PBF sees slow refining rebound as U.S. gasoline demand creeps higher

MOSCOW (MRC) -- PBF Energy, the fourth-largest U.S. oil refiner by capacity, is holding processing near 70% of throughput even as more states relax stay-at-home orders, boosting demand for motor fuel, executives said, as per Hydrocarbonprocessing.

The gasoline crack spread RBc1-CLc1, which drifted negative in March as the coronavirus pandemic sharply cut air and road travel, has recovered to USD11.42 per barrel this week. However, fuel demand is off 23% in the United States over the last four weeks.

“We are just not going to do what everybody expects refiners to do, see an improvement in gasoline cracks and say, ‘The Holy Grail, there it is, let’s ramp up, let’s run,’” Chief Executive Thomas Nimbley said on an earnings call on Friday. “This thing is not over." PBF’s shares were up nearly 4% at USD9.62 on Friday. They are off nearly 70% year to date.

At the start of the year, PBF planned to run about 950,000 barrels of oil per day (bpd). But it now expects to run in the 650,000 to 750,000 bpd range, executives said on the call. Demand for gasoline has inched up and gasoline production has climbed for a third straight week to 7.5 million bpd, according to the latest data from the Energy Information Administration.“We’re not planning to get back to where things were prior to the pandemic, but I do believe at this point, we are starting to see green shoots related to a recovery,” Nimbley told investors.

PBF Energy joined rivals such as Marathon Petroleum in shifting production to gasoline after initially maximizing diesel output during the early surge of coronavirus cases. With COVID-19 cases rising in South America, exports are being reduced, Nimbley said.

PBF reported a quarterly loss in the first quarter on a USD1.28 billion inventory writedown amid the sharp decline in fuel demand. The company posted an adjusted loss of USD1.19 per share, wider than analysts’ average estimate of a USD1.04 per share loss, according to IBES data from Refinitiv.

The loss reflected refinery operating expenses that were higher than analysts expected and weaker margins from a turnaround at its Toledo, Ohio, plant, financial services firm Tudor Pickering, Holt & Co wrote in a note on Friday. PBF said it cut its 2020 planned capital expenditures further by a total of more than USD350 million, from its previous estimates of USD240 million.

As MRC wrote before, US refiner PBF Energy has completed its acquisition of Shell’s 157,000 bbl/day Martinez refinery near San Francisco, California. The USD1bn deal, agreed in June 2019, was completed effective 1 February 2020.

Besides, in late March 2020, PBF Energy Inc said it was operating its refineries at minimum rates, with throughput about 30% lower than the refiner’s expectations, as coronavirus-driven travel curbs hit fuel demand.

We also remind 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 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

MOSCOW (MRC) -- A record volume of diesel is set to reach Europe from the East in May after lockdown measures due to coronavirus left refiners in Asia and the Middle East with huge excess volumes of fuel, reported Reuters.

Refineries around the world have cut output in recent months in response to the unprecedented drop in demand due to movement restrictions imposed by governments to limit the spread of the coronavirus epidemic.

But that may prove insufficient after countries including India extended lockdown measures and others, including many European countries, recover activity at a slow pace, traders and analysts said.

The weak demand led to a rise in global diesel stocks and has put heavy pressure on profit margins for converting crude oil into diesel which last week hit an 11-year low below USD5 a barrel, according to Reuters calculations.

"Cutting refinery runs further means shutting units. It is much harder for refiners to make that decision but it will have to happen," a source at a European refiner said.

Over 3 million tonnes of diesel are set to arrive in Europe in May, up from a previous record of 2.8 million tonnes in June last year, according to Refinitiv data.

The sharp rise in fuel exports from Asia comes after China’s refineries cranked up operations in April following the easing of lockdown measures were eased.

Oil demand in the world’s top energy consumer is however recovering slowly, leading to higher exports from China.

The collapse in fuel demand initially hit jet fuel and gasoline the hardest, while diesel refining margins, or cracks, held well due to ongoing industrial activity.

With diesel accounting for around 50% of global refinery output, plants must now prepare to shut down crude distillation units, Vienna-based consultancy JBC Energy said in a note.

"Diesel cracks only last week started to plumb new record lows - this difference in timing in our view doesn’t signify a sudden drop off in diesel demand, but is rather the primary signal to reduce crude distillation."

As MRC informed 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) -- The rebound in China’s crude oil processing in April looms large over Asia’s refineries, which are already battling weak profit margins from the slump in fuel demand caused by lockdowns aimed at containing the coronavirus pandemic, reported Reuters.

China’s refineries processed the equivalent of 13.1 million barrels per day (bpd) in April, up from a 15-month low of 11.78 million bpd in March, according to calculations based on official data released on May 15.

While the higher processing rate reflects a recovery in fuel demand in China after it lifted most lockdown restrictions, it also raises the likelihood that more refined products will be exported into a well-supplied Asian market.

There are already signs that China’s modern, low-cost refineries are playing a bigger role in Asia’s refined product markets, with official data showing fuel exports at a record-high 8 million tonnes in April, up 10.2% from March and 29.7% from the same month in 2019.

While a full breakdown by fuel type isn’t yet available, using a conversion factor of eight barrels of product per tonne gives a fuel-export figure of 2.13 million bpd.

For the first four months of the year, China exported 1.72 million bpd of refined products, up 15.1% from the same period in 2019.

The increase in fuel exports from China isn’t the sole reason for the regional weakness in refinery profit margins, but it certainly is a contributing factor, and appears to be largely structural rather than a temporary phenomenon.

China issued a second batch of fuel export quotas for this year to domestic refiners, allowing for 28 million tonnes of shipments, mainly for gasoline, diesel and jet kerosene, Reuters reported on May 11, citing four sources.

This follows the first 2020 allowance of 27.99 million tonnes and means Chinese refiners can keep product exports at the current high levels, should they so choose.

There are various methods of calculating refinery margins, with one of the benchmarks being the profit per barrel at a typical Singapore refinery using Dubai crude

This was showing a loss of USD3.29 a barrel in early trade on Monday, wider than the five-day average of a loss of $1.84 and well below the moving 365-day average of a profit of USD2.57.

The main culprit is gasoline, for which demand has been severely affected as a result of personal transport being curtailed by the lockdowns in various Asian countries.

The cost of producing 92-RON gasoline in Singapore from Brent crude was a loss of 85 U.S. cents per barrel on May 15.

While this was up from a record low of a loss of USD13.15 a barrel on April 14, it’s still well short of the high so far this year of a profit of USD9.35 on Feb. 11, just as the coronavirus was breaking out of China to spread around the globe.

The margin for gasoil, the building block of diesel and jet kerosene, has held up better, ending at a profit of USD3.45 a barrel on May 15, but this was just over a quarter of the USD12.79 high so far this year, reached on March 30.

Diesel demand has held up relatively well during the coronavirus crisis as freight, heavy vehicle transport, agriculture and mining have all largely continued.

Another factor that has perhaps prevented refining margins from falling more than they already have was the idling of capacity during recent weeks, with Refinitiv Oil Research data showing a sharp drop in utilisation.

Putting together the four biggest refining nations in Asia - China, India, Japan and South Korea - shows runs were just 84% of capacity in April, down from the annual averages of 94%-97% over the previous five years.

Refinery throughput is likely to increase in coming months, though, as more plants come back on stream as lockdowns are lifted. The question is whether the nascent recovery in fuel demand will be more, or less, than the additional volume of products being produced.

As MRC informed earlier, 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. 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.

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.
MRC

MOSCOW (MRC) -- Air Products, a global leader in industrial gases and megaproject development, and Haldor Topsoe, the world leader in high-performance catalysts and proprietary technology for the chemical and refining industries, today announced the signing of a global Alliance Agreement, said the company.

The two companies will collaborate, using their extensive market network outreach for developing potential projects and the combination of their expertise on large-scale ammonia, methanol and/or dimethyl ether plants to be developed and built globally.

Topsoe's proprietary autothermal reforming technology (ATR) will be one of the technologies offered to Air Products via the new alliance.

The Alliance Agreement provides Air Products access to Topsoe’s technology license(s) and the supply of certain engineering design, equipment, high-performance catalysts and technical services for ammonia, methanol and/or dimethyl ether plants to be built, owned and operated by Air Products. The collaboration allows for the integration of Topsoe’s technology into many Air Products’ technologies including gasification of various feedstocks, and synthesis gas processes.

“The global agreement with Haldor Topsoe is very important to Air Products as we continue to expand our scope of supply to customers in developing large-scale projects around the world. We have built a reputation for successfully executing megaprojects. Having this Alliance and access to Haldor Topsoe’s technology-leading capabilities will serve to strengthen both our offerings and customer confidence in the reliability and quality of project development and performance,” said Dr. Samir J. Serhan, executive vice president at Air Products.

“We are extremely satisfied to enter this Alliance. Air Products is an industry leader, and we share their commitment to providing customers around the world with excellent, innovative, and more sustainable solutions. This alliance forms the foundation for integrated large-scale projects that will benefit from the close collaboration and combined strengths of our two companies,” said Amy Hebert, Deputy CEO and Executive Vice President at Haldor Topsoe.

Topsoe’s technology enables companies in the chemical and refining industries to get the most out of their processes and products, using the least possible energy and resources. On the forefront of developing sustainable technologies, HTAS solutions enhance food production for the world’s growing population and help protect the environment. Half of all the ammonia used to make artificial fertilizer is produced using Topsoe catalysts.

Topsoe’s technology will be incorporated into Air Products’ recently announced world-scale coal-to-methanol production facility in Bengalon, East Kalimantan, Indonesia. In addition, Topsoe technology will also be part of the previously announced world-scale Gulf Coast Ammonia production plant in Texas. Air Products will supply hydrogen and nitrogen for the ammonia production in part from its largest-ever steam methane reformer.

Air Products’ involvement in these world-scale projects will capitalize on the alliance and deliver substantial sustainability benefits. These kinds of projects can serve as carriers of renewable hydrogen molecules as the world’s interest hydrogen for mobility and energy transition continues to grow.

As MRC wrote earlier, in December 2014, SIBUR-Khimprom (a subsidiary of SIBUR Holding) and Air Products entered into an agreement to build a new air separation unit in Perm and to supply the facility with locally produced gases. The unit came on-stream in 2016. After the commissioning Air Products will supply industrial gases for SIBUR-Khimprom over the next 20 years.

Besides, we remind that in September 2019, SIBUR, the largest petrochemical comples in Russia and Eastern Europe, and BASF, Geman petrochemical major, agreed to closely cooperate on sustainable development to share their best practices.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polyprolypele (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) -- China plans to launch a campaign to cut toxic emissions by oil refining and storage companies as well as chemicals, pharmaceutical and packaging firms during the summer as part of its efforts to reduce ground ozone pollution, according to Hydrocarbonprocessing.

Beijing has identified ground ozone pollution, primarily from vehicle exhaust fumes and volatile organic compounds (VOCs) from industrial plants, as a major cause of poor air quality during the summer season in China.

From July 1 it will introduce tougher VOC emission standards and will tighten supervision of production, transport and storage at plants in 102 cities across the Beijing-Tianjin-Hebei, Yangtze River Delta, Fenwei Plain and eastern China regions, according to a draft plan issued by the Ministry of Ecology and Environment (MEE) on Monday.

The environment ministry will also ask oil refiners, chemicals companies and coal-to-liquids, pharmaceutical and pesticide firms to avoid arranging overhauls during the peak time of ground ozone pollution in order to reduce VOC emissions.

Maintenance plans at companies will need to be submitted to the MEE by the end of May.

A MEE official said on Friday that the ministry will send experts to carry out research on ozone pollution in Hebei, Shandong, Jiangsu, Anhui and Henan province in late May, and will launch inspections at industrial plants from June.

State-backed oil giants, including China National Petroleum Corp (CNPC), Sinopec, CNOOC and Sinochem, will be urged by the MEE to invest more money to improve their VOC emission levels.

The environment ministry will publish monthly ground ozone pollution levels for the 102 cities and will penalise local authorities that fail the pollution control targets, but did not give details.

The average concentration of ozone in China in 2019 reached 148 micrograms per cubic metres, up 6.5% from the previous year, according to MEE data.

As MRC wrote before, China National Offshore Oil Corp (CNOOC) will trim annual investment by 10% to 15% in 2020, while maintaining its goal of increasing domestic crude oil and natural gas production for the year.

We remind that in early May, 2018, CNOOC and Shell Nanhai B.V. (Shell) announced the official start-up of the second ethylene cracker at their Nanhai petrochemicals complex in Huizhou, Guangdong Province, China.

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