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Shell Seeks to Export U.S. Oil

October 12, 2012

By BEN LEFEBVRE

HOUSTON—Royal Dutch Shell RDSA +0.28% PLC said late Thursday it has applied for a permit from the U.S. Department of Commerce to export crude oil in a sign of how a boom in U.S. oil production from shale rock is reshaping the country’s role in the global energy marketplace.

The U.S. currently exports less than less than one half of 1% of its total oil imports, according to data from the Energy Information Administration. However, the revolution in hydraulic fracturing technology that has coaxed large volumes of light sweet oil from shale rock previously thought unprofitable has generated an unprecedented boom that the EIA says will bring U.S. production to its highest level in nearly two decades next year.

Oil production in the U.S. totaled 194 million barrels of crude oil in July, the most in 14 years according to the latest data from the EIA. Oil production in the Eagle Ford area of South Texas—where Shell has significant operations—and the Bakken region in North Dakota are producing more oil than pipelines are currently able to carry to market.

This week, the glut of oil production in the center of the country pushed the U.S. benchmark oil price, West Texas Intermediate, to its lowest level in a year relative to international benchmark, Brent crude.

A decades-old law bars the export of crude oil produced in the U.S., although special permits can be given in some cases, including shipping oil to Canada. The U.S. exports about 41,000 barrels a day of oil already, less than one half of 1% of its total oil imports, according to the EIA.

Shell declined to say how much oil the company planned to export or to which destinations.

“Crude trades on a global scale, and imports and exports will follow supply and demand,” Shell spokeswoman Kayla Macke said.

BP BP.LN -0.88% PLC, which already has a license to export U.S. crude oil, sends it to Canada for refining, said a person familiar with the company’s operations.

The U.S. will become a net oil exporter but probably not until the end of the decade, said Pavel Molchanov, analyst at Raymond James. Companies now seeking an export license are most likely working to build the logistical networks needed for the future, Mr. Molchanov said.

“I don’t think these companies are literally looking to get tankers ready in the Port of Galveston to take shipments to China tomorrow,” Mr. Molchanov said. “They’re getting ready in advance for the big surge in U.S. oil production.”

Write to Ben Lefebvre at [email protected]

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