PES lowers price of refinery site citing pandemic disruption

MOSCOW (MRC) -- Economic uncertainty caused by the COVID-19 pandemic has trimmed 11% off the price of the now-closed Philadelphia Energy Solutions (PES) refinery site, said Chemweek.

In papers filed with the US Bankruptcy Court in Delaware on 18 June, PES has requested approval of an agreement that would reduce the initial USD240 million purchase price by USD27.5 million. Court approval would mean the sale to Chicago real estate developer Hilco could close by 26 June.

COVID-19 "has led to unprecedented economic uncertainty, resulting in many counterparties abandoning acquisitions that were agreed upon prior to the pandemic, with others significantly retrading on economic terms," PES’s submission states.

While the refiner believes "that all conditions to the purchaser's obligations to close other than closing deliverables have been satisfied, the purchaser has taken the opposite position," the motion said. "Under these circumstances it would be challenging to compel the purchaser to close the sale transactions as reflected in the original agreement, and that the debtors would face a challenge to their retention of the deposit."

In the request, Hilco cites difficulties created by COVID-19 as well as increased environmental remediation costs and expenses.

Under the terms of the amendment, if the deal doesn't close by 26 June, the purchase price will increase by USD357,143 for each calendar day during the period starting on June 1 and ending on the closing date. If the closing doesn't occur by June 26 or one business day after the court approves the amendment, PES will keep the USD15 million of Hilco's deposit in escrow and reserve its right to seek further relief.

In addition, PES will retain the emission reduction credits it owns instead of transferring them to the liquidating trust at closing, as stipulated by the original agreement. As previously reported by OPIS, the bankruptcy court approved on 3 June a settlement agreement between EPA and PES that would require the refiner to buy and retire USD10 million worth of third-party verified Renewable Identification Number (RIN) credits.

That agreement resolved PES's Renewable Fuel Standard compliance obligation under a deal it struck with EPA in 2018 after it first filed for Chapter 11 bankruptcy protection. PES shut its 335,000-b/d refinery and again filed bankruptcy in 2019 after a fire on June 21 destroyed parts of the two-plant facility.

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 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) -- Japanese firm Hitachi Chemical Company will undergo a name change to Showa Denko Materials on 1 October this year, parent firm Showa Denko said.

The name change "represents Hitachi Chemical's determination of opening its new chapter as a consolidated subsidiary of SDK", the producer said in a statement.

Here SDK announces the change in the firm name of Hitachi Chemical because it was resolved at Hitachi Chemical's annual general shareholders' meeting held on June 23, 2020. The new firm name "Showa Denko Materials Co., Ltd." represents Hitachi Chemical's determination of opening its new chapter as a consolidated subsidiary of SDK, and now SDK and Hitachi Chemical share the idea of offering their customers and society optimum solutions by combining Showa Denko Group's wide-ranging material technology with Hitachi Chemical Group's material design technology utilizing characteristics of raw materials, ability to evaluate functions, and ability to design functions leading to process technology, including module segmentation.

As MRC informed earlier, Showa Denko (SDK) expanded production lines to produce vinyl ester resin (VE) and synthetic resin emulsion (EM) in the premises of Shanghai Showa Highpolymer Co., Ltd. (SSHP), a Chinese subsidiary of SDK, and has increased production of VE and EM there, aiming to expand the Showa Denko Group’s functional resin business in China.

As per MRC's ScanPlast, Russia's production of unmixed polyvinyl chloride (PVC) decreased in April, including due to the scheduled maintenance works of one of the producers. Overall PVC output totalled 432,100 tonnes in January-May 2020, up by 2% year on year.

Showa Denko K.K. Mainly engaged in the petrochemical business. The company's petrochemical division produces and markets industrial gases, olefins, organic chemicals, and others.

Hitachi Chemical is a consolidated subsidiary of Showa Denko and is involved in the manufacturing, processing and sales of functional materials and advanced components and systems.
MRC

MOSCOW (MRC) -- After weeks of rising, prices of physical oil have begun to ease, traders and analysts say, as the rally succumbs to the reality of poor refinery margins and brimming storage tanks, said Hydrocarbonprocessing.

Refinery runs in Europe and China have been cut to allow time to sell off supplies of refined products before processing stored crude which is also stored in abundance, making the purchase of new oil shipments less attractive.

Meanwhile, refining profits for products have improved slightly but are still near their depths during the worst of the pandemic, as the world faces an uncertain recovery. "Margins are not at the bottoms but they’re very bad - that’s not going to help demand. We see these potential spikes in COVID-19, which are also not going to help matters,” one oil trader said. “The market was overdone and is going to need to retrace to reflect the realities now."

The price slowdown is visible globally: offers for heavier Angolan Dalia crude and Congolese Djeno are down at least a USD1 from just a week earlier to around a USD1 above dated Brent. Spot discounts for Abu Dhabi’s light sour Murban grade have widened nearly a dollar compared to their official selling price in just a few days.

Mediterranean crudes have also come off peaks: offers for CPC Blend have fallen by almost a dollar and Azeri crude is selling for a dollar less than earlier in June. "We haven’t bought anything in the last several weeks as everything is so expensive. CPC is still the most affordable, but still 20-30 cents away from profitability," a refiner said.

"Many Mediterranean refiners have cut runs, so hopefully weaker demand may push differentials down." In the United States, shale producers are now bringing back about a quarter of the volumes they shut as prices have improved, weighing on physical prices in the Permian and Bakken basins.

Much of the uptick in demand for physical crude deliveries came from China, but market sources say independent refiners there have shied away from the higher prices, cutting runs as they await new quotas from the government for crude imports.

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 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) -- U.S. refiners and other buyers of crude oil are reworking some of their supply contracts to guarantee volumes after many were cut off unexpectedly when a price collapse this spring led drillers to curtail production, sources said, said Hydrocarbonprocessing.

The effort reflects concern in the refining industry about the possibility of another drop in oil prices as world markets continue to reel from the economic fallout of the coronavirus outbreak.

Sellers will likely be forced to agree to the terms as buyers remain scarce in the oil market, traders and analysts said. U.S. oil prices crashed into negative territory for the first time in history in April as the pandemic crushed energy demand, prompting oil producers to shut in about 2 million barrels per day (bpd) of production, or nearly a fifth of the country’s output.

Normally a drop in prices is good for refiners, but only when they can get their hands on the cheap supply. Typically, physical crude sales agreements between buyers and suppliers at the wellhead specify a price differential to a floating benchmark that can rise or fall with the markets, but do not specify volumes that must be sold, allowing suppliers to hold back sales when the price is too low.

“Now they are trying to install volume thresholds into the lease contracts,” one of the sources, who works at an oil producer company, told Reuters. The seller typically has little clout in a lease agreement, said Sandy Fielden, analyst at Morningstar.

“Adding a volume clause helps guarantee supplies for buyers, but to make such a change now is acting after the horse has bolted and the only producers who can meet the volume requirements are those with enough tankage at the wellhead to give them that flexibility."

Some producers are now also selling at discounted rates after failing to deliver in previous months when they shut wells, in order to avoid legal disputes with buyers, some of the sources said. “You’re losing the price benefit now, but refiners are mad,” another source at a shale producer said. “There are a bunch of lease contracts that are going to read differently."

Some U.S. oil producers declared force majeure, an emergency clause typically set aside for acts of god or wars that provides some legal cover to breach contracts. But such declarations have drawn criticism from refining groups.

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 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) -- Chinese refiners have the capacity to produce 18.1 million tons of low-sulfur fuel oil (LSFO) this year, which would make the country self-sufficient in the new shipping fuel, an official with state major PetroChina said, said Hydrocarbonprocessing.

China has been striving to reduce its reliance on bunker fuel imports and is aiming to create its own marine fuel hub to supply northern Asia. About 20 refineries, mostly under state-run Sinopec Corp, PetroChina, CNOOC and Sinochem, installed equipment to produce 0.5% sulfur fuel that meets International Maritime Organization (IMO) rules that came into force at the start of this year.

China will be able to produce 22.6 million tonnes of the IMO-compliant fuel in 2021, rising to 29.6 million tonnes in 2022, Zhang Tong, a vice president of PetroChina International said at the debut of an LSFO futures contract on the Shanghai International Energy Exchange.

Zhang said if China fully releases the production capacity, the country would well be self-sufficient in supplying its bonded marine fuel market, which serves international shipping, estimated at about 12 million tonnes a year.

Before 2020, China imported almost all its bonded bunker supplies of high sulfur fuel oil from regional exporters such as Singapore and South Korea. By close of morning trade,the front-month INE LSFO contract ended the session 10.5% higher at 2,617 yuan (USD369.83) per tonne, with open interest of 19,842 lots, each of 10 tonnes.

China’s second oil product open to foreign investment after Shanghai crude oil, the new marine fuel futures is expected to attract strong investor interest from the oil industry, financial institutions and retail investors.

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