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Plains All American moving to become next condensate exporter

DAN MURTAUGH

HOUSTON (Bloomberg) -- Plains All American Pipeline LP says it should be on the list of companies that can export lightly processed oil from the U.S.

The company has all the same assets in place that helped Pioneer Natural Resources Co. and Enterprise Products Partners LP get relief from 29-year-old crude export restrictions this year, Plains CEO Greg Armstrong said in a conference call with analysts.

“We have the stabilization, distillation towers and the pipeline system all the way to the dock, we can pretty much trace the pedigree of that barrel all the way through,” Armstrong said. “The only thing that might get in our way is political arbitrariness.”

Pioneer and Enterprise jolted the oil industry when they said the U.S. Commerce Department issued private rulings allowing them to export ultra-light crude that has gone through a stabilizer that uses a distillation tower. The first shipment of 400,000 bbl was exported in late July, Pioneer CEO Scott Sheffield said on an Aug. 5 conference call.

The U.S. has restricted most crude exports since 1975 in response to the Arab oil embargo. Shipments to Canada are an exception, and those averaged 288,000 bpd in May, the highest level since April 1999.

Exxon Mobil Corp., ConocoPhillips and other producers have called for the end of such restrictions as improved use of horizontal drilling and hydraulic fracturing in oil-rich shale rock has helped increase U.S. crude production by 51% in the past three years, to the highest level since 1986.

No Comment

Plains executives declined to say on the call whether it has applied for a private ruling like the ones Pioneer and Enterprise received. Harry Pefanis, president of the company, said he hopes to get clarity on whether Plains can export condensate by the next earnings call.

Plains has an 80,000-bpd stabilizing facility in Gardendale, Texas, at a distribution hub for Eagle Ford shale oil. The capacity is being expanded to 120,000 in the second half of 2015. The facility has “extremely large distillation towers and everything that you can imagine that should meet the standards” of the Commerce Department, Armstrong said.

Crude oil is a complex mixture of different kinds of hydrocarbons that, when heated, separate into gases at different temperatures. Much of the oil extracted from shale rock has a high proportion of lighter hydrocarbons that separate at lower temperatures.

Safer Transport

Stabilizers boil off the most volatile compounds from ultra-light oil, leaving behind petroleum that is safe to transport or store. Stabilization is far less complex and cheaper than processing oil at refineries or at condensate splitters, which separate several gases and other products from crude.

Plains and Enterprise also jointly own a 300,000-bpd pipeline from the Eagle Ford that carries crude to Corpus Christi, Texas, where it can be loaded onto barges and tankers. The pipeline system can separate shipments so that processed condensate doesn’t commingle with unprocessed crude that can’t be exported.

“Gosh forbid you have an 80,000-bbl batch of what truly qualifies for export and it gets put into a pipeline and dumped into a tank with 40,000 bbl with something that doesn’t meet the same definition,” Armstrong said. “That’s a problem.”

08/08/2014

 

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