Shale boom weans U.S. from foreign oil, creates new opportunities

The U.S. may be producing more of its own oil than it has in decades, but it’s unlikely the nation will fully wean its dependence on foreign crude anytime soon.

“We will deeply remain an importer of crude oil for the absolute foreseeable future,” Greg Haas, director of integrated oil and gas research at Stratas Advisors told a group gathered at the Dallas Federal Reserve Bank on Thursday.

Although the U.S. is far from achieving anything close to full energy independence, the rapid resurgence in domestic oil and gas production has slashed the nation’s reliance on foreign oil in a short period of time, Haas said.

In 2006, about 70 percent of U.S. consumption came from other countries, notably Mexico, Venezuela and Canada, Haas said. But the uptick in domestic drilling has caused that pendulum to swing to less than 30 percent last week, according to the U.S. Energy Information Administration, which predicts that number to fall even further in the next year, Haas said.

With the U.S. relying less heavily on energy imports, other countries are taking notice, watching to see how the nation will take advantage of the vast new supplies of oil and gas, Haas said.

A long-standing government ban on crude oil exports created a bottleneck within U.S. borders, but that glut of oil and gas has generated new opportunities for midstream and downstream companies. For example, Haas said the proposed new infrastructure to bring natural gas liquids to market is the “highest growth market I know of, even exceeding that for crude oil.”

Haas said his company has identified more than 600 proposals to build new processing plants, fractionators, pipeline expansions and export facilities.

“Every day, you see a new announcement,” he said.

But he was particularly interested in condensate splitters, which are new innovation to the U.S. and can process a very light oil for a fraction of the cost  to build a new refinery. These projects pose an interesting opportunity for U.S. companies because the federal government recently ruled that condensate can be shipped overseas with minimal processing, Haas said. Two companies, Pioneer Natural Resources and Enterprise Products Partners, have received permission to export condensate.

The refining sector is another key area to watch, Haas said, noting that there’s been a surge of announcements of refineries for sale. Venezuela has said it may be considering selling its Citgo refineries along the Gulf Coast and a Korean-based company has expressed interest in offloading a high-cost refinery in Nova Scotia that has been running a deficit for years, forced to process Brent oil, the more expensive international benchmark crude because it lacks the pipeline infrastructure to bring in cheaper U.S. tight oil, Haas said.

The biggest game-changer, however, may be a refinery in St. Croix in the U.S. Virgin Islands, which has been mothballed since 2012, Haas said. The 500,000-barrel per day refinery, which has the capacity to process both light and heavy crude, isn’t subject to the Jones Act, meaning it costs less to ship products to and from the plant than it would inside the United States, Haas said.

The plant recently announced that it’s found a buyer, although declined to provide further details, and if it gets restarted soon, it could become a big new outlet for U.S. oil, Haas said.