WASHINGTON – Refiners opposed to oil exports said Thursday they have more than enough plants and equipment to process the light, sweet crude flowing out of U.S. wells, countering the chief argument of oil producers hoping for a new era of overseas sales.
A coalition of four refiners that have been fighting to preserve the 39-year-old restrictions on selling raw crude overseas released a report finding they can absorb as much as 4.3 million additional barrels per day of domestic ‘’light, tight oil’’ – far beyond the amount government energy analysts expect U.S. wells to produce through 2020.
‘“The U.S. refining system is the largest, most complex and flexible in the world,’’ said Jeff Peck, a lobbyist for the group, Consumers and Refiners United for Domestic Energy. ‘“U.S. refiners should be able to produce all the light, tight oil that will be produced in the U.S. for the remainder of this decade and likely for years beyond’’ by displacing existing oil imports, increasing utilization and investing in modest capacity expansions.
The report, produced by Baker & O’Brien, documents the ways domestic refiners are already swallowing more light, sweet U.S. crude – beginning by replacing imported, foreign crude with domestic oil. According to the analysis, refiners can absorb an additional 1.8 to 2.3 million barrels of light tight domestic oil by using it to replace all light crude imports and some of the medium and heavy crude coming from other countries.
Relatively modest changes to the gravity and quality of the oil flowing into refineries are far easier than the bigger investments and capacity expansions which the Baker & O’Brien report says also could help the facilities absorb more light U.S. crude. So far, companies have announced plans to add capacity to process 1.1 million barrels per day of crude and the ultra-light oil known as condensate. But Baker & O’Brien says that many companies may not announce light, tight oil capacity expansions.
While the report focuses on the refining sector’s ability to absorb more domestic oil, it doesn’t provide the price required for those changes.
‘“While these refiners can handle all of this crude, in many cases they will require discounts,’’ said Jamie Webster, an oil markets analyst with the research firm IHS.
The current narrow spread between lower-cost West Texas Intermediate oil and higher-priced international Brent crude suggests that current refining capacity handles domestic production without a steep U.S. discount.