Chevron Lummus Global secures Spanish refinery contract

MOSCOW (MRC) -- Chevron Lummus Global LLC (CLG) announced it has been selected by Compania Espanola de Petroleos (CEPSA) to provide licensed technology for its Algeciras Refinery in Spain, as per Hydrocarbonprocessing.

CLG has completed the design of the unit employing its proprietary LC-FINING and ISOTREATING technologies. The scope of work also includes the supply of catalysts, proprietary equipment, and engineering.

With an innovative process design integrating 36,700 BPSD of LC-FINING technology with 27,600 BPSD of ISOTREATING technology, the efficient unit will strengthen CEPSA’s position as a major provider of marine diesel and bunker fuel oil.

"This award further demonstrates CLG’s technology leadership in the complete bottom of the barrel solutions to meet future International Maritime Organization (IMO) regulations," said Ujjal Mukherjee, Managing Director of CLG.

CLG’s LC-FINING technology process provides high conversion of residues selectively to liquid products with superior performance and reliability. ISOTREATING technology employs state-of-the-art hydrotreating catalyst to produce high-quality products with long run lengths and minimal by-product formation.

As MRC informed before, in July 2019, Chevron Lummus Global (CLG) was awarded the license and engineering contracts for a 270 TMTPA (thousand metric tons per annum) Lubricants Base Oil plant at Indian Oil Corporation Ltd.’s Haldia Refinery in West Bengal, India.

Chevron Lummus Global (CLG), a joint venture between Chevron U.S.A. Inc. and McDermott, is a leading process technology licensor for refining hydroprocessing technologies and alternative source fuels, as well as a global leader in catalyst system supply. CLG offers the most complete bottom-of-the-barrel solution for upgrading heavy oil residues. Our research and development experts are continuously seeking advancements in technology and catalysts that will improve operating economics for your next project.
MRC

PDVSA partners fear reach of latest US sanctions on Venezuela

MOSCOW (MRC) -- Foreign joint venture partners with Venezuelan state-owned oil company PDVSA are concerned the latest set of US sanctions on the South American country could disrupt their operations, reported Reuters with reference to three industry sources.

The Trump Administration last week froze all Venezuelan government assets in the United States and US officials ratcheted up threats against companies that do business with Venezuela.

That has raised fears for those companies that the United States will make good on threats to sanction individual firms, and also that banks will limit transactions just to avoid the risk of sanctions as well, the sources said.

The White House imposed sanctions on Venezuela’s oil industry in January in an effort to oust socialist President Nicolas Maduro, whose re-election in 2018 is viewed by much of the Western Hemisphere as illegitimate.

The executive order issued on Aug. 5 did not explicitly sanction non-US companies that do business with PDVSA, including partners in crude operations like France’s Total SA, Norway’s Equinor ASA and Spain’s Repsol SA, as well as Russian and Chinese customers.

However, the order threatens to freeze US assets of any person or company determined to have “materially assisted” the Venezuelan government.

Similar language was included in sanctions in January, but US national security adviser John Bolton said last week that the newest measures mean companies have a choice between doing business with Venezuela or the United States.

“If they really want to do what Bolton says that he wants to do, which is to get these firms to stop doing business with Venezuela, they’re going to show that they mean it, they’re going to have to punish somebody,” said Francisco Rodriguez, a Venezuelan economist at Torino Economics in New York and former advisor to opposition presidential candidate Henri Falcon.

Total, Equinor and Repsol did not respond to requests for comment.

The latest measures do not go as far as Washington’s sanctions on Iran’s oil sector, which expressly prohibit foreign countries from purchasing Iranian crude.

Still, sanctioning companies that do business with PDVSA, known as secondary sanctions, could hamper Venezuela’s oil industry, analysts said. More than half of current crude production comes from joint ventures between PDVSA and foreign partners.

The January sanctions blocked U.S. firms from importing Venezuelan oil and US dollar transactions with PDVSA, accelerating a longstanding decline in the OPEC nation’s oil industry. The country shipped about 933,000 barrels per day (bpd) in July, down from almost 1.5 million bpd in the three months before sanctions.

One industry source said PDVSA’s partners and customers may request clarity on the order from the US Treasury Department or even request explicit waivers to ensure their activities do not run afoul of regulations.

The source said companies were concerned about potential over-compliance by financial institutions unwilling to risk sanctions by approving operations linked to PDVSA, complicating their ability to pay suppliers and contractors. That could cause oilfield activity to slow.

While transactions in dollars linked to PDVSA or its joint ventures remain banned, the European Union has not prohibited operations in euros. Nevertheless, many banks are not authorizing euro bank accounts to firms associated with PDVSA or transactions that can ultimately be tracked to it, which has left the state-run firm with frozen money all over the world.

“There is panic among oil companies about how the US government will interpret the new executive order since it could lead to secondary sanctions - not at the level of Iran, but close. Every punitive measure by the United States generates a corrosive effect,” said a third source.

Sanctioning companies from European allies of the United States could raise diplomatic tensions. Such sanctions would be less likely to influence companies from China and Russia, which have continued to back Maduro amid an economic and political crisis in Venezuela.
MRC

China petrochemical expansion to overwhelm Japan, South Korea producers

MOSCOW (MRC) -- A massive surge in China’s manufacturing capacity for paraxylene, a petrochemical used to make textile fibers and bottles, could force leading exporters in Japan and South Korea to cut production as early as the second quarter of 2020, said Hydrocarbonprocessing.

China will add about 10 million tones of paraxylene manufacturing capacity from March 2019 to March 2020, according to company reports and officials, that is enough for making 22 trillion 500-milliliter plastic bottles.

The world’s top consumer of paraxylene (PX), China imports 60% of its need for the chemical to feed polyester demand that has more than doubled since 2010. Over half of China’s PX imports come from South Korea and Japan and the new capacity is expected to cut Chinese imports by about 50%.

Without Chinese demand, the profit margins for regional manufacturers such as Japan’s JXTG Holdings Inc (5020.T), South Korea’s Lotte Chemical (011170.KS) and Hyundai Cosmo Petrochemical and domestic producer Dalian Fujia are expected to drop further, likely causing a rollback in output and decline in earnings.

“We will see drastic cutbacks in PX operating rates among many Asian exporters, and potential capacity rationalization in sites where integrated refining-aromatics margins are poor,” said Darryl Xu, principal analyst for Asia chemicals at consultancy Wood Mackenzie.

Private companies are leading China’s latest PX boom through a string of projects often integrated with big oil refineries which make them more cost competitive and flexible.

China’s Hengli Group launched in March a PX plant capable of producing 4.5 million tonne per year (tpy) in the city of Dalian and Zhejiang Petrochemical is slated to start a 4 million tpy plant in Zhoushan late in 2019.

In July, Shandong-based Hongrun Petrochemical began trial runs at its 700,000 tpy plant and China Petroleum and Chemical Corp, or Sinopec (0386.HK), will start a plant in Hainan producing 1 million tpy in the third quarter.

Helen Yang, a researcher at JLC Consultancy, estimated China’s PX imports could fall to 7 million tonnes next year and further to 4 million tonnes in 2021. Imports this year will be 12.6 million tonnes, the first annual decline in over a decade, down from a record 16 million tonnes in 2018.
MRC

Indian MRPL says it shuts some units at refinery

MOSCOW (MRC) -- India’s Mangalore Refinery and Petrochemicals Ltd has shut Phase-3 units at its 300,000 barrels per day (bpd) refinery in southern India due to a minor landslide, according to a company statement, as per Reuters.

Phase-3 project comprises a 60,000-bpd crude unit and some secondary units.

"The landslide has affected a pipe rack carrying pipelines between the process units and as a precautionary measure, the units in the Phase-3 complex have been temporarily shut down," the company said.

The other two crude units at the refinery are still in operation, the company said.

A company official said the Phase-3 project has been shut for the last three days.

As MRC informed earlier, in June, Mangalore Refinery and Petrochemicals Ltd will operate its 300,000 barrels-per-day refinery in southern India at about 50 percent capacity due to water shortage.

Mangalore Refinery and Petrochemicals Limited (MRPL), is an oil refinery at Mangalore and is a subsidiary of ONGC, set up in 1993. The refinery is located at Katipalla, north from centre of Mangalore city. The refinery was established after displacing five villages of Bala, Kalavar, Kuthetoor, Katipalla, and Adyapadi.
MRC

PES up against the clock to sell Philadelphia refinery in cash crunch

MOSCOW (MRC0 -- Finding a buyer for Philadelphia Energy Solutions’ oil refinery has grown urgent as the bankrupt company’s funds dwindle and no signs emerge that it is winning a fight for insurance payouts after a June blaze at the plant, reported Reuters with reference to court documents and bankruptcy experts.

Without access to the more than USD1 billion in insurance coverage, selling the refinery has become one of the company’s only options to raise cash before being forced to liquidate.

At least three parties have potential proposals to buy the shut Philadelphia refinery, each with plans to reopen the 1,300-acre (5.3-square km) site with a mix of oil refining and alternative energy production, sources familiar with the plans said.

Initial meetings are scheduled between the prospective buyers and a collection of vetters over the next several weeks, but it is unclear how long it would take for any official bid to come together, the sources said.

PES was not available for comment on whether it had reviewed any of the proposals or how viable it considered them to be.

For the second time in less than two years, PES filed for Chapter 11 bankruptcy on July 21, exactly a month after fire and blasts destroyed an alkylation unit at the 335,000-barrel-per-day refinery.

PES shut its final crude unit in late July, and more than 600 workers are in the process of being laid off without severance pay or the option for continued health insurance.

The company has no prepackaged arrangement to restructure the business or income from running the refinery, the largest in the US Northeast, raising the likelihood it will be forced to liquidate.

“They’re playing a game against the clock,” said Christina Simeone, a senior fellow at the Kleinman Center for Energy Policy at the University of Pennsylvania, who wrote a report last year predicting the refinery would close by 2022 due to poor economics.

To emerge from bankruptcy, PES needs to tap into USD1.25 billion in property damage and loss of business insurance coverage, according to court filings. So far, PES has been denied requests for payment, and at least one creditor has surfaced to fight for any future insurance proceeds. Seven others are objecting to PES’ bankruptcy plan.

It is unclear how much is left of the initial $65 million bankruptcy loan PES secured at the start of the process, which is needed to pay for attorneys, wind down the massive refinery complex, utility bills and salaries.

PES recently asked the court to retain law firm Kirkland and Ellis for USD4.6 million and another firm for USD1 million, according to court documents.

On Friday, the US Trustee appointed to the bankruptcy case objected to Kirkland and Ellis, saying the firm has represented PES’s largest equity holders in unrelated matters, creating a potential conflict of interest, court documents show.

“Given the incident which precipitated the filing of this Chapter 11 proceeding, there is a strong likelihood that the assets of the debtor will be liquidated rather than reorganized,” the trustee wrote in court documents.

PES hired investment bank PJT Partners about two weeks ago to market the site. PJT declined to comment on its efforts to find a buyer.

Companies in Chapter 11 bankruptcies generally face two scenarios when attempting to sell assets, said Eric Snyder, a bankruptcy expert and partner at New York-based law firm Wilk Auslander, who is not working on PES’ case.

With the luxury of time, companies can enter into an agreement with a single bidder to be decided on by a bankruptcy court judge. Or, they can hold a bare auction, opening up the sale to all qualified bidders for a set period of time.

If no deal comes together before the company runs out of money, it could be forced to start Chapter 7 liquidation, Snyder said. Chapter 11 is a generally better outcome for creditors, as assets tend to fall in value during liquidation, which would leave them with less chance to collect on what they are owed.

“It’s in the creditors’ best interest to try to make it through Chapter 11, but for people interested in the PES site for future uses, it’s far better for it to go to Chapter 7,” the Kleinman Center’s Simeone said.
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