Saudi Arabia floods globe to squeeze Russian share of oil market

MOSCOW (MRC) -- Saudi Arabia has stepped up efforts to squeeze Russia’s Urals oil grade out of its main markets by offering its own cheap barrels instead after their long-standing deal to support global oil prices fell apart, reported Reuters with reference to seven oil sources.

Cooperation between Moscow and Riyadh dramatically collapsed last week after Russia refused to support deeper oil output cuts desired by Saudi Arabia to fight falling oil demand as a result of the spread of the coronavirus outbreak.

Market sources told Reuters that state-controlled Saudi Aramco is trying to replace Urals in refiners’ feedstock around the world, from Europe to India.

"They (the Saudis) knock on all doors offering a lot and cheaply..." a source with a Western oil major told Reuters.

Saudi’s national shipping firm, Bahri, provisionally chartered up to 19 supertankers this week, with six of them set to take about 12 million barrels of Saudi crude to the United States, according to data and sources.

Saudi Aramco is in talks with European refiners, including big buyers of Urals oil like Finland’s Neste Oil, Sweden’s Preem, France’s Total, BP, Azerbaijan’s SOCAR, Italy’s Eni, the sources said.

The tactic has already started to pay off, with refiners ordering extra volumes of its crude for loading in April at "very attractive prices", the sources added.

Saudi Aramco, Neste Oil, Total, BP, Preem, Eni and SOCAR did not immediately respond to requests for comment.

Saudi Arabia will open the taps beginning on April 1, releasing 12 million barrels of oil per day (bpd) into the markets. Russia’s maximum production capacity is 11.80 million bpd, with Asia and Europe being key export markets.

Russian Energy Minister Alexander Novak said on Wednesday that Saudi plans to raise output was “not the best option”. Novak is meeting Russian oil companies on Thursday in Moscow.

"Riyadh is really mad at Moscow for their move in (the) OPEC meeting, so they target (the) Urals markets first", a source at a European trading firm involved in Urals trading said.

Market sources said that Saudi Aramco is trying to replace Urals in refiners’ feedstock in an attempt to punish Moscow and get the Russians back to the negotiation table.

On Saturday, the day after the landmark deal between the group known as OPEC+ fell apart, Riyadh slashed prices for its crude to customers worldwide.

Saudi Aramco may send an extra 1.5 million bpd to Europe in April alone, said the third source, who does calculations for a global trading house, said.

Oil wars between Russia and Saudi Arabia are not new: both were at a standoff before the OPEC+ deal three years ago. But now Riyadh is ready to go to as far as Belarus.

Russia and its ex-soviet neighbour failed to reach a new oil supply deal in January, meaning that Minsk started to look for Urals replacement.

"We’ve been working with Saudi Arabia since last year, there was a meeting in London last week... The prices are just wonderful," a source at a Belarus oil trader told Reuters.

Belarus said it would keep importing alternative crude oil even if supplies from Moscow are fully restored.

Saudi Arabia is also seeking to replace Urals crude in more unusual markets for the Russian grade such as India and the United States, traders said.

"There were phone calls over the weekend from Aramco to CEOs of majors and big independents about taking an increase in Saudi oil. My understanding is that this would be oil loading in April - reaching US in May and June”, a US market source said.

Indian refiners that had been increasing Russian oil purchases in recent months have also ordered extra Saudi oil.

Azeri state firm SOCAR ordered 3 million barrels from Saudi Arabia for loading in April for its STAR refinery in Turkey, which so far was processing mainly Urals, two sources said.

And France’s Total, one of the top Urals buyers, is in talks with Saudi Aramco to boost intake of Arabian barrels by some 600,000-700,000 bpd next month, another source familiar with the company’s plan said.

Neste Oil, Eni and Preem may also receive extra barrels from Riyadh, ranging from a one to three-four cargoes, traders said.

As MRC informed before, in October 2018, Saudi Aramco and Total launched engineering studies to build a giant petrochemical complex in Jubail. Announced in April 2018, the world-class complex will be located next to the SATORP refinery, operated by Saudi Aramco (62.5%) and Total (37.5%), in order to fully exploit operational synergies. It will comprise a mixed-feed cracker (50% ethane and refinery off-gases) - the first in the Gulf region to be integrated with a refinery - with a capacity of 1.5 million tons per year of ethylene and related high-added-value petrochemical units. The project represents an investment of around $5 billion and is scheduled to start-up in 2024.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 215,390 tonnes in the first month of 2020, up by 23% year on year. Shipments of all grades of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) increased due to higher capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 127,240 tonnes in January 2020, up by 33% year on year. ZapSibNeftekhim's homopolymer PP accounted for the main increase in shipments.
MRC

Jiangsu Sopo to shut No. 3 acetic acid plant in Juangsu for turnaround

MOSCOW (MRC) -- Jiangsu Sopo Chemical has planned to shut its No. 3 Acetic acid plant for a maintenance turnaround, according to Apic-online.

A Polymerupdate source in China informed that, the company is likely to halt operations at the plant, in end-March, 2020. The plant is expected to remain under maintenance for about 40 days.

Located at Zhenjiang in Jiangsu province, China, the No. 3 plant has a production capacity of 800,000 mt/year.

Acetic acid (AA) has been largely used with a wide range of applications such as a raw material for a synthesis of vinyl acetate monomer (VAM), cellulose acetate or acetate anhydrate, acetate ester and a solvent for a synthesis of terephthalic acid and so on.

VAM is one the main feedstocks for the production of ethylene-vinyl-acetate (EVA).

According to MRC's DataScope report, December 2019 EVA imports to Russia dropped by 4,1% year on year to 3,600 tonnes from 3,760 tonnes a year earlier, and overall imports of this grade of ethylene copolymer into the Russian Federation decreased in January-December 2019 by 17,8% year on year to 39,55 tonnes (48,09 tonnes in 2018).
MRC

Eni refineries in Italy working normally but monitoring developments

MOSCOW (MRC) -- Italian energy group Eni said all its refineries in Italy were working normally except for two which had partially cut their volumes for maintenance work, said Reuters.

“Eni however is carefully monitoring developments in the market so as to be able to gauge any possible changes in demand,” a spokesman said.

Concern is growing that with fuel demand falling as a result of travel restrictions triggered by the coronavirus outbreak refineries might have to scale back production.

The spokesman said Eni’s refineries at Sannazzaro and Taranto had partially cut production due to planned maintenance.

As MRC informed earlier, Versalis, the petrochemical division of Italy's Eni SpA, shut is cracker in Priolo, Sicily, for repairs in the last days of December, 2019. The capacity of the cracking unit at this complex is 490,000 tonnes of ethylene and 130,000 tonnes of propylene per year. The maintenance works lasted until February 2020.

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

BASF provides hospitals in the German Rhine-Neckar metropolitan region with free hand sanitizer

MOSCOW (MRC) -- BASF is set to begin production of hand sanitizers at its Ludwigshafen petrochemicals hub in Germany and will distribute them for free to nearby hospitals in the Rhine-Neckar region to help alleviate supply bottlenecks amid the worsening coronavirus (Covid-19) crisis, said the producer.

The company has obtained quick regulatory approvals to begin the production, and several tonnes of isopropanol have already been re-allocated to enable hand sanitizer production at the site, it said in a statement on Tuesday.

So far, BASF has been producing certain raw materials that can be used to make disinfectant products, but not hand sanitizers.

The company’s move comes amid bottlenecks in the supply of hand sanitizers because of the jump in demand amid the spread of the coronavirus, which keeps worsening in Germany and elsewhere.

“We know from hospitals in the region that supplies of appropriate disinfectants are very tight,” said Uwe Liebelt, head of the Ludwigshafen site.

BASF added that its production capabilities will be “limited”, and the company will therefore be able to distribute free products only to hospitals in the region.

German chemical producers' group VCI has launched a “disinfectant products initiative" that aims at ensuring supplies of isopropanol, ethanol, and other chemicals, as well as the disinfectants made from those raw materials. Because of complex legal regulations, Germany currently has only a few specialty firms that are allowed to produce and market disinfectant products, a VCI official said in a media interview last week.

As MRC wrote earlier, BASF, the world's petrochemical major, has restarted its No. 1 steam cracker following a maintenance turnaorund. Thus, the company resumed operations at the plant on September 30, 2019. 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 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).

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

Total UK Culzean facility has suspected coronavirus case

MOSCOW (MRC) -- Total said Tuesday it had a suspected case of coronavirus on a rig at its Culzean gas field in the UK North Sea, but production was unaffected, reported S&P Global.

A morning helicopter flight to change crew members at the gas facility was cancelled when the suspected case became apparent, a spokesman said.

"We are monitoring the situation and working closely with Maersk Drilling," which operates the rig, the spokesman said.

Culzean came on line in the middle of last year and is a major source of gas for the UK, with a maximum output capacity of 16 million cu m/d at present.

gas to the Teesside processing plant in Northeast England.

The issue of helicopter flights to facilities with suspected coronavirus cases is emerging as a significant issue for the North Sea industry in the current health crisis, with helicopter providers reluctant to serve such facilities.

So far, no cases of coronavirus in the UK offshore workforce have been publicly confirmed, although this may be due to a lack of testing capacity.

As MRC wrote before, Total has recently disclosed that it is evaluating construction of a new gas cracker at its Deasan, South Korea, joint venture (JV) with Hanwha Chemical.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 215,390 tonnes in the first month of 2020, up by 23% year on year. Shipments of all grades of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) increased due to higher capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 127,240 tonnes in January 2020, up by 33% year on year. ZapSibNeftekhim's homopolymer PP accounted for the main increase in shipments.

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