US to allow oil swaps with Mexico

OREANDA-NEWS. August 17, 2015. US crude export restrictions took another step toward easing today when the Commerce Department notified a handful of US oil companies seeking to swap crude with Mexico that their applications will be approved.

The approvals from the Commerce Department's Bureau of Industry and Security (BIS) come with certain conditions, including that companies promise not to try to re-export the Mexican crude to other countries.

"BIS is acting favorably on license applications for the exchange of US crude oil for similar quantities of Mexican crude oil," a senior US administration official said.

Mexico's state-owned Pemex in January asked Commerce to approve a request to swap 100,000 b/d of US light oil in exchange for Mexican heavy crude. Pemex has been seeking to import US light crude to blend with domestically produced oil supplying three of its six refineries.

The refineries that would receive the imported feedstock are the 430,000 b/d Tula in the central state of Hidalgo, 245,000 b/d Salamanca in the nearby state of Guanajuato, and 330,000 b/d Salina Cruz on the Pacific coast.

The license applications that BIS approves will cite specific quantities of oil that can be swapped. Each application will be handled on a case-by-case basis. The oil companies will have one year to deliver the volumes stipulated. BIS will keep tabs on the quantities heading south.

While the BIS' restrictions will not allow for the re-export of the crude, companies will have the authority to refine that crude and export the refined products. Unlike crude, the US does not limit the export of gasoline, diesel and other refined products.

An administration official said the decision is consistent "with provisions that allow for the exchange of US crude oil under certain circumstances and that support exchanges with Mexico."

BIS is denying a number of applications for crude or product exchanges with other countries.

The decision to allow crude swaps with Mexico follows BIS' decision last year to allow the export of lightly processed condensate, which regulators have concluded qualifies as a refined product.

Industry trade group the American Petroleum Institute executive vice president Louis Finkel said "trade with Mexico is a long-overdue step that will benefit our economy and North American energy security, but we shouldn't stop there."