Harvey may pinch some Gulf Coast refining and chemical projects

MOSCOW (MRC) -- Oil and petrochemical plants along the US Gulf Coast intend to go ahead with plans for near record spending on expansions next year, despite Hurricane Harvey driving up labor costs and slowing work, experts said, according to Hydrocarbonprocessing.

Harvey largely spared oil and petrochemical plants along the US Gulf Coast from significant damage but thousands of homes and businesses were not as fortunate. Refiners and recovery projects will complete for the same labor, driving up costs or causing labor shortages.

Industrial investment in the Gulf Coast is expected to hit USD51.9 B next year, near the 2015 peak, requiring an army of pipefitters, ironworkers and other craftsman, said Industrial Information Resources (IIR), which tracks labor supply for refiners and other industrial companies.

"We had a labor shortage before Harvey, but now it's significantly worse," said IIR's Anthony Salemme. "It's going to spread to soft crafts like painters and insulators."

Investments have soared in recent years because the shale revolution fed off an existing infrastructure. The region's deep water ports and expanding pipeline and storage networks offer an easy outlet to global markets. It also boasts a welcoming regulatory climate and skilled workforce.

Since 2010, USD85 B worth of petrochemical projects have started or been completed across the United States, nearly all of them in the Gulf Coast region, according to the American Chemistry Council.

But the concentration along the Gulf of Mexico leaves these facilities and supporting networks exposed to the brutal force of tropical storms and hurricanes, as Harvey laid bare last month.

The storm shut roughly a quarter of the nation's refinery capacity and more than a dozen petrochemical plants halted operations. Ports were closed and key fuel pipelines serving the Midwest and US Northeast were partially or completely shut, driving up pump prices as fears of fuel shortages took hold.

Preliminary assessments suggest that storm's hit to the region is not deterring companies from going ahead with existing projects. But global commodities buyers such as Ineos Group and Reliance Industries Ltd that relied on existing facilities shut by the storm may now consider putting some warehouses and stock elsewhere.

"The robustness of the supply chain is brought a little more under attention," said David Witte, a senior vice president at consultants IHS Markit. "They may be looking at it differently."

There is no sign that major new projects are under threat. Several with plans on the drawing board, including BASF SE, DowDuPont Inc and Exxon Mobil Corp are sticking to growth plans. Others said they will repair Harvey's damage before making any decisions on long-term strategy for the region.

Exxon earlier this year said it would invest USD20 B to expand Texas refining and petrochemical operations in Beaumont, Corpus Christi and Baytown. All three communities were damaged by Harvey.

As part of that expansion, Exxon and Saudi Basic Industries Corp are proposing an about USD10 B chemical plant in Corpus Christi, near where Harvey made landfall. The project is moving forward, according to a source familiar with the matter.

Exxon spokesman Scott Silvestri declined to comment.

DowDuPont is also undeterred from an ongoing USD4 B expansion project that includes new capacity in Freeport, Texas, on the coast. "Hurricane Harvey does not change our perspective on the region being a great location for our investments," spokeswoman Rachelle Schikorra said in a statement.

Royal Dutch Shell Plc, which is expanding its operations in the Gulf, also has proposed new investments in western Pennsylvania, near the natural gas-rich Marcellus formation.

The plant will help Shell capture a larger share of the US market for polyethylene, more than half of which is concentrated in northern states. It took Shell years to make the decision to build the plant.

Pennsylvania has started to position itself as a second US refining region, even though new plants are years away from opening. The state lacks the specialized refining workforce and proximity to open water - and the Panama Canal - that make the Gulf Coast area still so appealing.

The US Gulf Coast will remain an attractive investment area, said Shell spokesman Curtis Smith and other energy officials.

"What this storm has demonstrated is the resilience of the energy system," said Torgrim Reitan, who runs Statoil ASA's US operations. "Even a Harvey can't take out this capacity."

As MRC informed before, the wake of Hurricane Harvey, which had killed more than 40 people and brought record flooding to the oil heartland of Texas, paralyzed a quarter of the US refining industry. Harvey, downgraded to a tropical storm and losing steam as it moved inland, shut at least 4.4 MMbpd of refining capacity.
MRC

MOSCOW (MRC) -- The September contract price of ethylene was agreed in Europe up by EUR30/tonne from August. However, European polyethylene (PE) producers raised their export PE prices by an average of EUR40/tonne for September shipments to the CIS countries, as per ICIS-MRC's Price report.

Negotiations over export prices of European PE to be shipped to the CIS markets began last week. Many negotiators said most European producers raised their export PE prices more than the amount of the increase of monomer prices. Only in some cases, there was a price increase of EUR30/tonne, whereas in most cases, the rise was EUR40/tonne or higher.

Deals for September shipments of high density polyethylene (HDPE) were discussed in the range of EUR1,000-1,080/tonne FCA, whereas August deals were done in the range of EUR960-1,040/tonne FCA. Deals for black PE 100 were done in the range of EUR1,230-1,260/tonne FCA.

Deals for low density polyethylene (LDPE) were negotiated in the range of EUR1,150-1,210/tonne FCA.
MRC

MOSCOW (MRC) -- Croatia’s loss-making refinery in the central town of Sisak could be turned into logistics center and a facility to refine biomass, consultants Deloitte have proposed, as per Hydrocarbonprocessing.

The 60,000-bpd refinery is owned by INA, which is in turn owned by the Croatian government and Hungary’s MOL. INA has a bigger refinery with capacity of 100,000 bpd in the Adriatic port of Rijeka.

INA, which published the proposal by Deloitte on Thursday, said the Sisak refinery generated losses worth USD23.53 MM in the first half of 2017.

"INA’s refining capacities considerably surpass demand on the small regional market," INA said in a statement. "It is now necessary to hold talks with all the relevant stakeholders on the future of the Sisak refinery."

Deloitte’s study suggested the Sisak site could be turned into biorefinery within three years, INA said.

Fearing possible closure, a workers union at Sisak has threatened to block oil being transported to Rijeka unless the smaller plant is kept open. The Rijeka plant is due to be modernized.

Zagreb and MOL have for several years been at odds over management rights and INA’s investment strategy. They have been involved in international arbitrations to resolve the row.

Croatia’s government said in August it was hiring an adviser on a possible transaction to buy back MOL’s 49% stake in INA.

As MRC wrote previously, in 2016, the German Bodo Moller Chemie Group opened a subsidiary in Zagreb, Croatia. According to the company, primarily products from the Huntsman Advanced Materials range will be sold through its new site to the Balkan states. These products predominantly include epoxy resins, polyacrylates and polyurethanes for various bonding and sealing applications. The branch is officially affiliated to Bodo Moller Chemie Austria GmbH.
MRC

MOSCOW (MRC) -- Kazakhstan is aiming for a standalone deal with leading global oil producers on restraining its crude production due to a need to crank up output at its Kashagan field, reported Reuters with reference to a Kazakh official.

The Central Asian nation increased oil and gas condensate output by 9.9% in January-July to 49.907 MMt, or 1.724 MMbpd, exceeding its quota of 1.7 MMbpd under a global supply pact.

Kazakhstan has said it needs to adjust the terms of the deal as it expects to boost output later this year thanks to the giant Kashagan field.

On Thursday, Deputy Energy Minister Aset Magauov said his country needed to repay the shareholders in Kashagan, where output had been delayed for years before it was relaunched last year.

"I think that talks on Kazakhstan’s commitments will continue separately," Magauov told reporters.

"There is understanding from OPEC that the project (Kashagan) is very large, there have been huge investments and there is a need to return these investments to shareholders."

He said Kashagan, with investments of around USD55 B, was expected to produce 13 MMt next year (260,000 bpd), while other oil projects in the country could see their output reduced.

Kashagan has been developed by a consortium of China National Petroleum Corp, ExxonMobil, Eni, Royal Dutch Shell, Total, Inpex and KazMunaiGas.

The Organization of the Petroleum Exporting Countries and other producers, including Russia and Kazakhstan, agreed to cut output from January this year until the end of March 2018 to reduce global inventories and support oil prices.

As MRC informed before, in May 2017, Kazakhstan and UAE agreed to prepare a joint project for polyethylene production, reported the Ministry of Energy of Kazakhstan. The industry is going to be based on the territory of the petrochemical zone in Atyrau region, which provides special legal regime, tax, customs and other preferences.
MRC

MOSCOW (MRC) -- French chemical firm Arkema SA said an evacuation zone put in place amid fears that more flammable organic pesticides at its flooded plant in Crosby, Texas, would explode was lifted on Monday after the materials were ignited in a controlled burn, said Reuters.

The plant, which makes organic peroxides for the production of plastic resins, polystyrene, paints and other products, was swamped by as much as 6 ft of water due to Hurricane Harvey and had been without electricity since Aug. 27. Starting on Thursday, three of the nine trailers at the facility containing a total about 500,000 pounds of chemicals exploded and caught fire. The company had warned it expected a series of fires as temperatures in the trailers rose without functioning cooling systems.

In a statement on Monday, Arkema's North American unit said the 1.5-mi evacuation zone ordered by Harris County authorities since Tuesday had been lifted. On Sunday, the company said it had safely caused "ignition of the remaining" six containers which had then "largely burned themselves out."

The US Environmental Protection Agency and the Texas Commission on Environmental Quality said on Sunday fire officials would perform a controlled burn of materials at the facility, located about 25 mi northeast of Houston, to avoid further damage and limit the risk to the surrounding area. The environmental officials said they would continue to monitor air quality around the plant.

The EPA has said its testing methods have not found toxic concentration levels in smoke from the plant in areas away from the evacuated facility since explosions were first reported on Thursday. The plant lost refrigeration when backup generators were flooded, prompting workers to transfer products from warehouses into diesel-powered refrigerated containers. The company said refrigeration of some back-up containers was compromised because of high water levels.

Last week, 15 Harris County Sheriff's deputies were briefly taken to a hospital after inhaling smoke from fires at the Arkema plant but were released soon afterward. The Federal Aviation Administration last week temporarily barred flights near the plant because of the risk of fire or explosions.

The company said it is opening an assistance center at Crosby to provide financial assistance to people who were affected by the evacuation order near the plant.
MRC