FERC rejects BP complaint over bundling of NGPL transportation service

MOSCOW (MRC) -- The Federal Energy Regulatory Commission has dismissed a complaint filed by BP Energy alleging Natural Gas Pipeline Company of America acted improperly by forcibly bundling a systemwide gas transportation service option as a condition of BP exercising its right of first refusal to bid on continuing firm service, reported S&P Global.

The dispute involves the reach of FERC rules meant to protect an existing firm customer's need to continue its historical transportation service.

FERC sided with the pipeline company Wednesday in finding that BP was seeking to alter existing service rather than preserve it. The right of first refusal "does not afford the firm shipper a right to change the essential character of its service, as BP seeks to do here," FERC concluded in a Wednesday order (RP20-481).

BP had contended that NGPL, in violation of its tariff and FERC rules, "required BP to take its 'optional' (systemwide) service to retain capacity subject to a regulatory right of first refusal, even though NGPL's own notice of released capacity stated the current capacity holder my elect to match the bids with or without the (systemwide) option."

BP said it had preferred to continue primary point capacity without systemwide service that provided access to secondary points throughout its system.

The net effect of NGPL's approach was to increase the cost of its exercise of its right of first refusal for a single contract by about USD7.5 million over the life of the contract, BP argued in its January 31 compliant.

Tenaska Marketing Venture also weighed in in support of the complaint.

NGPL for its part countered that BP was trying to use the right of first refusal to change its existing service, contrary to FERC rules, the pipeline's tariff and BP's contract. It argued that BP exercised its right to match the highest bid to keep its firm service with the systemwide option but now sought to downgrade that service.

BP was using the process to get a different service at a rate below the highest bid received, NGPL asserted.

FERC ultimately concluded that the systemwide option was "essential" to BP's existing firm service, which had a higher maximum reservation rate reflecting the right to secondary access points.

Language in the tariff does not provide BP with a right to discontinue a fundamental part of its existing service that includes a systemwide options while keeping a firm transportation service through a right of first refusal, FERC said.

"Rather, this language ensures that a historical shipper without the (systemwide) option in its existing service may not be compelled to add the (systemwide) option in order to match a competing bid in the (right of first refusal) process," FERC said.

As MRC informed before, BP has entered into an agreement to license its latest generation technology for the production of purified terephthalic acid (PTA) to China’s Dongying Weilian Chemical Co., Ltd. Weilian Chemical is a subsidiary of Dongying United Petrochemical Co., Ltd, one of the leading manufacturers and distributors of petroleum and petrochemical products in China. Weilian Chemical intends to build a 2.5 million tonnes per annum PTA production unit at the Dongying Port Economic Development Zone in eastern Shandong province, adding to Dongying United Petrochemical’s existing refineries and paraxylene (PX) facilities portfolio.

PTA is used to produce polyethylene terephthalate (PET), which, in its turn, is used in the manufacturing of plastic bottles, films, packaging containers, in the textile and food industries.

According to MRC's ScanPlast report, April total estimated PET consumption virtually did not change year on year, totalling 60,840 tonnes (in April 2019 - 60,980 tonnes). 235,160 tonnes of PET chips were processed in Russia in January-April 2020.

BP is one of the world's leading international oil and gas companies, providing its customers with fuel for transportation, energy for heat and light, retail services and petrochemicals products for everyday items.
MRC

OPEC+ reaches tentative deal on one-month extension to 9.7 mil b/d oil cuts: sources

MOSCOW (MRC) -- OPEC and its allies have coalesced around a one-month extension to their 9.7 million b/d collective production cuts beyond June, with key members Saudi Arabia and Russia aligned, though the date of a meeting to finalize a decision remains in flux, reported S&P Global with reference to people involved in the talks.

OPEC kingpin Saudi Arabia is insisting on firm commitments from other members to stick to their production quotas, and those who have violated their caps are being pressured to overcomply in the coming months to make up for their excess barrels, OPEC+ sources told S&P Global Platts.

The OPEC+ alliance had floated moving forward the meeting to June 4 from its previously scheduled June 9-10, but no announcement has been made as the compliance discussions continue.

"Hopefully the [earlier] meeting will happen, but it's not yet decided," a source said.

Without an extension, the 9.7 million b/d in cuts are scheduled to roll back to 7.7 million b/d starting July 1 through the end of 2020.

Oil prices have rebounded -- with front-month ICE Brent futures rising above USD40/b in early trading June 3 -- but are still far below desirable levels for many OPEC+ members, and with the global economy only just starting to recover, many members have pushed to maintain the deeper cuts.

Under the proposed one-month extension, OPEC+ ministers would meet monthly to review compliance and market conditions, the sources said.

Several of the six secondary sources used by OPEC to monitor output, including S&P Global Platts, have yet to report their May production figures.

But preliminary production and export data released by some countries have indicated uneven compliance so far, with Russia exceeding its cap by 100,000 b/d and Iraq reporting exports that nearly match its production quota.

Saudi Arabia itself, along with Gulf allies the UAE and Kuwait, have pledged additional cuts below their quotas for June, though it was unclear whether the countries would continue their overcompliance in an extension.

As MRC informed previously, global oil consumption cut by up to a third in Q1 2020. 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 721,290 tonnes in the first four month of 2020, up by 4% year on year. Low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) shipments grew partially because of the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market totalled 347,440 tonnes in January-April 2020 (calculated by the formula production minus export plus import). Supply exclusively of PP random copolymer increased.
MRC

LyondellBasell recognized for leadership in environmental, health & safety performance

MOSCOW (MRC) -- American Chemistry Council (ACC) presented its Responsible Care Company of the Year Award to LyondellBasell, FMC Corporation and Ethyl Corporation, recognizing each for excellence and leadership in environmental, health, safety and security (EHS&S) performance, said ACC.

"Responsible Care has always been a program based on leadership, safety and continual improvement in our facilities, operations and products. It’s a commitment that helps us to operate with health, safety, security and environmental protection as our top priorities,” said ACC President and CEO Chris Jahn. “Today, we recognize LyondellBasell, FMC and Ethyl Corporation for their outstanding leadership and dedication to the tenets of Responsible Care with ACC’s highest honor, the Responsible Care Company of the Year Award."

ACC presents the Company of the Year award to one company each in three size categories: large, medium-sized and small companies. To be eligible for the Company of the Year award, ACC members must demonstrate they have met and surpassed Responsible Care performance criteria, including: achieving a safety performance rating in the top 10 percent of companies in their size category, with no significant process events in the previous year; positive performance measures in the areas of transportation safety, process safety and emissions reduction; and demonstrated improvements in EHS&S performance, product stewardship, distribution safety and emergency preparedness.

LyondellBasell applies Responsible Care requirements when making decisions every day. The company’s Operational Excellence and Product Stewardship systems have resulted in continually improving health, safety, security and environmental performance. Since 2017, LyondellBasell has reduced its Total Recordable Injury Rate at ACC member sites by 68 percent, and reduced the number of reportable environmental events by 26 percent.

In 2019, LyondellBasell expanded an initiative that uses mechanical recycling technology to transform post-consumer plastic waste into high-quality polymers to make new products with recycled content in a number of sectors. In addition, LyondellBasell began pilot production of bio-based feedstocks made from renewable resources. Through these initiatives, the company is offering more sustainable solutions and helping customers achieve their environmental targets.

As MRC reported earlier, 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, said the company's CEO Bob Patel. 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.

We also remind that 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

Having fallen in May, PVC prices in Russia begin rising in June

MOSCOW (MRC) -- Negotiations over June shipments of suspension polyvinyl chloride (SPVC) to the domestic market began in the Russian market in the middle of last week. After a sharp price drop in May, domestic producers announced a price increase in June, according to ICIS-MRC Price report.

Last month, amid a significant fall in PVC prices in foreign markets and a major decrease in demand due to quarantine restrictions in the domestic market, Russian producers were forced to reduce their prices by Rb8,000/tonne or lower. In the second half of May and early June, PVC prices resumed their upward trend in foreign markets, and demand for resin began to slowly recover from the domestic market. On the back of this, Russian producers raised their prices for June deliveries to the domestic market by Rb1,000-2,000/tonne.

Quarantine restrictions due to the spread of coronavirus negatively affected demand for finished products from PVC in April-the first half of May. As a result, many converters reduced their capacity utilisation, and some of them, including the large ones, were forced to suspend their operations in the first decade of May.

In the second half of May, quarantine restrictions were eased, and many consumers have already predicted a gradual recovery in demand for finished products from PVC in June and intend to increase their capacity utilisation. At the same time, the last year's figures are unlikely to be reached in the next couple of months.

Demand has been also gradually recovering in the Chinese domestic market, which led to higher PVC prices in the Asian region. Chinese producers also raised their export prices of acetylene PVC. Offer prices for preferential shipments in containers by rail for Russian consumers have reached USD820/tonne DAP Moscow by early June.

Despite weaker demand for finished products, amid low prices in foreign markets, some Russian companies still began to buy resin. Chinese and American producers traditionally accounted for the bulk of PVC purchases, and according to preliminary results, resin imports reached 6,000/tonnes in May.

Kaustik (Volgograd) shut down its production capacities for maintenance in May. The two largest producers - SayanskKhimPlast and RusVinyl - will shut down their production capacities in July, the outages will last for a month and a couple of weeks, respectively.

Most Russian converters announced an increase in PVC purchases in June, which was partially caused by expectations of stronger demand for finished products. Some companies still began to build up additional stocks for July.

Overall, June deals for Russian resin with K=64/67 were negotiated in the range of Rb72,000-74,500/tonne CPT Moscow, including VAT, up by Rb1,000-2,000/tonne from May, for quantities of up to 500 tonnes.

Last week, some consumers were in no hurry to agree on deals for June deliveries. At that time, SayanskKhimplast had already sold out all of its June quotas by the middle of this week, and the producer announced a price increase of another Rb2,000/tonne for additional quantities.
MRC

COVID-19 - News digest as of 04.06.2020

1. COVID-19 economic shock, capacity overhang to pressure petchem margins, stall investment

MOSCOW (MRC) -- The worldwide economic shock due to the coronavirus disease 2019 (COVID-19) pandemic and a major petrochemical production capacity overhang could mean weak industry margins and low plant utilization rates for several years, according to the International Energy Agency (IEA; Paris), said Chemweek. The wide-ranging annual benchmark analysis by the IEA in its world energy investment report also includes a forecast for the largest annual decline in energy investment on record in 2020, with the total to plunge by $400 billion compared to capital spending in 2019.




MRC