Russia cashes in as European oil refiners pay for US sanctions

MOSCOW (MRC) -- European refiners are paying the price for US oil sanctions on Venezuela and Iran as they scramble to replace sour crude Washington has blocked from the global market with increasingly expensive Russian oil, reported Rueters with reference to trading sources.

Compounding the impact of sanctions, OPEC members have mainly cut sour crude output as part of their deal with allied producers to boost oil prices while a large, new refinery, designed to run on sour oil, has just started up in Turkey.

US output is soaring and exports are set to jump later this year as new infrastructure comes online but it is not an alternative, being mainly light and sweet.

As a result, European refiners have been left competing to secure as much medium, sour Russian Urals as they can, pushing the differential of that oil to levels not seen since 2013.

"Urals is anchored in a positive zone versus dated Brent and there is no indication it will fall to a discount any time soon," a trading source at a European oil major said.

In the Mediterranean, the differential for Urals typically trades at a discount of at least a dollar to benchmark dated Brent but since early November, the level has spiked and now stands at a premium of 70 cents a barrel.

For a 600,000-barrel cargo of Urals, that rise translates to an extra USD1.35 million cost.

Thanks to the higher premiums, Russia made an additional USD140 million in March from seaborne and pipeline deliveries versus October prior to the sanctions coming into effect.

Initially, Europeans gravitated to heavy, sour Venezuelan oil when sanctions on Iran hit in early November but then Washington also placed sanctions on the Latin American country in late January in a bid to oust President Nicolas Maduro.

Even though sanctions on Venezuelan crude will not come into effect until the end of April, the oil is effectively already untouchable as the US State Department has exerted direct pressure on foreign companies to stop all dealings.

The two sets of sanctions combined have taken at least 800,000 barrels per day (bpd) out of the market, which is as much as what the Organization of the Petroleum Exporting Countries agreed to cut.

The United States granted waivers on Iranian oil to six jurisdictions including three countries in the region - Italy, Greece and Turkey - but only Turkey was able to continue purchases. It remains unclear whether the current waivers will be extended in May.

The situation is set to worsen as European refiners emerge from their springtime maintenance just as Middle Eastern Gulf sour crude producers increasingly favor Asia, where refining capacity in the near term is set to jump.

Saudi Arabia, a major sour crude producer, is shouldering the bulk of the OPEC and non-OPEC cuts. Between October 2018 and March this year, the kingdom slashed its exports to Europe by nearly half, Refinitiv Eikon data shows.

Iraq reduced its contracted volumes for European refiners in 2019 and increasingly sells its oil to the highest bidder via tender.

Iraqi supplies to Europe fell by over 40 percent to 355,000 bpd in March compared with 615,000 bpd in October 2018, Refinitiv Eikon data showed.

Meanwhile, Azerbaijan’s 200,000-bpd STAR refinery in Turkey is slowly ramping up and will be a new competitor for dwindling sour oil.

Designed to run on sour grades such as Russian Urals and Iraqi Basra and Kirkuk, the refinery took 184,000 bpd of Urals in March, Refinitiv Eikon data showed.

"One expected STAR’s launch to be a serious jolt for the market, but little did we know it would make the sour shortage this bad ... refiners are rushing for sours," a European trader said.

As the supply-side structure has changed, the spread between sour and the historically far more expensive light, sweet crude has thinned and even flipped in some instances.

In the Mediterranean, the light grade Kazakh CPC Blend trades at a discount to Urals and Kurdish crude, which used to be one of the region’s cheapest oils.

The Urals price out of the Black Sea has also increasingly traded at a premium to Urals out of Baltic ports - previously a rare occurrence. The trend has prompted commodity price-reporting agency S&P Global Platts to start an industry consultation on changing how the Urals market is assessed.

"All refiners are looking for Urals or a Urals replacement," said a third trader in an international trading firm.

"And we see that it won’t be enough for everyone."

We remind that, as MRC wrote previously, in October 2018, SOCAR, the largest direct foreign investor in Turkey, launched its USD6.3-billion SOCAR Turkey Aegean Refinery - STAR Refinery, which will provide a large portion of oil products demand in the local market with 10 million tons of annual oil processing capacity.
MRC

MOSCOW (MRC) - A fire was brought under control early on Friday after an explosion at a Malaysian oil refinery being developed by state oil firm Petronas, which was testing its facilities ahead of planned commercial operations later this year, said Reuters.

RAPID, or Refinery and Petrochemical Integrated Development, will anchor the Pengerang Integrated Complex (PIC) and is Petronas’ biggest domestic investment, made in a 50-50 partnership with Saudi Arabia’s state-owned Saudi Aramco.

The explosion and fire occurred at about 1:25 a.m. on Friday (1725 GMT on Thursday) at the plant’s atmospheric residue desulphurisation unit (ARDS), which is in its commissioning stage, Petronas said in an updated statement.

Petronas said there were no fatalities caused by the explosion and fire. The fire was contained within 30 minutes, it had said earlier.

“We wish to assure members of the public that the situation is under control and there is no health related risk to this incident,” the company said in its latest statement.

Police said two people were given outpatient treatment following the incident, which was attended to by five fire trucks and 30 staff from the Petronas RAPID Pengerang emergency response team.

“Teams have been set up and are currently working closely with the relevant authorities to investigate the cause of the incident,” Petronas said.

Petronas started trial runs at the refinery in early 2019 and had planned to start offering some products in April.

The fire will likely set back plans for the refinery to reach commercial operations by October as several units will have to be shut for further inspection, Energy Aspects’ analyst Nevyn Nah said.

Petronas did not immediately respond to an email seeking information on how the fire would affect its start-up plans.
MRC

MOSCOW (MRC) -- A fire shut down a kerosene unit in the refinery of Mina Abdulla, Kuwait state news agency KUNA said. Officials are investigating the cause of the fire, which was extinguished by early Wednesday, said Hydrocarbonprocessing.

The head of state-run Kuwait Petroleum Corp, Hashem Hashem, said the expected reason of the fire is a mechanical failure at one of the pumps.

There are no casualties, Hashem said.

The other Mina Abdulla refinery units are operating normally, he added.

Kuwait National Petroleum Company’s (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.
MRC

MOSCOW (MRC) -- The chemical company ELIX Polymers has renewed its EcoVadis GOLD level Corporate Social Responsibility (CSR) certification in the ranking published by EcoVadis, an independent rating agency specialising in sustainable development and performance control, as per the company's press release.

The company obtained its first certification in 2017, with the highest level of recognition, and in 2019, following the renewal audit, it again achieved the GOLD level, increasing its rating by 8 points with respect to 2017.

This is the highest level currently awarded by EcoVadis, following an exhaustive evaluation based on a system which rates 21 criteria that follow international CSR standards, such as the Global Compact, the International Labour Organisation, the Global Reporting Initiative and the ISO 26000 standard.

The overall result obtained by ELIX Polymers places the company head and shoulders above its competitors, making it one of the 2% of evaluated companies with the highest score. EcoVadis evaluates 20,000 manufacturers from 99 countries and in 150 different business sectors. The evaluation consists of 4 scores that assess the company’s milestones and development in areas related to the environment, social/human rights, ethics/fair business practices and supply chain, thus reflecting the performance of ELIX Polymers in CSR.

Judith Banus, Head of the Corporate Social Responsibility Programme at ELIX Polymers, commented: "We are proud to have obtained this award, which acknowledges the effort made by the different areas of the company to improve sustainability management".

ELIX Polymers is firmly committed to corporate social responsibility and puts all its effort into maintaining a strategic sustainable management line that enables us to obtain prestigious certifications such as EcoVadis Gold.

As MRC reported earlier, ELIX Polymers announced a new investment amounting to EUR4 million, whose objective is to optimize its ABS powder production facilities. The company began executing this new project in 2018, which it will continue to develop and consolidate throughout the year of 2019.

ELIX Polymers is one of the most important manufacturers of ABS resins and derivatives in Europe, with 40 years of experience in engineering plastics and an installed capacity of 180,000/year from their plant in Tarragona (Spain) to the world. The operation starts in 1975, when the Tarragona ABS and SAN production plant was inaugurated.
MRC

MOSCOW (MRC) -- Cyberhawk, a world leader in drone inspection technologies and visualization software for UAV data, has signed a global teaming agreement with John Zink Hamworthy Combustion (JZHC), a world-leading authority on flares, burners and emissions control and a pioneer in smart combustion solutions, as per Hydrocarbonprocessing.

Cyberhawk will be supporting JZHC with aerial inspections of industrial assets and comprehensive inspection reporting worldwide. JZHC and Cyberhawk inspection engineers will collaborate to analyze and assess all integrity aspects of UAV flare inspection data, with JZHC providing operational, remediation and/or replacement recommendations. A complete and comprehensive report will be presented to the customer following each inspection.

JZHC designs some of the world’s most advanced flaring and combustion systems. Decades of research and development are incorporated into every flare design to provide unsurpassed reliability, safety, efficiency and cost effectiveness. With the advent of safer, more reliable live UAV flare inspections over the last decade, operators now expect to see aerial solutions offered as part of these solutions.

Since completing the first drone flare inspection in 2010, Cyberhawk is the only global UAV inspection company which has inspected more than 800 flares, consisting of both onshore and offshore, in over 30 countries.

Over the last decade, the use of drones for industrial asset inspections has grown significantly. The ability to inspect in-service flares can eliminate millions of dollars of OPEX from a company’s bottom line. Detection and monitoring of changes to an operational flare system could potentially avoid future unplanned shutdowns because of the early detection. These dollars can be better served through upgrading systems and/or designing preventative UAV inspection programs.

The safety risks presented by traditional access methods are also eliminated, including working at significant heights and in a potentially hazardous industrial environment.

While using drone-mounted cameras to capture detailed visual and thermal data, typical components inspected include the flare tip, pilot burners, stack, ladders, platforms, molecular seal and steam lines. The imagery obtained is analyzed and recommendations are provided. This lends to better maintenance planning and decision-making processes for the customer. For instance, preparing accurate turnaround workscopes and supporting scheduling and the sourcing of labor.

Cyberhawk has teamed-up with JZHC to provide expert analysis of flare inspection imagery. JZHC’s decades of experience in flare solutions will enhance Cyberhawk’s already world class inspection reports. In many cases, the inspection imagery can indicate operational anomalies. By analyzing Cyberhawk’s imagery, JZHC may be able to identify and recommend proactive actions to mitigate operational issues before they result in punitive regulatory action.
MRC