I can only hope you caught the recent ruling handed down this week by the Commerce department that gave the go ahead for condensate exports.
Essentially, Pioneer Natural Resources and Enterprise Product Partners now have permission to ship the ultralight oil with only minimal processing. And if you’ve been keeping tabs on whether the U.S. government will once again export crude oil, this may be the first step that paves the way for everyone else.
First, it’s important to realize what we’re talking about here. I know it’s easy for media pundits to jump the gun and assume that companies can now start shipping their crude oil out of U.S. ports, but that’s simply not the case.
We’re talking about condensate, which is basically a hydrocarbon liquid that is produced along with natural gas and becomes a liquid when extracted.
But even though the ruling was for only condensate, I think we’re seeing the beginning of a slow crawl towards full-blown U.S. crude oil exports has begun.
But before I go any further let me explain something that a lot of people forget…
Look, the advantages of allowing producers to tap into global markets should be obvious, especially after the price spike we saw earlier this week in Brent crude:
Don’t make the mistake of thinking that we don’t already export petroleum. Truth is, refiners are able to sell products like gasoline and diesel without any hindrances.
Those refiners have no qualms exploiting cheaper North American oil supply, too, just see for yourself…
They’re also making a killing from exporting nearly 3.5 million barrels per day.
What the Commerce Dept. ruling does is threaten the status quo. Sure, the White House will claim that there has been no policy change, but like I said… this is only the beginning.
From their vantage point in South Texas, Pioneer Natural Resources is in a perfect position to capitalize on this opportunity. And once more companies get the go-ahead, you can be our Eagle Ford players will become even more attractive to Wall Street.
It’s important to remember, however, that these condensate exports won’t start until August at the earliest, and they won’t reach full capacity until 2015.
Once they hit that point, the U.S. will be in a position to export up to 300,000 barrels of condensate, or about 40% of daily production from U.S. shale plays.
In other words, the time to start positioning yourself is now, with the biggest winners coming from the Eagle Ford Shale.
The South Texas formation is responsible for 70% of U.S. condensate production and is in prime location near stabilizing facilities on the Gulf Coast, so look for the drillers who are producing a lot of condensate to see massive gains.
Until next time,
Keith Kohl
