Photographer: Eddie Seal/Bloomberg

Some U.S. Oil Is a Bit Too Dirty and Costly for an Asian Buyer

Some condensate from U.S. shale fields is too dirty to justify the ultra-light oil’s price in Asia compared with the supply from the Middle East, according to a South Korean joint venture of French major Total SA.

Cargoes are being contaminated by lead and mercury, making the supply more expensive to process in the longer run, said Sebastien Bariller, senior vice president of feedstock purchasing at Hanwha Total Petrochemical Co. A cargo of Eagle Ford grade the company bought had 83 parts per million of nitrogen compared with 7ppm found in Qatar’s Deodorized Field Condensate, he said at the Condensate and Naphtha Forum in Penang, Malaysia.

The supplies are getting tainted when pumped through pipelines on their way to storage, said Rusty Braziel, president of consultancy RBN Energy. These pipes are also used to transport heavy crude, meaning that contaminants discolor the “nice clean material” along the way, he said.

Total believes a discount may work. U.S. producers need to “send a lower price signal’’ to encourage investments in upgrading Asian plants so they can process grades with higher amounts of impurities, said Frederic Lasserre, director of market analysis at Total.

“Certainly, U.S. producers aren’t going to discount the material,’’ said RBN’s Braziel. “What’s going to happen is that U.S. producers are going to clean it out. They’re going to invest in pipelines and tankage and facilities to be able to bring the clean material that you’d like to see, rather than that dirty stuff you’re seeing so far.’’

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