Shell, other US Gulf producers plan to resume operations as Cristobal storm passes

MOSCOW (MRC) -- Shell and other top producers in the US Gulf of Mexico are planning to resume drilling operations and bring production volumes back online now that Tropical Depression Cristobal is onshore and most deepwater oil and gas facilities were left unscathed, said S&P Global.

While Shell never took any oil and gas volumes offline during the storm, BP, Occidental Petroleum and others shut in some production volumes as the Gulf temporarily lost nearly 35% of its crude volumes and almost one-third of its natural gas output, according to the US Bureau of Safety and Environmental Enforcement.

More than 635,000 b/d of crude and 878 MMcf/d of gas were shut in ahead of Cristobal's move onshore, BSEE said June 7, as operators evacuated 188 platforms and rigs in the Gulf -- roughly 30% of the US Gulf's total platforms with working personnel.

BP, for instance, had reduced outputs at its Thunder Horse, Atlantis and Na Kika platforms in the Gulf. Those three BP-operated platforms churn out more than 200,000 boe/d.

Shell said June 8 that it will begin redeploying nonessential workers who were evacuated from offshore platforms as Shell resumes operations. "There were no impacts to our production as a result of TS Cristobal, and we expect to resume our drilling operations as conditions continue to improve today and tomorrow," Shell said in a prepared statement.

A Murphy Oil spokesman said the oil producer was working to return crews to their offshore locations. And ExxonMobil said its offshore facilities and USGC refineries are all operating normally.

Cristobal battered southern Mexico and shut down ports over the past week, before moving through the Gulf and spreading heavy rainfall from Louisiana to Florida. The storm hit just as oil prices were moving up with the OPEC+ group agreeing to extend deeper production cuts at least through July and front-month NYMEX WTI flirting with hitting $40/b for the first time since early March.

Total Gulf oil production was nearly 2 million b/d before the coronavirus pandemic cratered global demand and oil prices. BSEE was estimating Gulf oil production at closer to 1.85 million b/d before Cristobal.

However, S&P Global Platts Analytics data estimates that Gulf crude oil production will fall to an estimated 1.62 million b/d average for June as some producers reduced their volumes because of lower prices.

As MRC wrote previously, Tropical Storm Cristobal forced ports to close in three states in Mexico's Bay of Campeche area June 3, although there has been no major impact on oil, gas or power generation infrastructure.

We remind that Royal Dutch Shell Plc restarted the crude distillation unit, coker and gasoline-producing cat cracker at its 225,300 barrel-per-day (bpd) Norco, Louisiana, refinery. Shell is restarting the hydrocracker, while the reformer and naphtha hydrotreater will remain shut for previously planned work, the sources said. The coker is scheduled to undergo planned work beginning next week, but is expected to remain in operation.

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 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

MOSCOW (MRC) -- Formosa Petrochemical Corp (FPCC) restarted No2 cracker in Mailiao, Taiwan on 4 June after brief outage, said Chemweek.

The craker No2 of capacity 1.035m ethylene, 520,000 propylene tonnes/year was shut on 1 June 2020 on technical issues. The company is currently operating its No 2 cracker at around 90% of capacity after resuming operation on 5 June, according to a market source.

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.

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) -- The Bank of England (BoE) says that as of 3 June, 53 companies had used the CCFF and a total of GBP16.2 billion (USD20.6 billion) had been loaned to cope with the impacts of COVID-19, said Chemweek.

BASF is the biggest beneficiary of a UK government emergency loan scheme to help the biggest companies operating in the country cope with the impacts of COVID-19, Bayer is also one of the biggest recipients of the emergency funding, which takes the form of cheap government loans, under the Covid Corporate Financing Facility (CCFF).

The Bank of England (BoE) says that as of 3 June, 53 companies had used the CCFF and a total of GBP16.2 billion (USD20.6 billion) had been loaned. BASF was the biggest beneficiary, receiving GBP1 billion, the maximum amount allowed by the BoE to one company under the CCFF, and Bayer had received GBP600 million. The other chemical industry participant is AkzoNobel, which had received GBP30 million of loans under the scheme.

The CCFF was announced in March and is run by the BoE on behalf of the UK government. To qualify for funding under the scheme, companies must be deemed to make a "material contribution" to the UK economy and be investment-grade rated as of 1 March.

BASF says it has eight production sites in the UK and employs about 850 people there. Bayer says it has 880 employees in the UK.

We remind that BASF has restarted its No. 1 steam cracker following a maintenance turnaorund. Thus, the company resumed operations at the plant on September 30, 2019. 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

MOSCOW (MRC) -- Oil prices have quickly climbed to levels that raise the risk of price falls as demand is fragile, Morgan Stanley said, as benchmark crude hit its highest in three months, said Hydrocarbonprocessing.

Oil climbed on Monday after major producers agreed to extend a deal on record output cuts to the end of July and as China’s crude imports hit an all-time high in May.

The bank said its base case expectation remained that oil markets will be progressively under-supplied in the second half of this year and inventories will shrink in the fourth quarter and first quarter next year.

But it said in a note the rally “appears mostly supply- rather than demand-driven, and it is questionable how strong refinery runs can increase against this backdrop”.

Refining margins are historically low and inventories of oil products remain elevated relative to crude oil inventories, suggesting the demand recovery is relatively fragile.

Consumption is unlikely to return fully to pre-coronavirus levels until the end of 2021, Morgan Stanley said, adding that inventories are unusually high after the increases in April.

Growth from U.S. shale could return to levels that are too high, if the U.S. benchmark WTI trades too far above the low-USD40s, it added.

The bank also sees a risk to OPEC’s compliance with supply cuts that have led to unusually high levels of spare capacity. “When the cuts are eventually unwound, production could rise sharply,” it said.

As MRC infomed earlier, the fall in Russia's GDP in non-working April 2020 is estimated at 12% in annual terms after growth, according to updated data, by 0.8% in March, 2.6% in February and 1.6% in January. As a result, in January-April 2020, according to the ministry, the RF GDP decreased by 1.9% in annual terms after an increase of 1.6% in January-March.

As MRC informed earlier, Russia's output of products from polymers grew in April 2020 by 11.2% year on year due to quarantine restrictions. However, this figure increased by 3.4% year on year in the first four months of 2020. According to the Russian Federal State Statistics Service, April production of unreinforced and non-combined films decreased to 107,000 tonnes from 110,400 tonnes a month earlier. Output of films products grew in the first four months of 2020 by 12.5% year on year to 402,800 tonnes.
MRC