Britains biggest oil pipeline shut for weeks for repairs

MOSCOW (MRC) — Britain's largest oil pipeline could shut down for weeks for unscheduled repair work, sending the price of crude to new 2-yr highs and triggering a steep rally in natural gas prices, just as a cold snap sweeps the country, said Reuters.

The Forties Pipeline System, which carries around 450,000 bpd of Forties crude from the North Sea to the Kinneil processing terminal in Scotland, had been operating at reduced capacity since Dec. 7 when a routine inspection revealed a small leak. Ineos, a privately owned Anglo-Swiss chemicals company, owns the pipeline and said it had taken the decision to close the system completely.

Oil traders estimated this was the first total closure since 2011, when then-operator BP shut it down while a suspected World War II bomb was removed from the seabed. "It's early days and it is premature to give a time frame for the repair work. We can't give a precise estimate other than to say it is a matter of weeks, rather than days," an Ineos spokesman said.

Ineos bought the Forties Pipeline System (FPS) from BP less than 2 mos ago for USD250 MM. The pipeline, which handles nearly a quarter of total North Sea crude output, is also a major route for bringing natural gas to Britain that has been produced offshore.

Britain is in the grip of a cold front that has brought heavy snowfall and prompted the closure of schools and disrupted travel across the country. Ineos, which also owns the 200,000-bpd Grangemouth refinery in Scotland, said the plant would have to seek "alternative supplies of crude", but that there was enough oil currently in storage at Grangemouth for the company to "manage the situation."

Fiona Legate, a senior analyst for the North Sea oil industry at consultant Wood Mackenzie, said even a temporary shutdown of the pipeline would have wide-reaching implications for the UK oil and gas industry. "FPS transports liquids from more than 80 fields, including the two largest producers in the UK—Buzzard and Forties," she said.

"The bulk of throughput from FPS comes from 10 fields ... In 2017, FPS transported more than 40% of liquids in the UK Continental Shelf." The price of Brent crude oil rose by nearly 2% on Monday to its highest since mid-2015, around USD65/bbl, while prices of Forties on the physical market traded at four-month highs. Forties is the biggest of the five North Sea crude oil streams that underpin the dated Brent price benchmark.
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MOSCOW (MRC) — A major Chinese chemical producer based in the southern province of Yunnan said it has halted production of synthetic ammonia and urea due to natural gas shortages as China's winter heating crisis deepens, as per Reuters.

Yunnan Yuntianhua Co stopped a 500,000-tpy production plant of ammonia and an 800,000-tpy urea production line at its Yunnan Shuifu subsidiary, it said in a filing to the Shanghai Stock Exchange on Tuesday. "Gas producers have suspended gas supplies to major industrial consumers in southwestern regions. Our Shuifu plant will temporarily halt production of two chemicals as a result," the company said.

Yuntianhua, which halted production on Monday, will book a USD3.78-MM loss due to the disruption. The company does not expect to resume before Dec. 31. The stoppage comes as at least one state natural gas producer has diverted supplies of the fuel to China's north for residential heating use.

State radio reported last week that PetroChina has sent at least 5 MMcm of gas from the southern provinces of Zhejiang, Fujian and Guangdong province to help relieve shortages in northern China. A PetroChina official familiar with the plan said as much as 10 MMcm has been diverted north. He declined to be named because he is not authorised to speak to the press.

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MOSCOW (MRC) -- China's crude oil imports are expected to rebound in January as demand from independent refiners will accelerate once 2018 import quotas are in place, and processors start to replenish inventories, reported Reuters with reference to analysts and trade sources.

China's crude imports are expected to rise to another record in 2018 as new capacities are brought online and Beijing allows more independent refiners to import crude.

Robust demand growth in the world's largest crude importer - China having overtaken the United States this year - is also helping to support global oil prices just as the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers are set to extend supply cuts.

China's crude imports could hit 8.8 MMbpd next year, while January shipments may hit a monthly record of 8.53 MMbpd as independent refiners receive their import quota and buyers start to replenish stocks ahead of Chinese New Year in mid-February, said Seng Yick Tee, analyst at Beijing-based consultancy SIA Energy.

"An oil price at above USD60/bbl is unlikely to dampen buyers' enthusiasm as refiners can pass on the cost to end-users on the upward trend of crude prices," Tee said.

Beijing is expected to bring forward the release of 2018 import quotas to December, allowing shipments to enter the country from January, refining and trade sources said. For 2017, the Ministry of Commerce issued quotas in January.

"Demand is accelerating because of more crude quotas coming in January," a source with an independent refiner said.

The source said refineries are placing more orders for crude arriving in the second half of January on concerns that the quotas may not come in time.

Stronger than expected fuel demand and firm margins has lifted China's refinery use rates and pushed crude oil inventories to their lowest in more than seven years as refiners drew down stocks.

China is likely to buy crude mainly from the Middle East and Russia, while some of its demand will be met from other regions, the sources said.

Spot premiums for Oman and Russian ESPO grades, two of the most popular among independent refiners, have hit multi-month highs for January loading.

As much as 800,000 bpd of US crude is expected to arrive in Asia in December, said an analyst who tracks oil flows.

Royal Dutch Shell is sending 6 million barrels of North Sea crude to Shandong, where most of the country's independent refiners are located, in December and January, trade flows data on Thomson Reuters Eikon showed.

Shell said it does not comment on commercial matters.
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MOSCOW (MRC) -- BASF and LetterOne has signed a letter of intent to merge their respective oil and gas businesses in a joint venture, which would operate under the name Wintershall DEA, said BASF on its site.

The oil and gas business of BASF is bundled in the Wintershall Group consisting of Wintershall Holding GmbH and its subsidiaries, including the gas transportation business. The oil and gas business of LetterOne comprises DEA Deutsche Erdol AG and its subsidiaries. By combining these two German-based entities, their parent companies strive to create a basis for further profitable growth, optimize the portfolio footprint of the combined business and realize synergies. Wintershall DEA would have significant growth potential and be one of the largest independent European exploration and production companies. In the medium term, BASF and LetterOne envisage to list Wintershall DEA through an initial public offering.

In the coming months, BASF and LetterOne will prepare and conduct a confirmatory due diligence and negotiate definitive transaction agreements. Closing could be expected in the second half of 2018, subject to customary regulatory approvals. Until the closing, Wintershall and DEA will continue to operate as independent companies. There is no assurance that BASF and LetterOne will enter into definitive transaction agreements or that the intended transaction will be consummated.

It is intended to form Wintershall DEA by LetterOne contributing all its shares in DEA Deutsche Erdol AG into Wintershall against issuance of new shares to LetterOne. Based on the valuation of the exploration and production businesses, BASF shall initially hold 67% and LetterOne shall hold 33% in Wintershall DEA. In this shareholding ratio, Wintershall’s gas transportation business is not accounted for. As of closing, Wintershall DEA shall issue a mandatory convertible bond to BASF reflecting the value of Wintershall’s gas transportation business. No later than 36 months after closing, this bond shall be converted into new shares in Wintershall DEA, resulting in a higher shareholding ratio for BASF.

In 2016, the combined business had pro-forma sales of €4.3 billion, EBITDA of €2.2 billion and net income of €326 million. Overall, production volumes of Wintershall and DEA amounted to 215 million barrels of oil equivalent (BOE) in 2016, this equals a production of around 590,000 BOE per day. Based on proven reserves (1P) of 2.1 billion BOE at the end of 2016, the reserve to production ratio of the combined business would be around 10 years.

BASF would determine the chief executive officer and LetterOne the deputy chief executive officer of Wintershall DEA. The company would be headquartered in Kassel and Hamburg, Germany.
Following the closing of the transaction, BASF expects to account for its stake in the joint venture under the equity method in BASF’s consolidated financial statements.

As MRC informed earlier, within the next five years, BASF SE plans to invest globally more than EUR200 million in its plastic additives business, approximately half of which in Asia, focusing on capacity expansions and operational excellence. Plastic additives improve product properties such as scratch resistance or light stability, and optimize plastics manufacturing processes. As the leading global supplier of plastic additives with manufacturing assets in all regions, BASF is a major partner to the plastics industry.

DEA is operating in the field of exploration and production of crude oil and natural gas and is headquartered in Hamburg, Germany. The company has long-standing experience along the entire value chain of the upstream business. In March 2015, DEA - formerly part of RWE AG - was acquired by LetterOne. With its workforce of around 1,150 employees, DEA has stakes in production facilities and concessions in Germany, Norway, Denmark, Egypt, Algeria and Mexico. For the full year 2016, net sales of the oil and gas activities bundled in the DEA Group amounted to around EUR1.5 billion, EBITDA was EUR614 million and EBIT EUR44 million. For 2016, DEA reported a production of 50 million BOE and proven crude oil and natural gas 1P reserves of 483 million BOE at the end of the year.

Wintershall, headquartered in Kassel, Germany, focuses on exploration and production in oil and gas-rich regions in Europe, Russia, South America, North Africa, and the Middle East. Together with Gazprom, Wintershall is also active in the transportation of natural gas in Europe. The company has about 2,000 employees worldwide and is Germany’s largest, internationally active crude oil and natural gas producer. For the full year 2016, net sales of the Oil & Gas segment of the BASF Group amounted to around EUR2.8 billion, EBITDA was around EUR1.6 billion and EBIT around EUR500 million. Crude oil and natural gas production of Wintershall amounted to 165 million BOE in 2016; the 1P reserves were 1.6 billion BOE at the end of 2016.

BASF is the largest diversified chemical company in the world and is headquartered in Ludwigshafen, Germany. BASF produces a wide range of chemicals, for example solvents, amines, resins, glues, electronic-grade chemicals, industrial gases, basic petrochemicals and inorganic chemicals. The most important customers for this segment are the pharmaceutical, construction, textile and automotive industries. BASF generated sales of about EUR58 billion in 2016.
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MOSCOW (MRC) -- A major fire broke out at Paradip refinery of Indian Oil Corporation Limited (IOCL) on December 12, 2017, as per Apic-online.

A domestic source informed Polymerupdate team member that a pipeline inside the INDMAX Unit of Paradip Refinery caught fire following a leakage at about 12 noon yesterday, destroying properties worth crores. As the heavy smoke was emanating from the unit and was clearly visible from a distance, panic gripped the workers and residents of nearby Trilochanpur, Mahal and other villages.

However, no casualties were reported. Nine fire tenders took more than half-an-hour to douse the fire. The INDMAX Unit having the capacity of 4.17 MMTPA is a major landmark for Indian Petroleum Industry. It is used for the production of high yield LPG, light olefins and high octane gasoline from various petroleum fractions.

When asked to comment on the operational status of the refinery, the source added, ?the company has shut the fluidic catalytic cracking unit (FCCU) on precautionary measures after a fire broke out at a nearby INDMAX unit. It remains unclear when the unit will resume operations.

Located at Paradip in Odisha, the east coast refinery has a processing capacity of 300,000 barrels per day.

Indian Oil Corporation Limited, or IndianOil, is an Indian state-owned oil and gas corporation with its headquarters in New Delhi, India.
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