The world's largest resources company BHP Billiton Limited (ASX: BHP) has begun exporting oil products from North America, despite strict laws prohibiting most petroleum exports from the US.
The giant miner says it plans to export processed condensate, a type of ultralight oil that is flowing in massive quantities from US shale wells. The US Federal government recently gave two Texas energy companies permission to export condensate, while the Wall Street Journal estimates that as much as 12% of daily US crude production might qualify as condensate.
BHP says will export condensate from the Gulf of Mexico, after processing at its Eagle Ford operations in Texas.
"BHP Billiton continuously examines opportunities to optimise its commercial options in full compliance with all applicable laws and regulations … After taking the necessary time to thoroughly examine the issues involved, we concluded that processed condensate is eligible for export," said the company in a statement released earlier today.
BHP says it has also taken steps to ensure the exported condensate is not crude oil under BIS regulations. The condensate will be produced from assets acquired when BHP purchased US company Petrohawk Energy for US$15 billion back in 2011.
US domestic gas prices have hampered the company's US energy division, and exports of condensate are likely to realise higher prices, which should translate into higher earnings for BHP.
The move comes at a good time, with oil prices falling below US$80 per barrel this week, and West Texas intermediate (WTI) oil has dropped close to 30% since a high of US$108 per barrel in June this year. Exports of condensate may offset some of those falls for BHP which produced 255 million barrels of oil equivalent in the 2014 financial year. Woodside Petroleum Limited (ASX: WPL), Australia's largest independent oil and gas producer, aims to produce between 89 -94 million barrels of oil equivalent in 2014.
Sales of condensate will also go some way to offset the falling iron ore price, which hit five-year lows overnight. BHP derived 53% of group earnings from iron ore in 2014, and 23% of earnings from petroleum & potash. By comparison, Rio Tinto Limited (ASX: RIO) generates around 92% of its net profit from iron ore.
