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Following long ban, US could dominate global light oil supply

Jun 30 2014, 14:29 IST
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SummaryFollowing rulings disclosed this week, US companies can now export the light, gaseous petroleum known as condensate.

from West Africa, are "lined up waiting to buy light crudes and condensates if the price is right" said one trader working in crude purchases, speaking on the condition of anonymity.

In India, Essar Oil's chief executive L K Gupta said "we will look at buying condensate from the United States if the pricing is right. We do buy condensate and if a new source is opening up that is good for us".

It is unclear what the cost of U.S. condensates would be, given that the price depends on the density and where it is produced. Some condensate from the Eagle Ford play in Texas does appear to be cheaper than some grades currently exported from Australia's North West Shelf, according to traders and Reuters data.

"According to an internal analysis at our company, the U.S. condensate based upon (U.S.) WTI pricing appears to have cost competitiveness compared with those from the Middle East based upon Dubai crude," said one Seoul-based refining source, adding that competitive U.S. exports could help bring down global prices.

LENGTH TO TIGHTNESS

The Middle East dominates supply of condensate. Qatar and Iran export 760,000 barrels per day combined, about half daily global supply, according to a presentation in November by analysts at Facts Global Energy. Australia and Africa make up most of the rest.

The majority of supply heads to Asia, where importers like China, Japan and South Korea have build processing plants known as splitters that can turn condensate into naphtha and other oil-related products. In Asia Pacific, splitters can process up to 900,000 barrels per day of condensate, according to Facts.

But as demand rises, production from existing exporters is faltering. In Australia, where condensate is a by-product of liquefied natural gas production, exports are already declining in part because new gas produced is "drier" than before. In Qatar, domestic demand is set to slow exports. Iranian output has been hampered by sanctions.

"The condensate market East may move from length to tightness," the Facts report said.

It remains to be seen if the United States can fill the gap, and it is expected to take time to determine whether US condensate is compatible with Asian importers' needs. Some said that no moves have been made to export condensate to Asia from the United States. Sampling could take months, others said.

But with demand on the rise, the United States could offer unexpected respite.

"What we hope is this (US) export will help

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