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The Latest Developments On U.S. Condensate Exports

The Latest Developments On U.S. Condensate Exports

Dec 22, 2015 | Oil & Gas

The U.S. Congress has officially lifted its 40-year-old ban on crude oil exports. The embargo, which was originally set in place to offset the 1975 oil crisis, has been fully repealed as of Friday, December 18, 2015.

In June 2014, the U.S. passed legislation that relaxed the ban’s restrictions to allow some American companies to export lightly refined condensate under special licenses. Most overseas shipments have been sent to Canada at nearly 400,000 barrels of crude a day.

The recent repeal presents new market opportunities around the world. For instance, U.S. exports could replace crude oil acquired from West Africa and then sent to Latin America. Moreover, wholesale trading companies can access large volumes of U.S. crude production and find the most profitable destination for their barrels through supply deals with producers and holdings in storage tanks and pipelines networks.

There are, however, challenges with the acceptance of U.S. condensate and how its use may gain traction in the upcoming years. One issue is that many overseas refineries aren’t designed to handle condensate from the United States. Other hindrances include associated transportation costs and the ability to keep up with demand.

Still, the oil and gas industry is anticipating a favorable outcome of the repeal. Japanese companies are watchful because U.S. oil can provide Japan, who receives 80 percent of its condensate exports from the Middle East, with an additional energy source. U.S. exporters can also leverage their heavy oil ties and close proximity with Latin America, where light oil purchases have recently grown.

What becomes of the market for U.S. exports remains to be seen, but a shift is certain, as the lifting of the embargo aids in keeping the industry dynamic.