Roaming the aisles at last month’s Offshore Technology Conference in Houston, a word overheard frequently in multiple conversations was “exports.” When will the U.S. lift that legal anachronism left over from the 1970s’ gas lines that bans crude oil exports? I heard the same question at our DUG Permian conference in Fort Worth.
And if that happens, will the U.S. midstream be ready? There are a lot of opinions but little analysis of what might happen.
Not to worry, maintain some in the energy business. The U.S. already has record petroleum product exports—perfectly legal—and gasoline, diesel, jet, LPG and that ethereal “processed condensate” represent greater valuethan selling the feedstock crude straight out. They have a point.
But let’s consider some objective analysis rather than subjective opinions. The problem is most great ideas are seldom unique to one person, firm or country—and analysis shows that. Stratas Advisors, the research arm of Hart Energy, has a new report out, entitled “The Oil-Price Plummet: Deciphering the Fallout,” that analyzes what has happened to crude prices in the past year and projects what lies ahead for the industry into 2016. Stratas Advisors’ researchers raise some interesting issues.

One takeaway is that, absent a massive ramp-up in crude oil exports, hard-charging and highly utilized U.S coastal refiners (and any others restarting, expanding or building new refining capacity) will need to compete shrewdly to penetrate new global markets,” the report said. “But some of these global refined product markets are also being targeted by Saudi Arabia, the United Arab Emirates and other OPEC members who are expanding crude refining capacity. With 1.4 million barrels per day of state-of-the-art refinery expansion opened up in the past few quarters, OPEC members have stealthily expanded their natural hedge against low crude prices.”

The study goes on to say “these OPEC refineries are on the offensive” even as OPEC crude producers are playing defense, “trying to protect share on the crude oil market.”
So what’s the result for the industry?
Inefficient refineries around the world are likely to go offstream in the next two years, creating export opportunities for the comparatively advanced U.S. refiners—and their OPEC competitors.
“This bottom-up squeeze on the U.S. refining industry is analogous to the top-down squeeze on the U.S. upstream segment that is ongoing as high OPEC crude output pressures global crude prices and producer netbacks,” Stratas Advisors added.
Both of these trends, the report’s analysis found, create a challenge for the U.S. midstream: storage. Where will mid-
stream operators put the stuff until the global economy picks up and demand increases.
It will highlight current analysis and trends in the upstream and midstream.
Speaking of analysis, the keynote luncheon speaker will be Pulitzer Prize-winning columnist and author Dr. Charles Krauthammer. I’m sure his analysis of energy—and much more—will be a highlight of what should be an outstanding event. I hope you will be able to join us there.