WASHINGTON — BHP Billiton is preparing to export a processed, ultra-light oil overseas without the government’s explicit authorization — a move likely to be mimicked by other energy companies eager to sell crude to foreign buyers.
BHP declined to provide details on its planned transactions, first reported by the Wall Street Journal. But BHP said it was moving ahead with exports of processed condensate only after scrutinizing applicable laws, including the United States’ longstanding ban on selling raw crude overseas.
“BHP Billiton continuously examines opportunities to optimize its commercial options in full compliance with all applicable laws and regulations,” the company said in an e-mailed statement. “We plan to export processed condensate that has been fractionated in distillation towers at our Eagle Ford operations in south Texas.”
The move mirrors sales by Pioneer Natural Resources and Enterprise Products Partners, which began exporting that ultra-light Eagle Ford condensate earlier this year. But there’s one big difference: Unlike Pioneer and Enterprise, BHP Billiton did not wait for the Commerce Department’s Bureau of Industry and Security to bless their plans and instead “self-classified” its condensate as an exportable petroleum product.
In confidential rulings given to Enterprise and Pioneer earlier this year, the bureau affirmed that condensate qualifies as a petroleum product, making it eligible for export, after it has been distilled and separated into distinct components.
Because the orders aren’t licenses to export in and of themselves — and instead are designed mainly to provide legal assurance — potential copycats don’t need similar rulings of their own to begin selling processed condensate overseas.
Trade lawyers said BHP Billiton’s move likely is just the first of many.
“The announcement is not surprising and is fully consistent with the framework of the export regulations, which contemplate self-classification by exporters,” said Ted Kassinger, a partner at law firm O’Melveny & Myers, who represented Enterprise before the bureau. “I expect others having similar processes will follow the same path.”
Jacob Dweck, a trade lawyer with Sutherland, Asbill & Brennan, said last month that he expected more companies to export processed condensate under self-classifications, particular amid a slowdown in the agency’s vetting of new requests for those interpretations.
Read more: Wannabe condensate exporters might not wait for green light
But Pioneer Natural Resources CEO Scott Sheffield last month said some potential buyers were wary of taking on condensate cargos — and the legal liability that could come with them — in transactions with firms that don’t have their own bureau rulings.
BHP Billiton stressed that the processed condensate it plans to export is not a crude oil under U.S. trade regulations.
“BHP Billiton has worked through a robust due diligence, secured a dedicated supply chain, and has taken steps to ensure the quality of our product for export,” the company said.
There is a limited U.S. market for condensate, which is generally is a gas underground and is so light domestic refiners have a limited capacity to process it. But Asian buyers are interested in it as a replacement for naphtha, a petrochemical feedstock. And so far, Pioneer has found enough buyers to export about 15,000 barrels per day of distilled condensate, with cargoes going to South Korea, Europe, Singapore and Japan and plans to bump up exports to 70,000 barrels per day next year.
Condensate makes up about half of the 1.5 million barrels of oil flowing out of the Eagle Ford shale formation daily.
Although at least a half dozen companies have asked the Bureau of Industry and Security for classification rulings, those requests stalled after the applicants answered bureau questions about their equipment, processes and the way unfinished condensate would be altered.
Under the previous rulings, Enterprise and Pioneer must keep processed condensate segregated from unprocessed crude that is not eligible for export.
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