn't oil. It may be the same family, just like natural gas is, but it isn't oil.
Amazing folks think the government should get to dictate who you are allowed to sell your product.
Do you think plastics, cars, food, etc would become cheaper if we forbid exports? Or do you think less suppliers would provide the product?
Thinking the Demand curve of economic reins without restraint while the Supply curve can be ignored is foolish.
This is not crude oil. This is condensate, natural gas liquids.
Would you show me a link for a planned expansion at any refinery to process natural gas liquids? This is nearly always done at a gas processing plant, or a natural gas liquids plant like the one I do work at in Mont Belvieu.
Our analysis shows that 8 companies have announced plans to build condensate splitters in addition to the already operating 75 Mb/d Total/BASF unit at Port Arthur, TX. Some of these plans are further along than others notably the Kinder Morgan 100 Mb/d splitter being built in the Houston Ship Channel delayed earlier this year but still due online in November 2014 with the first 50 Mb/d of production fully contracted to BP. Similarly on their way to completion are splitters (topping units) announced by Marathon at their OH and KY refineries. Magellan, Castleton and Martin Midstream have announced plans for three splitters at Corpus Christi on the Gulf Coast south of the Eagle Ford.
Thank you for that info, so some at refineries, others not.
It seems to me this ruling give a larger market for the splitters, it does not take away their feedstock. The ruling specified distillation tower, IIRC. Field stabilization units do not meet that criteria.
The move, which came in private classification orders issued by the Commerce Departments Bureau of Industry and Security, effectively confirms that hydrocarbon known as condensate qualifies as a petroleum product once it has been processed in a distillation tower
...The decision falls far short of what oil producers and some of their allies in Congress have been urging including a wholesale repeal of the trade limits on crude. But it could provide a new avenue for the ultra-light condensate that flows along with crude out of many Texas wells tapping the Eagle Ford Shale and effectively delay a broader, deeper debate about broader crude exports.
Because the classification ruling is limited to condensate that has been run through a distillation tower, it does not apply more broadly to unprocessed condensate that has just flowed out of oil and gas wells.
Distillation involves using heat and condensation to separate hydrocarbons into their different streams and generally goes beyond simply stabilizing condensate for pipeline transport by boiling off butane and other light, volatile gases.
I think there is no shortage of “journalists” misrepresenting this ruling.
The ruling appear to require distillation. That would be splitting.
Is read most of these articles using phrases like "could lead to", "could be expanded to", etc.
The actual ruling, requires a distillation process, not just stabilization.
Oil will probably go high enough
This isn't oil, regardless of the attempts by the media to pretend it is. A portion of this, after splitting, can be fed into the refinery process, but most condensate is primarily natural gas liquids and feedstock to the PetroChem industry.
Some of my post above contained English. Some of it looks like a lame attempt at it.
“The ruling appears to require...”
“I read most of...”
“most condensate is primarily natural gas liquids” should have been “all condensate is NGL”. By definition, condensate is gas in the reservoir and condensing to liquid at surface conditions. That isn’t oil.
Refiners Crash as Exports From Shale Boom Threaten Costs
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Key phrase in your linked article...