Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

Eagle Ford condensate producers win, refiners lose in oil export decision
SeekingAlpha ^ | 25 Jun 2014

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 ...


TOPICS: Business/Economy; Foreign Affairs; Government; News/Current Events
KEYWORDS: energy; oil; refineries; refining
Links to these four related articles at the SA article.
1 posted on 06/25/2014 5:12:18 PM PDT by shove_it
[ Post Reply | Private Reply | View Replies]

To: shove_it; thackney

I don’t REALLY know what this means except, we lose again.


2 posted on 06/25/2014 5:17:30 PM PDT by knarf (brooklyn bridge)
[ Post Reply | Private Reply | To 1 | View Replies]

To: knarf

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.


3 posted on 06/25/2014 5:22:38 PM PDT by CedarDave
[ Post Reply | Private Reply | To 2 | View Replies]

To: knarf

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.


4 posted on 06/25/2014 5:37:31 PM PDT by shove_it (long ago Orwell and Rand warned us of Obama's America)
[ Post Reply | Private Reply | To 2 | View Replies]

To: shove_it; knarf

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.


5 posted on 06/25/2014 6:29:54 PM PDT by familyop (We Baby Boomers are croaking in an avalanche of corruption smelled around the planet.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: shove_it; knarf

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.


6 posted on 06/25/2014 6:32:32 PM PDT by familyop (We Baby Boomers are croaking in an avalanche of corruption smelled around the planet.)
[ Post Reply | Private Reply | To 5 | View Replies]

To: knarf

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.


7 posted on 06/26/2014 4:01:48 AM PDT by Dusty Road
[ Post Reply | Private Reply | To 2 | View Replies]

To: familyop
That will be an added cost for refineries

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.

8 posted on 06/26/2014 4:32:43 AM PDT by thackney (life is fragile, handle with prayer)
[ Post Reply | Private Reply | To 5 | View Replies]

To: familyop
depend more on ultra-light crude

This isn't oil. It may be the same family, just like natural gas is, but it isn't oil.

9 posted on 06/26/2014 4:34:13 AM PDT by thackney (life is fragile, handle with prayer)
[ Post Reply | Private Reply | To 6 | View Replies]

To: knarf

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.


10 posted on 06/26/2014 4:44:47 AM PDT by thackney (life is fragile, handle with prayer)
[ Post Reply | Private Reply | To 2 | View Replies]

To: thackney
"How in the world does that become an added cost?"

U.S. refineries that don't already have contracts for splitting the product from the oil fields but had planned to do so would have to compete with foreign buyers.

"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."

There are some splitters running, and more refiners were planning to build them. It's not relatively expensive to do so, but competing with foreign buyers would be expensive.

On the other hand, if it were focused on helping Europe with its Russian problem and refused to Asia with its SCO buildup, then it might be worthwhile. We don't see a whole lot of patriotic duty from many contemporary government-linked constituents, though.


11 posted on 06/26/2014 6:35:39 AM PDT by familyop (We Baby Boomers are croaking in an avalanche of corruption smelled around the planet.)
[ Post Reply | Private Reply | To 8 | View Replies]

To: familyop

This is not crude oil. This is condensate, natural gas liquids.


12 posted on 06/26/2014 6:38:38 AM PDT by thackney (life is fragile, handle with prayer)
[ Post Reply | Private Reply | To 11 | View Replies]

To: familyop
and more refiners were planning to build them

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.

13 posted on 06/26/2014 6:40:08 AM PDT by thackney (life is fragile, handle with prayer)
[ Post Reply | Private Reply | To 11 | View Replies]

To: thackney
Imagine there’s no export ban – no need to split the condensate
Oil & Gas Financial Journal
May 27, 2014
Sandy Fielden, RBN Energy
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.



14 posted on 06/26/2014 11:51:08 AM PDT by familyop (We Baby Boomers are croaking in an avalanche of corruption smelled around the planet.)
[ Post Reply | Private Reply | To 13 | View Replies]

To: familyop

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.


15 posted on 06/26/2014 12:06:11 PM PDT by thackney (life is fragile, handle with prayer)
[ Post Reply | Private Reply | To 14 | View Replies]

To: thackney; shove_it; knarf
Some background information here.

Report: Obama can use executive powers to lift oil export ban
http://dailycaller.com/2014/03/03/report-obama-can-use-executive-powers-to-lift-oil-export-ban/

Drillers hopeful that Obama will ease longstanding ban on oil exports
http://www.rawstory.com/rs/2014/05/23/drillers-hopeful-that-obama-will-ease-longstanding-ban-on-oil-exports/

Obama administration rulings loosen ban on U.S. oil exports, Wall Street Journal reports
http://www.nola.com/business/index.ssf/2014/06/obama_administration_rulings_l.html

How Obama gave hope to supporters of oil exports
http://washingtonexaminer.com/how-obama-gave-hope-to-supporters-of-oil-exports/article/2550210

Obama Administration Takes Next Step Toward Lifting Oil Export Ban
http://www.wusa9.com/video/3641846284001/1/Obama-Administration-Takes-Next-Step-Toward-Lifting-Oil-Export-Ban
(video)

Obama loosens 4-decade ban on crude oil exports
http://americablog.com/2014/06/obama-loosens-four-decade-ban-crude-oil-exports.html

Relaxation of Export Ban Puts Pressure on Refiners
http://finance.yahoo.com/news/relaxation-export-ban-puts-pressure-132010350.html

White House reviews crude oil export ban
http://www.cnbc.com/id/101657233

European leaders ask Obama to allow increased exports of US shale gas
http://www.theguardian.com/world/2014/mar/26/europe-asks-obama-increased-exports-shale-gas


16 posted on 06/26/2014 12:15:55 PM PDT by familyop (We Baby Boomers are croaking in an avalanche of corruption smelled around the planet.)
[ Post Reply | Private Reply | To 13 | View Replies]

To: familyop
http://fuelfix.com/blog/2014/06/24/feds-open-door-to-condensate-exports/

The move, which came in private classification orders issued by the Commerce Department’s 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.

17 posted on 06/26/2014 12:17:55 PM PDT by thackney (life is fragile, handle with prayer)
[ Post Reply | Private Reply | To 14 | View Replies]

To: familyop

I think there is no shortage of “journalists” misrepresenting this ruling.


18 posted on 06/26/2014 12:18:51 PM PDT by thackney (life is fragile, handle with prayer)
[ Post Reply | Private Reply | To 16 | View Replies]

To: thackney; shove_it; knarf
"It seems to me this ruling give a larger market for the splitters, it does not take away their feedstock."

According to much of the news/propaganda, it can be shipped without splitting. I agree that refiners shouldn't be canceling plans, though. Oil will probably go high enough before long for them to make some profits despite competition with European buyers. Not a whole lot of spread between Brent and WTI lately (for example).

Sorry about the choice of titles in that last comment. Mean little exercise in political speech there and a mean way to get a grin. ;-)


19 posted on 06/26/2014 12:25:40 PM PDT by familyop (We Baby Boomers are croaking in an avalanche of corruption smelled around the planet.)
[ Post Reply | Private Reply | To 15 | View Replies]

To: familyop
it can be shipped without splitting

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.

20 posted on 06/26/2014 12:36:39 PM PDT by thackney (life is fragile, handle with prayer)
[ Post Reply | Private Reply | To 19 | View Replies]

To: familyop

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...”

and

“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.


21 posted on 06/26/2014 12:40:27 PM PDT by thackney (life is fragile, handle with prayer)
[ Post Reply | Private Reply | To 20 | View Replies]

To: thackney
"...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."

I agree with the present relaxation on exports for the purpose of helping Europe, but a repeal of all of the trade limits would be an extremely dangerous act. The U.S.A. needs more oil security than that for defense.

For folks who are reading this and have no instruction in overall warfare necessities, extreme quantities of oil are necessary for mechanized and air pursuits necessary for winning a war (expecially a world war). And the world now is getting to be much more dangerous than it was during the Cold War. Reserves, no matter how large, are not nearly enough.


22 posted on 06/26/2014 12:46:33 PM PDT by familyop (We Baby Boomers are croaking in an avalanche of corruption smelled around the planet.)
[ Post Reply | Private Reply | To 17 | View Replies]

To: thackney

Refiners Crash as Exports From Shale Boom Threaten Costs
http://www.bloomberg.com/news/2014-06-25/refiners-crash-as-exports-from-shale-boom-threaten-costs.html
[Title and link only, content prohibited from posting on FR.]


23 posted on 06/26/2014 12:50:07 PM PDT by familyop (We Baby Boomers are croaking in an avalanche of corruption smelled around the planet.)
[ Post Reply | Private Reply | To 21 | View Replies]

To: familyop
on speculation that

Key phrase in your linked article...

24 posted on 06/26/2014 1:34:35 PM PDT by thackney (life is fragile, handle with prayer)
[ Post Reply | Private Reply | To 23 | View Replies]

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson