HOUSTON, Aug. 19 (UPI) — Approval for oil swaps with Mexico opens the spigot for U.S. crude oil, but might not be the export indication supporters hope for, an industry analyst said.
The U.S. Commerce Department last week granted a request from Mexican energy company Petroleos Mexicanos, known also as Pemex, to swap as much as 100,000 barrels of U.S. crude oil per day for Mexican refining. The deal forbids the re-export to other nations.
Sen. Lisa Murkowski (R-AK), R-Alaska, who chairs the Senate Energy Committee, said she welcomed the step toward opening up the U.S. oil economy.
“I remain committed to the full repeal of the ban on selling oil to our friends and allies overseas and I believe we should do so as quickly as possible,” she said in a statement.
Murkowski has moved several pieces of legislation aimed at ending a ban on U.S. crude oil exports, arguing removing the ban would boost economic strength at home while advancing U.S. national security interests overseas. The Senate Energy and Natural Resources Committee, in a 12-10 vote, voted in July to repeal the 1970s-era ban.
Skip York, an oil analyst from consultant group Wood Mackenzie, said the Mexican oil swaps are part of an incremental step toward easing restrictions on crude oil produced in the United States. The Commerce Department last year gave permission two U.S. companies, Pioneer Natural Resources and Enterprise Products Partners, to ship an ultra-light form of oil called condensate from the U.S. market.
With a free-trade deal with the United States, York said the Mexican oil swap deal might open doors for other trading partners. A similar agreement is already in place for Canada.
“The next step, absent legislative action, could be extending export policy relief to other partner countries with free trade agreements,” York said in an emailed statement. Though Congress could vote on the issue in the coming months, supporters still face an uphill battle.”
Those in the U.S. refining sector have said lifting the ban would hurt their industry as they’d be forced to import more crude oil. Some overseas refineries, meanwhile, aren’t configured to handle the lighter crude oil grades found in many U.S. shale basins behind what industry supporters describe as an era of abundance.
York said the swap is a boost for Mexico, which may be facing a shortage of light and medium grades of crude.
“In a few years, demand will likely exceed supply, leaving Mexico in a position of searching for lighter barrels to fill refineries,” he said.
Condensate approved for U.S. exports that is refined or processed in a certain way is not characterized as crude oil and is therefore not subject to the export ban.
In March, York said the debate over crude oil export policy needs to move beyond generalities to a “more substantive discussion of potential destinations and types of US crude oil that might be exported.”
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