The headlines as July began proposed major change—even if tempered with perhaps a bit of caution. The Wall Street Journal trumpeted, “U.S. ruling loosens four-decade ban on oil exports,” and the Washington Post queried, “Did the Obama administration just lift the ban on U.S. crude oil exports?”

The answer—in a single word—is no.

What did happen is the U.S. Department of Commerce responded to private requests from Enterprise Products Partners LP and Pioneer Natural Resources Co. to clarify whether each could export certain condensate production from their Eagle Ford operations.

As consulting engineers Turner, Mason & Co. explained in a report, the firms had asked the Bureau of Industry and Security, part of the U.S. Department of Commerce, to determine if the level of crude processing at the South Texas basin was sufficient to create a “product” that could be exported. The bureau approved the facility designs, which had the practical impact of permitting the two companies a new export opportunity.

Investors were all aflutter at the news, and unit and share prices for the two companies popped up. Refiners, which depend on abundant cheap production for feedstock, saw their stock prices drop.

Status quo

But beyond the market reaction, little really changed. One analyst told Midstream Business the net effect of the Enterprise and Pioneer rulings was that shares of San Antonio, Texas-based refining giant Valero Energy Corp., one of the best buys on the market, fell briefly.

Jason Stevens, director of energy equity and credit research at Morningstar Inc. in Chicago, agreed the Commerce Department’s decision didn’t equate to a game-changing phenomenon.

“It’s kind of a trivial deal,” he told Midstream Business. “It’s a small amount of exports for Pioneer particularly. There was no reason for their prices to pop 5% the other day, and no reason for the U.S. refiners to drop off between 5% and 10%. Nothing [about the decision] in and of itself is going to impact refiners’ feedstock costs and margins.”

Stevens said the reason for the market reaction is that the U.S. has a glut of up to half-a-million barrels of crude production each day. But only a small portion of that is condensate. If the Commerce Department allowed a chunk of the condensate to be exported, Stevens explained, it would probably give E&P companies slightly better-than-current netbacks, but it still wouldn’t be enough to hurt the bottom line on refiners.

Part of the debate is centered on the difference between condensate and crude oil, and it’s a matter left unsettled by a measure of degrees: typically, that condensate is ranked somewhere between 45° and 55° API gravity.

Conventional wisdom on the Commerce ruling is that the Pioneer and Enterprise facilities qualify as light processing, and hence, those streams are eligible for export, said analysts at Poten & Partners in a recent opinion piece.

All of which means the companies that have invested millions of dollars into condensate infrastructure are in a good spot.

Robb Barnes, senior vice president for commercial crude oil at Magellan Midstream Partners LP, told Midstream Business, “In general, Magellan’s perspective is that if restrictions are eased to allow for exports of condensate or if there are no changes and condensate stays in the U.S. and continues to be utilized by the local refineries and is blended into the local products, Magellan is well-positioned either way to meet those logistics needs of our customers.”

The Tulsa, Okla.-based company is building a 50,000 barrel per day, $250 million condensate splitter in Corpus Christi, Texas, which is already under a long-term contract with Trafigura AG. Included in the terminal project is the construction of storage and dock modifications.

“We believe there are long-term domestic and international markets for the products that will be produced from our splitter in Corpus Christi,” Barnes said. “To the extent that if condensate production increases in the region as a result of the private rulings, we may see additional shipments on the Double Eagle Pipeline system that transports condensate from the Eagle Ford to our terminal in Corpus Christi.”

And with the terminal’s multiple existing ship berths that can accommodate large vessels, Magellan is positioned to serve an export market if it develops.

Deon Daugherty can be reached at ddaugherty@hartenergy.com or 713-260-1065.

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