CHINA-11

CHINA: January import of crude oil from the US was first since 2005, too early to call it a trend

(EnergyAsia, April 17 2013, Wednesday) — The US has made its first direct crude oil sales to China since November 2005, but it is far from certain if this heralds the start of a trend amid the growing clamour for American companies to export oil and gas in the face of rising domestic production.

Without disclosing the details of the rare trade on grounds of confidentiality, the US Energy Information Administration (EIA) said a company had imported the oil into the US and re-exported it to China at an average rate of 9,000 b/d over the course of January.

The re-export was permitted because the owner could not refine or re-sell it in the US as Department of Commerce regulations forbid export of oil, especially domestic crudes, to foreign countries other than Canada. The DOE declined to mention if the export was made in one or several shipments or where the crude or crudes came from.

Due to tough licensing conditions imposed since the 1970s to ensure domestic supply security, the US exported a mere 35,000 b/d of crude oil between 2003 and 2012. About 98% of that went to Canada while the rest was sold in small lots to France, South Korea, Mexico and Costa Rica, said the EIA, citing data from the Census Bureau as it does not track crude oil exports.

The China deal has added excitement to a growing debate over whether the US should relax oil and gas export restrictions amid rising domestic production and growing forecasts that the country could become a net oil supplier by the end of this decade.

US crude production is expected to top seven million b/d this year, up from just over five million b/d in 2010, while consumption has been declining since reaching 19.2 million b/d at the start of this decade. While the US will remain a major net oil importer, it will come under pressure to export its rising domestic supply of light crude that are unsuitable for many of its refineries that were built to process imported heavy crudes.

According to consultant Turner, Mason & Co, US crude oil production could almost double to nine million b/d between 2011 and 2020 while its capacity to refine light crude will creep up by just 300,000 b/d to eight million b/d, leaving an overhang of un-usable crude.

The EIA has spiced up expectations with its most recent predictions that the shale-inspired industry could turn the US into a net oil producer from as early as the end of this year for the first time since 1995.

Its March 2013 short-term energy report said US crude oil production, boosted by fracking of shale and other tight rock formations in North Dakota and Texas, could exceed imports by almost two million b/d by end-2014. US oil self-sufficiency has been boosted by declining crude imports, the result of a weak economy and improving energy efficiency. Last year’s imports of 8.5 million b/d were the lowest since 1997 as US refiners are using an increasing amount of domestically produced crude oil.

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