IEA chief: Export ban could limit US oil boom -FT op ed
NEW YORK, Feb 6 (Reuters) - Laws restricting exports of U.S. crude oil could cap the recent surge in domestic output, the executive director of the International Energy Agency wrote in the Financial Times on Wednesday.
Maria van der Hoeven said in an opinion piece posted on the FT's website that while advances in techniques such as hydraulic fracturing and horizontal drilling have sent U.S. oil output on a steep climb, domestic refiners can only absorb so much of the light sweet crude produced from shale oil and other unconventional plays.
Much of U.S. refining capacity is geared toward processing heavier sour crude. Van der Hoeven noted total U.S. refining capacity is slated to grow by only 300,000 barrels per day through 2017, with oil production expected to grow by 1.4 million bpd by 2014.
Unable to export crude to countries other than Canada and Mexico due to the Export Administration Act of 1979, van der Hoeven wrote, oil companies may not be able to develop all U.S. oil resources if they are unable to find new markets.
"Some may see this as a choice between keeping American oil within U.S. borders for reasons of economic security, and allowing the U.S. to generate billions of dollars in new export revenues," van der Hoeven said.
"But market realities suggest a far simpler decision ahead: either U.S. crude is shipped abroad, or it stays in the ground."
The IEA chief noted that values for U.S. crude in the Midwest already had been depressed relative to other regions, due to limited infrastructure to move it to refining centers along the coasts.
Rising production from the Bakken play in North Dakota and Eagle Ford in Texas have boosted crude oil inventories around the Cushing, Oklahoma, delivery point for the U.S. West Texas Intermediate oil futures contract. WTI prices have subsequently fallen to steep discounts to international benchmark Brent crude, which now more closely reflects the price of crude at the U.S. Gulf Coast refining center.
"While new pipeline links, supplemented with increasingly efficient railroad links, will give producers short-term relief from depressed prices, new export outlets will ultimately be necessary to leverage the full potential and reap the benefits of the new American oil revolution," van der Hoeven wrote.
Before the shale boom, U.S. oil production had been on a steady decline for decades, and some opponents of export constraints say the conditions of the market have now switched to a level that shipments abroad should be considered.
"Washington will need to address this misalignment, lest the great American oil boom goes bust," the IEA chief said.
(Editing by Dan Grebler)