Over the past week, the writers at Shale Plays Media have been counting down the top ten oil and gas-related stories of the year. Each weekday, a new top story is revealed, and the number one story set to reveal next Tuesday. Today we have our number four story of the year: Exports, as well as Mexico’s energy idependence. We hope you have been enjoying our countdown and look forward to bringing you the remainder of our top stories over the course of the next week! Happy holidays.
Export Loopholes Exposed
Although the United States still holds onto a ban on crude oil that’s lasted nearly 40 years, many companies have still figured out loopholes to get some of its product out of the country. Companies began using a method called “condensate splitting” to push oil out of the country. The companies refine light crude oil, the majority of which is produced from shale, and the end product close resembles gasoline or diesel fuel. The new product is then exempt from the ban.
If U.S. lawmakers were to reverse the 40-year ban on oil exports, the United States would add more than $1 trillion to government revenues through 2030. The lift of the export ban would also add an average of more than 300,000 jobs per year. However, there are opinions on both sides of the debate as to whether or not the potential lift of the oil ban would lead to lower fuel prices. According to a study by The Aspen Institute, the lifting of the ban would not raise domestic gasoline prices. The reasoning? If the ban were to be lifted that would mean more petroleum entering the global market where fuel prices are primarily set.
Only Congress can fully reverse the restraint on exporting crude. Congress put the ban in place after price shocks from the 1973 Arab oil embargo led to the notion that the United States was running out of oil.
Where are we at now?
On December 11, a House of Representatives panel held a hearing to explore whether the ban on crude exports makes sense in an era of domestic energy abundance. Leading the charge was U.S. Representative Joe Barton (R-Texas), who introduced a bill to lift the ban. The bill is not expected to pass in Congress, although that may change when the new Republican-heavy Congress assembles in 2015.
Mexico’s Energy Independence
Back in August, Mexican president Enrique Pena Ñieto officially signed into law new rules governing an historic opening of Mexico’s state-run oil, gas and electricity industries to foreign and private companies. In 1938, the Mexican government gained control of the oil industry with the nationalization of foreign oil companies. In recent years, however, Mexico has experienced a steady decline in oil and gas production as Petroleos Mexicanos (PEMEX) proved unable to open up significant deepwater or shale gas production. By opening up the market, the Mexican government is hoping that private firms will bring in expertise, resulting in tens of billions of dollars in investments.
The U.S. Energy Information Administration has analyzed the potential in the Mexican oil fields and projected that they will create half a million new jobs by 2018.
Mexican president Enrique Pena Ñieto:
“We have overcome decades of immobility, and overturned barriers that prevented Mexico from growing. With this reform we can extract oil from deep waters and take better advantage of our vast deposits of shale gas, to generate electricity at lower prices.”
In 2004, Mexico’s oil and gas production peaked at 3.4 million barrels a day, and then declined steadily to 2.5 million barrels. With the new reform, the government hopes to increase output to 3 million barrels by 2018 and 3.5 million by 2025.