CNOOC, Shell and Huizhou government sign agreement to further expand petrochemical complex in China

MOSCOW (MRC) -- CNOOC Oil & Petrochemicals Co. Ltd (CNOOC), Shell Nanhai B.V (Shell) and the Huizhou Government have announced a strategic cooperation agreement to further expand the CNOOC and Shell Petrochemical Company (CSPC) 50:50 joint venture in Huizhou, Guangdong Province, China, as per Shell's press release.

Due to COVID-19 travel restrictions, the agreement was signed in a virtual online ceremony, attended by dignitaries including Party Secretary of Guangdong Province Li Xi, CNOOC Chairman Wang Dongjin, Shell CEO Ben van Beurden, CNOOC VP for Downstream Chen Bi and Shell Downstream Director Huibert Vigeveno.

The expansion is planned to serve the growing number of intermediate and performance chemicals customers in the key market of China, supplying products including SMPO, polyols, ethylene glycol, polyethylene (PE) and polypropylene (PP). These chemicals are used in a wide range of end products, in healthcare, construction, fabrics, packaging, transport and electronics. For the first time in Asia, Shell would apply its advanced technology for linear alpha olefins. The project is intended to include construction of a new 1.5 million-tonnes-per-year ethylene cracker, with the mega-site bringing economies of scale and enhanced competitiveness.

Thomas Casparie, Executive Vice Present for Shell’s global chemicals business, said "Our growth strategy is based on long-term chemicals demand. We are very selective in our investments, and this agreement underlines Shell’s confidence in both the chemicals business fundamentals and our strategic partnerships with CNOOC and the Huizhou Government."

The CSPC site currently converts a variety of liquid feedstocks into olefins and derivative products. It has a strong track record of safe, reliable and energy-efficient operations. In January 2020, CNOOC and Shell announced the signature of a Memorandum of Understanding to explore its first commercial-scale polycarbonate production unit at the site.

As MRC informed before, the two partners signed Memorandum of Understanding on 16 October 2018 to explore expansion of the existing collaboration. The start-up of the site’s second ethylene cracker was announced on 2 May 2018. The site’s second SMPO plant, which will be the largest in China, is currently in construction.

Ethylene and propylene are feedstocks for producing PE and 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.

China National Offshore Oil Corporation (CNOOC), the largest offshore oil & gas producer in China. CNOOC businesses cover the main segments of oil & gas exploration and development, engineering & technical services, refining and marketing, natural gas and power generation, and financial services.

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) -- Saudi Arabia’s sweltering summer may complicate the kingdom’s pledge to deepen oil production cuts, said Hydrocarbonprocessing.

Curbing crude output means lower production of associated gas, a byproduct of crude extraction, which Saudi Arabia uses to power air conditioners during the summer months and as feedstock for its petrochemical industry.

While industry sources do not question Saudi Arabia’s ability to deliver on the cuts and note that opening and shutting oil wells is technically easier for OPEC’s biggest producer than in other parts of the world, balancing the supply and demand of gas for the residential sector and industry is a delicate process.

OPEC and allies led by Russia, a group known as OPEC+, agreed last month to reduce output by about 9.7 million barrels per day (bpd) in May and June, a record cut aimed at shoring up sliding prices as coronavirus-related lockdowns crippled the global economy and demand for oil tanked.

In a further step, Saudi Arabia, Kuwait and the United Arab Emirates pledged this week to deepen their cuts by an extra 1.180 million bpd in June.

Because Saudi oilfields pumping lighter crude tend to produce more associated gas than fields with heavier and sour grades, where the cost of production is also higher, the Kingdom’s oil output will likely drift more towards these lighter quality grades, analysts and experts say, potentially worsening the current global glut of such barrels.

“The shutting down of (some) fields is not easy because of the gas,” said one Gulf oil industry source. “But we can reduce production capacity rates at some fields or bring forward field maintenance to reduce output.”

Ethylene and propylene are feedstocks for producing PE and 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) -- Global oil refining production could start rebounding in June, the International Energy Agency said, but refiners’ margins may be squeezed due to rising crude prices as producers slashed output much faster than expected, said Hydrocarbonprocessing.

Refiners throttled back output globally as the coronavirus pandemic sent billions of people into lockdown and cut fuel demand by 30%. Crude prices crashed, prompting the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, agreed to cut oil output by 9.7 million barrels per day (bpd), while other nations have also reduced output.

“If crude supply adjusts more quickly to the oversupply than forecast, this will support crude prices and depress refinery margins, resulting in lower refining throughput than anticipated,” the IEA said in its monthly oil market report. In recent days, several OPEC nations including Saudi Arabia said they will cut output more than originally pledged. Producers in the United States and Canada have cut production by 1.7 million bpd, much faster than expected.

The tight supply has hit refining margins in the United States and Europe. U.S. diesel margins HOc1-CLc1 are currently less than $11 a barrel, lowest seasonally over the last decade, while European diesel margins LGOc1-LCOc1 are below USD5 a barrel, lowest since mid-2009.

In Asia, gasoil margins, which are derived from Dubai crude prices, have slumped by around 60% in the past month to under USD4 per barrel. The margins for the benchmark 10ppm gasoil grade in Singapore are currently at their lowest seasonal levels on record, Refinitiv Eikon data showed. While the easing of some lockdown restrictions should boost fuel demand, refiners still face big headwinds and more are shutting down until margins improve.

Oil demand in April slumped by around 25%, or more than 25 million bpd, IEA monthly figures showed, in reaction to global lockdowns. In the United States, refining capacity use fell to 68% in the most recent week, just off an all-time low, the U.S. Energy Information Administration said.

But producer cuts have been swifter. Saudi Arabia said it will reduce output by nearly 5 million bpd in June, or 1 million bpd more than expected. Kuwait and United Arab Emirates also said they would clip production, boosting crude prices.

Ethylene and propylene are feedstocks for producing PE and 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) -- The first shipment of U.S. crude oil is heading to Belarus this week, fulfilling a commitment made in February, U.S. Secretary of State Mike Pompeo said, said Reuters.

The shipment involves by U.S. firm United Energy Trading, with the assistance of U.S. firm Getka and Polish partner UNIMOT. “This competitive deal ... strengthens Belarusian sovereignty and independence, demonstrates that the United States is ready to deliver trade opportunities for American companies interested in entering the Belarusian market,” Pompeo said.

Belarus, a close ally of Russia, became involved in a row with Moscow earlier this year over the price it pays for Russian oil. The dispute has since been concluded, but Belarus has said it wants to diversify its oil imports. In late April, Belarus, which has long relied on Russian oil, purchased its first crude from Saudi Arabia, according to state refiner Belneftekhim.

“The United States urges Belarus to build on the progress it has made to increase the access of American businesses to its market and undertake the market-oriented, trade-liberalizing reforms necessary to advance its WTO (World Trade Organization) accession process,” Pompeo said in a statement.

Ethylene and propylene are feedstocks for producing PE and 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) -- Solvay SA said it will close two plants making composites for Airbus SE and Boeing Co. in a sign the deepening aerospace crisis is hitting suppliers of even the latest aircraft materials, reported Bloomberg.

The Belgian chemical maker is adding to savings achieved in the past year following the grounding of Boeing’s 737 Max. The latest measures from Solvay Chief Executive Officer Ilham Kadri will lead to about 570 job cuts, or 20% of the workforce in Solvay’s composites unit, the Brussels-based company said Friday.

The closure of sites in Manchester, England, and Tulsa, Oklahoma, mark the latest example of a permanent downsizing now taking place across in the aircraft industry.

Before the coronavirus crisis, composites had been a bright spot. With each new jet, Airbus and Boeing strove to replace metal parts with advanced materials to save on weight and boost fuel efficiency. Now, both major planemakers are preparing to slash jobs, with the impact being felt by their suppliers.

Solvay said it will book a 30 million-euro (USD32 million) charge to cover expenses related to the restructuring plan. The savings generated are expected to be double that amount by the year-end.

"The steps we are taking are necessary to adapt to the dynamic environment," said the CEO, a former Dow Chemical Co. executive.

As MRC reported earlier, in response to urgent needs by medical professionals for protective equipment to combat COVID-19, Solvay is supplying high-performance, medical-grade transparent film to Boeing for its production of face shields. Boeing approached Solvay due to its experience in the use of advanced composite and adhesive materials on multiple commercial and defense programs.

We remind that earlier this year, DOMO Chemicals completed its acquisition of Solvay’s Performance Polyamides Business in Europe. This Business includes Engineering Plastics operations in France and Poland; High Performance Fibers in France; Polymer and Intermediates operations in France, Spain and Poland. The Business comprises Production, Sales, Technical Support, R&D and Innovation services in France, Spain, Poland, Germany and Italy that currently have a combined headcount of approximately 1,100 employees. The agreement also involves a joint venture between BASF and DOMO in France for the production of Adipic Acid.

And on January 31, 2020, BASF, the world's petrochemical major, closed the acquisition of Solvay's polyamide (PA 6.6) business. The transaction broadens BASF's polyamide capabilities with innovative and well-known products such as Technyl. This will allow BASF to support its customers with even better engineering plastics solutions, e.g., for autonomous driving and e-mobility. The transaction also enhances the company's access to growth markets in Asia as well as in North and South America.

We also remind that BASF restarted its No. 1 steam cracker on September 30, 2019, following a maintenance turnaorund. 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 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