HOUSTON — Removing the current ban on crude oil exports would lower consumer prices and stimulate further tight oil production, ConocoPhillips CEO Ryan Lance told a Houston audience Tuesday.
The United States has dramatically increased its production of oil from tight formations like shale tight oil in the last five years, but refining and pipeline limitations have created bottlenecks of crude that have lowered prices and discouraged production, Lance said at the 2013 Deloitte Oil and Gas Conference in Houston.
Most of the country’s domestic refineries are designed to process the heavy, sour crude coming from Canada and South America, while the shale regions are producing a lighter, sweet crude for which US refineries are not well-equipped.
“The refineries are tooled up for sour crudes, with only so much capacity for light sweet crudes,” Lance said. “Either you are going to shut down production, or you get wide differentials to try to incentivize capital investment in more facilities. The world needs the crude and there are places where we could export that crude into existing refineries.”
The Obama administration has approved four export permits for liquefied natural gas in light of the nation’s shale gas boom. Now, as production of tight oil continues to increase, some lawmakers are raising questions about easing of the ban on crude exports.
The United States holds 17 percent of the 345 billion barrels of technically recoverable shale oil resources, Lance said. Refining the lighter crude overseas would be more economic for domestic consumers, because it would be cheaper to use existing refineries overseas than to make the capital investments to refine the increased production domestically.
“It will ultimately give the consumer cheaper prices at the pump,” Lance said. “I accept that it is going to be pretty hard climb in D.C., but we need to start making the case for the economic benefits.”