European refiners leave oil cargoes on water as storage tanks fill on coronavirus outbreak

MOSCOW (MRC) -- A growing number of oil tankers across Europe have been unable to unload their cargo over the past month as refining demand crashes, turning them into de facto floating storage, reported Reuters with reference to shipping data and trading sources.

European refineries have had to cut runs after measures put in place to contain the coronavirus outbreak crushed fuel demand.

More than 25 tankers with roughly 18 million barrels onboard were anchored near European ports, with most them already there for over a week as of Thursday, Refinitiv Eikon shipping data showed.

Many oil cargoes scheduled for late March or early April arrival were bought by refineries before the coronavirus pandemic paralysed business and social activity in Europe, traders said. But now the volumes are not needed.

"The refinery tells us they can’t take a cargo now. And it’s not very clear when they’ll be able to. It could take a month," a source with a major oil company said.

Storage facilities in Europe are filling up fast, with traders saying nearly all tanks are already rented and leaving no option for the refineries other than to float the cargo until it can be offloaded.

Full tankers are floating all over Europe, but the Mediterranean region, where refining run cuts have been higher, is harder hit.

Italy’s Trieste port, a Mediterranean oil hub connected to refineries in Austria, Germany and the Czech Republic by the Transalpine pipeline (TAL), has six vessels waiting to discharge, traders said and the shipping data showed.

“Delays in Trieste are above two weeks now for some cargoes. Some vessels discharge, but many are floating. And we see more coming”, a Mediterranean trader told Reuters. He added that the slower oil intake by refineries connected to TAL was disturbing pipeline operations.

TAL pipeline did not respond to a Reuters request for comment.

A number of cargoes floating outside other Italian ports including Milazzo, Vado Ligure and Genoa have been waiting for several weeks, four cargoes are facing weeks-long discharge delays in France’s Fos and delayed cargoes are also anchored around Turkey and Greece, the data shows.

“We’ve been waiting for...nine days,” a trading source selling to Mediterranean refineries told Reuters.

In northwest Europe the situation is generally better, traders said, but several vessels have been delayed in the last two weeks in the Antwerp-Rotterdam-Amsterdam hub and traders fear the number could rise.

“OPEC+ can try to establish market balance in the future, but it can’t solve the issue of a currently oversupplied physical market in Europe, it will be tough this month,” a trader with a major oil company told Reuters, referring to the grouping of OPEC countries and allies including Russia.

As MRC informed earlier, Royal Dutch Shell will start large-scale maintenance of its Pernis refinery in the Netherlands in mid-April, more than two weeks earlier than previously planned. The maintenance would mean the 404,000 barrel per day refinery, Europe’s largest, would be shut temporarily. The previous maintenance plan involved starting on May 4 and was expected to last through May and June.

We also reminad 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 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

MOSCOW (MRC) -- Shell expects delays to a number of projects in the UK North Sea including the start-up of its Shearwater gas infrastructure hub, the centerpiece of a number of inter-linked investments, reported S&P Global with reference to a source close to the situation, as the company grapples with coronavirus and the turmoil in oil markets.

The delays also encompass a proposed development known as Jackdaw and progress on the Penguins oil project, and reflect last month's decision by the global major to slash its capital spending by 20% this year, as well as an issue with construction work in China.

Shell would not comment on the topic.

The Shearwater project aims to create a new infrastructure hub that will redirect gas and condensate to St Fergus in eastern Scotland from the Shearwater field, and from other fields being developed by Shell and other companies in the vicinity, such as the Arran, Fram and Columbus fields.

From St Fergus, natural gas liquids are to be sent on to the Mossmorran processing and petrochemical plant. The start-up of the new hub, first approved for development in 2018, is now deferred to 2021 from this year, the source said.

Shell also expects to delay until next year a Final Investment Decision on Jackdaw, a proposed gas and condensate development in the central North Sea, the source said. Approval had been expected in the current quarter.

And delays were expected in the redevelopment of the Penguins field in the far north of the North Sea, which was first developed in the early-2000s as a tie-back to the Brent field, itself now in the process of decommissioning.

Shell had not given an explicit schedule for Penguins. However there are believed to be hold-ups with construction in China of the floating production storage and offloading vessel, and some "rephrasing" of drilling was also expected, the source said.

Shell embarked on its current series of North Sea projects after hailing the success of the industry in reducing its costs in the wake of the 2014-15 collapse in oil prices.

Last June, Shell's UK and Ireland vice president, Steve Phimister, indicated the company expected to spend around $800 million annually in its UK upstream business for a number of years, and would be active in exploring for new resources.

The major has stakes in the three biggest West of Shetland fields operated by BP - Schiehallion, Clair and Foinaven - but its recommitment to conventional North Sea projects was seen as a sign of the UK oil and gas industry's reviving prospects.

Shell said on March 23 it was cutting its expected capex this year to USD20 billion or below, part of a wave of spending cutbacks by oil and gas companies around the world in response to plummeting commodity prices.

As MRC wrote before, Royal Dutch Shell will start large-scale maintenance of its Pernis refinery in the Netherlands in mid-April, more than two weeks earlier than previously planned. The maintenance would mean the 404,000 barrel per day refinery, Europe’s largest, would be shut temporarily. The previous maintenance plan involved starting on May 4 and was expected to last through May and June.

We also reminad 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 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.

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.
MRC

MOSCOW (MRC) - Imports of suspension polyvinyl chloride (SPVC) into Ukraine increased by 2% in the first three months of this year, compared to the same period in 2019 and reached about 11,500 tonnes. At the same time, sales of Ukrainian PVC to foreign markets dropped by 47% year on year, according to a MRC's DataScope report.

Last month's SPVC imports into the Ukrainian market decreased to 3,700 tonnes from 4,200 tonnes in February, plastic products producers fell in purchases, including due to the spread of coronavirus.

Overall SPVC imports reached 11,500 tonnes in January-March 2020, compared to 11,300 tonnes a year earlier. The high level of capacity utilisation and the steady demand for polymer from foreign markets helped the Ukrainian producer to seriously increase export volumes.

The key suppliers of PVC to the Ukrainian market were producers from Europe, their share in total imports for the period under review amounted to about 76%. Producers from the USA with the share of about 23% were the second largest suppliers. The high level of capacity utilisation and good demand from India and Turkey allowed the local producer, Karpatneftekhim, to significantly increase export sales, although exports have sagged in the last two months.

Last month's exports of Ukrainian PVC were 12,100 tonnes versus 16,100 tonnes in February. Overall, about 54,500 tonnes were shipped for export in the first three months of 2020, compared to 37,100 tonnes a year earlier.

MRC

MOSCOW (MRC) -- The profound challenges facing the refining sector have never been more evident than during the present crisis. As countries go into lock down to slow the global coronavirus pandemic, demand for oil products is collapsing and with it, the market for oil, according to Hydrocarbonprocessing.

As we enter the second quarter of 2020, global oil demand could fall by almost 9 million barrels per day (b/d) from last year’s second quarter.

Alan Gelder, vice president, refining and chemicals, at global natural resources consultancy Wood Mackenzie, said: “Refinery utilisation - and profitability - is falling sharply in response. Refiners have started to reduce runs, margins are coming under severe pressure and some refineries will close, albeit temporarily.”

Could this be a foretaste of the future, as the energy transition and the prospect of peak oil demand combine to squeeze the sector?

Gelder said: “Since 1980, global refining has increased by 25%, but that growth has varied markedly by region. Investment has flowed where oil demand growth or imports of refined products have been strong; elsewhere, capacity has been either rationalised or closed.”

That same story will continue to play out over the next two decades. But sustained investment in additional refining capacity will be required during this period, according to Wood Mackenzie’s energy transition outlook.

He added: “Continued population growth and rising incomes in developing economies outweigh vehicle fuel efficiency improvements and the electrification of the transport fleet. These two factors displace over 10 million b/d of demand, but the outlook for overall growth suggests that, at present, the sector’s long-term viability is assured.”

More capacity will be needed in the Middle East and Asia to satisfy regional demand growth. In OECD countries, weak assets will close, as local demand falls due to fuel efficiency improvements and electrification of the vehicle fleet.

Gelder said: “Within the next five years, the risk of cannibalisation – when each new refinery project prompts the closure of assets elsewhere – within the sector will grow. World-scale refineries are getting bigger while the energy transition is weakening the global growth in oil demand.

“Any new refineries will need to be large coastal sites that are heavily integrated with petrochemicals to ensure they are highly competitive.”

OECD refiners need to adapt to declining local demand and a shifting social and political landscape. Business responses must extend beyond the traditional levers of selective investment and cost control to reduce carbon intensity in both operations and their supply of liquid fuels.

Gelder said: “The core competencies of operating integrated refinery petrochemical sites can be built on to create a central hub in a ‘low-emissions energy complex’ that brings together carbon capture and storage, chemical recycling, LNG and renewables.”

In a world aspiring to restrict the global temperature rise to less than 2o C, the disruption to the global refining industry could be even more severe. Wood Mackenzie’s accelerated energy transition sees much greater penetration of battery technology and hydrogen into the vehicle fleet.

Gelder said: “In such a scenario, localisation is a key theme – refiners working closely with the local community and their government to retain a social licence to adapt their business.

“Cost reduction, competitive position improvement and understanding the refinery’s carbon life cycle are obvious “no regret” moves. Beyond that, no one size fits all, so strategic reviews will be essential to establish a road map for the future.”

He added: “Refining is, after all, a conversion industry – one that must transition away from carbon-intensive feedstocks such as crude oil and into products and services that the consumer still values.”
MRC

MOSCOW (MRC) -- Employees at Valero Energy Corp’s Port Arthur, Texas, refinery expressed worries about the company’s slow response to keep the coronavirus from spreading there after two workers tested positive, reported Reuters with reference to four people familiar with the matter.

Valero, the nation’s second-largest refiner, started to cut non-essential work and related contractors only this week after starting temperature checks last week - much later than other major U.S. refiners, according to the people.

Valero spokeswoman Lillian Riojas said the company maintains the privacy of employee health information and as such would “not publicize individual cases of COVID-19.”

Riojas, however, outlined Valero’s response in case of a positive test, saying it included compliance and cooperation with the Centers for Disease Control and local health authorities, sterilization of affected areas and communicating with employees in ‘close contact’ with those affected.

That is “followed by implementation of appropriate quarantines, communication with our employees at the site, and, most importantly support of all affected employees.”

Globally, the coronavirus has infected over 1.3 million people and killed more than 74,000. The United States has the most number of cases, at more than 360,000.

The pandemic presents significant challenges to energy facilities like power generation plants, offshore drilling platforms and refineries, where remote operation is often not possible and some staffing is needed to run key units.

Refiners are still meeting customer needs for gasoline and jet fuel that have slowed to a trickle in the United States and globally as the pandemic keeps people at home.

The largest U.S. refiner Marathon Petroleum Corp, and Exxon Mobil Corp, the third largest, cut contract workers, who perform maintenance, two weeks ago.

Temperature checks for people entering refineries began about the same time at major U.S. refineries.

Unable to work from home, many Port Arthur refinery employees are indoors in shared control rooms and eat in common dining areas, placing them at greater risk of contracting COVID-19, the sources added on condition of anonymity because they are not authorized to speak to media.

The Port Arthur refinery processes 335,000 barrels of crude oil per day, though it has lately been running at reduced rates due to weakened demand for products.

The refinery employs more than 900 salaried and hourly workers. Its about 450 hourly workers are represented by the United Steelworkers union (USW). About 750 contract workers are employed by third-party companies Valero hires to perform maintenance in the refinery.

The first case reported at the refinery was a contract worker who had no contact with employees, but had contact with another contract worker who had access to a building used by employees, the sources said.

Employees were notified on March 28.

Temperature checks were implemented after employees were notified about the first case.

“In my opinion it was a very meager cover-your-ass by a company that has already had a contractor working inside the fence who tested positive for COVID-19,” one of the sources said of the temperature checks.

The second case was an employee, the sources said.

The company notified its employees on April 5, adding the affected person has not been in the refinery since March 27.

The two people and those who worked closely with that person were sent home for 14 days and the places where they were working underwent “enhanced cleaning,” according to the sources.

Officials with USW 13-423 in Port Arthur, which represents workers at the Valero refinery, declined comment.

In other recent incidents, BP Plc said some workers have contracted COVID-19, the respiratory disease caused by the coronavirus, on offshore platforms in the Gulf Coast and at a facility in Alaska.

As MRC reported before, Valero Energy Corp restarted the small CDU at its Port Arthur refinery after repairing a valve on 25 September 2019. And in late October 2019, Valero Energy Corp shut the small crude distillation unit (CDU) at its Port Arthur refinery. The 75,000-bpd AVU 147 CDU was shut to repair a heat exchanger.

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