More than a year ago, U.S. regulators quietly gave a small company permission to export lightly processed oil known as condensate - a previously unreported ruling that could further strengthen the hand of big energy companies pushing hard to chip away at a 40-year-old ban on domestic crude exports.
The approval, issued to Peaker Energy on Sept. 11, 2013, a copy of which was seen by Reuters this week, means the U.S. Commerce Department has clearly determined in three cases that companies can export minimally processed condensate.
That, analysts said, may encourage more companies to decide there is now enough of a precedent to give them the right to ship condensate overseas without seeking formal clearance.
"Knowing there's a third ruling in the first wave probably doesn't make you unhappy. It probably strengthens your conviction that you're doing the right thing," said Kevin Book, energy policy analyst at ClearView Energy Partners LLC.
The implications are significant. Condensate increasingly makes up much of the crude production in U.S. shale oilfields and has helped lift total U.S. output to a 25-year-high of nearly 9 million barrels per day. But U.S. refiners and petrochemical companies have a limited appetite for it.
Last week, frustrated by waiting for formal permission from the Commerce Department, BHP Billiton said it would move ahead with condensate exports, satisfied that its processing method meets the same standards as those approved by Washington.
BHP, like several other companies, had sought rulings similar to ones given to Pioneer Natural Resources and pipeline company Enterprise Products Partners - which came to light in June 2014. They were issued sometime in early 2014 and were widely thought to be the first of their kind.
Peaker Chief Executive Matthew Goitia confirmed that his company received the first ruling issued by the Commerce Department, while declining comment on whether the company had yet exported condensate.
The Peaker ruling also shows that the Commerce Department's move to broaden the definition of exportable refined products to include processed condensate started earlier than previously known.
Commerce reportedly made that change without coordinating with the White House.
COMMERCE PUNTS ON DEFINITION
Peaker's ruling does not define condensate based on its gravity and viscosity relative to other types of crude.
Instead it defines a product as having gone through a process that makes use of a distillation column, which removes natural gas liquids but does not make motor fuels or building blocks of fuels as a refinery or splitter does. It does not say how sophisticated that column must be.
At the time Goitia sought the ruling, the oil industry believed condensate had to undergo sophisticated processing in a condensate splitter or a refinery to qualify for export.
However, Peaker's ruling allows for "stabilized condensate" to be treated as a refined product. That includes condensate run through a stabilizer, which is simpler.
Stabilizers are ubiquitous in the Eagle Ford shale in Texas, and their traditional role is to ensure crude and condensate are safe to transport in pipelines. They are much cheaper than refineries or splitters.
Peaker's ruling - and those later obtained by Pioneer and Enterprise - turned stabilizers into a faster route to exporting condensate.
While demand for condensate in the United States is limited, Asia and other markets want it. Enterprise executives said last month that demand for domestic processed condensate was robust and the company had sold out its supply through the end of 2014.
When he sought clarity from the Commerce Department in mid-2013, Goitia wanted to see if the step of going through a splitter was even necessary in regulators' eyes, or if stabilization would meet the processing threshold for an exportable product.
"I thought we could get this out another way, to help producers break away from the stranglehold," of the export ban, Goitia said. "It was to help our customers get better performance."
Join the Conversation