US exports of LPG to drop as COVID-19 dents oil output

MOSCOW (MRC) -- Liquefied petroleum gas (LPG) production in the US is likely to be lower in the next few years as crude oil and associated gas production are expected to be weighed down by the effects of COVID-19, based on IHS Markit forecasts, reported Chemweek.

"The global LPG market growth, the trajectory of the growth, is being reset by the pandemic situation," Yanyu He, executive director at IHS Markit, said in an online presentation on Wednesday at the IHS Markit Asia NGLs and Naphtha conference.

Global refinery production of LPG and natural-gas-processing–related output over the next few years are likely to be lower than previous IHS Markit forecasts, he said.

In the US, crude oil production in 2023 is currently estimated at about 10 million b/d, down by about 4 million b/d from an earlier IHS Markit forecast, a chart in the presentation slide showed. "According to IHS Markit upstream colleagues, we're losing US crude oil production by almost 4 million b/d in the next few years. This year, we're not seeing too much of it, but really the biggest cut is still to come," and this would lead to a slowdown in associated gas output, He said.

As a result, total US natural gas liquid (NGL) production in 2023 is expected to drop to about 5 million b/d, down about 1 million b/d from IHS Markit's previous forecast, a chart in the presentation slides showed. "Now out of this 1-million (b/d)] overall NGL production, about two-thirds are LPG so roughly 600,000-b/d level, which is a huge amount. That number translates into roughly 20 million metric tons per year. If you recall, last year, the US exported 40 million metric tons," he said. "If indeed this is how much we're losing, we're going to lose a lot of exports from the US in the coming years."

Turning to LPG demand in Asia, China is likely to see an increase in propane consumption over the next few years as new propane dehydrogenation (PDH) projects come onstream. "In the coming years, China is expecting to add another dozen or so PDH projects. If all materialize, we should expect another 7-8 million metric tons of propane consumption in the coming 3-4 years," he said.

As MRC wrote previously, LPG intake by coastal steam crackers in northwest Europe plunged to a three-year low in June, although a widening discount of propane to naphtha has drawn a fresh deluge of US imports to the region for July.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.
MRC

Crude oil futures in Asia mixed awaiting fresh drivers

MOSCOW (MRC) -- Crude oil futures were mixed during mid-morning trade in Asia July 6 as the market awaits for fresh drivers to kick start the week, reported S&P Global.

At 10:40 am Singapore time (0200 GMT), ICE Brent September crude futures were up 14 cents/b (0.33%) from the July 3 settle at USD42.94/b, while the NYMEX August light sweet crude contract was down by 28 cents/b (0.66%) at USD40.37/b.

"Crude oil prices rose last week as optimism of a V-shaped economic recovery was strengthened by positive economic data, though some gains were pared on Friday. Falling inventories in the US and stronger US job data boosted positive market sentiment," according to a July 6 note by ANZ analysts.

Nonetheless, rising cases of coronavirus in the US, which led to several states re-introducing movement restrictions continued to dampen the demand outlook. In Florida, new infections rose by more than 10,000 in a day on July 5, for the third time in the last week, pushing the state's total number of infected cases past 200,000. Meanwhile, the situation remains equally dire in Texas, with more than 8,000 new cases on July 4, a new record high, according to media reports.

The newly reported coronavirus case counts and mobility data coming out of the July 4 long holiday weekend in the US will be keenly watched by market participants, which in turn, might determine the short-term direction of crude prices this week.

"The July 4th holiday weekend presents a fat tail risk for oil with gasoline inventories rising last week. If the weekend mobility data suggests muted activity, even if it is only in the Sunbelt states, you will be able to buy barrels cheaper this week," Stephen Innes, chief global markets analyst at AxiCorp, said in a July 6 note.

On the supply front, OPEC+ production, which is at its lowest since 1991, has helped to support oil market sentiment and fundamentals. However, the current record production cuts of 9.7 million b/d, which is set to expire at the end of July and ease into curbs of 7.7 million b/d in August, will likely keep traders cautious. The next OPEC+ Joint Ministerial Monitoring Committee, or JMMC, meeting is scheduled for July 15.

"My view on the JMMC outcome is based on the fact OPEC+ is using more sophisticated models for production targeting, including the oil market curve. If the forward slope does not move into backwardation, I suspect OPEC+ will be more inclined to extend the 9.7 million b/d production cut accord beyond July," Innes added.

As MRC informed before, 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 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.
MRC

Total Port Arthur refinery operating at 60% capacity

MOSCOW (MRC) -- Total SA’s Port Arthur, Texas, refinery is operating at about 60% of its 225,500-barrel-per-day (bpd) capacity, said sources familiar with plant operations, said Hydrocarbonprocessing.

The refinery is running at reduced capacity because of the loss of demand during the coronavirus pandemic, the sources said.

As MRC informed earlier, Total Petrochemicals, Europe’s third largest producer of crude oil, announced an increase in polypropylene (PP) prices for US shipments in August. So, the price increase will come into force on 1, August of the current year and will be 3 cents per pound or USD66/tonne, or according to the terms of current contracts.

According to MRC's ScanPlast report, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.

Total S.A. is a French multinational oil and gas company and one of the six "Supermajor" oil companies in the world with business in Europe, the United States, the Middle East and Asia. The company's petrochemical products cover two main groups: base chemicals and the consumer polymers (polyethylene, polypropylene and polystyrene) that are derived from them.
MRC

SayanskKhimPlast shut PVC production

MOSCOW (MRC) -- SayanskKhimPlast (Irkutsk region) has shut down its polyvinyl chloride (PVC) production for a scheduled maintenance, according to ICIS-MRC Price report.

The plant's representative said PVC production was taken off-stream for the scheduled turnaround on 8 July. The outage will be quite long and will last for about 25 days. The plant's annual production capacity is 350,000 tonnes.

As reported earlier, Russia's second largest PVC producer - RusVinyl - intends to shut its production for a two-week scheduled maintenance from 13 July. The plant's annual production capacity is 330,000 tonnes.

It is also worth noting that due to problems with feedstock, Bashkir Soda Company shut its PVC production for several days in mid-June. At the same time, the Bashkir producer will not conduct maintenance works this year.

JSC "Sayanskkhimplast" (Irkutsk region), established in 1998, is a complex of large-capacity chlororganic production facilities connected in a single production cycle. SayanskKhimPlast produces PVC, caustic soda and bleach. After commissioning of RusVinyl's PVC production (Nizhny Novgorod region), SayanskKhimPlast became Russia's second largest PVC producer.
MRC

LG Polymers CEO arrested after fatal India gas leak

MOSCOW (MRC) -- Police in India have arrested the South Korean CEO and 11 other employees of a chemical plant over a gas leak that killed 15 people and injured hundreds, reported BBC News.

The 12 employees are accused of causing the deaths by negligence.

The deadly leak occurred at the South Korea-owned LG Polymers plant in Visakhapatnam city on 7 May.

The arrests are the result of an official investigation into the cause of the leak, which found evidence of negligence and poor safety standards.

The inquiry found that "less stringent standards may have been applied to the Indian facility due to negligence, leading eventually to the disaster", BBC Telugu has learnt.

LG declined to comment when the BBC contacted them. But the company had issued a statement in May, saying that it was investigating the cause of the leak.

It offered "sincere condolences and apologies" to the victims and their families, and said it was looking into providing help and treatment to all of them.

Among those arrested on Wednesday are two South Korean nationals - CEO Sunkey Jiong and technical director DS Kim - who had been asked not to leave the country when the probe began in May.

Police told BBC Telugu that the other accused include the additional director of operations, three engineers and a safety officer.

Meanwhile, the state pollution control board in the southern state of Andhra Pradesh, where Visakhapatnam is located, has also suspended two environmental engineers who are being investigated for negligence - they are accused of having failed to enforce the necessary safety rules.

An earlier investigation by BBC Telugu had found evidence of negligence and reported that the plant was operating without the required environmental clearances.

On 7 May, people living in areas surrounding the plant woke up around 03:00 local time to a pungent smell and rushed from their homes suspecting a gas leak.

It later emerged that the deaths were caused by inhalation of vapours of styrene gas, a toxic compound that had leaked from the factory.

Styrene, a flammable liquid, is used in the manufacture of a range of plastics, including polystyrene (PS). It's stored in tanks at temperatures under 20C because it evaporates easily and the temperature has to be monitored regularly.

Officials now believe the leak was triggered by a significant rise in the temperature.

The investigation alleges that the leak happened due to various technical flaws in the way the gas was stored: "poor design of the tank, (an) inadequate refrigeration and cooling system, the absence of circulation systems, and inadequate measurement of parameters".

It described these as "a serious lapse" on the part of LG Polymers and said that the accident was also the result of "poor management" and "a total breakdown of the emergency response procedures".

"LG Polymers bears absolutely liability as a polluter," the findings of the investigation concluded.

As MRC informed before, LG Polymers has decided not to resume operations at its polystyrene (PS) plant in India after the gas leak. A company source who wished not to be identified informed a Polymerupdate editorial team member, on account of the coronavirus pandemic, the plant had been shut. After 40 days of being closed, the company was preparing to restart operations when the accident occurred. The leakage was plugged within hours of the accident and the vapours neutralised.

The PS plant was set up in 1961 as Hindustan Polymers and was taken over by South Korea?s LG Chem in 1997 following which it was named LG Polymers. The plant makes PS and expandable polystyrene (EPS).

According to MRC's ScanPlast report, May total estimated consumption of PS and styrene plastics in Russia was 29,990 tonnes versus 41,780 tonnes a year earlier, down by 28% year on year. Russia's overall estimated consumption decreased in the first five months of 2020 by 10% year on year to 186,670 tonnes.
MRC