US oil production shut-ins top 2.2 million b/d during pandemic

MOSCOW (MRC) -- More than 2.2 million b/d of US oil production has been shut in response to low prices and weak demand, reported S&P Global with reference to US Energy Secretary Dan Brouillette's statement Thursday.

Register Now "We'll probably see that climb a little bit more before we start to see the demand curve pick up again," Brouillette said during a teleconference meeting of the Secretary of Energy Advisory Board.

"Hopefully that will allow us to stabilize this recovery and also begin the process of perhaps increasing our production and seeing this industry come back as strong as it was pre-pandemic and hopefully even stronger," he added. "It's very important that we see this energy industry come back to pre-pandemic levels."

US Energy Information Administration data released Wednesday showed US production at 11.5 million b/d last week, down 1.6 million b/d from March 13.

Brouillette said the US' status as the top global oil producer gave President Donald Trump leverage to negotiate a deal to end the March oil price war between Saudi Arabia and Russia.

"Had we not been in the position that we were in ... there was no way that he could have engaged in the way that he did," he said.

On the administration's efforts to fill the Strategic Petroleum Reserve while oil prices are low, Brouillette said DOE may seek to negotiate additional rental contracts with oil producers to store private supplies in the government caverns.

In March, Democrats in Congress blocked DOE's request for USD3 billion to buy US crudes for the SPR. DOE then switched to a rental plan that resulted in nine companies negotiating to store a total of 23 million barrels in the government stockpile. Renters include Chevron, ExxonMobil, Energy Transfer, Vitol, Atlantic Trading, Alon USA, Equinor Marketing & Trading, Mercuria Energy America, and MVP Holdings.

SPR stocks grew 1.9 million barrels last week to 641.6 million barrels, for a total addition of 6.7 million barrels since April 17, according to EIA data. With current authorized capacity of 714 million barrels, the stockpile has room for another 72.4 million barrels.

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) -- Cepsa (Madrid, Spain), a leading energy and chemicals player, said on Thursday that it is to restructure operations into five business units, exploration & production; refining; chemicals; sales; and trading, gas, power & renewables, said Chemweek.

The new organization will be managed by a team of newly hired executives with extensive international experience in the oil, gas and chemical sectors alongside Cepsa’s existing leadership team, headed by CEO Philippe Boisseau. The new structure kicks in on 1 June 2020 and aims to pursue a strategy that focuses on international expansion and the development of new businesses to drive Cepsa’s transformation and growth in the evolving energy and market environment.

Paloma Alonso will head Cepsa’s chemicals unit after a 23-year career with Dow. She succeeds Jose Manuel Martinez, who will lead a newly created technical and operations department. Alonso will also be responsible for the company’s environmental, social and governance activities. She moves to Cepsa on 15 July. Exploration & production will be led by Alex Archila, who joins Cepsa with 36 years’ experience with BHP and Chevron. Refining will be led by its current director, Antonio Joyanes, who has more than 20 years of experience in engineering, chemicals, trading and refining. Sales will be led by Pierre-Yves Sachet, who joins the company from Total and has 30 years of industry experience. He will also be responsible for the company's strategic growth area. Trading, gas, power & renewables will be managed by the CEO. Juan Vera, currently COO, transitions into overseeing special projects.

The restructuring is part of a reorganization that began in October 2019 after the US private equity firm Carlyle acquired a 37% stake in Cepsa from Mubadala Investment Co., the Abu Dhabi sovereign investment group, and the appointment of the current CEO who came from Total. Mubadala continues to hold a 63% stake in Cepsa. The shuffle follows a previous reorganization in 2018 which created four business segments, exploration & production, refining, marketing, and petrochemicals. Cepsa in 2019 reported revenue of €21.06 billion ($23.08 billion) with petrochemicals accounting for 16.4% and refining for 57% of the total.

“With this new and diverse executive committee, which brings in complementary talents and expertise, and with the support of all our professionals, we aim to meet the challenges of the energy transition, drive Cepsa's international growth, and expand each of our businesses as well as develop new ones. To achieve these goals, we will optimize our integrated business model, enhance our competitiveness and continue to pursue operational excellence, said CEO Philippe Boisseau.

As it was written earlier,Cepsa Quimica has postponed planned maintenance to the turn of Q3/Q4 on unit 3 of its Huelva, Spain, phenol and acetone plant that was initially scheduled from mid May to mid June, according to a market source. Its other phenol and acetone production unit (2) at Huelva will remain operational.

Phenol is one of the main feedstocks for the production of bisphenol A (BPA), which, in its turn, is used for the production of polycarbonate (PC).

According to MRC's ScanPlast report, Russia's estimated consumption of PC granules (excluding imports and exports to/from Belarus) totalled 78,500 tonnes in 2019, up by 15% year on year (68,100 tonnes a year earlier).

Cepsa’s chemicals operations include the production of linear alkyl benzene (LAB), in which it is the world’s leading producer with plants in Spain, Canada and Brazil. The company is also the leading producer of cumene and the second largest in phenol and acetone with plants in Spain and China. Cepsa recently diversified into fatty alcohols through expansion of plants in Indonesia and Germany via its Sinar Mas Cepsa joint venture.
MRC

MOSCOW (MRC) -- SIBUR Holding decided to establish a Sustainable Development Committee of the Board of Directors, said the company.

The Committee will be responsible for: taking part in shaping and implementing the Company’s 2025 Sustainable Development Strategy and publicly promoting ethical, transparent and sustainable business practices; and monitoring that the Company’s activities are conducted in a responsible and sustainable manner.

The Committee will coordinate the management of sustainable development risks and opportunities, enhance SIBUR's business reputation, investment appeal and relationships with stakeholders, and indicate that the Company puts a special focus on sustainability and recognises its strategic importance.

Establishing a designated committee of the Board of Directors is the best practice among international leaders in sustainability. The Committee will contribute to improving the efficiency of the Company's activities in this area and advise the Board of Directors on the matters of sustainable development.

In 2019, the Board of Directors of SIBUR Holding adopted the 2025 Sustainable Development Strategy.

As MRC informed earlier,SIBUR has completed the start-up and commissioning work at key production facilities at ZapSibNeftekhim (ZapSib), its flagship petrochemical complex at Tobolsk. ZapSib in the first quarter of 2020 produced 115,000 metric tons of PP and 259,000 metric tons of PE, part of which is en route to clients and was not reflected in the sales volumes for the reporting period. Sales of PP grew by 87.3% to 243,000 metric tons and of PE by more than 100% to 132,000 metric tons. In January 2020, Sibur completed construction of its new thermoplastic elastomers production facility at Voronezh and launched trial production.

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) -- Japanese refiners have received "larger than expected cuts" in their June-loading term crude supply from OPEC producers, keeping them balanced amid plummeting domestic demand due to the coronavirus pandemic, the newly appointed president of the Petroleum Association of Japan said, as per S&P Global.

The refiners, however, are mulling the possibility of seeking spot barrels when there is supply shortage from the domestic demand recovery in the coming months, Tsutomu Sugimori told a press conference via webcast.

"We cannot disclose degrees of informed supply cuts," said Sugimori, who is president of JXTG Holdings, the parent of the largest Japanese refiner JXTG Nippon Oil & Energy. "It was larger than expected either way."

Saudi Aramco has informed at least one Japanese refiner that it will reduce the refiner's June-loading crude allocations by 20%-40%, with the cuts being made across grades, with larger cuts in heavier grades.

"Considering the domestic demand, which has shrank significantly, we are confident to operate normally with the basis of the current OPEC supply cut for now," said Sugimori.

"However, there is a possibility of facing [supply] shortage considering the domestic demand to recover," Sugimori said. "In such case, we will balance it out from procuring spot cargoes from around the world."

As MRC informed earlier, Japanese oil refiner Idemitsu Kosan expects Japan’s demand for oil products to fall by about 20% in the April-June quarter from a year earlier as measures to curb the coronavirus pandemic reduce jet fuel and gasoline use.

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) -- Hengyuan Refining Company Bhd said that a tank storing crude oil had caught fire at its refinery on the Malaysian west coast, reported Reuters.

Preliminary investigations show the fire at the Port Dickson refinery was due to a lightning strike, the company said in a statement.

"The damages sustained from the fire incident are restricted to one crude tank area," the company said.

The fire affected a 10,000-litre capacity oil tank, Malaysian state news agency Bernama reported, citing fire and rescue department officials. Firefighting operations were ongoing, it said.

Hengyuan is a subsidiary of China’s Shandong Hengyuan Petrochemical Co. The refinery at Port Dickson has a capacity of 156,000 barrels per day (bpd).

We remind that, as MRC wrote before, in mid-March 2020, Malaysia's Pengerang Refining and Petrochemical (PRefChem), a 50:50 JV between Petronas and Saudi Aramco, took its naphtha cracker in Johor off-stream after an explostion and fire at the site. The cracker has an annual capacity of 1.2 million tons/year of ethylene and 600,000 tons/year of propylene. Thus, the explosion occurred at PRefChem complex at roughly 10.50 PM on 15 March 2020, which killed five people. The initial report confirmed that the incident took place at the 300,000 barrel per day refinery unit.

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