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Global Marketplace
www.read-tpt.comN
ovember
2015
69
Oil and gas
In its loosening of a 40-year ban
on oil exports, Washington frees
American energy companies to
trade oil with Mexico
On 14 August it was reported that Washington would permit
US crude oil to be exported to Mexico – an apparent first step
in the eventual overturn of a ban on all oil exports regardless
of destination, in place for four decades.
The lifting of the export ban in full would benefit US producers
whose price for crude could then rise to match that of Brent
crude, the global benchmark for oil, which usually trades at
a premium to West Texas Intermediate crude (WTI), the US
benchmark.
The United States banned exports of crude in 1975 in a bid
to promote domestic oil production and build up reserves in
response to the oil embargo enacted by OPEC in late 1973.
Except for exports to neighbouring Canada, oil exports from
the US have been legally blocked ever since. This was a
virtual non-issue in the decades when the nation was a net
importer of oil.
Of course, that changed over the last few years as the shale
oil boom in the US set off a surge in crude oil production. Calls
for lifting the ban on exports began in earnest in 2014, as
sinking prices prompted oil companies to go on the offensive
with Congress and the Obama administration. But until this
summer no action was taken in the matter.
The prospect of outright approval for the unconstrained
sale of US crude was welcomed by American oil producers.
While the export ban has been widely derided as a politically
charged relic, the lifting of the ban has an implicit political
component of its own.
It presumably would enable domestic producers to export
more energy products to Europe, thereby offsetting the
continent’s dependence on Russian natural gas.
›
Viewed in that light, the significance of the initial move by
the Commerce Department might be more apparent than
real. The financial journalist Cyrus Sanati noted in
Fortune
that the loosening of the ban allows Pemex, Mexico’s state-
run oil company, to exchange its heavier and cheaper crude
for lighter and more expensive US crude. Mexico’s purpose
in favouring such a swap would be to boost the efficiency of
its refineries which, unlike many US facilities, are unable to
process heavier crude grades into such saleable products as
gasoline or jet fuel.
The amount to be exchanged will most likely be 100,000
barrels a day, which is the amount the Mexican government
was seeking when it first approached the US about doing
a deal earlier in the year. “There doesn’t seem to be a net
increase or decrease in US oil supply here,” Mr Sanati wrote.
“Just a swap in the grade of the oil.” (“The US Is Not Opening
the Tap on Crude Oil Exports,” 17 August)
In brief . . .
›
With about 20 per cent of all jobs in Oklahoma tied
to oil and natural gas, the state has been notably
reluctant to blame those sectors for an exponential increase
in earthquakes, despite years of persuasive input from
scientists studying the issue.
While standards are in place to prevent injection wells from
being sited near known faults, only earlier this year did
Oklahoma’s official seismologists declare that oil and gas
drilling can cause the earthquakes.
But now Mary Fallin, Oklahoma’s governor, has acknowledged
a “direct correlation” between the increase in earthquakes and
the state’s oil and natural gas industry. As reported in the
Oklahoman
(5 August), her comments at a meeting of the
state Coordinating Council on Seismic Activity are some of her
strongest yet on the links between the earthquakes and the
injection into the ground of wastewater from drilling.
The council, which does not have regulatory authority, was
organised by Gov Fallin to look into the hundreds of recent
earthquakes, a sharp increase from the single-digit annual
frequency of the past.
›
Natural gas overtook coal as the leading source of electric
power generation in the US this year.
According to a recently released report from the research
company SNL Energy (Charlottesville, Virginia), which drew
upon US Energy Department data, 31 per cent of the electric
power produced in April came from natural gas, 30 per cent
from coal.
American power companies have long switched back and
forth between natural gas and coal, as dictated by commodity
prices. But new regulations that restrict the emission of
greenhouse gases have added pressure for a permanent
withdrawal from coal.
›
East Africa’s fledgling oil sector took what Platts termed
“a significant step forward” when the governments of oil-
rich Uganda and Kenya agreed on the route of an export
pipeline that will enable crude from the region to reach
international markets for the first time. The formal go-ahead
for the 930-mile pipeline – which will take the northern route
across Uganda to the Kenyan port of Lamu, on the Indian
Ocean – is anticipated for late 2016 or early 2017.
As reported from London by Platts (14 August), the long-
awaited undertaking expected to provide a boost for both
countries could also transform the region into a major oil hub.
The announcement was welcomed by the main players
in the region including London-based Tullow Oil, which is
developing oil resources in both Uganda and Kenya, and
its Kenyan partner Africa Oil Corporation. Total had no
comment, but Platts noted that the French company has
often asserted that no development work on Uganda’s vast
reserves could begin until plans for an export pipeline were
agreed upon.
Dorothy Fabian, Features Editor (USA)