Shell Canada sees cost advantage in LNG Canada expansion

MOSCOW (MRC) - An expansion of LNG Canada has a cost advantage over its rivals in the race to build more liquefied natural gas export capacity, but a go-ahead decision on phase two is likely still a few years away, Shell Canada's president said, as per Reuters.

The first phase of the C41 billion (USD31.3 billion) Royal Dutch Shell-led project was given the go-ahead last month, firing up a race among companies eager to be the next to tap into booming Asian demand for the gas that is supercooled into liquid form for export by tanker.

"What's in our favor now is expansions are typically lower capital cost," Michael Crothers, Shell Canada President, told the Reuters Global Commodities Summit. "I think that opens up an even more competitive opportunity for us and the partners."

That expansion cost saving adds onto the project's other advantages, including a relatively short shipping distance to key Asian markets and cheap feed gas. The question of when the second phase, which would double output at the 14 million tonne per annum (mtpa) plant to 28 mtpa, will be approved remains unclear, Crothers said.

"I'm sure Shell leadership would like to see demonstrated performance before we start to consider this too closely. So that's still probably a few years away," he said.

He added an LNG Canada expansion would have to compete with global rivals, including options in the U.S., Africa and Middle East, and would depend on the market for the fuel - though all signs point to sustained Asian demand.

LNG demand has risen sharply in recent years, led by China, gobbling up an anticipated surplus and fanning fears of a shortage by mid-next decade. This has projects around the world scrambling to secure the long-term deals they need to finance multi-billion dollar builds.

LNG Canada is a joint venture between Shell, Malaysia's Petronas, PetroChina Co Ltd, Mitsubishi Corp and Korea Gas Corp.
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MOSCOW (MRC) - The world's biggest oil traders are gearing up to cash in on big disruptions that could hit the shipping fuel market in just over a year due to new U.N.-mandated environmental rules, Reuters.

International Maritime Organization (IMO) regulations will cut the limit for sulphur in marine fuels globally from 3.5 percent to 0.5 percent from the start of 2020.

"We're going to hopefully facilitate the new rules in 2020 by helping out the industry and the participants in general to have a reasonably smooth transition," Marco Dunand, the chief executive of trading house Mercuria, told the Reuters Global Commodities Summit.

He said Mercuria was in talks to finance shipowners who want to install expensive sulphur cleaning kits called scrubbers, allowing them to burn cheaper high sulphur fuel. He declined to name those clients. The company is offering a package that would include providing compliant fuels via its subsidiary Minerva as well as fuel-price hedging.

Traders are widely expected to benefit as they thrive off efficiently moving products between regions with price dislocations. But the market currently lacks a benchmark for the new compliant fuel grade.

"There are legitimate concerns about this product being available in multiple locations," Vitol Group Chief Executive Russell Hardy told the summit. He added that planning for the changes in the absence of a futures market was complicating matters. "It's doable but we would like a bit of transparency," he said.

While S&P Global Platts, the agency that publishes benchmark physical fuel oil price assessments, plans to launch a set of new 0.5 percent sulphur prices starting in January, a paper market does not yet exist. "I think it will be a bit chaotic in the beginning of 2020 ... (but) we don't think it's going to be extremely disruptive," Gunvor CEO Torbjorn Tornqvist told the summit.

Other winners from the changes will be complex refineries that have invested in the right kit to turn high-sulphur products into low-sulphur, or sweet, ones. This leaves simple refiners that can't easily clean sulphur from petroleum products at a risk of losing out.
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MOSCOW (MRC) - As U.S. oil production rises - setting records in average daily output nearly every month this year - the companies that convert crude to diesel and gasoline are increasing their ability to consume more crude and generate higher profits, Reuters.

Using more efficient equipment and running bigger plants at peak speeds, the combined capacity of nation's 135 refineries was 18.6 million barrels per day (bpd) at the start of the year, up 16 percent over the 15.7 million bpd in 1985, when there were 223 refineries, according to Energy Information Administration data.

Demand for new products coming from these expansions "will lead to higher refinery utilization, higher distillate prices and higher refinery margins generally," Arvinder Saluja, a senior analyst at debt ratings firm Moody's Investors Service, wrote in a report on Thursday.

U.S. refinery utilization, or how much of the capacity is being used, hit a record 98 percent in early August, the EIA said. Utilization differs from capacity due to weather or maintenance disruptions, market demand and other factors.

This year, high production and ample supplies of shale and heavy Canadian oil have made U.S. refiners very profitable. Refining income this year through September at Phillips 66 was USD1.94 billion, up 87 percent from the year earlier. Valero Energy's refining business posted an operating profit of USD3.64 billion, up 21 percent.

Just as shale producers are exporting more, U.S. refiners which convert crude into low-sulfur fuels should be able to drive exports of marine fuel and profits higher next year. Earning from such sales can remain strong through "at least 2022," Moody's Saluja said.

Between 2012 and 2017, exports of finished U.S. refined products climbed by 772,000 bpd to 2.79 million bpd, accounting for a national increase of refined products exports of 735,000 bpd to 3.34 million bpd.

Consolidation is also lifting refiners' outlooks. Last month, second-largest refiner Marathon Petroleum Corp acquired fifth-largest Andeavor in part to gain Andeavor's ability to process shale and because of its retail gasoline network in Mexico.

Six of the 10 largest U.S. refineries are owned by oil producers, including Motiva, owned by Saudi Aramco, Exxon Mobil Corp and Chevron Corp .
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MOSCOW (MRC) -- Fluor Corporation announced that its joint venture team, FDH JV, has successfully generated first steam into Kuwait National Petroleum Company’s (KNPC) Clean Fuels Project in Kuwait, as per Hydrocarbonproceesing.

"This significant milestone marks the completion and turnover of the first utility units by the Fluor-led joint venture and KNPC is advancing these units into operation with our ongoing support,” said Al Collins, president of Fluor’s Energy & Chemicals business in Europe, Africa and the Middle East. “The 12,000-plus craft workers at site have been backed by joint venture project team members across three continents, a global operation for a mega-sized project. Accomplishing this milestone shows we are set to deliver the remaining units in the project to support KNPC’s ambitious Clean Fuels Program."

This project is being executed on the three KNPC-owned and operated refineries in Kuwait. As part of the Clean Fuels Project, KNPC plans the retirement of existing processing facilities at Shuaiba and a major upgrade and expansion of the Mina Al Ahmadi and Mina Abdullah refineries to integrate the refining system into one complex with full conversion operation. The Fluor-led joint venture with Daewoo Engineering & Construction and Hyundai Heavy Industries is responsible for engineering, procurement and construction as well as associated pre-commissioning and testing support for the Mina Abdullah Package 2. After commissioning, both the Mina Abdullah and Mina Al Ahmadi refineries will have a capacity of 800,000 barrels-per-stream day to supply local and international demand for clean fuels meeting the most stringent environmental requirements.

The American Society of Safety Engineers recently recognized the project with its 2018 Gold Award in Health, Safety and Environmental Excellence. The strong safety culture at site was achieved by active engagement at all levels of the organization and a relentless focus on risk identification and mitigation. This engagement has enabled the workforce to achieve 60 million work hours without a lost-time incident.
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MOSCOW (MRC) - Benchmark northwest European gasoline refining margins rose sharply on Thursday, buoyed by lower oil prices and inventory drawdowns on both sides of the Atlantic, said Reuters.

U.S. gasoline stocks fell 3.2 million barrels last week, according to the Energy Information Administration. This compared with analysts' expectations in a Reuters poll for a 2.1 million barrels drop.

Stocks independently held in the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub declined slightly to 985,000 tonnes in the week to Thursday, according to data from Dutch consultancy PJK International.

Nigeria's state oil firm NNPC said on Thursday it had signed a crude-for-product deal with BP for the next six months to help meet the country's gasoline needs over the holidays and ahead of its general election early next year.
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