Chevron ups Permian Basin resource estimate to over 21 billion boe, double 2017 estimate

MOSCOW (MRC) -- Chevron has upped its Permian Basin resource estimate to more than 21 billion barrels of oil equivalent, more than double the company's estimate just three years ago, reported S&P Global with reference to its top executives' statement last Tuesday.

The company's 2017 resource estimate for the basin, the largest source of oil output in the US and a significant source of natural gas, was 9 million boe, Jay Johnson, Chevron's executive vice president of exploration and production, said in webcast remarks at the company's annual Security Analyst Meeting in New York.

And the major expects to take final investment decisions on two 2018 deepwater discoveries in 2021 and 2022, Johnson said.

With flat prices, Chevron expects the Permian, in West Texas and New Mexico, to eventually generate more than USD4 billion/year of free cash flow, he added.

Chevron's output from the play is expected to top 600,000 boe/d this year and 1 million boe/d in 2024, Johnson said.

"We believe our Permian production has the potential to grow and sustain at around 1.2 million boe/d," Johnson said.

Moreover, the production and free cash flow Johnson cited are based on development of only half the company's 2.2 million Permian acres and only a portion of the play's multiple "benches" or sub-zones, he said. Free cash flow is a key financial goal of most upstream operators in the current low oil-price milieu.

Beyond that, the company also has what Chevron CEO Mike Wirth said were future investment opportunities within its portfolio for several years and beyond.

"Many of these positions are facility constrained, meaning with backfill projects, production has little to no decline," Wirth said. "We expect successes that will result in developments during the second half of this decade."

These projects range from LNG, led by the Gorgon and Wheatstone developments in Australia, shale and tight oil anchored by the Permian and including the Vaca Muerta play in Argentina and the Duvernay Shale in Canada, the Tengiz expansion project in Kazakhstan that will raise production to 1 million boe/d in 2023 and the Gulf of Mexico, Wirth said. The company has 232 blocks in the US Gulf with 62 active prospects.

Beyond that, additional upside potential may come from increasing activity in the Permian and other shale plays, ramping up production in the Neutral Zone between Saudi Arabia and Kuwait and of heavy oil in Venezuela, Johnson said, adding importantly, these assets are already in Chevron's portfolio.

In addition, Johnson suggested the Gulf of Mexico is a brighter spot for the company than it has been in years.

Chevron continues to acquire exploration acreage in the Gulf, where it is one of the premier explorers and producers, and expects to sanction two additional projects in the next two years after green-lighting Anchor last year.

Whale and Ballymore, back-to-back finds in 2018, are expected to receive the go-ahead in 2020 and 2021. Whale, a remote field off the Texas Gulf Coast, will be a standard facility design, while Ballymore, further east off the toe of Louisiana, is envisioned as a possible tieback to an existing production hub.

Anchor, which has involved development of new technology enabling the extremely high-pressure field to prepare for production in 2024, will also benefit other such prospects.

Chevron plans to drill 11 potentially impactful exploratory wells around the world this year, including four in the US Gulf, two in the Mexican Gulf of Mexico and two in Brazil.

Also, Wirth said the previous company-wide total projected capital and exploration budget of USD19 billion-USD22 billion/year for the next three years has been extended to a fourth year (2024). Chevron has affirmed a USD20 billion capex budget for 2020.

As the oil industry has become increasingly vocal about committing to decarbonization in the last few years, Chevron executives said they are pursuing those initiatives although not as a separate business. Instead, they are integrating and weaving it into projects where appropriate.

While the company has vastly reduced its exposure to US gas production per se, it is involved in LNG. Chevron aims to improve returns at two such Australian facilities, Gorgon and Wheatstone, and will look at other opportunities to expand its LNG portfolio, Wirth said.

"But they have to be the right ones," he said. "We're in no hurry to do anything there [in that arena]. Everybody who's looking at making final investment decisions on LNG is going to have to be pretty thoughtful about when and how they step into that market."

We remind that in March 2018, Chevron Phillips Chemical Company LP successfully introduced feedstock and commenced operations of a new ethane cracker at its Cedar Bayou facility in Baytown, Texas. At peak production, the unit will produce 1.5 million metric tons/3.3 billion lbs. per year.

As MRC wrote before, US-based Phillips 66 remains open to developing another ethane cracker for its Chevron Phillips Chemical (CP Chem) joint venture, the refiner's CEO said in March 2018.

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 San Ramon, California, Chevron Corporation is the the second-largest integrated energy company in the United States and among the largest corporations in the world. Chevron is involved in upstream activities including exploration and production, downstream activities including refining, marketing and transportation, and advanced energy technology. Chevron is also invested in power generation and gasification processes.
MRC

PP prices slightly grew in Russian in line with stronger demand

MOSCOW (MRC) - After a long period of surplus and decrease in of polypropylene (PP) prices in early March, the Russian market has seen an increase in demand and prices.At the same time, the largest PP producer in Russia will shut its production for a long-term maintenances in the near future, according to the ICIS-MRC Price Report.

The long period of surplus and falling prices of PP in the Russian market began in early January and lasted until the end of February. Demand for polypropylene began to grow in the middle of last month, and some sellers began to raise prices in the last days of February.

Demand for PP significantly increased in early March under the pressure of the seasonal factor, while a number of small sellers had limited stocks. SIBUR Tobolsk is going to shut its capacities for 45 days turnaround next week.

Imports of homopolymer PP raffia from Turkmenistan increased significantly to about 7,000 tonnes in January-February. But in March, a serious drop in imports is expected.

The weakening rouble against the dollar and the high export prices in Turkmenistan do not yet allow talking about new supplies of polypropylene. Demand for PP rose in March, as many companies have begun to gradually increase capacity utilisation.

Restrictions on road transportation, which will last until mid-May (depending on the region) is expected to be introduced in some Russian regions since mid-March. Some converters in this regard were quick to buy additional supplies of PP. However, there was no deficit so far.

Large sellers still have sufficient supplies of polypropylene, but some small sellers reported that they had already sold all their March volumes of homopolymer PP.

By the beginning of March, homopolymer PP prices in the spot market rose to the level to Rb81,500-83,000/tonne CPT Moscow, including VAT, although in mid-February in some cases there were Rb1,000/tonne cheaper. Prices for injection moulding homopolymer PP were heard on average in the range of Rb82,000 - 85,000/tonne CPT Moscow, including VAT.
MRC

Japanese oil refiners keep running even as coronavirus curbs fuel sales

MOSCOW (MRC) -- Sales of petroleum products are slumping in Japan as the coronavirus outbreak worsens in the world's fourth-biggest importer of crude, but the country's biggest refiners say they are not planning to cut production, reported Reuters.

Oil product sales, including gasoline and jet fuel, slumped more than a quarter last week, the most recent period for which figures are available. Jet fuel sales sunk nearly 80% as Japanese and global airlines cancelled flights to China and other destinations.

The coronavirus outbreak that started in China late last year is spreading across the world at an increasing rate, with Japan now one of the worst affected countries and streets in Tokyo, the world's biggest urban centre, largely empty.

"We estimate domestic Japanese oil product demand in the first quarter will fall by an average of 7-8% year-on-year, both as a result of slowing economic activity as well as a result of the battle against coronavirus," said Aaron Cheong, an oil products analyst at Energy Aspects."The spread of COVID-19 in Japan, should it be prolonged, will likely weaken demand further, with the largest impact already seen in the jet market," he said.

Gasoline sales fell 2.3% to 750,000 barrels per day (bpd) in the week through Feb. 29, while bunker fuel was down more than 20% for A-fuel and naphtha sales were off by 84%.

Japan's refinery run rate was at 82.2%, compared with 84.3% the previous week.

"Demand for jet fuel for international flights has dropped," said a spokesman at Japan's second-biggest refiner, Idemitsu Kosan, told Reuters.

"But we have not seen any specific impact on demand for jet fuel for domestic flights and we are still examining how much impact it has had on local gasoline demand," he said.

Idemitsu is not planning to shut any of the crude distillation units at its refineries and said they are operating as normal.

A spokesman at JXTG, Japan's biggest refiner with a roughly 50% market share, said by phone: "For our fuel stocks and facilities, there is no effect right now. We don't think there is a huge impact on our market."

A spokesman at Cosmo Energy Holdings, Japan's third-biggest refiner, declined to comment on demand or whether the company had cut crude runs but said all units were operating normally and it had no plans to shut any refining operations. Still, oil traders said that Idemitsu and other Japanese refiners were cutting runs due to lower demand and margins.

As MRC wrote before, seven naphtha crackers in Japan were expected to be shut in 2018 for scheduled 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

U.S. production of major plastic resins totaled 7.9 billion pounds during January

MOSCOW (MRC) -- U.S. production of major plastic resins totaled 7.9 billion pounds during January 2020, an increase of 5.4 percent compared to the same month in 2019, according to statistics released today by the American Chemistry Council (ACC).

Sales and captive (internal) use of major plastic resins totaled 7.8 billion pounds during January 2020, an increase of 6.3 percent from the same month one year earlier.

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

KNPC starts operating naphtha conversion unit

MOSCOW (MRC) -- Kuwait National Petroleum Co (KNPC) on Thursday announced the operation of naphtha conversion unit number 107 in the Mina Al-Ahmadi refinery with a production capacity of 30,000 bpd, reported Reuters with reference to state news agency KUNA.

As MRC informed earlier, in November 2018, Kuwait Petroleum Co prepared a study to transform its al-Zour refinery into a commercial one to increase its profitability.

We also remind that Kuwait Olefins Co (TKOC) brought on-stream its cracker in H2 November, 2017, following a maintenance turnaround. The cracker was taken off-line in end-October 2017. Located at Shuaiba in Kuwait, the cracker has a ethylene production capacity of 850,000 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 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