LyondellBasell cuts rates across system on lower demand amid coronavirus

MOSCOW (MRC0 -- Global petrochemical producer LyondellBasell has reduced rates across its system to accommodate lower demand wrought by shutdowns around the globe to stem the spread of the coronavirus pandemic, reported S&P Global with reference to CEO Bob Patel's statement.

LyondellBasell's overall global petrochemical and refining assets were expected to operate at 60% to 80% of nameplate capacity through the second quarter, Patel said during the company's first-quarter earnings call. European crackers were seen running at 80% to 85%, while US crackers were expected to run at about 75%, he said.

"Everything was fine until mid-March when durable demand stopped as social distancing mandates were enforced," Rob Stier, senior manager of petrochemical analytics at S&P Global Platts, said after the call.

LyondellBasell was among several global petrochemical producers to announce quarterly results on Friday. Others included ExxonMobil, Phillips 66 and Eastman Chemical. As expected, efforts to adapt operations and cut costs as the pandemic crushed oil demand and bruised the energy complex were common themes for those four and others who already have unveiled first-quarter results.

"Q1 was normal with increasing consumer packaging demand," Stier said. "However, Q2 will not be normal and economic run cuts are already being announced as expected to manage inventories."

Petrochemical producers have seen strong demand for some plastics used for food packaging and medical devices, such as melt-blown fabric medical face masks. But automotive plant shutdowns and sharp slowdowns in construction crushed for plastics used in vehicles and homebuilding or butadiene to make rubber.

Phillips 66 CEO Greg Garland said the Chevron Phillips Chemical, the joint venture of Phillips 66 and Chevron, aimed to run its plants at 90% capacity through the second quarter. However, he also said CP Chem and Qatar Petroleum had delayed a final investment decision on a new petrochemical facilities, including crackers and derivative plants, on the US Gulf Coast and in Qatar, to 2021 from this year given pandemic uncertainties.

ExxonMobil CEO Darren Woods said the company's petrochemical complex in Baton Rouge, Louisiana, had reconfigured operations to produce, blend, package and distribute medical-grade hand sanitizer and was designing new reusable face masks and face shields to combat the virus.

And Eastman CEO Mark Costa said the company was "adjusting our operations to the current demand environment" reducing spending and deferring some turnarounds on expectations of volumes falling 15% to 20% in the second quarter.

"There's just a phenomenal amount of uncertainty when we don't even know when the US and Europe are going to restart yet," Costa said. "We can get people back to work in a lot of companies, but it's really a question of what consumers are going to do. Are they going to go back to restaurants, back to their normal life activities, travel, shop in retail stores, buy cars?"

Those behaviors will dictate when auto and tire plants start up and how housing markets will play out, he said.

Patel said consumer-driven demand for resins used in packaging and healthcare, such as food packaging and test kits, supported relatively stable polyethylene margins as virus responses spread worldwide. LyondellBasell ramped up its new 500,000 mt/year polyethylene plant in La Porte, Texas, in the first quarter.

The need for plastic packaging switched to smaller sizes in grocery stores rather than bulk as restaurants shut down, leaving consumers to buy groceries and takeout, Patel said. Demand for frozen, dairy and packaged food has risen 30%, he added.

But demand for oxyfuels and intermediates plunged as shutdowns sharply reduced driving, reducing the need for fuel additives and plastics used in vehicle manufacturing.

That leaves LyondellBasell wary of taking too much advantage of naphtha, the chief feedstock for crackers in Asia and Europe, which has become much more competitive with ethane as a cracker feedstock. Naphtha is priced off of oil, so the oil price plunge brought naphtha down with it.

US and Middle East crackers favor ethane, a natural gas liquid priced off of natural gas. As oil and gas production has declined amid much weaker demand and shrinking storage availability, less ethane availability has boosted prices, leaving it less competitive with naphtha.

LyondellBasell's cracker network has flexibility to increase naphtha and liquefied petroleum gas runs while reducing ethane feeds. But while ethane yields mostly ethylene, used to make resins that are used to manufacture the most-used plastics in the world, naphtha yields less ethylene per gallon and more coproducts that are low in demand in the coronavirus environment. One of those coproducts is butadiene, a building block for tires.

"We'll crack liquids up to a point where we can move the butadiene and I think that's already globally been restricting the amount of naphtha that's being cracked," Patel said.

Even though some pandemic-related shutdowns have begun to ease, leading to more driving and tire replacement, Patel sees potential butadiene oversupply from naphtha cracking "to be a constraint through most of this year."

As 350,000 b/d of US ethane production has been rejected before oil and gas producers started pulling back on output, he said. The amount rejected would be the first to decrease with output cuts. If supply were still seen "snug" with rising prices, crackers with flexibility would switch to other feedstocks, such as liquids and LPGs, Patel said.

"Beyond that, some of the exports could even get shut off for ethane," he said. "So it seems to me that what we're really trying to think through is could we have another spike as opposed to a sustained period of high ethane prices. In the end, we continue to believe that there's an abundance of ethane available in the US and higher prices will just attract more investment and more supply of ethane over the long term."

As MRC wrote before, to further aid in the fight against the COVID-19 pandemic, LyondellBasell (LBI) donated a key ingredient to Huntsman Corporation to produce hand sanitizer for US first responders.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.

LyondellBasell is one of the largest plastics, chemicals and refining companies in the world. Driven by its 13,000 employees around the globe, LyondellBasell produces materials and products that are key to advancing solutions to modern challenges like enhancing food safety through lightweight and flexible packaging, protecting the purity of water supplies through stronger and more versatile pipes, and improving the safety, comfort and fuel efficiency of many of the cars and trucks on the road. LyondellBasell sells products into approximately 100 countries and is the world's largest licensor of polyolefin technologies.
MRC

MOSCOW (MRC) -- Formosa Chemical and Fibre Corp (FCFC), part of Formosa Petrochemical, is likely to undertake a planned shutdown at its No. 1 Styrene monomer (SM) unit in Mailiao, according to Apic-online.

A Polymerupdate source in Taiwan informed that, the company has scheduled to start a turnaround at the unit by mid-May, 2020. The unit is likely to remain under maintenance for about 45 days.

Located in Mailiao, Taiwan, the No. 1 unit has a production capacity of 250,000 mt/year.

As MRC informed before, Formosa Plastics' new 1.5 million mt/year cracker in Point Comfort, Texas, came online in H1 January, 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 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.

Formosa Petrochemical is involved primarily in the business of refining crude oil, selling refined petroleum products and producing and selling olefins (including ethylene, propylene, butadiene and BTX) from its naphtha cracking operations. Formosa Petrochemical is also the largest olefins producer in Taiwan and its olefins products are mostly sold to companies within the Formosa Group. Among the company's chemical products are paraxylene (PX), phenyl ethylene, acetone and pure terephthalic acid (PTA). The company"s plastic products include acrylonitrile butadiene styrene (ABS) resins, polystyrene (PS), polypropylene (PP) and panlite (PC).
MRC

MOSCOW (MRC) -- Iraq is cutting its oil output by around 700,000 barrels per day (bpd), a third less than required under an OPEC+ supply pact, after it failed to persuade international oil majors operating its giant fields to agree to deeper reductions, reported Reuters.

Iraq has agreed with oil majors operating its five giant southern oilfields to cut 300,000 bpd, Iraqi oil officials told Reuters on Wednesday. It will also lower production from other fields which it operates alone, bringing the total reductions to slightly below 700,000 bpd, they said.

The country’s oil output cut target under the OPEC+ supply reduction pact is 1.06 million bpd for May and June.

OPEC and its allies, a group known as OPEC+, agreed last month to slash output by 9.7 million bpd for May and June, a record production cut.

The agreement with the oil majors came after what Iraqi officials described as “a defensive position” by the international oil companies developing Iraq’s southern fields.

The refusal by the oil majors to cut more oil indicates the difficulties which are facing Iraq to fully comply with the OPEC+ crude supply reduction pact.

Two senior Iraqi officials who are part of the talks with foreign companies said they had to agree this deal to avoid paying the companies for the curtailed production.

Foreign oil companies, such as BP, Exxon Mobil Corp , Italy’s Eni and Russia’s Lukoil, who are developing Iraq’s giant southern oilfields operate under service contracts which pay them a fixed dollar fee for their output and are also compensated in crude cargoes.

This type of contract shields oil companies against sharp falls in oil prices. But it also means that with the OPEC cuts, Iraq ends up with less crude to sell bringing lower revenue to its state budget.

“Companies accepted to cut around 300,000 bpd which is considered nominal,” said a senior official at Iraq’s Basra Oil Company (BOC) who has direct knowledge of the discussions with the oil majors.

“We are in a critical situation where we cannot exert more pressure on the foreign firms and at the same time, we have to respect the OPEC agreement which is very difficult to fully implement” said another senior BOC official, who also asked not to be named.

Iraq has often lagged other OPEC+ producers in their previous deal to cut production and had not complied fully with its agreed output targets.

“We are optimistic that OPEC and other producers will understand Iraq’s situation when we meet next month,” the second BOC official said.

At least one European and two Asian customers will receive reduced oil supplies from Iraq in June, industry sources familiar with the matter said, as OPEC’s No.2 producer cuts some of its output.

European oil major Total’s allocation of Basra crude will be cut by over 25% in June and India’s Bharat Petroleum Corp will get about 25% less oil from Iraq.

South Korea’s GS Caltex was also told that it would receive less in June.

As MRC reported previously, global oil consumption cut by up to a third. What happens next in the oil market depends on how quickly and completely the global economy emerges from lockdown, and whether the recessionary hit lingers through the rest of this year and into 2021.

Earlier this year, BP said the deadly coronavirus outbreak could cut global oil demand growth by 40 per cent in 2020, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.

We remind that, in September 2019, six world's major petrochemical companies in Flanders, Belgium, North Rhine-Westphalia, Germany, and the Netherlands (Trilateral Region) announced the creation of a consortium to jointly investigate how naphtha or gas steam crackers could be operated using renewable electricity instead of fossil fuels. The Cracker of the Future consortium, which includes BASF, Borealis, BP, LyondellBasell, SABIC and Total, aims to produce base chemicals while also significantly reducing carbon emissions. The companies agreed to invest in R&D and knowledge sharing as they assess the possibility of transitioning their base chemical production to renewable electricity.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.
MRC

MOSCOW (MRC) -- Recognizing the importance of proper personal protective equipment (PPE) in the fight against COVID-19, MEGlobal Fort Saskatchewan donated 40 sets of mono goggles to the Fort Saskatchewan Community Hospital Foundation this week, said the company.

Andrew Maile, MEGlobal North America Responsible Care Leader, said MEGlobal evaluated its current inventory and determined that after ensuring an adequate supply for employees, the remaining 40 sets of eye protection could be given to the hospital.

“We all have a role to play in preventing the spread of COVID-19, whether that means staying at home, social distancing, or providing resources to the people who need them,” he said. “If this PPE can prevent one person from catching the virus, that could mean a big impact."

Laura Houghton, Foundation Administrator for the Fort Saskatchewan Community Hospital Foundation, said the donation will be put to good use.

“The goggles are especially needed for the nurses that do not wear glasses,” she said. “This helps relieve the burden on AHS financially especially when shortages occur. It also calms and decreases the anxiety levels for our staff knowing they have the protective equipment available to wear."

She added that not only is the equipment helpful, but it also elevates the morale of the health care staff to know that local businesses appreciate their efforts. "This donation is very much appreciated by the staff and they feel very grateful that you, the community, are supporting front line workers," Houghton said.

MEG is one of the main feedstocks for the production of polyethylene terephthalate (PET).

As per MRC's ScanPlast report, Russia's estimated PET consumption decreased to about 53,890 tonnes in February 2020, down by 3% year on year. 100,830 tonnes of PET chips were processed in Russia in the first two months of 2020. February PET production in Russia dropped to 45,800 tonnes, down by 5% year on year. Russia's overall PET production fell in January-February 2020 by 13% year on year.

MEGlobal is a global leader in the manufacture and marketing of ethylene glycol (EG). With a worldwide network, MEGlobal markets its products throughout Asia, the Americas, Europe and the Middle East. MEGlobal embraces the principles of Responsible Care®, focusing on the safety of employees, neighbors, communities and the environment in every aspect of its operations. As a subsidiary of EQUATE Petrochemical Company (EQUATE), MEGlobal is part of the EQUATE Group which is the world’s second largest producer of EG.
MRC

MOSCOW (MRC) -- Royal Dutch Shell Plc’s Norco, Louisiana, refinery is operating at about 80% of its 225,300 barrel-per-day (bpd) capacity, reported Reuters with reference to sources familiar with plant operations.

A Shell spokesman declined to comment.

The Norco refinery cut production in April, the sources said. Shell’s 211,270 bpd-capacity Convent, Louisiana, refinery, has as well reduced production by 100,000 bpd with the shutdown of a small crude distillation unit (CDU).

As MRC informed earlier, Pilipinas Shell Petroleum Corp said it will shut down its 110,000-barrel-per-day Tabangao refinery in the Philippines for one month from mid-May as the coronavirus pandemic has hammered oil demand.

We also remind that Shell Singapore restarted its naphtha cracker in Bukom Island this week 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 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers 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