Chevron-led Kazakh consortium fulfilling OPEC+ cuts for May-June

MOSCOW (MRC) -- The Chevron-led consortium that operates Kazakhstan's largest oil field, Tengiz, is imposing production cuts in line with government legislation covering May-June and is not yet aware of additional restrictions for July, reported S&P Global with referenceto its statement June 19.

In production since 1993, Tengiz is the mainstay of Kazakhstan's crude production and the CPC export blend loaded on the Black Sea coast. It accounts for 40% of Kazakh oil production, with output of 667,000 b/d in the first quarter. A major coronavirus outbreak at the site by the Caspian Sea has disrupted a USD46.5-billion expansion project expected to lift output to 900,000 b/d in 2023.

Kazakhstan has acknowledged a failure to fulfil production cuts agreed in April among the OPEC+ group of countries in response to collapsing demand and global oversupply. On June 18, the country's energy ministry said over-supply in the first 12 days of May had amounted to 3.13 million barrels, resulting from "industry inertia," and would be compensated through additional cuts in August and September.

S&P Global Platts estimates Kazakhstan's production was 160,000 b/d above its quota of 1.319 million b/d over the full month. The country told an OPEC+ monitoring meeting this week it would cut an extra 15,000 b/d in July and 50,000 b/d in August and September.

In emailed comments, Chevron said the TCO consortium was playing its part in production cuts, although it gave no indication of plans beyond June, following an agreement by the OPEC+ group to extend the first phase of cuts, totaling 9.7 million b/d, into July.

"TCO, as a law-abiding company, is following the Republic of Kazakhstan's government decree imposing oil production limitations in May and June and is not currently aware of additional legislative action. We remain focused on safe and reliable operations and continuously strive to meet the expectations of our shareholders," Chevron said, adding it was "generally TCO's policy not to comment on commercial matters."

A provisional program for CPC crude loadings for July suggests a sizable increase from June to 1.31 million b/d. This is close to Kazakhstan's production quota for May and June, however, not all CPC crude is produced in Kazakhstan, about 10% being from Russian oil fields in the northwest portion of the Caspian Sea.

The OPEC+ agreement in any case only covers crude oil, and not condensate, sizeable volumes of which supplement crude oil in the CPC crude stream. Kazakhstan's third largest hydrocarbon field, Karachaganak, is primarily a gas and condensate field, with liquids output of around 220,000 b/d in 2019.

TCO said this month that work on the Tengiz expansion project, known as the Future Growth Project-Wellhead Pressure Management Project, was now 77% complete, and it was "taking actions to safely execute the projects key critical-path activities."

Chevron, which is a 50% shareholder in TCO, has cut its capital spending plans for this year by almost a third, indicating that Tengiz will account for a significant portion of the savings.

The other shareholders are ExxonMobil, on 25%, state-owned KazMunaiGaz on 20% and Lukoil subsidiary LukArco on 5%.

We remind that, as MRC informed before, in late May, 2020, Borealis said it will not proceed with the development of a multi-billion-dollar integrated steam cracker and polyethylene (PE) project in Kazakhstan. “The decision to discontinue this project is based on a thorough assessment of all aspects of the prospective venture and impacted by the effects of the COVID-19 (coronavirus disease 2019) pandemic as well as the increased uncertainty of future market assumptions,” Borealis states.

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.
MRC

MOSCOW (MRC) -- Teijin says that its subsidiary Teijin Carbon Europe (Heinsberg, Germany) has increased the production capacity of chopped carbon fiber by 40%, according to Chemweek.

The company says that it is responding to the growing demand from European electronics manufacturers in recent years, as well as the current increase in demand for compounds for medical devices.

Teijin says that European customers' demand has been partly met by its Mishima plant in Japan. With the increased German capacity, Teijin can now "react more flexibly to inquiries in the European market."

Other product types of its brand Tenax short fiber-chopped, pelletized or milled - are produced at facilities in Japan and the US, it says. They are supplied in a variety of sizings to be used, besides thermoplastic materials, with thermosets and in water-based processes.

As MRC reported before, Teijin Ltd. is expanding its footprint in Europe with Teijin Automotive Center Europe GmbH, a new base in Wuppertal, Germany, that will house technical functions for the company’s automotive composites business.

Polypropylene (PP) is used in the production of autocomponents, as well as yarns and fibre.

According to MRC's ScanPlast report, 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.

Teijin is a technology-driven global group offering advanced solutions in the areas of sustainable transportation, information and electronics, safety and protection, environment and energy, and healthcare. Its main fields of operation are high-performance fibers such as aramid, carbon fibers & composites, healthcare, films, resin & plastic processing, polyester fibers, products converting and IT. The group has some 150 companies and around 17,000 employees spread out over 20 countries worldwide.
MRC

MOSCOW (MRC) -- National Petrochemical Co. (Petrochem) said that the board of directors of its subsidiary, Saudi Polymers Co., decided to shut down the polystyrene unit and amortize its value, due to difficulties in achieving profits amid the global polystyrene market conditions, said Argaam.

The company expected this process to have an impact of up to SAR 277 million on its financial statements for Q2 2020.

Polystyrene output represented less than 2% of the project’s total production during the last two years, Petrochem added in a bourse statement.

As MRC informed earlier, National Petrochemical Company (Petrochem) started the scheduled maintenance for the Saudi Polymers plant in 2016. The plant was shut for 60 days.

According to MRC's ScanPlast report, April estimated consumption of PS and styrene plastics in Russia was 36,170 tonnes, down by 12% year on year. Russia's estimated consumption of PS and styrene plastics totalled 157,110 tonnes in January-April 2020, down by 5% year on year.

The National Petrochemical Company (NPC), a subsidiary to the Iranian Petroleum Ministry, is owned by the government of the Islamic Republic of Iran. It is responsible for the development and operation of the country's petrochemical sector.
MRC

MOSCOW (MRC) -- Gasoline demand in Japan is showing signs of recovery following the lifting of the state of emergency, prompting the country's largest refiner, JXTG Nippon Oil & Energy, to snap up at least one MR-sized gasoline cargo from Singapore, believed to be the first purchase from overseas in months, reported S&P Global.

JXTG bought one gasoline cargo loading in June in Singapore, a source familiar with the matter said June 17, without giving further details.

A spokeswoman for JXTG Nippon Oil & Energy on June 17 declined to comment on specifics of its product deals.

JXTG's purchase comes on the heels of a larger than expected domestic demand recovery for gasoline in recent weeks following the lifting on May 25 of the state of emergency, which was declared April 7 to curb the spread of the coronavirus pandemic.

Trafigura will use its own ship, the Olaf, for loading a 35,000 mt cargo in June for Kawasaki delivery, shipping brokers said. The Olaf, which is in Singapore, was scheduled to arrive in Kawasaki on June 25, according to S&P Global Platts trade flow software cFlow. Trafigura executives could not be immediately reached for comment.

Currently, JXTG's 235,000 b/d Kawasaki refinery is shut for scheduled maintenance work. The 65,000 b/d No. 3 crude distillation unit at Kawasaki is due to be restarted in late June, with the 170,000 b/d No. 2 CDU restarting in early July.

JXTG last bought at least one spot MR-sized gasoline cargo loading in April from South Korea when Japanese refiners were increasingly cutting runs as the coronavirus pandemic eroded domestic oil demand, as well as the import economics for product from the country.

Together with increased imports by Cosmo Oil, Japan was a net importer of gasoline in April as refiners raised oil product imports from neighboring countries because of refinery run cuts in response to plummeting domestic demand.

Japan imported an average of 68,571 b/d of gasoline in April, more than triple the 19,569 b/d a year earlier, and flipped to being a net importer after exports came to 44,856 b/d, according to the Ministry of Economy, Trade and Industry data.

At the start of June, however, Japan's crude throughput rose for the first time in seven weeks, with domestic gasoline demand recovering to pre-state of emergency levels.

Japan's estimated gasoline shipments rose 3.8% week on week to 5.23 million barrels in the June 7-13 week, staying above the pre-state of emergency level of 4.72 million barrels over April 5-11, according to calculations by Platts based on Petroleum Association of Japan data.

On June 17, Japan's domestic gasoline rack prices in Chiba, east of Tokyo Bay, stood at Yen 37,300/kiloliter (USD55.21/b), up 33% or Yen 9,200/kiloliter from May 25 when the state of emergency was lifted, Platts data showed.

Japan's demand recovery follows a trend in the wider Asian gasoline market, which has been heavily supported of late by an uptick in driving activity in the region.

The latter has especially seen sustained growth since mid-May, with most Southeast Asian countries such as Malaysia, Vietnam, Cambodia and Myanmar easing lockdowns and reopening their domestic economies.

Even Singapore - the region's oil trading hub - is set to move into its next phase of easing on June 19, after having been in partial lockdown since mid-March.

Against the backdrop of improved demand, supply-side fundamentals have similarly recovered, with China and South Korea having lowered their export volumes in May and June.

"We are seeing a converging demand-supply dynamic now. Supplies are not tight but the amount of replacement barrels is not as much," a Singapore-based trade source said.

"Vietnam is coming out to buy, and without South Korean barrels, they are forced to take the cargoes from alternate sources such as Singapore," a second source said.

As MRC wrote previously, JXTG Holdings Inc, Japan’s biggest oil refiner, plans to spend 1.5 trillion yen (USD14 billion) for the next three years to drive its transformation into a supplier of low-carbon energy and materials.

We remind that JXTG Nippon Oil and Energy brought on-stream its cracker on April 28, 2020, following a turnaround. The cracker was shut for maintenance on February 27, 2020. Located at Kawasaki in Japan, the cracker has an ethylene production capacity of 460,000 mt/year and propylene production capacity of 235,000 mt/year.

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) -- PKN Orlen (Plock, Poland), the country’s largest oil refiner and petrochemicals producer is set to gain EU antitrust approval for its takeover of smaller rival Lotos (Gdansk, Poland) after agreeing some concessions aimed at allaying competition concerns, according to Reuters citing people familiar with the matter.

PKN wants to buy at least 53% of Lotos. EU said it was concerned that the deal may push up prices and reduce competition in Poland, the Czech Republic, Estonia, Lithuania, Latvia and Slovakia.

PKN last month offered to sell Lotos’ stake in a joint venture with BP called Lotos - Air BP Polska (LABP) and also pledged to supply jet fuel to LABP with the aim of creating a viable competitor. The company has since made some minor changes to the package after rivals and customers provided feedback to the European Commission, Reuters says.

The acquisition of Lotos by PKN was initiated in February 2018 by signing a letter of intent with the Polish State Treasury, holding 53.19% of voting rights. In April 2018, a due diligence process was commenced at Lotos to examine its commercial, financial, legal and tax positions ahead of the planned acquisition. In November 2018, a draft application for approval of the concentration was submitted by PKN to the European Commission.

PKN says the aim is to build a strong entity with international potential, which would be an important player on the oil supply market. This is particularly important for the fuel and energy security of supply for Poland, but also for Central and Eastern Europe. The creation of such an entity would also increase its ability to finance large, multi-billion-dollar projects. With the closing of the acquisition, Poland would join the global trend towards building major players on the fuel and energy market, PKN says.

As MRC informed before, in September 2019, Honeywell announced that PKN orlen had licensed the UOP MaxEne process, which can increase production of ethylene and aromatics and improve the flexibility of gasoline production. The project, for the PKN Orlen facility in Plock, Poland, was in the basic engineering stage then.

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