OKLAHOMA CITY ̶ Cheniere Energy Inc. is planning an export facility for growing U.S. condensate supply now, along with its $30 billion of natural-gas-export facilities underway on the Gulf Coast.

“The predominant issue we see is a high degree of light barrels being produced in the Eagle Ford and Midcontinent,” Chad Zamarin, president, Cheniere Pipeline Co., told attendees at Hart Energy’s DUG Midcontinent conference.

Exporting unrefined, U.S. oil remains prohibited by federal law, in most cases; however, the Commerce Department’s Bureau of Industry & Security (BIS) allows the export of condensate that has been, at least, lightly processed. The recipe has not been disclosed. However, the BIS approval last year is expected to open overseas markets for more than 1 million barrels of daily, domestic, condensate production, which has grown primarily from the Eagle Ford and, increasingly, from new Midcontinent plays.

Using its BIS-approved recipe, Enterprise Products Partners LP exported 3.7 million barrels of condensate in the second half of 2014 from the Gulf Coast. Other producers have begun exporting as well, according to news reports.

Plains All American Pipeline LP disclosed in its annual report filed in February that it received a BIS letter last year that how it processes condensate at its Eagle Ford plant in Gardendale, Texas, does create an exportable product. Among Plains’ projects under way this year is the addition of 40,000 barrels of daily, condensate-processing capacity at Gardendale, where capacity is already 80,000 a day.

At a dock at Corpus Christi, Texas, near its LNG-plant construction, Cheniere aims to build a condensate splitter, Zamarin told DUG Midcontinent attendees.

Of the roughly 9.3 million barrels of daily U.S. oil production currently, most of the 4 million barrels of growth in the past few years has been of light oil from shale plays. From the Eagle Ford, in particular, and increasingly from the Midcontinent, oil production is ultra-light of more than 45 degrees in gravity by API standards.

Meanwhile, most U.S. oil-refining capacity is on the Gulf Coast, which converted to primarily processing heavy oil beginning in the 1990s. East Coast refiners can process light oil, but access is by Brent-priced tanker or by rail, rather than WTI-priced and low-cost pipeline.

The gridlock is severely affecting the domestic value of WTI, which is a light oil, Zamarin noted. WTI for April delivery closed at about $50 on Feb. 27; meanwhile, seaborne Brent closed at about $63.

WTI storage at Cushing—at which Nymex oil is priced—was about 49 million barrels on Feb. 27, according to a weekly EIA analysis, having doubled in three months. Working capacity is estimated at between 65- and 70-million barrels.

Instead of adding to Cushing this past week, most oil owners put it on the Gulf Coast—for a 5.4-million-barrel add to total 219.9 million barrels. Gulf Coast capacity is estimated to be between 250- and 260 million barrels.

Contributing to the growth in oil in storage is that many refiners shut down in the spring for maintenance. This year, however, the storage build is additionally due to continued growth in U.S. oil production without an overseas market for the excess and due to that some traders are storing $50 oil today in the hopes of selling it for $70 or more later.

Even Louisiana Light Sweet is getting a relatively harsh discount, Zamarin noted; LLS closed Wednesday at $57 compared; Brent, $61.

Zamarin said, “The shift in price dislocation has, effectively, moved all the way to the Gulf Coast … Access to Gulf Coast markets is no longer enough. Refineries are saturated … so we see that the best way to get value for the domestic producer is to provide access to the international market.”

Enterprise Products reported in its annual report filed Tuesday that it received a subpoena for documents relating to its Feb. 13 acquisition of Oiltanking Partners LP. In the deal, it gained 12 ship and barge docks at the Houston Ship Channel and Port of Beaumont and some 26 million barrels of oil- and products-storage capacity. The Oiltanking system was already connected to Enterprise’s Echo storage facility.

The Wall Street Journal reported last week that producers, including BP Plc, have complained to the FTC that Enterprise is hoarding dock space it gained from Oiltanking for its own product exports. Enterprise replied to WSJ that oil-storage customers wanting dock time can buy it at the market rate.

Zamarin told Midcontinent conference attendees that the ship channel at Corpus Christi is not congested. Plans are for 200,000 barrels a day of initial throughput of both oil and condensate. “That could expand to up to 1 million barrels in the right market conditions, but we think that, initially, 200,000 is a nice facility for producers.”

Getting Eagle Ford, Midcontinent and other U.S. condensate “into a more premium, international market just makes good sense. So, we want your natural gas; we want to turn it into LNG and export it. And we want your crude condensate; we want to … export it.”

– Nissa Darbonne is the author of The American Shales. Contact her at ndarbonne@hartenergy.com.