Posted 12/29/15 (Tue)
By Kevin Killough
While people keep an eye on oil prices, the lifting of the 40-year-old ban on crude exports earlier this month seemed a bright spot.
But people who work in the industry are hesitant to see the change as the answer to low oil prices.
Kathy Neset, owner of Neset Consulting Service, said the move will ultimately produce benefits but not immediately.
She said the lifting of the ban adds options for marketing strategies, and we’re no longer limited to just a domestic market.
“Domestic refineries are taxed. They’re full,” Neset said.
Ron Ness, president of the ND Petroleum Council, also believes the change in law will create opportunities down the road but will have little immediate impact on crude oil prices.
Ness told the Oil Patch Hotline last week industry growth has been hampered by a decades-old policy that prohibits exporting domestically produced oil “to our allies while countries that fund terrorism have held a monopoly on the market.”
Ness said lifting the ban will create stability in global markets and global politics.
Leaders in the industry also praised the Congress for lifting the ban.
Hess Corp. CEO John Hess called it a “bright spot” for the industry that will increase energy investment in the U.S.
“Instead of investing in other countries, you’re going to have more of an incentive to put the dollars here,” Hess said.
Continental Resources Chairman Harold Hamm said a third of US refineries are foreign owned and said lifting the ban will allow operators to be more competitive.
Tim Fisher, CEO and founder of Bakken Energy Services, said the end of the export ban is a positive development, but without some pieces in place, the impacts to the Bakken will be “negligible.”
Bakken Energy Services is a coalition of 30 companies that provide services to the oil and gas industry. Together they do about $100 billion in annual revenue.
Iran is also set to enter the market with 2 million barrels per day and another 2 million coming online in the future, all of which is going to Russia, Fisher explained.
Russia signed a 30-year supplier deal with China, the second largest economy in the world, shutting off the country from American exports.
“The largest importer is off the table for us,” Fisher said.
This limits U.S. exports to European markets, which are considerably smaller.
The U.S. market is also limited by the fact most refineries cannot use our product. The crude oil out of the Bakken is a “light sweet” form, whereas most refineries are designed to process high-sulfur “heavy” crude like that from Middle Eastern countries.
While domestic refineries could be built to handle the U.S. shale product, Fisher said any plans would face expensive and lengthy delays from oppositional groups and the EPA.
“This administration has a war on fossil fuels,” Fisher said, so increased refinery capacity won’t be online for years to come, if at all.
Lifting the ban has created some solid opportunities for liquid natural gas exports, Fisher said, but there’s no real potential in that market for North Dakota producers.
The Bakken’s natural gas production is a small byproduct of the oil production.