From Seoul to Mexico City, pressure mounts to ease U.S. oil export ban

By Reuters

Sep 01, 2014 08:29 PM EDT

Washington is facing growing international pressure to ease its long standing ban on crude oil exports, with South Korea and Mexico joining the European Union in pressing the case for U.S. oil shipments overseas.

South Korean President Park Geun-hye told a visiting U.S. delegation of lawmakers on the House of Representatives energy committee on Aug. 11 that tapping into the gusher of ultra-light, sweet crude emerging from places like Texas and North Dakota was a priority, the lawmakers said.

One of South Korea's leading refiners has opened discussions with the government in Seoul over how to encourage Washington to open the taps, three sources in South Korea with direct knowledge of the matter told Reuters.

Mexico is also eagerly awaiting word from the U.S. Department of Commerce on possible shipments and the EU wants U.S. oil and natural gas exports covered by a proposed trade agreement with Washington, the Transatlantic Trade and Investment Partnership.

Joe Barton, Republican Representative from Texas and one of the lawmakers who met Park, told Reuters that lifting the ban would boost the U.S. economy, but also provide allies with a reliable energy trading partner.

"I'm in favor of overturning the ban on crude oil exports," he said.

The South Korea talks, which have not previously been reported, are an indication of how swiftly pressure on the Obama administration to relax the ban on oil exports has broadened, and also how it is increasingly being questioned in the context of oft-touted free-trade agreements (FTAs).

In a meeting with Republican U.S. Representatives Barton, Marsha Blackburn of Tennessee, and Leonard Lance of New Jersey, President Park said she hoped for Congress's help in "allowing U.S. condensate exports to FTA partner South Korea" and developing shale gas reserves, according to a statement from the presidential office. She did not specify what kind of involvement in developing shale gas she sought.

White House officials declined to comment on whether the Obama administration has had talks with South Korea or other countries on oil exports.

However, Energy Secretary Ernest Moniz said during his trip to Seoul in May that his South Korean counterparts brought up the subject.

In Mexico, which is thirsty for oil as its own reserves decline, state oil company PEMEX said on Thursday that it could enter an agreements with the United States on crude oil swaps or on direct imports.

Jose Manuel Carrera, CEO of PMI Comercio Internacional, the trading arm of state-owned oil company Petroleos Mexicanos, told Reuters his company has been talking with government officials and potential sellers about starting oil shipments.

In Japan, the government is carefully monitoring oil production in the United States, and is interested only if the supplies are economically feasible, according to a Japanese government official familiar with the matter. Tokyo is not currently asking to ease the ban.

Meanwhile, U.S. oil drillers such as Continental Resources are stepping up their own campaign to loosen - or better yet eliminate -- a ban imposed after the Arab oil embargo of the 1970s, which they argue is now obsolete.

In the midst of a shale revolution, the United States is soon expected to surpass both Russia and Saudi Arabia as the world's largest producer. While fully overturning the ban would require Congressional action that most consider unlikely in the near-term, many argue that Obama could gradually allow for more oil to flow abroad through existing means.

New supplies would be welcome in South Korea, which relies on imports to cover 97 percent of its energy needs and has been pressured to curb purchases from OPEC member Iran -- once one of its primary suppliers -- due to U.S. and EU sanctions introduced in 2012.

"Depending on one source too much raises risks," said James Kim, research fellow at the Asian Institute for Policy Studies think tank in Seoul. "If we have various sources to import crude including the United States, it will help reduce price fluctuations."


U.S. condensate supplies are plentiful in part because they differ from the type of crude U.S. refineries have been configured to process.

In March, the U.S. Department of Commerce approved exports from two domestic companies, Pioneer Natural Resources and Enterprise Product Partners, of lightly processed condensate. A first cargo of 500,000 barrels was loaded in Texas City, Texas at the end of July and is expected to reach South Korea on Sept. 10.

But since the Commerce Department's decision became public in June, at least three further applications have been put on hold as the Obama administration sorts out policy on the ban.

The Bureau of Industry and Security at the Department of Commerce, in charge of granting the approvals, had no comment on the Congressional delegation's talks.

Early this year the parties pressing for change were limited mainly to lawmakers from energy-rich states led by Senator Lisa Murkowski, a Republican from Alaska, and by U.S. oil producers.

European countries have also pushed for U.S. energy exports as an alternative to supplies from Russia where President Vladimir Putin has shown he can restrict natural gas supplies.

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