Lopez Obrador pledges more than USD11B for refineries

MOSCOW (MRC) - Mexican President-elect Andres Manuel Lopez Obrador said his administration will invest more than USD11 billion to boost refining capacity in order to curb growing fuel imports, as per Hydrocarbonprocessing.

Lopez Obrador, who will take office on Dec. 1, told reporters his government plans to invest USD2.6 billion to modernize existing domestic refineries owned and operated by national oil company Pemex and spend another USD8.4 billion to build a new one within three years.

The USD8.4-billion figure is higher than a USD6 billion estimate provided by a key energy advisor during the campaign.

Lopez Obrador, set to become Mexico’s first leftist president in decades, did not detail how the projects would be financed or whether private capital would be involved, but he has often said he will not raise taxes or grow government debt.

Mexico is among Latin America’s largest crude exporters but is also the biggest importer of U.S. refined products. The country’s next president has pledged to lift refining capacity, which he says has declined due to corruption and neglect.

Pemex, formally known as Petroleos Mexicanos, has six domestic refineries with a total processing capacity of some 1.6 million barrels per day (bpd), but the facilities are only operating at about 40 percent of capacity so far this year. Meanwhile, gasoline and diesel imports have sky-rocketed in recent months amid planned and unplanned refinery stoppages.

Pemex has posted losses in its refining division for years but Lopez Obrador aims to boost crude processing enough to halt imports within three years.

Lopez Obrador also said he plans to invest another $4 billion to drill new onshore and shallow-water oil wells in the states of Veracruz, Tabasco and Chiapas.

Pemex production has consistently declined in recent years to fall below 2 million bpd after hitting peak output of 3.4 million bpd in 2004.

President Enrique Pena Nieto passed a reform to open up Mexico’s state-run energy industry to private producers, which has led to a series of competitive auctions that have awarded more than 100 oil exploration and production contracts.
MRC

China oil refinery output up 12 pct in July, buoyed by state refiners

MOSCOW (MRC) - Chinese oil refinery output rose 11.6 percent in July from a year earlier, government data showed with state-run plants operating at high rates but smaller independent refiners struggling with squeezed profit margins, as per Hydrocarbonprocessing.

Refinery throughput last month reached 50.95 million tonnes, or 11.95 million barrels per day (bpd), according to the data from the National Bureau of Statistics. That compared to 12.11 MMbpd in June.

For the first seven months of 2018, refinery production climbed 9.2 percent year-on-year to 350.57 million tonnes, or 12.07 MMbpd, the data showed.

Facing strict government scrutiny on taxes since March and oil prices near USD70 a barrel, independent plants, sometimes known as ‘teapots’, were forced to scale back operations over the second quarter, many taking advantage of the adverse market conditions to carry out maintenances, analysts said.

Crude oil output in July dropped 2.6 percent on-year to 15.85 million tonnes or 3.73 MMbpd.

That marked the lowest daily rate since at least June 2011, and was down from the previous month’s level of 3.86 MMbpd, according to the official data.

Production over the first seven months of 2018 fell 2.1 percent to 109.95 million tonnes.

But crude output has this year been declining more slowly than in 2017 as companies step up developments to cash in on the higher crude oil prices.

Natural gas output in July rose 10.5 percent on-year to 13 billion cubic metres, while production over the first seven months was up 5.5 percent from last year at 90.5 bcm.

State energy producers face geological and technical challenges in boosting production fast enough to cover rapid demand growth, with imports of the fuel growing more than a third in the first half of the year.

National oil majors last week pledged to expand investment in domestic oil and gas exploration and production, in response to President Xi Jinping’s call to boost national energy security.
MRC

Indian Oil sees no impact from U.S. sanctions on refinery JV investment with Iran

MOSCOW (MRC) -- Indian Oil Corp.’s planned USD5.10 billion expansion of its unit Chennai Petroleum, partly owned by Iran, is not expected to be hit by U.S. sanctions against Tehran, reported Reuters with reference to Chairman Sanjiv Singh.

Chennai Petroleum plans to invest up to 356.98 billion rupees to replace its 20,000 barrel per day (bpd) Nagapattinam refinery in Southern Tamil Nadu state with a 180,000 bpd plant, it informed stock exchanges last year.

Naftiran Intertrade, the Swiss subsidiary of National Iranian Oil Company, holds a 15.4 percent stake in Chennai Petroleum, while IOC has about a 52 percent share.

"We won’t stop because of that (the sanctions). This is an investment and investment has to be done by shareholders and we are the largest equity holder so we will do that," Singh told reporters.

The United States, which withdrew from the 2015 Iran nuclear deal in May, has renewed some sanctions on Tehran from Aug. 6, while others, most notably on the petroleum sector, will be implemented from Nov 4.

Iran is keen to remain invested in Chennai Petroleum, Singh said, adding that a final investment approval on expansion will be made during the first quarter of 2019.

"I am sure we will be able to work out something because we are buying Iran crude, we want Iran to invest money," he said.

IOC, the country’s top refiner, has emerged as Iran’s biggest Indian oil client in the fiscal year beginning April 2018 and was hoping to buy as much as 180,000 bpd Iranian oil, including 40,000 bpd for Chennai Petroleum.

Singh said his firm would like to continue buying Iranian oil beyond November because of better incentives offered by Tehran in terms of credit period and freight.

The company is buying Iranian oil on a delivered basis, with vessels and cargo insurance arranged by Tehran.

However for supplies from November India needs to set up a payment mechanism involving local and foreign banks, he said.

In the previous round of sanctions, India had significantly reduced imports from Iran to win a waiver from the United States. Also, the South Asian nation had devised a barter-like mechanism to keep Iranian oil flowing.

IOC is already in talks with traditional suppliers to meet any shortfall in Iranian oil imports from November and has boosted purchases from the United States.

The company is scouting for a long-term deal for the assured supply of U.S. crude, pricing of which is giving tough competition to other grades despite the distances involved, Singh said.

"We have a back-up plan," he said. "Even our other term contracts have some flexible quantity which can be utilized. We are in touch with other suppliers also, they have shown interest also. I am sure that we will be able to take care of any shortfall."

We remind that, as MRC wrote before, Indian Oil Corporation's Rs 34,555-crore 15 million tonnes per annum Paradip Refinery was commissioned in phases from March 2015 onwards. Indian Oil Corporation was conducting feasibility studies to set up a petrochemical complex at Paradip in Odisha for Rs 20,000 crore. The petrochemical complex will be built in the vicinity of the company’s to-be-commissioned 15-mln tpa greenfield refinery at Paradip. The petrochemical complex will be in addition to the already announced Rs 3,150-crore polypropylene project at the same location, the foundation stone for which was laid by MOS for petroleum and natural gas.

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

Nigerias state oil company considers refinery partnerships

MOSCOW (MRC) - Nigeria's state oil company could allow private investors to install two refineries on two of its sites, said Hydrocarbonprocessing.

The country's existing 445,000 barrel per day (bpd) refining system operates well below capacity due to mismanagement and lack of investment, forcing the Nigerian National Petroleum Corporation (NNPC) to import the bulk of the country's gasoline.

NNPC said in a statement it was considering plans to establish a 100,000 barrel per day brownfield refinery at its Port Harcourt and Warri sites in collaboration with private sector investors.

The company said its strategy was "aimed at getting private sector investors to bring in brownfield refineries so that they can share facilities".

NNPC said investors had already begun relocating a refinery from Turkey to Nigeria to be installed near the state oil company's Port Harcourt refinery. It did not name any companies or provide a timeline.

A spokesman for the state oil company did not immediately respond to a phone call, text message and email seeking comment.

NNPC has sought new investment for years to reduce the reliance on imported oil products. Last year Nigeria's Forte Oil said it was in talks to form a strategic partnership for local refining of petroleum products. (Reporting by Camillus Eboh and Paul Carsten; Writing by Alexis Akwagyiram; Editing by David Goodman and Mark Potter)
MRC

Shell Convent refinery FCCU down for two weeks

MOSCOW (MRC) -- Royal Dutch Shell Plc’s 45,000 barrel-per-day (bpd) heavy oil hydrocracker at its Convent, Louisiana, refinery remained shut following a Sunday fire, reported Reuters with reference to sources familiar with plant operations.

Also, the refinery’s 92,000-bpd gasoline-producing fluidic catalytic cracking unit (FCCU) may be shut up to two weeks for repairs to a malfunctioning compressor, the sources said.

Shell spokesman Ray Fisher declined to comment on operations at the 209,787-bpd Convent refinery.

On Sunday, Fisher said there were no injuries or offsite impact from the early morning fire at the heavy oil hydrocracker, called the H-Oil Unit.

Shell attempted to restart the H-Oil Unit late on Sunday, the sources said.

The FCCU was completely shut for a planned overhaul from May 30 until Thursday, when workers were attempting to get products from the unit back into specification. A compressor on the unit began malfunctioning with excessive vibration, the sources said.

The H-Oil Unit is an atypical hydrocracker because it converts residual crude oil into motor fuels, especially diesel. Residual crude is normally processed by coking units.

Hydrocrackers use hydrogen and a catalyst under high heat and pressure to produce motor fuels, usually starting with gas oil as a feedstock.

FCCUs use a catalyst under high heat and pressure to convert gas oil into gasoline.

The planned overhaul on the FCCU is intended to keep the unit in operation for another five years. Until last year, Shell had planned to shutter the FCCU to reduce redundant operations at the company’s two refineries in Louisiana, which are to be linked by pipelines.

As MRC informed before, in March 2018, Shell EP Middle East Holdings B.V. completed the sale of the entire share capital of Shell Iraq B.V (SIBV), which held its 19.6% stake in the West Qurna 1 oil field, for USD406 million, to a subsidiary of ITOCHU Corporation.

Royal Dutch Shell plc is incorporated in England and Wales, has its headquarters in The Hague and is listed on the London, Amsterdam, and New York stock exchanges. Shell companies have operations in more than 70 countries and territories with businesses including oil and gas exploration and production; production and marketing of liquefied natural gas and gas to liquids; manufacturing, marketing and shipping of oil products and chemicals and renewable energy projects.
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