Will U.S. Export Crude To Mexico As Shale Oil Flows? (Investor's Business Daily)

June 15, 2015


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WASHINGTON, D.C. — Mexico is hopeful it will join Canada in importing U.S. crude, as exemptions to Washington’s oil export ban grow.

Sending light shale crude from the U.S. to Mexico in exchange for Mexico’s heavier crude is “under active consideration” by Washington, said Energy Secretary Ernest Moniz at the Energy Information Administration’s conference Monday. “With Mexico’s energy reform, a lot of things are different.”

There is demand for Mexico’s heavier crude as refineries in Louisiana and other Gulf states are fitted to process heavy crude, not the light stuff coming from the Eagle Ford and Permian Basin.

But the export ban isn’t in Moniz’s “bailiwick,” and the Commerce Department needs to approve the deal.

Petroleos Mexicanos (Pemex), Mexico’s state-run oil company, applied for the swaps last year, though no updates have been given to the status of its request.

But Mexico doesn’t want to push the U.S. into speeding up the decision, according to Leonardo Beltran Rodriguez, Mexico’s deputy secretary for planning and energy transition.

The crude export ban has been in place since the 1970s and was designed to protect domestic energy supplies and reduce reliance on oil from the Middle East and other overseas players. But some shipments to Canada are allowed under the law, and exports of refined products aren’t affected.

While lifting the export ban outright might not come for several years, more exemptions are gaining momentum. Last June, the Commerce Department gave Pioneer Natural Resources (NYSE:PXD) and Enterprise Products Partners (NYSE:EPD) approval to export minimally processed condensate, a type of ultralight oil.

Mexico is eager to improve energy relations with its northern neighbor. Rodriguez also emphasized how important “integration” is as it opens up its energy industry. Mexico is already working on building 10,000 kilometers of natural gas pipelines with the U.S.

In December of 2013, Mexico declared the start of its energy reform, allowing Pemex to keep its monopoly on oil but partner with foreign firms on development projects.

Rodriguez expects total investments in the oil and gas sector of $50 billion to $60 billion over the next four years.

U.S. companies are poised to take advantage of Mexico’s energy revolution. Exxon Mobil (NYSE:XOM) and ConocoPhillips (NYSE:COP) want to help extract the estimated 27 billion barrels of deep-sea crude oil in Mexico’s waters.

Follow Gillian Rich on Twitter: @IBD_GRich.