U.S. sanctions on Venezuela would reroute crude, leave refiners short

MOSCOW (MRC) - Potential U.S. sanctions on Venezuela’s crude oil exports would cut off the nation from Gulf Coast refiners that are among its biggest customers, likely forcing it to send more crude to China, India or other Asian countries, traders said, as per Hydrocarbonprocessing.

U.S. refineries that depend on Venezuela’s heavy crude would have even more trouble securing supplies as Canadian and Mexican crudes are often not as discounted and are limited in availability. The United States is considering moves to cripple Venezuela’s oil shipments, which account for nearly all of the country’s exports, in response to the reelection of President Nicolas Maduro that was widely viewed as a sham.

Washington has recognized opposition leader Juan Guaido as Venezuela’s president as protests against Maduro erupted across the country. It is also considering sanctions on oil deliveries, a move it has until now resisted, energy company sources told Reuters.

Venezuela, on average, exported about 500,000 barrels of crude a day to the United States in 2018, according to U.S. Energy Department data. Those shipments fell in November to an estimated 358,000 barrels per day, however, according to a report by Caracas-based consultancy Gas Energy Latin America seen by Reuters. The U.S. share of its exports has declined in recent years with more shipments going to Russia and China.

Those deliveries are being made largely through oil-for-debt repayment structures as output from state-run oil company Petroleos de Venezuela, S.A., known as PDVSA, has slumped to near 70-year lows in a nationwide economic crisis. Venezuela’s output has been cut in half since 2016 to less than 1.2 million bpd, according to figures from OPEC secondary sources.

Shipments to the United States account for about 75 percent of the cash Venezuela gets for crude shipments, according to a Barclays research note published last week. In the wake of sanctions, the country could seek additional deals with Turkey, India or other Asian nations, one trader of Venezuelan crude said. Gas Energy’s report said India was the second-largest importer of Venezuelan crude in November.

“It will be costly for Venezuela but eventually they’ll be able to sell that oil to Asia at a discount. There will be a period in the middle in which they have difficulty selling those barrels,” said Francisco Monaldi, fellow in Latin American Energy Policy at the Baker Institute for Public Policy at Rice University in Houston.

Though the United States produces nearly 12 million barrels of oil a day, complex Gulf Coast refineries need heavier crude grades to produce diesel and other high-margin products, and cannot simply sub in light crude.

Prices of heavier U.S. grades like Mars Sour, an offshore medium U.S. crude, and Heavy Louisiana Sweet crude have risen as buyers scramble for supply. Mars traded at a $6.90 premium to U.S. crude on Wednesday, a five-year high, according to Refinitiv Eikon data, as bidders came into the market to secure supplies through the second quarter, traders said.

“It would make a tight market even tighter. If it happens, it would be an unambiguous headwind for refiners already struggling to find supplies,” said Bob McNally, president of Rapidan Energy Group, an energy consultancy in Bethesda, Maryland.

Traders said the United States may need to sell oil from the U.S. Strategic Petroleum Reserve to cover supply shortfalls as additional shipments are secured via Canada or Mexico. Sanctions could also include U.S. exports of petroleum products to Venezuela, used for blending with Venezuelan heavy crude.
MRC

MOSCOW (MRC) -- Clariant, a world leader in specialty chemicals, has announced that it has signed a joint research agreement with ExxonMobil and Renewable Energy Group (REG) to evaluate the potential use of cellulosic sugars from sources such as agricultural waste and residues to produce biofuel, which has the potential to play a role in reducing greenhouse gas emissions, as per Hydrocarbonprocessing.

The new partnership expands a previously announced agreement for joint research between ExxonMobil and REG, in which the companies successfully validated the ability of REG Life Sciences bio-conversion technology to convert sugars from cellulosic biomass into biodiesel through a single-step process.

The new agreement with Clariant allows ExxonMobil and REG to further optimize REG’s bio-conversion process using previously tested and benchmarked cellulosic sugars created through Clariant’s sunliquid process. The companies’ ultimate objective is to combine Clariant’s and REG’s processes into a seamless cellulosic biomass-to-biodiesel technology.

"Over the past three years, our work with REG has led to important advances in genetically improving REG’s proprietary microbes for a beneficial use in facilitating the conversion of cellulosic sugars into biodiesel," said Vijay Swarup, vice president of research and development at ExxonMobil Research and Engineering Company. "Applying Clariant’s expertise and knowledge will help us better understand and advance a key stage in the overall cellulosic conversion process, and hopefully lead to the development of scalable biodiesel technology."

Clariant is a leading company offering integrated technologies and solutions for converting agricultural residues such as wheat straw, rice straw, corn stover and sugar cane bagasse. Clariant‘s sunliquid process features chemical-free pretreatment, the integrated production of feedstock and process-specific enzymes and thus high yields of fermentable C5 and C6 sugars. Clariant will conduct trials at its pre-commercial plant in Straubing, Germany using different types of cellulosic feedstock that will be converted into sugars for conversion by REG and ExxonMobil into high-quality, low-carbon biodiesel.

"We are committed to innovation and R&D, together with a focus on sustainability, as main pillars of Clariant’s strategy. Our sunliquid technology platform is a key outcome of this commitment. We are proud that two strong allies in the biofuels industry have selected Clariant as their partner and are excited to work with them on further leveraging this unique technology for converting cellulosic biomass to fuels and chemicals, including biodiesel," said Christian Kohlpaintner, member of Clariant's executive committee.

REG Life Sciences technology has proven its broad applicability to industries as diverse as flavor and fragrance, specialty chemicals and transportation fuels. Through its partnership with ExxonMobil, REG has developed proprietary technology that utilizes industrial microbes to convert complex cellulosic sugars into low-carbon biodiesel in a one-step fermentation process.

"ExxonMobil has been an exceptional partner in developing this promising technology. We are delighted to be able to add Clariant to the team with its market leading sunliquid technology. We believe we have assembled a dream team for conversion of cellulosic biomass to low carbon biofuels and are excited about the promise of this collaboration,” said Eric Bowen, vice president of REG Life Sciences."

The partners will also work on a conceptual engineering study to validate the feasibility of the integrated process comprising the technologies of all parties.

As MRC informed before, in December 2017, Clariant announced that it had been awarded a contract by Dongguan Grand Resource Science & Technology Co. Ltd. to develop a new propane dehydrogenation unit in cooperation with CB&I. The project includes the license and engineering design of the unit, which is to be built in Dongguan City, Guangdong Province, China.

We also remind that in October 2017, ExxonMobil Chemical Company commenced production on the first of two new 650,000 tons-per-year high-performance polyethylene (PE) lines at its plastics plant in Mont Belvieu, Texas. The full project, part of the company’s multi-billion dollar expansion project in the Baytown area and ExxonMobil’s broader Growing the Gulf expansion initiative, will increase the plant’s polyethylene capacity by approximately 1.3 million tons per year.

Clariant AG is a Swiss chemical company and a world leader in the production of specialty chemicals for the textile, printing, mining and metallurgical industries. It is engaged in processing crude oil products in pigments, plastics and paints.

ExxonMobil is the largest non-government owned company in the energy industry and produces about 3% of the world's oil and about 2% of the world's energy.
MRC

MOSCOW (MRC) – Russia’s overall polypropylene (PP) production dropped by 2.2% year on year in 2018, totalling 1,370,500 tonnes. At the same time, only two out of seven producers reduced their output, according to MRC’s ScanPlast report.

Local PP producers’ December total output rose to 130,700 tonnes versus 91,100 tonnes a month earlier, SIBUR Tobolsk and Ufaorgsintez increased their capacity utilization.

Russia’s overall production reached 1,370,500 tonnes in 2018, compared to 1,400,900 tonnes a year earlier. At the same time, only SIBUR Tobolsk and Ufaorgsintez reduced their output over the stated period, whereas other producers managed to raise it.

The production structure by plants looked the following way over the stated period.

SIBUR Tobolsk had solved its technical production problems by December, the plant’s total output rose to 46,700 tonnes versus 18,700 tonnes a month earlier. The Tobolsk plant’s overall production reached 436,100 tonnes last year, down by 15% year on year. Such a great reduction in production was caused by two shutdowns for maintenance.

Omsk Poliom (part of Titan) produced 19,100 tonnes of PP last month, compared to 17,600 tonnes in November. The Omsk plant’s overall production totalled 214,200 tonnes in 2018, up by 4% year on year.

Nizhnekamskneftekhim produced 18,500 tonnes of polymers of propylene in December versus 17,800 tonnes a month earlier. The Nizhnekamsk plant’s overall output increased to 215,800 tonnes last year, compared to 210,800 tonnes in 2017.

Tomskneftekhim produced 12,400 tonnes of propylene polymers last month, as in November. The Tomsk plant’s overall output reached 141,300 tonnes in 2018, which is virtually comparable to the figure for 2017.

Ufaorgsintez’s total PP production was 11,400 tonnes in December versus 9,700 tonnes a month earlier, the plant operated with reduced capacity utilization in early November because of feedstock problems. The Ufa plant’s overall output of polymer did not exceed 119,300 tonnes last year, compared to 124,500 tonnes a year earlier.

Neftekhimia (Kapotnya) produced 10,700 tonnes last month versus 10,200 tonnes in November. The plant’s overall output reached 131,400 tonnes in 2018, up by 23% year on year. Last year’s increase in production was caused by the absence of shutdown for maintenance.

Stavrolen (LUKOIL) produced slightly more than 11,900 tonnes of polymers of propylene in December, compared to 7,600 tonnes a month earlier, the plant shut its production a one-week turnaround in early November. The Budenovsk plant’s overall output of propylene polymers reached 111,800 tonnes versus 101,000 tonnes a year earlier.

MRC

NOSCOW (MRC) -- An expected increase in US oil exports could weigh on oil prices towards the end of the year, as per Hydrocarbonproccesing with reference to the chief executive of French energy company Total's statement.

Speaking to France's BFM Business TV on the sidelines of the World Economic Forum in Davos, Pouyanne said there were many factors weighing on oil prices, yet a key one was related to the situation in the United States.

One of the main reasons as to why prices were expected to be weak was because in the United States, a major oil producer, a good part of its production was not being exported because of bottlenecks at the pipelines.

"These are being constructed, and when it will be done at the end of the year, there will be an influx of US crude in the market and this will drag prices lower towards the end of the year," Pouyanne said.

As MRC wrote before, crude oil output from the United States is expected to rise to a new record of more than 12 million barrels per day (bpd) this year and to climb to nearly 13 million bpd next year, the US Energy Information Administration said in its first 2020 forecast.
MRC

MOSCOW (MRC) -- China's imports of liquefied natural gas (LNG) in December soared 25% from the same period a year earlier to a monthly record of 6.29 metric MMt, reported Reuters with reference to customs data.

The previous record of 5.99 metric MMt was set in November.

For the whole of 2018, imports grew 41% from 2017 to a record 53.78 metric MMt, according to the data from the General Administration of Customs. That saw China retain its position as the world's second-buyer buyer of the super-chilled fuel after Japan, having leapfrogged South Korea in 2017.

The 2018 surge came after gas shortages last winter prompted Chinese companies to buy supplies ahead of this winter, with Beijing continuing to push millions of households to shift to gas from coal for heating.

But analysts at IHS Markit and Wood Mackenzie are forecasting slower growth this year, at 15%–20%, as the government move to a more moderate stance in its coal-to-gas push.

"For domestic demand, the focus (this year) of air pollution campaign has changed to clean coal rather than coal-to-gas switching," said Lu Xiao, Beijing-based gas analyst with IHS, speaking before the customs data was released.

Warmer winter. Meantime this winter, temperatures have been higher than normal, leaving suppliers with hefty inventories. Dealers said there had been backlogs at some receiving terminals as deliveries were particularly strong in the first few weeks of the winter heating season.

"Because the supplies this time somehow outpaced demand, the pressure was on how to remove the surplus," an official from a state oil and gas importer said, speaking before the customs data was issued.

However, the official, who declined to be identified as he was not authorized to speak to media, said that oversupply had been gradually easing.

State-run CNOOC, the country's largest LNG importer, had to resell a cargo of LNG at a leased floating tanker meant for emergency demand cover, industry sources said this week.

Growth in appetite for LNG has also been curbed as industrial users including some steel mills and ceramics plants had to restrict production over winter to meet China's anti-pollution targets.

Meanwhile, China's gasoline and diesel exports last year both hit record as state refiners won more quotas to ship surplus fuel.

For the whole of 2018, gasoline exports were up 23% from 2017 at 12.88 metric MMt, and diesel rose 7.8% to 18.53 metric MMt, according to the data.

Diesel exports in December stood at 1.57 metric MMt and gasoline exports were 1.28 metric MMt, the data showed.

Total refined fuel exports rose 12% last year to a record 58.64 metric MMt, customs said earlier this month.
MRC