By Kristen Hays
HOUSTON, July 16 (Reuters) - Plains All American may build new pipelines dedicated solely to a very light form of crude oil known as condensate in parts of the Permian Basin in West Texas as output increases, an executive of the U.S. company said this week.
Infrastructure in the Permian is playing catch-up to areas like the Eagle Ford in South Texas, where such pipelines already exist, amid changing regulations for exporting the oil.
The issue is more acute after the U.S. Commerce Department told two prominent Eagle Ford operators that condensate could be exported internationally if it has been run through a stabilizer, a very basic form of processing that removes natural gas liquids such as propane and other contaminants from crude.
Plains is considering new condensate-only pipelines and storage tanks in the Permian's Delaware Basin if customers want them.
Condensate makes up much of the output from the prolific Eagle Ford, where newer pipeline and storage infrastructure is better suited to segregate it from more traditional light crudes like West Texas Intermediate (WTI), Sam Brown, vice president of pipeline business development for Plains, said on Tuesday at an energy conference in Houston.
"There is ability to receive those segregated streams at the terminals in Corpus Christi, and potentially Houston, so you can basically segregate any condensate or processed barrel all the way from the wellhead from a centralized facility to the dock, to a ship," Brown said.
Before the government issued private rulings to Pioneer Natural Resources and Enterprise Products Partners , condensate was treated as crude under U.S. law and banned from export unless companies obtained a special license. The rulings opened the door to exporting minimally processed condensate because it qualifies as a refined product.
Brown said the industry was seeking more clarity on what needs to be done between the wellhead and the export dock.
"It's a work in progress," he said, "and we'll have to see what we can do to meet the criteria the government's going to allow to export this product."
Permian output has traditionally been WTI and West Texas Sour (WTS), Brown said. Permian output is getting lighter, with more condensate in the production, he said.
While condensate has traditionally been mixed with other Permian crude as it moves to markets, midstream companies will look at ways to segregate it as output volumes increase, Brown said.
Shipments on bigger, longer pipelines known as trunklines that carry both regular crude and condensate would be "batched," or keeping each type of crude in its own separate shipment.
"I think you'll see more and more batching," Brian Melton, vice president of pipeline marketing and business development for BlueKnight Energy Partners, said on Wednesday. "We think you'll see more pipeline competition, and you'll see more and more of an ability to do a batched system." (Reporting by Kristen Hays; Editing by Jessica Resnick-Ault and Lisa Von Ahn)