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Obama unleashes shale oil on the world

By News Express on 20/11/2016

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Surplus America’s shale oil will now be exported to the rest of the world, compounding the already glutted oil market and likely to dampen price recovery efforts being made by OPEC and non-OPEC countries.

The impact of the decision will be felt harshly by Nigeria, a major producer of light crude.  Shale oil is similar to Nigeria’s Brent crude.

The new development follows Obama administration bowing to months of pressure over a 40-year-old ban on exports of most domestic crude.

His administration has now taken two steps expected to unleash a wave of ultra-light shale oil onto global markets.

The Bureau of Industry and Security, or BIS, which regulates export controls, said it had granted permission to “some” companies to sell lightly treated condensate abroad. Condensate is a form of ultra-light crude.

Some two dozen energy companies had asked the agency for clarification on permissible exports earlier this year, but until Tuesday those requests had been put on indefinite hold.

The BIS also released guidance in the form of frequently asked questions, or FAQs, to explain what kind of oil was generally allowed under the ban, the first effort by the administration to clarify an issue that has caused confusion and consternation in energy markets for more than a year.

The two measures are clearest signs yet that the administration is ready to allow more of the booming U.S. shale oil production to be sold overseas, where drillers have said it can fetch a premium of $10 a barrel or more.

They follow a year of murky messages and widespread uncertainty over what is or is not allowed under a trade restriction that critics say is a relic of a bygone age, when oil was seen as scarce after the 1970s Arab oil embargo.

A domestic drilling boom of the past six years has transformed the United States into an energy powerhouse, boosting U.S. production by more than 50 percent and reversing decades of decline.

Output of very light oil has been especially strong, leading to a glut that threatens to overwhelm domestic demand. The constraints helped fuel bumper profits for refiners such as Valero Energy Corp and PBF Energy Inc, but angered drillers such as Hess Corp that say they were selling at a discount.

The US decision to allow export of shale oil coincided with the discovery of a vast field of shale rock in West Texas.

The finding could yield 20 billion barrels of oil, making it the largest source of shale oil the U.S. Geological Survey has ever assessed, agency officials said.

The Wolfcamp Shale geologic formation in the Midland area also contains an estimated 16 trillion cubic feet of natural gas and 1.6 billion barrels of natural gas liquids, the agency said in a release.

The discovery is nearly three times larger than the shale oil found in 2013 in the Bakken and Three Forks formations in the Dakotas and Montana, said Chris Schenk, a Denver-based research geologist for the agency. (NAN)

•Photo shows U.S. President Obama.

Source News Express

Posted 20/11/2016 05:27:59 AM

 

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