The U.S. Commerce Department cracked open the door for exports of very light oil this week, with two companies receiving private letter rulings allowing them to ship lease condensate overseas.

Pioneer Natural Resources Co. (NYSE: PXD) and Enterprise Product Partners LP (NYSE: EPD) received permission from the U.S. Commerce Department's Bureau of Industry and Security allowing them to export treated lease condensate.

Lease condensate is considered too light to be crude but is nevertheless trapped by law from leaving the United States. Lease condensate is not optimal as a feedstock for refined products so potential impacts on gasoline and diesel prices would likely be minimal, experts have told Hart Energy.

The companies’ permission slips are not a broader dismantling of laws banning exports such as the Energy Policy and Conservation Act of 1975 and other regulations.

“I think it's an incremental step forward” and should support North American growth, said Bill Herbert, managing director and co-head of securities for Simmons & Co. International.

Specific details are sparse, but the news is positive for the upstream industry and Pioneer specifically, said Pearce Hammond, managing director and co-head of exploration and production research for Simmons & Co. International.

The private letter ruling defines condensate as a petroleum product, meaning it can be exported after it is treated/processed/refined.

Enterprise said the ruling does not represent a change in federal policy, as petroleum products can already be exported. It is unclear whether other producers will need to secure private letter rulings in order to export similarly treated condensate.

Pioneer will likely use central gathering plants in the Eagle Ford where field condensate is placed through a distillation tower. The process reduces the Reid Vapor Pressure (RVP) and stabilizes the condensate, meaning it removes some of the light, more volatile gases, Hammond said.

Hammond also said Simmons’ discussion with Pioneer indicates the ruling only applies to treated/stabilized field condensate.

“We are not certain how much U.S. condensate production is treated/stabilized or what the cost is to process it,” he said in a report. “We believe this cost is substantially less than the discount the condensate currently receives in the market—about $10 per barrel (bbl) discount to WTI.”

David Tameron, a Wells Fargo Securities LLC senior analyst, said after speaking with Pioneer, “they indicated that no timing or volume restrictions are in place.”

The companies’ private rulings said that both companies can begin exporting condensate as early as August, according to press reports. However, exports may take some time.

Eagle Ford producers are generally the most likely near-term beneficiaries of the ruling, and should see the buildup of condensate on the Gulf Coast alleviated.

“We have yet to confirm with other Eagle Ford producers if they have applied for permission to export condensate, as PXD did,” Tameron said.

Should additional exports be permitted, those most likely to benefit include Rosetta Resources Inc. (NASDAQ: ROSE), SM Energy Co. (NYSE: SM) and others such as EOG Resources Inc. (NYSE: EOG) and Devon Energy Corp. (NYSE: DVN).

Pioneer itself is currently in discussions with midstream providers, in addition to working toward a marketing solution to export their condensate from the Eagle Ford, which we estimate to be about 3,540 Mbbl/d gross.

U.S. oil producers such as Continental Resources Inc. (NYSE: CLR) and ConocoPhillips (NYSE: COP) have been campaigning for an end to the restrictions as shale production has brought a surge in North American petroleum supplies, Bloomberg reported. U.S. crude production has jumped 45% since the start of 2012, driven by horizontal drilling and hydraulic fracturing in places including North Dakota and Texas.

Supplies on the Gulf Coast rose to more than 215 MMbbl in May, the highest level on record since 1990, according to Energy Information Administration (EIA) data. Much of that supply has been in the form of lighter crude, and arrived after Gulf Coast refiners made expensive upgrades to their plants to process heavier crudes from places such as Canada and Mexico.

As with many producers, Pioneer is currently receiving $10 to $12/bbl below WTI for their Eagle Ford condensate. The company will need to secure international buyers that are willing to test the condensate and enter into pricing agreements. The company hopes to get the first export shipments completed by year end, Hammond said.

Enterprise can export the condensate from any of their export docks, but most likely will do so from Corpus Christi.

“Investors will likely interpret this ruling as the Obama Administration becoming more open to crude oil exports,” Hammond said. “We believe the events of the past few weeks have likely raised the probability of the federal government allowing crude oil exports, especially if violence in Iraq spreads south and significant oil production is negatively impacted.”

In that situation, the U.S. would use light crude oil to aid allies such as Japan and Korea.

Ethan Bellamy, senior analyst for Baird Energy, said reductions in export controls, whether for LNG or crude, are net positive for the MLP and upstream sectors.

“This appears to be the first step in a narrowing of the crude oil export ban that could reduce pressure on condensate pricing, a positive for producers, and possibly reduce the efficacy or growth in condensate splitters,” Bellamy said.