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What’s in a Name? The Rise of Condensate Exports

With the recent rapid increase in domestic shale oil production and a steep decline in crude oil imports, debate on whether to lift the ban on crude oil exports is gaining traction in Congress. While the United States allows the export of refined petroleum products, crude oil exports remain prohibited through the Energy Policy and Conservation Act of 1975 following the 1973 Arab oil embargo. One aspect of this discussion is the potential export of “lease condensate”?an ultralight form of crude oil that can take the form of a gas underground and a liquid as it reaches the surface. Condensate has a wide variety of uses, including in fuel production and chemical manufacturing.

The Emergence of Condensate Exports

Two companies, Enterprise Products Partners and Pioneer Natural Resources, have helped pave the way to exporting processed condensate. In 2014, each received confirmation from the Department of Commerce’s Bureau of Industry and Security (BIS) that the minimal field stabilization and distillation processes the companies utilized for condensate were sufficient to qualify as a petroleum product, and therefore eligible for export as a refined product.  However, unprocessed lease condensate remains classified as crude oil and cannot be exported. The majority of the condensate under consideration for export is sourced from the Eagle Ford shale play in Texas. Additional companies, including BHP Billiton Ltd., Royal Dutch Shell, BP, and Plains All American LP, have followed suit, either having already exported processed condensate or seeking federal permission to do so.

Officially defining lease condensate, particularly in regards to various distillation processes and refining activities, is becoming an important topic in the energy legislation discussion. BIS notes that “?under 754.2(a), lease condensate that has been processed through a crude oil distillation tower is not crude oil but a petroleum product.” Determining whether this has been achieved, however, may yield a complex answer. The main issue for energy producers is how to determine exactly how much (or how little) processing is required for condensate to officially be considered a petroleum product, and thus legally eligible for export.

The Legislative Landscape

Congressional members have started to take notice of the potential of condensate exports, particularly in the clarification of federal definitions of condensate. Sen. Lisa Murkowski (R-AK), chairwoman of the Senate Committee on Energy and Natural Resources, introduced the Condensate Act of 2015 (S. 1224) in early May 2015 in order to address these issues, including calling for the Secretary of Energy to produce a “standard definition of the term ?condensate,’” which should be utilized by all associated agencies in order to establish clear energy policy. Importantly, the bill notes, “It is the sense of Congress that processed condensate is a petroleum product,” which would allow the export of processed condensate.

The exact language from this stand-alone bill has also been incorporated in subsequent energy bills, including the Energy Supply and Distribution Act of 2015 (S. 1312), also introduced by Sen. Murkowski in May 2015, and the House’s version of the bill, the Energy Supply and Distribution Act of 2015 (H.R. 2369), introduced by Rep. Michael Conaway (R-TX) in May 2015. Both bills have bipartisan support, with Sen. Heidi Heitkamp (D-ND) co-sponsoring S. 1312 and Rep. Henry Cuellar (D-TX) supporting the House bill.

The State of Exports Today

Tracking the movement of processed condensate exports is challenging. According to a January 2015 article from Platts, the U.S. Energy Information Administration (EIA) classifies processed condensate export data under the classification of “Kerosene and Light Gas Oils” within the subsection of “Unfinished Oils.” This data only begins in July 2014, and does not include export destinations. Meanwhile, the same Platts article notes that importers in South Korea and Japan have purchased U.S.-produced condensate, and other industry sources indicate that buyers in Europe and Brazil are also receiving significant American volumes.


As more companies received the green light to export from BIS, processed condensate exports continued to rise from 400,000 barrels in July 2014 to a high of over 2.5 million barrels in January 2015. However, the collapse in global oil prices could impact export numbers throughout the year, as has been the case across the industry. As other companies enter into the condensate export market and increase relatively low production levels, total U.S. export numbers have the potential to increase significantly. Indeed, recent industry data provided by Reuters indicates that American condensate exports reached between 120,000 and 140,000 bpd (3.7 and 4.3 million barrels) in May 2015, which would be the highest total on record.

The Greater Impact of Condensate Exports

The fact that the government is allowing the export of minimally processed condensate, coupled with other related developments, such as greater permitting of liquefied natural gas (LNG) exports, perhaps alludes to a greater interest in whether the United States should lift the crude oil export ban. Ultimately, clarifying federal definitions of processed condensate could affect whether greater exports of the resource occurs. This, in turn, could influence the discussion on whether Congress should lift the crude oil export ban.

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