EIA to cast new data into oil export debate

WASHINGTON — The U.S. Energy Information Administration is on track next month to issue two highly anticipated reports that will shape the debate over exporting crude, including an analysis of how the price of oil around the globe affects gasoline costs inside the United States.

Another study on the horizon, EIA Director Adam Sieminski said Monday, is a report on the costs of building equipment to process crude, ranging from small stabilizers and distillation towers to splitters and big refineries.

The studies respond to a plea from lawmakers for more data about domestic crude production and markets as some companies push to sell that oil overseas and policymakers worry that potential exports could affect U.S. gasoline prices.

While the coming EIA analysis won’t directly answer that question, it “will do a more thorough job” of quantifying the relationship between domestic gasoline prices and the cost of crude, both inside the United States and overseas, Sieminski said.

Some industry-funded and private reports already have concluded that because gasoline prices generally track the cost of Brent crude, the global benchmark, they will not be pushed higher if the United States starts widely exporting its lower-cost West Texas Intermediate oil. In fact, the opposite may be true; the early third-party analyses suggest putting more oil into the international market could lower the Brent price and spur a slight decline in the cost of gasoline.

Report: Crude exports would be economic boon

But oil industry-funded studies on the issue have limited sway with policymakers on Capitol Hill and in the Obama administration, who may find comfort in analysis that carries the EIA imprimatur.

“What we’re trying do here is drill down more,” Sieminski told reporters after an unrelated briefing. “The goal would be to try to understand if midwest crude oil prices go up, is that going to change gasoline prices in the United States.”

And Sieminski said EIA statisticians are aiming to put some confidence level on that cost analysis, which will fold in the prices of Brent and WTI crude, as well as gasoline prices in the U.S., Singapore and Rotterdam.

Ongoing analysis

Sens. Mary Landrieu, D-La., and Lisa Murkowski, R-Alaska, the top two senators on the Energy and Natural Resources Committee, asked EIA for the ongoing analysis — rather than a single, snapshot report on issues surrounding oil exports. The first of the subsequent studies issued in May highlighted the wide rainbow of domestic crude production covered under the catch-all term “oil,” classifying domestic output by its API gravity, a measure of its density.

The EIA, an independent government data agency, will update some of the studies periodically. In January, when the agency publishes its short term energy outlook, EIA will update that study on crude oil production by API gravity, with estimates out to 2016. And this October, the agency is expected to issue a similar, API gravity-sorted projection to 2025.

Refining capacity

The EIA is also looking to bolster its existing analysis of U.S. refining capacity. Its analysis of various refining installation costs will help define the price tag and array of options for oil producers and midstream companies looking to sell crude products overseas.

The Commerce Department’s Bureau of Industry and Security recently told Enterprise Product Partners and Pioneer Natural Resources that once they passed condensate through a distillation tower, that ultra-light hydrocarbon qualified as a petroleum product, unrestricted by the 39-year-old ban on most raw crude exports.

Distillation towers are a much larger investment than the flash drums and heater treaters generally used to stabilize condensate when it comes out of the ground. But they are much smaller and far cheaper than modest refineries and even splitters.

Some midstream companies looking to build splitters to take advantage of the flood of light sweet oil and condensate flowing out of U.S. wells may modify those plans in light of the Commerce Department rulings, which could shift the industry’s attention and appetite to lower-cost distillation towers for transforming oil into an exportable petroleum product.