Crude Export Ban in Congress’ Crosshairs

by Deon Daugherty, Senior Editor

Eager to stanch the bleeding from low oil prices, oil producers will probably get behind legislation to lift the ban on U.S. crude oil exports to generate more cash flow.

But it won’t be that easy.

Rashed Haq, vice president for business consulting at Sapient Global Markets in Houston, told Rigzone that you have to look at the crude export ban from two perspectives: the economic and the political. Without perspective, the reality of either can send big plans plummeting.

Economically, exporting crude would benefit exploration and production companies that are currently sitting on a supply glut. Plus, as Haq explained, more construction is expected to take place in the next 40 years than in the whole of human history. Much of that will happen in places such as India and China, and E&P companies want the ability to sell hydrocarbons to those markets. And, if commodities prices increase, so much the better for their bottom line, he said.

The flip side of that is the opposing position of midstream companies and refiners. Those businesses want the stuff to stay in the United States where they can move and distill it, he said.

“The political answer is simpler,” Haq said. “For the people who vote for it, the one thing they are very concerned about is, when prices go up at some future point, whether they going to get attacked for it. For that reason, it will take a lot for people to vote for it.”

Still, the drop in crude prices, precipitated by an oversupply of the shale-developed hydrocarbons, has made lifting the ban on crude oil exports more attractive to many.

Although repealing the 40-year-old ban has been bandied about in recent years, it now has renewed momentum. This spring, U.S. Sens. Lisa Murkowski, R-Alaska, and Heidi Heitkamp, D-ND, introduced bipartisan legislation, the Energy Supply and Distribution Act of 2015, which would end the ban on crude oil exports.

“America’s energy landscape has changed dramatically since the export ban was put in place in the 1970s. We have moved from energy scarcity to energy abundance. Unfortunately, our energy policies have not kept pace,” Murkowski said in a statement. “This legislation builds from bipartisan ideas, linking energy security and infrastructure to expanding exports and helping our allies. Our nation has an opportunity to embrace its role as a global energy powerhouse, sending a signal to the world that we are open for business and will stand by our friends in need.”

Filed as Senate Bill 1312, the legislation would authorize all export of crude oil and condensate produced in the United States without the need for a federal permit—similar to the current authorization on exports of petroleum products.

Continental Resources CEO Harold Hamm has long been a champion for lifting the ban. The Bakken Shale producer testified to Congress last year that the nation is at a crossroads.

“Do we cap oil production or allow exports? Lifting export restrictions will strengthen our domestic oil industry, a critical component of our economy whose impact reaches far beyond the American consumer,” he said, adding that lifting the ban would improve energy security and independence.

Exxon Mobil Corp. CEO Rex Tillerson told a crowd at IHS CERAWeek 2015 that if the stars aligned, the United States could be a net exporter by the end of the next decade. Ryan Lance, chief executive at ConocoPhillips, said the ban is contrary to domestic economic growth.

It’s not just U.S. oil producers who want to see the ban lifted. Eager to escape the tight grip of their dependence on Russia for oil and gas, the European Union is also pushing the United States to export crude oil.

The EU’s energy chief, Maros Sefcovic, told the Wall Street Journal recently that obtaining crude oil exports from the United States is a priority for the bloc.

“We are the biggest market in the world; we are the biggest energy importer in the world,” Sefcovic said. “So I think we are a quite important destination for any energy exporter.”

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