Petrobras, oil workers reach agreement to end strike

MOSCOW (MRC) -- Brazil’s state-controlled oil company Petrobras and unions representing the firm’s oil workers reached an agreement to end a partial strike, reported Reuters with reference to a judge at the country’s highest labor court.

As MRC wrote earlier, the chief executive of Brazilian state-run oil firm Petroleo Brasileiro said in December 2019 he wants to sell the company's stake in petrochemical company Braskem within 12 months.

We also remind that Braskem is no longer pursuing a petrochemical project, which would have included an ethane cracker, in West Virginia. And the company is seeking to sell the land that would have housed the cracker. The project, announced in 2013, had been on Braskem's back burner for several years.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).

Headquartered in Rio de Janeiro, Petrobras is an integrated energy firm. Petrobras' activities include exploration, exploitation and production of oil from reservoir wells, shale and other rocks as well as refining, processing, trade and transport of oil and oil products, natural gas and other fluid hydrocarbons, in addition to other energy-related activities.
MRC

MOSCOW (MRC) -- Abu Dhabi National Oil Co. (ADNOC), the UAE's biggest oil producer, awarded two contracts for USD1.65 billion to a Petrofac-led group to develop the Dalma ultra-sour natural gas project as the emirate seeks gas self-sufficiency, reported S&P Global.

The Dalma Gas Development project, which is set to produce 340 million standard cubic feet/day of gas, will be completed in 2022, ADNOC said in a statement on Tuesday. Dalma is part of the Ghasha mega-project that is expected to produce over 1.5 bscf/d of gas when it comes on stream around the middle of this decade. Two contracts were awarded to UK-based Petrofac and a joint venture between Petrofac and Sapura Energy of Malaysia.

"The Ghasha project has the potential to meet nearly 20 percent of the UAE's gas demand by the second half of this decade," ADNOC said. "In addition, more than 120,000 barrels per day of oil and high-value condensates are expected to be produced when the project is fully on stream."

ADNOC, which is currently producing 10.5 bscf/d, is aiming to help the UAE become self-sufficient in gas production. The UAE currently imports gas from Qatar and the emirate of Dubai buys LNG from international markets. ADNOC produces about 3 million b/d of crude oil.

The Ghasha concession is made up of the Hail, Ghasha, Dalma, Nasr, SARB, Bu Haseer, Shuweihat and Mubarraz offshore sour gas fields in Abu Dhabi. ADNOC holds the majority stake in the concession, with Italy's Eni, Germany's Wintershall, Austria's OMV and Russia's LUKOIL holding the remainder.

As MRC informed earlier, in late July 2019, ADNOC said its Ruwais Refinery West Cracker was offline for maintenance.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).
MRC

MOSCOW (MRC) -- Royal Dutch Shell and Total both applied for environmental permits to drill in offshore blocks acquired during Brazil's 16th bid round held last year, reported S&P Global with reference to documents published Wednesday by federal environmental regulator IBAMA.

Shell applied to tap up to six wells in the Campos Basin C-M-659 block that could also include up to four well-formation tests, according to IBAMA. In addition, Shell wants to drill up to three wells in the C-M-713 block that could also include up to two well-formation tests. Shell expects to start the campaign in 2022-2024, IBAMA said.

Total, meanwhile, applied to drill up to five wells in the Campos Basin C-M-541 block, including two exploration wells and three evaluation wells, IBAMA said. The campaign could also include up to four well-formation tests, IBAMA said.

The two companies signed the concession contracts for the blocks on Friday, making the turnaround time less than a week.

The quick turnaround underscored the aggressive path international oil companies have taken since Brazil started holding regular sales of acreage under concession and production-sharing contracts in 2017, including making terms more competitive with rival sales in Mexico and the US Gulf of Mexico. Many winning bid groups from the recent licensing rounds have submitted requests for drilling permits and other administrative tasks nearly immediately after signing contracts, demonstrating the desire to move quickly to explore regions where a single well can pump as much as 50,000 b/d of oil equivalent. Among the changes made, Brazil allowed international oil companies to operate subsalt fields sold under production-sharing contracts and reduced requirements to use locally produced goods and services in exploration and development.

The changes made Brazil one of the world's hottest frontiers, with oil companies agreeing to record-setting signing bonuses and profit-oil guarantees to expand exploration portfolios over the past three years. That streak ended in November, when companies balked at paying sky-high signing bonuses for subsalt production-sharing areas and complicated negotiations to reimburse Petrobras for investments made at oil fields in the transfer-of-rights areas.

Brazil may eventually end the subsalt polygon that requires production-sharing agreements as well as Petrobras' preferential right to hold at least a 30% operating stake in the fields, with several bills working through Congress at the moment.

Shell, which is Brazil's second-largest oil and natural gas producer after state-led oil company Petrobras, holds a 40% operating stake in the C-M-659 block. Chevron retains a 35% minority share, with Qatar Petroleum owning 25%. The companies paid Real 714 million (USD163 million) for the development rights, including a commitment to drill at least one well.

As MRC wrote before, Royal Dutch Shell, which plans billions of dollars in spending on shale drilling projects, boosted output in the top US shale field to 250,000 barrels per day in December, 2019. Shell plans to spend about USD3 billion per year for the next five years on shale projects.

We also remind that Shell Singapore restarted its naphtha cracker in Bukom Island in early December 2019, following a two months maintenance shutdown since the beginning of October 2019. Thus, this cracker was taken off-stream for the turnaround on 1 October 2019. The cracker is able to produce 960,000 tons/year of ethylene and 550,000 tons/year of propylene.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).

Royal Dutch Shell plc is an Anglo-Dutch multinational oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the biggest company in the world in terms of revenue and one of the six oil and gas "supermajors". Shell is vertically integrated and is active in every area of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading.

Total S.A. is a French multinational oil and gas company and one of the six "Supermajor" oil companies in the world with business in Europe, the United States, the Middle East and Asia. The company's petrochemical products cover two main groups: base chemicals and the consumer polymers (polyethylene, polypropylene and polystyrene) that are derived from them.
MRC

MOSCOW (MRC) -- As the US has sought to exploit its hydrocarbon resources over the last decade, natural gas prices - which were once close to parity with oil prices in the early 2000s - have since diverged from oil prices. This shift evolved through the direct production of natural gas as well as gas production associated with oil development. The dynamic has transformed North America into a prolific producer of natural gas liquids (NGLs), the feedstocks used in the production of petrochemicals, according to Chemweek.

Given the plentiful supplies of these feedstocks and their inherent advantage relative to oil-based feeds, massive investment in grassroots petrochemical capacity—namely complexes dedicated to the production of ethylene -occurred to monetize the gas-linked feedstocks. In the past five years, nearly 7 million metric tons (MMt) of ethylene capacity were added in North America.

This capacity addition is considered unprecedented, given that North American chemical producers took about 20 years to reach an almost equivalent amount of new builds. Between 2019 and 2022, more than 6 MMt of ethylene capacity is expected to come onstream. An additional 13 MMt of capacity additions have either been announced or are under feasibility studies. While IHS Markit does not believe all this announced capacity will come to fruition, much of it likely will be added and will require a commensurate response on the demand side.

Ethylene demand has indeed been growing strongly as a result of the numerous new integrated ethylene derivative and standalone projects - mainly polyethylene (PE) and ethylene glycol (EG) targeting the export market - and derivative exports from the US have grown. Yet ethylene molecule exports became a hot topic as the substantial increase in ethylene supply in the US as well as a structural shortfall in other regions made the molecule shipments economically viable. Enterprise Products’s 1-million metric tons/year terminal project, which commenced construction in 2018, loaded its first cargo in December 2019.

In contrast to the accelerated project executions in both ethylene and ethylene derivatives, the overall demand growth for derivatives is moving slowly this year, a pattern driven by a cyclical slowdown in the global economy combined with prolonged US-China trade tension. These headwinds have inevitably had a negative impact on projects geared towards export markets, particularly those destined for China. Considering this reality, there is an open question on how hard those ethylene derivative projects can operate in the near term to avoid creating an oversupply scenario. The market is now casting increasing anxiety on the potential cycle of surplus.

Ethylene, often referred to as one of the key building blocks of petrochemical value chains, is typically converted to chemical derivatives such as polyethylene (PE), ethylene oxide (EO), styrene, ethylene dichloride (EDC), and others. Many of these derivatives will be eventually converted into plastics.

On top of those conventional outlets, we now have a new home for ethylene, ethylene to alkylate, a gasoline blendstock. In recent weeks, two separate announcements were made by an investor/operator and an engineering, procurement, and construction firm, discussing a new US Gulf coast project to produce alkylate from ethylene. Although neither announcement commented about the other, IHS Markit speculates that these two announcements are linked to the same project.

The positive final investment decision made by Next Wave Energy Partners pointed out that this complex is anticipated to begin initial production by mid-2022, consuming over 1.2 billion pounds of ethylene/year (515,000 metric tons/year). The expected structure of the project includes one dimerization unit to convert ethylene to butylenes and an alkylation unit that routes produced butylenes (C4) to make alkylate. From a technical standpoint, neither the involved ethylene dimerization nor the C4 alkylation process are novel technologies. However, it is certainly a unique approach that may become a new way to consume ethylene, diverting from traditional chemical use to fuel demand.

Refiners are being pressed to seek new strategies or sources to yield high-octane, clean alkylate products from diverse mandates and trends, including:

- Rising demand in cleaner-burning gasoline required by high-performance engines
- The looming International Marine Organization specification change that mandates a reduction in bunker fuel sulfur content to 0.5%
- The expiration of certain provisions pertaining to Tier 3 gasoline regulations in the US
- The on-purpose alkylation technology utilizing pure feedstock of ethylene, derived from NGL feedstocks, provides a solution that produces clean, high-quality alkylate product amidst a tight alkylate market.

The project is quoted at about 515,000 metric tons/year of ethylene consumption and 28,000 b/d of alkylate production at a cost just north of USD600 million. We queried our technical and analytics group at the Process Economic Program to assess the economic outlook. From the point of a pure merchant buyer of ethylene priced at market price, the economics look good in the near term but a bit challenging in the outer years. (Calculation on this route is based on IHS Markit US ethylene average acquisition index.)

In a second scenario, we calculated the project using ethylene priced at cash cost based on ethane feed. The ROI metrics look much better overall from a long-term perspective and compete very well versus the other key ethylene derivative, PE, for the export market. Thus, the ethane-to-alkylate chain makes a lot of economic sense in the longer run.
Both routes to alkylates, whether on merchant ethylene or priced at cost, yield a positive process scheme in the short term from today to 2026, with the excess ethylene capacity and traditional derivatives coming onstream. A player long in ethylene that blends gasoline could be a likely supplier or offtaker in an investment of this nature.

It is unknown whether this new ethylene demand will lead to continued investment in ethylene-derived gasoline blendstock or if it is just one-time occurrence. However, it is clear is that the surplus of ethylene production paved the way for a new source of demand.

As MRC informed previously, SP Olefins, a subsidiary of SP Chemicals, has recently started up China's "first" gas-based ethylene plant at a new gas cracker facility in Taixing, China, and was able to produce on-spec olefins, according to Wood Mackenzie. The new 650,000 t/y ethylene cracker will provide feedstock to the plant's 500,000 t/y vinyl chloride monomer unit and 320,000 t/y styrene facility. About 300,000 t/y of ethylene, as well as the entire 122,000 t/y of propylene production, will be supplied to the merchant market. SP Olefins' gas cracker facility is also the "first" to import US ethane as a feedstock, Wood Mackenzie noted.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).
MRC

MOSCOW (MRC) -- Albemarle Corporation announced its results for the fourth quarter and full year 2019. The company’s net sales in fourth quarter increased 8% to USD993 million with an adjusted EBITDA of USD295 million increasing 12%, reported Kemicalinfo.

Its full year net sales increased 6% to USD3.6 billion with an adjusted EBITDA of USD1.04 billion increasing 3%.

Net sales in the Lithium business were USD411 million, up roughly 20% prior-year quarter. Net sales grew because of favorable volume of 27%, largely in battery-grade lithium hydroxide.

Net sales in the Catalysts business were USD282.5 million, down roughly 7% prior-year quarter. Fall in sales of Clean Fuel Technology, or HPC, and Fluid Catalytic Cracking (FCC) Catalysts due to delays in the start-up of new FCC units, partially offset by favorable price impacts and product mix caused the decline.

Net sales in the Bromine Specialties business were USD243.5 million, up roughly 2% prior-year quarter. Net sales increased due to favorable price impacts and product mix of 3%.

"Our ability to integrate, execute and adapt to market conditions contributed to our strong growth and notable achievements this year," said CEO Luke Kissam. "In 2019, we saw solid performances across our portfolio and expanded our market-leading position in Lithium with additional high-quality resources and greater nameplate conversion capacity."

Albemarle anticipates its 2020 performance to be lower year-over-year based on expected lower results from Lithium and flat-to-slightly lower results from Bromine Specialties, partially offset by flat to slightly higher results from Catalysts.

As MRC wrote before, in April 2018, W. R. Grace & Co. completed the USD416 million acquisition of the Polyolefin Catalysts business of Albemarle Corporation. The acquired business primarily develops and manufactures proprietary and custom-manufactured single-site catalysts as well as metallocenes and activators used in the production of plastic resins. The transaction also includes a comprehensive series of highly optimized Ziegler-Natta catalysts for polyethylene production. The acquisition includes production plants in Baton Rouge, LA and Yeosu, South Korea; R&D and pilot plant capabilities; and an extensive portfolio of intellectual property.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).
MRC