Echoing some of the criticism from Congress toward the U.S. Commerce Department on its handling of proposals to allow crude oil condensate exports (see Shale Daily, July 10), Marathon Petroleum Corp. (MPC) CEO Gary Heminger on Thursday said the uncertainty is counterproductive economically. He made the remarks during a 2Q2014 conference call reporting greatly increased quarter-over-quarter results.
Ohio-based Marathon Petroleum recorded profits of $855 million, or $2.95/share, for the second quarter, compared to $593 million, or $1.83/share, for the same period last year, Heminger said.
Saying the Commerce Department's recent moves are impacting perceptions of the oil industry (see Shale Daily, June 25), Heminger said the private-letter Obama administration rulings for limited condensate exports "unfortunately are not transparent and have created much uncertainty about [liquid hydrocarbon] exports [generally] going forward. We think the market has over-reacted."
Heminger said there is no "clear change in [federal] policy," and the outcome remains uncertain. He said the U.S. oil industry has the ability to handle much more of its light shale crude oil condensate than is processed today, "but the decisions to do so will not likely be made in the environment of uncertainty that has been created."
Whatever the eventual outcome of the machinations at the Commerce Department, Heminger thinks that U.S. refiners will continue to have a transportation advantage. "Even if the export infrastructure is built, the cost advantages for U.S. refiners will continue to be significant, due to their proximity to the domestic production," he said.
"We are confident that the flexibility and optionality in our system positions us very well in any circumstance."
Later on the conference call, Heminger was asked if he is looking for other acquisitions, coming after $2.6 billion purchase in May of Hess Corp.'s more than 1,300 gasoline stations and convenience stores along the East Coast (see Shale Daily, May 23). "We're pretty satisfied with our footprint right now."
In response to another question, Heminger also emphasized his bullishness as a refinery company toward U.S. light sweet crude supplies. "The market is far from saturated from running light sweet crude," he said. "We have the ability to run [at MPC refineries] 65% light sweet crude and we only ran approximately 45%-46% in the [2Q2014] quarter. There is tremendous opportunity, but we are always going to choose the most economical barrel."
As imported oil prices edge up, the competitiveness of the domestic supplies from the Bakken, Utica and elsewhere gets better from the refiners' perspective, Heminger said. "This issue of the condensate exports continues to be a 'sticky-wicket' in the marketplace because the lack of transparency and the unknown has changed foreign suppliers' ideas on how to supply the North American market; it has changed some of the South American suppliers."
Heminger estimated it will take another quarter for those issues to be sorted out in the marketplace. He repeated his dislike for private letter rulings from federal government agencies being using to set policy.