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October 1, 2015

July petroleum data show challenges in the reporting of processed condensate exports

graph of U.S. condensate wholly derived from natural gas exports to countries other than Canada, as explained in the article text
Source: U.S. Energy Information Administration, based on U.S. Census Bureau International Trade Commission data

According to official U.S. trade data, the United States exported 21,000 barrels per day (b/d) of condensate derived wholly from natural gas (CDWFNG) to Brazil in July 2015. Under the current U.S. export classification system, CDWFNG falls under the general heading of crude oil within the 2709 Schedule B category. Consequently, these exports are counted as crude oil in the U.S. Energy Information Administration's (EIA) Petroleum Supply Monthly released yesterday.

EIA made inquiries regarding the July shipment to Brazil and understands that the reported shipment actually consists of processed lease condensate. EIA aggregates unprocessed lease condensate at the wellhead into its measure of crude oil production. The U.S. Department of Commerce Bureau of Industry and Security (DOC/BIS) also considers unprocessed condensate at the wellhead to be crude oil.

In mid-2014 DOC/BIS responded to classification requests filed by market participants with decisions that lease condensate processed through a distillation tower is a refined petroleum product rather than crude oil and is therefore not subject to the licensing regime applicable to crude oil exports. Because crude oil exports to Canada for use within that country have been presumptively granted licenses under Presidential determinations issued in 1985 and 1989, the classification rulings made by DOC/BIS with respect to condensate processed through a distillation tower mainly matter for exports to destinations other than Canada. In December 2014, DOC/BIS published frequently asked questions related to the requirements for exporting crude oil and refined petroleum products.

Following the DOC/BIS decision that lease condensate processed through a distillation tower was not subject to the export licensing regime for crude oil, trade press reports and other data show shipments of processed condensate to countries other than Canada. The EIA product category of unfinished oils-kerosene and light gas oils includes exports of processed condensate that are reported in official U.S. export statistics within the 2710 Schedule B category. As shown in the figure, these exports averaged 85,000 b/d during the first seven months of 2015.

The July 2015 shipment of processed condensate to Brazil was the first such shipment to a country other than Canada to be reported within the 2709 Schedule B category in official U.S. trade data since the DOC/BIS issued its classification rulings in mid-2014. Clearly, it is not very satisfactory to have one shipment of processed condensate be reported as CDWFNG within the 2709 Schedule B category and be counted as crude oil in EIA's data systems while other processed condensate shipments are reported within the 2710 Schedule B category and are therefore counted as petroleum products by EIA.

EIA believes that data transparency and consistency would best be served by creating explicit codes for processed condensate within the 2710 Schedule B category alongside other petroleum products. These codes would be consistent with the recent DOC/BIS rulings and with EIA's own view of the appropriate classification of this material, based on our energy expertise and our role as the primary federal statistical agency for energy data.

Principal contributor: EIA Staff