AFPM ’14: Debate over crude exports divides independents, integrateds

Editor in Chief

ORLANDO -- The AFPM annual meeting is an ideal venue to learn about new refining and petrochemical technologies, meet old college mates and former colleagues, and strike up conversations with fellow delegates on issues of the day.

This year, a frequent topic of conversation during the AFPM opening reception on Sunday evening was the prickly issue of US crude oil exports. The question of whether the US government should lift the 39-year-old ban on crude oil exports has created an economic tug-of-war between the upstream and downstream sectors of the oil and gas industry.

The issue has also caused a division between the downstream independents, who depend totally on refining operations, and the vertically integrated operators, who have both upstream and downstream operations.

The upstream crude oil producers would like the export ban lifted in the hopes of a free, global market for their light shale crude. The opposition comes from some US refiners, who want to preserve the status quo, and be able to continue to obtain shale crude, at a discount of as much as $12/bbl, and export refined products at a significant economic advantage over refiners in other parts of the world. At this time, there are no restrictions on the export of refined products.

The shale producers have embarked on a lobbying effort, led by the American Petroleum Institute (API), and Alaska Senator Lisa Murkowsky (Rep.) to lift the export ban. In early March, a few of the refiners teamed up to launch the first major lobbying campaign to retain exclusive access to US-produced light shale crudes. The campaign is titled CRUDE (Consumers and Refiners United for Domestic Energy).

At this time, CRUDE members are small independents: Alon USA Energy, PBF Energy, Monroe Energy, and Philadelphia Energy Services. CRUDE has hired the lobbying firm of Peck, Madigan & Jones to represent its interests in Washington D.C. While Valero Energy is absent from CRUDE coalition, its spokesman Bill Day told The Houston Chronicle that “the current system is working well and should stay in place.”

AFPM annual meeting delegates expressed a wide range of opinions during the opening reception on Sunday evening.

“We believe in free trade, so we’re for crude oil exports,” said Gary G. Yesavage, President of Chevron Manufacturing. “It is the independents that would be affected. Of course, in a diverse organization as AFPM, you can have a diversity of opinions on this subject.”

“Some of the shale operators are already getting around the export restrictions by minimal refining through teapot refineries and splitters,” suggested Tariq Malik, General Manager (Refining) for CITGO Petroleum in Corpus Christi, Texas. 

“I think most North American refiners would be against lifting the ban,” said Chris Gamble, process engineer with Irving Oil in New Brunswick, Quebec in Canada. “Right now, low feedstock prices are helping us compete with the Asian refiners.”

An executive with Tesoro Corporation concurred by saying low feedstock prices are necessary for American manufacturers to remain competitive. “We need to protect the US manufacturing sector,” he insisted.

AFPM President Charles Drevna expressed a more nuanced opinion. “Free trade would apply to crude oil exports, but there are tangential issues that need to be addressed in the creation of a comprehensive energy policy. These issues include opening up Federal lands for exploration and elimination of the Jones act (which requires all goods transported by water between U.S. ports be carried on US-flag ships).”

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