Expecting Energy Exports
Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
What do ExxonMobil (NYSE: XOM), Royal Dutch Shell (NYSE: RDS-A), Phillips 66 (NYSE: PSX) and Marathon Petroleum (NYSE: MPC) all have in common? They are all positioned to profit from the export of energy products from the United States. If you thought that the glut of oil at Cushing, Okla., was going to result in a glut of gasoline and low prices at the pump, well, you better think again.
Exxon is the biggest natural gas producer in the United states. The glut of it on the market caused by the increase due to hydraulic fracturing has kept prices low and hurt their bottom line. They plan on investing $10 billion with Qatar Petroleum to turn a gas import terminal into one that can export two billion cubic feet a day of liquefied natural gas. This won't happen overnight. They first need to get regulatory permission and the upgrade can take up to five years to complete. But like the gasoline and diesel it is exporting to Central and South America, Exxon will find the best price for its products.
I have talked about Shell before. Their $10 billion Port Arthur joint venture expansion was partially shut down right after it opened back in May. When it is fully open and operational it will be the largest refinery in the United States. It was built to take the cheaper heavy crude and turn it into refined product there by maximizing profits. They have increased their diesel production to take advantage of the higher export prices. Brazil, Mexico and Chile are places where they increase profits by selling diesel fuel. Shell has operations in the nearby Eagle Ford area of South Texas, which produces the lighter sweet oil. So what has Shell done? Why of course they have applied for an export license from the United States. Eagle Ford Crude will yield higher prices on international markets.
Phillips 66 has estimated that it will have a capacity of 155 million barrels a day of refined product exports this year. They would like to have a 220 million a day capability by 2015. According to their Dec. 13 news release, “Margins are also expected to improve as the company increases its ability to serve the growing international refined products markets where opportunities exist. Phillips 66 has several projects planned or in execution to increase export capability from its Gulf Coast and West Coast refineries by 100,000 bpd by 2014.” Phillips 66 Chairman Greg Garland is one of the first major oil executives to publicly back the export of U.S. oil, which now can only be done by a special export license.
Lastly we have Marathon Petroleum. They expect by early next year to finalize their $2.5 billion purchase of a Texas City, Texas, refinery. This refinery currently does not export any of its 400,000 barrel per day of refined products. Do not expect that to last very long. Their Garyville, La., refinery exports about 112,000 barrels per day of diesel and the purchase of Texas City will increase their export capabilities.
All four of these companies are situating themselves to take advantage of a lucrative export market. How much this will add to their bottom line? Only time will tell.
mwm102 has no positions in the stocks mentioned above. The Motley Fool owns shares of ExxonMobil. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!