Russian Transneft resumes supplies to Belarusian refineries

MOSCOW (MRC) -- Russia’s oil pipeline monopoly Transneft has started supplying crude oil to Belarusian refineries, reproted Reuters with reference to news agency Interfax, citing the company's statement.

Major Russian oil companies suspended supplies to Belarus from Jan. 1 after failing to agree supply terms, with Moscow wanting to end years of discounted oil supplies to Minsk.

Russia used to supply about 1.5 million tonnes of oil (360,000 bpd) to Belarus each month, but flows have dwindled to a trickle since the start of the year.

Transneft did not disclose the volumes it plans to ship to Belarus this month.

In late January 2020, as MRC wrote before, Belarusian Naftan refinery received 80,000 mt of Norwegian oil to test out new routes and compare losses with the current price of Russian oil.

Lukashenko said in mid-December 2019 that Russia had agreed in principle to supply 20-22 Bcm of gas and 24 million-25 million mt of oil in 2020 to Belarus.

According to ICIS-MRC Price report, lower capacity utilisation at Polymir (part of Naftan) in January 2020 did not affect the balance of the local low density polyethylene (LDPE) market, there was no shortage of polyethylene (PE). Local companies partially compensated for the absence of domestic PE by higher shipments from Russia.

Polymir (part of Naftan) is Belarus' largest petrochemical company, producing a wide range of chemical products, such as LDPE, acrylic fibers, products of organic synthesis, hydrocarbon fractions, etc. Polymir was founded in 1968. The producer uses technologies of the largest foreign companies from Great Britain, Japan, Germany, Italy (Courtaulds, Asahi Chemical Co. Ltd, Kanematsu Gosho, SNIA BPD, etc.), as well as the developments of scientific research institutes and design institutes of the CIS countries. The plant"s annual production capacity is 130,000 tonnes.
MRC

Refinery in Pakistan to close in a week unless demand rises

MOSCOW (MRC) -- Pakistan’s Attock Refinery is operating its 54,000 barrels per day (bpd) plant at 29% capacity and is prepared to shut the complex in a week’s time if local demand does not recover, reported Reuters with reference to the company’s top official.

If it closes, it would be the third Pakistani refinery to halt operations because of the collapse in demand as the country implements a lockdown to try to limit the spread of the novel coronavirus.

"The main plant is shut down. Only two small units are running and these will be closed in the next few days if the situation persists," Adil Khattak, chief executive officer at Attock Refinery, told Reuters from the garrison city of Rawalpindi, where the refinery is located.

Pakistan’s energy ministry last week asked fuel retailers and refiners to cancel the import of products and crude from April. The government also asked the oil marketing companies that supply fuel stations to increase purchases from national refiners to try to ensure operations continue.

But on Saturday, Pakistan’s largest refiner Byco Petroleum Pakistan Ltd halted crude processing at its 155,000 bpd refinery because of "zero demand for products in the aftermath of COVID-19 lockdowns," Shahryar Ahmad, its head of communications, said.

Byco, located on the outskirts of Pakistan’s largest city, Karachi, has put the refinery on cold circulation, which means crude is passed through the machinery without producing any refined products as fired heaters are shut.

The process would help in quick restart of refinery in case demand recovers, Byco said in a statement.

Similarly, Pakistan’s National Refinery Ltd stopped crude processing at its 64,000 bpd plant from last Wednesday.

As MRC informed before, North Atlantic Refining Ltd’s Come-by-Chance refinery in Canada will be the first to close in North America due to the coronavirus pandemic as refineries worldwide cut back operations.

We also remind that US-based Phillips 66 is delaying three sizeable scheduled shutdowns at its refineries this year, the company said last week, because of concerns that coronavirus could spread among the refineries' workers if the maintenance goes ahead.

Besides, 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 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.
MRC

Mexico talking to fellow producers to find 'suitable oil price'

MOSCOW (MRC) -- Mexico has been communicating with other oil-producing countries about stabilizing production to obtain an appropriate crude price, the government said, even though it has given no indication of any plans to curb Mexican output, said Reuters.

U.S. President Donald Trump said on Thursday he expected Russia and Saudi Arabia to announce a major oil output cut by as much as 15 million barrels per day, while Saudi state media said the kingdom was calling an emergency meeting of oil producers.

Global oil prices, which in the first quarter registered their steepest fall in history, soared in reaction. Benchmark Brent crude futures jumped 19% while U.S. WTI gained 23% to USD22.55 per barrel.

Writing on Twitter, in reaction to Trump’s prediction of a major output cut, Mexico’s Energy Minister Rocio Nahle said she was pleased the United States, Russia and Saudi Arabia were “on the same track." "Mexico’s government maintains communication with producing countries with the purpose of stabilizing the production platform and achieving a suitable oil price,” Nahle added.

Earlier on Thursday, Mexican President Andres Manuel Lopez Obrador said the country, which he said is producing nearly 1.8 million barrels per day (bpd) of oil, would increase domestic refining as opposed to planning output cuts. He did not provide a time frame for the measure to be implemented.

Lopez Obrador has promised to increase domestic refining capacity by building a new USD8-billion refinery, while also refurbishing existing facilities to produce more gasoline and diesel. The move would reduce Mexico’s crude exports as it makes more use of its oil at home.

Even though other Latin American producers such as Brazil have announced production cuts and slashed oil investment to deal with historically low oil prices, Lopez Obrador has said the new Dos Bocas refinery will not be postponed or cancelled.

Mexico’s oil revenue is protected by a USD1.4-billion hedging program. State oil company Pemex also contracts an annual hedge, which this year covers about a quarter of its current export volume.

But rating agencies have said the hedging programs and Pemex’s available credit lines will not be enough for the country and its highly indebted oil company to weather the storm of low oil prices this year.
MRC

Australian Caltex to extend planned shutdown for oil refinery amid pandemic

MOSCOW (MRC) -- Takeover target Caltex Australia Ltd said it would bring forward and extend the planned shutdown of its sole oil refinery Lytton refinery to ward off the expected hit to refining amid the pressures on demand from the coronavirus pandemic, reported Reuters.

The company said that operations at the refinery will restart once margin conditions recover.

As MRC wrote before, Italian energy group Eni said most of its oil refineries in Italy were working at around 60% of their capacity as the coronavirus emergency continues. The pandemic has shut down large parts of economies across the globe and prompted many governments to slap tough restrictions on travel, triggering a steep fall in the demand for refined oil products. In emailed comments, Eni said its biggest refinery Sannazzaro, in northern Italy, was running at around 50% of its capacity since it was also impacted by planned maintenance work.

We also remind that operations at Italian petrochemical producer Versalis (part of Eni) werenot affected by emergency quarantine measures in the country imposed in March 2020. Italian Prime Minister Giuseppe Conte extended its emergency coronavirus measures on 8 March and announced the closure of "non-essential" commercial businesses. This follows the announcement of a nationwide lockdown on 6 March, limiting movement for around 60 million people. Under these measures people are only allowed to leave their homes for work or health reasons. Versalis has three steam crackers in Italy, capable of producing 1.675 million mt of ethylene, 750,000 of propylene and 285,000 mt of butadiene a 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 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.
MRC

Oil market shock to spill over into global supply chains

MOSCOW (MRC) -- The global crisis caused by the coronavirus pandemic will be felt throughout oil’s global supply chains and ripple into other parts of the energy sector, the International Energy Agency (IEA) said in a report, said Reuters.

Oil prices crumbled as the pandemic slashed global fuel consumption, with further pressure from a supply shock due to the end of production cuts from OPEC producers and Russia. Crude oil prices ended a volatile quarter with their biggest losses in history, and declined about 55% in March, the most on record. Prices also plunged to their lowest level since 2002 on Monday.

About 5 million barrels of oil extracted worldwide every day are not attracting high enough premiums to offset the costs of extracting it out of the field, according to the Paris-based IEA agency. Prices available to producers in Western Canada have dropped to single digits, and instances of negative prices have also emerged in parts of North America for other grades, IEA said in the report.

Oil producers have responded by implementing major reductions to their spending on new production, with the initial cuts in the 20%-35% range relative to what was previously planned for 2020, the report said.

IEA had earlier estimated 50%-85% drops in net income for selected producer countries in 2020, compared with 2019, but these declines could be even greater depending on the extent of demand shock.

Many oil majors will re-evaluate their existing portfolios, possibly leading to another wave of refinery closures.

The agency also warned against the implications of oil price collapse on other energy sectors, adding a sustained period of low oil prices would affect the prospects for clean energy transitions such as natural gas.

“Oil at USD25 a barrel would leave some international gas suppliers struggling to cover their operating costs, and the depressed spot market for gas would not provide any relief."

As MRC wrote before, Taiwan’s Formosa Petrochemical Corp plans to operate its refinery at a reduced rate after completing maintenance at some units later this month amid weak margins. The company is expected to restart one of its three crude distillation units (CDUs), its residue fluid catalytic cracker (RFCC) and one of its two residue desulphurizers (RDS) around April 20 after more than a month’s shutdown for scheduled maintenance. After the unit’s restart, Formosa plans to be processing 480,000 barrels per day (bpd) of crude, spokesman KY Lin told Reuters, about 10% below the refinery’s nameplate capacity of 540,000 bpd.

As MRC wrote before, Formosa Plastics' new 1.5 million mt/year cracker in Point Comfort, Texas, came online in H1 2020 and was seen ramping up through January.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.
MRC