As Delta refinery snaps up Nigerian crude, U.S. producers ask Congress for freedom to export

This Thursday, April 19, 2012 file photo shows the ConocoPhillips refinery in Trainer, Pa., near Philadelphia.  Delta Air Lines Inc. bought the refinery as part of an unprecedented deal that it hopes will cut its jet fuel bill. A Delta subsidiary paid $150 million, including $30 million in job-creation assistance it is getting from the state of Pennsylvania. (AP Photo/Alex Brandon)
This Thursday, April 19, 2012 file photo shows the ConocoPhillips refinery in Trainer, Pa., near Philadelphia. Delta Air Lines Inc. bought the refinery as part of an unprecedented deal that it hopes will cut its jet fuel bill. A Delta subsidiary paid $150 million, including $30 million in job-creation assistance it is getting from the state of Pennsylvania. (AP Photo/Alex Brandon)

WASHINGTON — American oil producers eager to sell their bounty abroad are pointing to a Delta Air Lines refinery’s purchase of millions of barrels of Nigerian crude as fresh evidence the United States should lift its longstanding ban on exporting raw petroleum.

While domestic refiners are free to buy crude from most any foreign supplier and shop around for the best price, U.S. oil producers don’t have the same luxury, said George Baker, executive director of Producers for American Crude Oil Exports.

“When we don’t have a buyer, the price comes down, crude goes to storage, or we stop producing,” Baker said.

U.S. law blocks most unprocessed crude from being sold overseas, but does not affect oil imports and does not limit trade in refined petroleum products, such as gasoline, diesel and jet fuel, which can be freely sold to foreign buyers.

There also are exceptions to the oil export ban for some Californian crude, oil extracted on Alaska’s North Slope and shipments to Canada.

The Delta case study is likely to get some air time this week, when separate House committees hold hearings on crude exports.

According to a Reuters report, Delta’s refining unit, Monroe Energy, is set to buy as many as 5 million barrels of discounted Nigerian crude between now and mid August for its refinery in Trainer, Pa.

The purchases mark a shift for the refinery, which had largely stopped importing Nigerian oil two years ago and had been using largely North American supplies earlier this year

A Monroe Energy spokesman did not respond to a request for comment, but the company told Reuters that it will always pursue crude with competitive prices and quality.

Overall, the United States’ overall imports of Nigerian crude have been dwindling, down from 32 million barrels in April 2010 to 1.4 million barrels in April 2015, according to the government’s Energy Information Administration.

In April 2015, the most recent month for which EIA data is available, Monroe Energy directly imported 1.1 million barrels of crude — all of it from Canada and Mexico.

But foreign oil from Nigeria and other countries may become more attractive to some U.S. refineries as the price difference between domestic West Texas Intermediate and international crude benchmark Brent dwindles. Although the WTI-Brent differential has been in the double digits in recent years, it had closed to about $4 per barrel in futures trading of August contracts on Monday afternoon.

And Louisiana Light Sweet crude was trading at $60.46 per barrel in the spot market on Monday — 40 cents higher than Brent, at $59.06. Spot prices for West Texas Intermediate were $56.93 per barrel.

Transportation costs for U.S. crude — including the expense of railing it across the country or shipping it on American-built, -flagged and -crewed vessels — also can give a price advantage to foreign supplies.

Oil producers have argued that the existing trade restrictions unfairly keep them from accessing world markets, artificially suppressing domestic prices for their crude. Recent studies by think tanks, academics and the EIA suggest that U.S. producers could see a modest lift in domestic crude prices — possibly propelling them closer to international Brent.

But with domestic and international crudes relatively close in price, export advocates have shifted some of their arguments and focused more on making the case that selling U.S. oil abroad would strengthen the nation’s hand internationally.

Sen. Lisa Murkowski, R-Alaska, and other export backers also have pointed to a possible surge of Iranian crude, unleashed if a nuclear deal is reached with the country and sanctions are lifted.

Read more: Iranian crude could pinch U.S. producers without export freedom, paper warns

Delta’s Monroe Energy and other Northeast refiners that rely on waterborne shipments of crude have argued that if the oil export ban is lifted, it could put them at a disadvantage to competitors in Europe — possibly allowing their foreign counterparts to buy U.S. crude more cheaply than they can. The difference, they say, is federal Jones Act requirements forcing them to use American-made and U.S.-flagged ships anytime they transport cargo among U.S. ports.

The issue will get attention on Capitol Hill this week, beginning with a House Agriculture Committee hearing on Wednesday. David Porter, chairman of the Texas Railroad Commission that regulates oil and gas activity in the state, is set to testify as the panel examines “the economic impact of exporting crude oil.”

A House Energy and Power Subcommittee hearing on Thursday will focus on legislation to lift the export ban sponsored by Rep. Joe Barton, R-Ennis.

The subcommittee has already studied the issue broadly, but this is set to be its first hearing specifically on the Barton bill.

Related story: Obama knows crude export ban is bad economics, North Dakota senator says

Barton has been slowly luring support from colleagues and has lined up 70 cosponsors, 63 of which are Republicans. But he faces wariness among some fellow Republicans as well as Democrats, who worry that if Congress authorizes oil exports, voters will hold them accountable for any future spike in gasoline prices — even if it is completely unrelated to the policy change. Most of the studies of the issue have predicted oil exports could lead to a slight decrease in gasoline prices.

House Energy and Commerce Committee Chairman Fred Upton, R-Mich., stopped short of endorsing oil exports last month, but said it was time for Congress to examine the issue.

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