US energy exports to climb as China pledges ramp-up in purchases

MOSCOW (MRC) -- US energy exports to China, mostly crude oil and natural gas, will climb as the world’s two largest economies struck a trade agreement after a more than year-long tariff war, reported Reuters with reference to executives and traders' statement.

The accord did not specify quantities of the products. Energy executives and analysts welcomed the deal after liquefied natural gas (LNG) and crude exports to China largely dried up last year, but said plenty of uncertainties remained. Market reaction was mixed with oil trading lower and US stock indexes higher.

China committed under the deal to add at least USD52.4 billion in energy purchases over two years, from USD9.1 billion in 2017. This amounts to USD18.5 billion more in 2020 and another USD33.9 billion next year.

The agreement "is a step in the right direction that will hopefully restore the burgeoning U.S. LNG trade with China," said Jack Fusco, chief executive of Cheniere Energy Inc, the largest exporter of US gas. Fusco attended the ceremonial signing at the White House.

Despite China’s withdrawal from most US LNG purchases last year, U.S. sales to other Asian countries, Europe and Latin America still drove the United States to become the world’s third-biggest LNG supplier in 2019, behind Qatar and Australia.

In crude, China may increase its imports to 500,000 barrels per day (bpd) in 2020 and 800,000 bpd in 2021, analysts at Goldman Sachs said in a Jan. 10 report. It also said LNG imports could hit 10 million tonnes this year and 15 million next, valued at USD38.2 billion combined.

Traders including Vitol SA and Trafigura AG provisionally chartered four to eight supertankers to load US crude for China this month and next, data from Refinitiv, Kpler and Vortexa showed. The companies declined to comment.

One Singapore oil trader said economics favor U.S. crude as freight rates are dropping and rising shale production has US crudes selling at a discount to international Brent. But he warned that the price window "is really tricky as it can open and shut within days."

A shale boom propelled the United States to rank as the world’s largest producer of crude and natural gas, with China’s purchases of US crude and LNG surging, before the trade dispute flared.

Analysts, US energy trade executives and Asian buyers said demand, pricing and transportation costs would determine whether exports over two years hit the USD52.4 billion mark.

"We are in uncharted territory here; quota sales are not the norm," said Sandy Fielden, an energy analyst at financial services firm Morningstar.

Tariffs will remain on many products the two countries sell to one another, including LNG. China imposed a 25% tariff on LNG, crimping most activity with the United States.

"We have to have some sort of clarity around how China is going to either exclude the tariffs that are currently in place against LNG or ultimately lift them before we start to see a real sort of sizeable amount of US LNG finding its way to China," said Charlie Riedl, executive director of trade group Center for LNG.

"The purchases would require China to buy the bulk of U.S. exports and China’s refineries are also not currently set up for light US oil," said analysts at research firm Capital Economics.

China’s share of total US crude exports dropped from over 20% in the first half of 2018 before the trade war to nearly 6% in the first half of 2019.

The United States exported about USD5.4 billion worth of crude to China in 2018, but the value of those shipments slid to just USD2.6 billion in 2019 through October, according to data from the US Census Bureau and the Energy Information Administration. "This is a good first step in removing barriers with one of our most critical trading partners," said Derrick Morgan, a senior vice president at trade group American Fuel and Petrochemical Manufacturers (AFPM).

"We hope this will be the first in a series of steps to open a key market for American exports of all kinds - including energy and petrochemical products, which still are in need of tariff relief," he added.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,904,410 tonnes in the first eleven months of 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments increased from both domestic producers and foreign suppliers. The PP consumption in the Russian market was 1,161,830 tonnes in January-November 2019, up by 7% year on year. Deliveries of all grades of propylene polymers increased, with the homopolymer PP segment accounting for the largest increase.
MRC

MOSCOW (MRC) -- BASF plans to increase the production capacity for its antioxidant Irganox 1520L by 20% at the site in Pontecchio Marconi, Italy, said the company.

Irganox 1520L is a key product in BASF’s antioxidant portfolio. The company is a leading global supplier for plastic additives. With this expansion, BASF responds to an increasing market demand and aims to better serve its global customers.

"The production expansion of Irganox 1520L underlines our clear commitment to continuously support the growth of our customers. By debottlenecking operations at our Pontecchio plant in Italy, we are able to respond quickly to an increasing market demand," says Achim Sties, Senior Vice President, Performance Chemicals Europe, BASF.

Irganox 1520L is a highly effective thermo-oxidative stabilizer in a wide range of solution polymerized, emulsion polymerized and thermoplastic elastomers, plastics, adhesives, sealants, oils and lubricants. It is unique in its ability to provide both processing and long-term heat-aging stability used alone, at low levels and without co-stabilizers. Where necessary, Irganox 1520L can be used with other additives such as secondary antioxidants, benzofuranone, light stabilizers and other functional stabilizers.

BASF is a leading supplier, manufacturer and innovation partner of plastic additives. Its comprehensive and innovative product portfolio includes stabilizers which provide ease in processing, heat and light resistance to a variety of polymers and applications including molded articles, films, fibers, sheets and extruded profiles.

As MRC informed before, BASF, the world's petrochemical major, restarted its No. 1 steam cracker on September 30, 2019, following a maintenance turnaorund. The plant was shut for maintenance in mid-August, 2019. Located at Ludwigshafen in Germany, the No. 1 cracker has an ethylene production capacity of 235,000 mt/year and a propylene production capacity of 125,000 mt/year.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,904,410 tonnes in the first eleven months of 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments increased from both domestic producers and foreign suppliers. The PP consumption in the Russian market was 1,161,830 tonnes in January-November 2019, up by 7% year on year. Deliveries of all grades of propylene polymers increased, with the homopolymer PP segment accounting for the largest increase.

BASF is the leading chemical company. It produces a wide range of chemicals, for example solvents, amines, resins, glues, electronic-grade chemicals, industrial gases, basic petrochemicals and inorganic chemicals. The most important customers for this segment are the pharmaceutical, construction, textile and automotive industries. BASF generated sales of around EUR63 billion in 2018.

MRC

MOSCOW (MRC) -- Crude oil stocks held by Saudi Arabia and Abu Dhabi in Japan surged 28% month on month to 8.87 million barrels at the end of November after Saudi Aramco discharged a crude cargo at its leased oil storage terminal in Okinawa, according to S&P Global.

The supply of 1.41 million kiloliters of crude, equating to four days of Japanese oil consumption, increased from 1.1 million kiloliters a month earlier, according to data released Wednesday by the Ministry of Economy, Trade and Industry.

Saudi Aramco also made shipments from the Okinawa terminal in October and March, a source familiar with the matter said. S&P Global Platts trade flow software cFlow showed the fully laden VLCC Arsan discharged a crude cargo there from Saudi Arabia's Ras Tanura over November 4-7.

Saudi Aramco shipped a 136,000 mt Arab Light crude cargo on the Suezmax tanker Glorycrown from the Okinawa terminal to China in October after shipping another crude cargo on the Suezmax Jag Lakshya to the same country in March.

According to METI data covering January-November 2019, a total of 1.09 million kiloliters, or 6.86 million barrels, of crude oil was shipped from Saudi Arabia and Abu Dhabi's leased oil storage terminals in Japan in shipments made in March, July, August and October.

The crude stocks held by Saudi Arabia and Abu Dhabi accounted for 1.7% of Japan's total petroleum reserves of 81.87 million kiloliters, or 514.95 million barrels, at the end of November, equating to 235 days of Japanese oil consumption, a slight drop from 81.98 million kiloliters at the end of October, METI data showed.

Japan's petroleum reserves have been in the spotlight following the escalation of tensions in the Middle East between the US and Iran. The Middle East supplies close to 90% of Japan's oil imports.

Japan agreed Monday to boost Abu Dhabi's leased crude oil storage capacity to 1.3 million kiloliters, or 8.18 million barrels, from 1 million kiloliters, to enhance its security of supply and expand the Middle East supplier's access to the East Asian market.

Under the agreement, which involved the renewal of the existing joint crude oil storage scheme for three years, the Abu Dhabi National Oil Company can use the leased facility at Kiire in southwestern Japan as an East Asian supply base in exchange for prioritizing supply to Japan in the event of an emergency.

Following the latest deal, crude storage capacity in Japan leased to its top two crude suppliers, Saudi Arabia and the UAE, rose to a total of 2.6 million kiloliters, or 16.35 million barrels, equating to eight days of domestic consumption.
MRC

MOSCOW (MRC) -- Reliance’s petrochemicals business’ fiscal third-quarter (October-December 2019) earnings before interest and taxes (EBIT) fell nearly 30% year on year on the back of lower selling prices, affecting margins, said the company.

RIL will announce its results for the quarter ended December 2019 on Friday. In a Bloomberg poll, 10 analysts estimated revenue of Rs 1.45 trillion and net profit of Rs 11,435 crore for the third quarter on a consolidated basis.

For the quarter ended December 2018, the company reported a consolidated net profit of Rs 10,251 crore and consolidated revenue was at Rs 1.71 trillion.

"RIL’s profit is expected to be sequentially flat,” said Nitin Tiwari, vice-president at Antique Stock Broking. For the September 2019-ended quarter, RIL reported a net profit of Rs 11,262 crore. “The retail segment will show better numbers as it was a festive quarter. Telecom should benefit from increase in rates and levy of interconnect usage charges (IUC). Petchem could see a weak quarter while refining margins are expected to be sequentially flat to marginally lower," said Tiwari.

In the refining business, RIL is expected to report gross refining margins (GRMs) in the range of $9.2 to $9.9 a barrel. “Benchmark refining margins have collapsed, given the sharply lower high sulphur fuel oil (HSFO) cracks.We forecast RIL’s reported GRM’s to be flattish, sequentially, at $9.4 per barrel and this would imply record premiums over the Singapore benchmark. But most of the premium would be because of fuel oil,” analysts at JP Morgan wrote in a note.

While RIL’s refining segment performance is expected to remain flattish, petchem performance is expected to take a further hit.

As MRC informed earlier, Sibur and India’s Reliance Industries Ltd. have launched butyl rubber production at the joint integrated petrochemical plant Reliance Sibur Elastomers Private Ltd. in the Indian city of Jamnagar.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,904,410 tonnes in the first eleven months of 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments increased from both domestic producers and foreign suppliers. The PP consumption in the Russian market was 1,161,830 tonnes in January-November 2019, up by 7% year on year. Deliveries of all grades of propylene polymers increased, with the homopolymer PP segment accounting for the largest increase.
MRC

MOSCOW (MRC) -- Following the appointment of Chris Tane as Chairman of INOVYN, the company is pleased to welcome Geir Tuft as the new INOVYN CEO, as per the company's press release.

Geir returns to INOVYN from INEOS Oil & Gas, where he was CEO, and brings with him extensive experience of petrochemicals and the chlorvinyls value chain.

Comments Geir: "Since its formation in 2015, INOVYN has delivered consistent year-on-year growth. I very much look forward to working with colleagues to build on this performance as we carry INOVYN forward into the next decade."

Alongside his role as Chairman of INOVYN, Chris Tane retains his existing roles as Chairman of INEOS Automotive and Director of Belstaff.

There are no other changes to the INOVYN Executive Team.

As MRC wrote before, in July 2016, Solvay completed the divestment of its shareholding in INOVYN (London), bringing to an end Solvay's chlorvinyls joint venture with Ineos. INOVYN was formed on 1 July 2015 as a jv between Ineos and SolVin, a subsidiary of Solvay. Solvay and Ineos signaled their decision to end their chlorvinyls jv in March 2016.

Besides, we remind that INOVYN conducted maintenance works at its polyvinyl chloride (PVC) plant at its Jemeppe Site, Belgium in October 2019. According to the company’s website, the Jemeppe site is one of the largest PVC production capacities in Europe with 420,000 tons/year of material supplied to key sectors including building, automotive and piping.

According to MRC's ScanPlast report, Russia's estimated consumption of unmixed PVC was 857,450 tonnes in January-November 2019, up 4% year on year. Emulsion and suspension PVC (EPVC and SPVC) markets showed an increase in supplies. November consumption of SPVC (excluding exports to Belarus) decreased to 70,620 tonnes from 71,720 tonnes in October. Some producers reduced PVC production in November, which affected export sales. Overall shipments of suspension to the Russian market totalled 736,570 tonnes in the first eleven months of 2019, up by 3% year on year. Local producers managed to increase suspension output by 3%, whereas exports grew by 24%.

Headquartered in London, INOVYN has pro-forma sales of more than EUR3 billion, with 4,300 employees and assets across 14 sites in Belgium, France, Germany, Italy, Norway, Spain, Sweden and the UK. Governance of the Joint Venture is equally split between the partners.
MRC