US refiners slashed gasoline output in response to lockdown

MOSCOW (MRC) -- Faced with an unprecedented collapse in gasoline consumption during the most intense period of lockdown, US refiners responded by slashing crude intake and curbing conversion processes used to boost gasoline yields, reported Reuters.

But the extraordinary operating changes introduced during the emergency left refiners with a legacy of too much diesel, which is still weighing down diesel prices worldwide, and will have to be eliminated over the next few months.

The scale of the shock and the shift in refinery processes to cope with it were revealed for the first time on Tuesday with the publication of “Petroleum Supply Monthly” by the US Energy Information Administration.

Consumption of all three major fuels fell sharply in April, the most recent month for which data is available, but the hit was greatest for jet (down 61% compared with a year earlier) and gasoline (37%) and much smaller for distillate fuel oil (12%).

Faced with a collapse in the demand for gasoline, refineries cut the volume of crude and other inputs fed into their distillation units to just 70% of their maximum capacity compared with almost 89% a year earlier.

More importantly, they slashed the flow of semi-refined distilled oil into downstream conversion units, including catalytic crackers and reformers, that would normally upgrade more fuel oil into gasoline and jet fuel.

In April, their catalytic crackers were operated at just 59% of their capacity compared with 81% a year earlier. Hydrocracker usage was down to 56% from 71%. And catalytic reformers were down to 61% from 80%.

The result of these changes in downstream conversion was an abrupt shift in the mix of refinery output, from gasoline and jet towards distillate, that has no precedent in terms of either size or speed outside wartime.

Gasoline production fell to just 41% of total output from 45% in April 2019; jet output halved to less than 5% from 10% a year ago; by contrast, distillate fuel oil surged to more than 38% from less than 30%.

The twin shifts in refinery operations (reduced crude intake and reduced downstream processing) minimized the overall build-up of fuel inventories and gasoline in particular.

But the consequence has been a massive blow out in stocks of less-refined distillate fuel oil which has only recently been brought under control and which is now overhanging the market, depressing diesel prices.

To work down bloated distillate stocks, refiners are continuing to restrict crude processing, even as the economy recovers, but are now switching to maximum gasoline production.

The most recent weekly refinery reports from the Energy Information Administration show gasoline output rising steadily since late April while distillate and jet output remains almost unchanged.

Refineries are now producing about two-thirds more gasoline than distillate and jet combined, up from around equal volumes in April, as refiners ramp up conversion units.

If refiners continue to operate in max-gasoline mode, distillate stocks are likely to normalise in the next 2-3 months – provided the global economy does not stumble into a double-dip recession.

As MRC reported earlier, Valero Energy Corp’s Memphis, Tennessee, crude oil refinery is operating at two-thirds of its 180,000 barrel-per-day (bpd) capacity because of low demand in the COVID-19 pandemic. The Memphis refinery cut production by as much as 50% in early April and has been raising production gradually since 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 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 lower as fresh coronavirus cases outweigh bullish US jobs report

MOSCOW (MRC) -- Crude oil futures were lower in midmorning trading in Asia July 3, after hitting a four-month high overnight on better-than-expected US labor market data, as concerns over rising COVID-19 cases continue to cap the upside, reported S&P Global.

At 10:05 am Singapore time (0205 GMT) on July 3, ICE Brent September crude futures were down 23 cents/b (0.53%) from the July 2 settle at USD42.91/b, while the NYMEX August light sweet crude contract was down by 24 cents/b (0.59%) at USD40.41/b.

US non-farm payrolls added 4.8 million jobs in June, exceeding market expectations of a 3.2 million gain, and bringing the nationwide unemployment rate down to 11.1% from 13.3%, according to data released July 2 by the US Department of Labor. The improvements in the labor market was largely due to a sharp increase in employment in the leisure and hospitality sectors which benefited as states reopened and economic activities resumed.

"Markets responded positively to the US labor market release, which mirrored other data suggesting that the economy is recovering quicker than median expectations," ANZ analysts said in a note July 3.

However, sharply rising coronavirus cases continue to weigh heavily on market sentiment even as the US head toward the long Fourth of July weekend, traditionally one of the busiest driving periods of the year. Florida, the third most populous state, set a new daily record of over 10,000 new infections July 2, bringing its total confirmed cases to nearly 170,000, according to media reports.

The US registered over 55,000 new infections nationwide July 2, marking a second consecutive day when cases rose more than 50,000, and the largest single-day total since the start of the coronavirus outbreak, according to media reports.

"And as significantly, the infection curve rose in 40 out of 50 states in a reversal that has mostly spared only the Northeast. Indeed, faltering re-opening of US States as COVID-19 cases rise remains the primary thorn in the oil bulls' side," said Stephen Innes, chief global markets analyst at AxiCorp, in a note July 3.

Beyond the US, a surge in infections post-lockdown plagued several other countries. Australia's second most populous state of Victoria reported 77 new cases on July 2, leading authorities to lock down more than 300,000 people in Melbourne suburbs to contain the situation. Meanwhile, Tokyo recorded 107 new cases on July 2, the highest the capital has seen since May 2, raising fears that Japan might yet declare another state of emergency, according to media reports.

On the supply front, OPEC+ continues to ensure a strict level of compliance among member countries to previously agreed oil production cuts, and requiring laggards to compensate for non-compliance. However, the current record production cuts of 9.7 million b/d is set to expire at the end of July.

"The market will have to confront the specter of rising OPEC supply in the near term. Russia's Energy Minister said the OPEC+ alliance hasn't made a decision on extending the deeper cuts past July, but warned that it should avoid repeated changes to the current plan," the ANZ analysts said.

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

Chemical company R&D spending falls on COVID-19, economic slowdown

MOSCOW (MRC) -- Spending by chemical companies on R&D fell year on year (YOY) in the first quarter of 2020 due to the impact of COVID-19 and the worldwide economic slowdown, reported Chemweek with reference to the International Energy Agency (IEA; Paris, France).

Reductions in R&D spending “were seen in all reporting companies in the chemical sector, with some declines of over 10%,” the IEA says. Corporate R&D is “highly likely” to be cut or to grow more slowly in most energy-related sectors as a result of lower revenue this year and beyond, with the impact “already evident in company reports for the first quarter of 2020, with companies representing a large share of global revenue in automotive, aviation, and chemicals spending less on R&D than in previous years,” it adds.

The reduction in R&D matches the perceptions of respondents to a survey carried out in May by the IEA, which showed they anticipated “pressure on corporate R&D budgets for key net-zero emissions technology areas for the rest of 2020 and into 2021,” the agency says. The IEA says it contacted “a number of large companies” active in the development of specific technologies expected to play a significant role in the achievement of net-zero emissions such as hydrogen; direct electrification; carbon capture, utilization, and storage; and digitalization. This included end-user companies outside the energy sector such as the chemicals, iron and steel, and cement sectors, with 28 companies responding representing almost 1.5 million employees worldwide.

First-quarter YOY spending cuts in R&D by DuPont, LG Chem, Dow, BASF, Linde, and Mitsubishi Chemical are highlighted by the IEA, with DuPont shown to have implemented the largest expenditure cut in percentage terms compared with the prior-year quarter of almost 12%, followed by LG Chem with a cut of 8%. Dow is shown to have cut R&D spending YOY by just under 6%, BASF and Linde by more than 4%, and Mitsubishi by almost 3% (chart). The IEA notes that the chart data is from the subset of companies that report quarterly R&D spending.

The responses overall indicate serious disquiet among experts about keeping their innovation pipelines flowing over the next couple of years, the IEA says. “Most respondents think it is at least ‘somewhat likely’ that all elements of their R&D, demonstration, and deployment strategies will be affected. Companies that are prioritizing technologies for the electrification of energy demand, especially those in heavy industry, consider it likely that their R&D budgets will be considerably or significantly reduced,” it says.

The IEA has released a new wide-ranging report that focuses on the need for R&D and other innovation efforts to achieve global net-zero emissions objectives, and says that without a “major acceleration” in clean energy innovation, countries and companies will be unable to fulfil their pledges to bring their carbon emissions down to net zero over the coming decades. “There is a stark disconnect today between the climate goals that governments and companies have set for themselves and the current state of affordable and reliable energy technologies that can realize these goals,” says Fatih Birol, IEA executive director. A significant part of the challenge comes from major sectors where there are “currently few technologies available for reducing emissions to zero” including shipping, trucking, and aviation, and heavy industries such as steel, cement, and chemicals, he says.

In 2019, overall reported corporate energy R&D spending worldwide reached USD90 billion, according to the IEA.

As MRC wrote before, in late May 2020, BASF successfully issued corporate bonds with a total volume of EUR2.0 billion (USD2.28 billion) on the capital market, including its first-ever placement of a green bond that will be used purely to finance sustainable products and projects.

We remind that an unexpected outage occurred at BASF Total Petrochemical’s joint-venture (JV) olefins unit at Port Arthur, Texas, Thursday afternoon, 11 June. The cause of the outage is being investigated, with a compressor shutdown cited as a possible factor, according to a Texas Commission on Environmental Quality filing. Total’s refinery near the olefins plant has also drastically reduced rates. The outage had little effect on Friday’s US spot ethylene market. The JV’s steam cracker at Port Arthur has a production capacity of more than 1 million metric tons/year of ethylene and 544,000 metric tons/year of propylene, according to IHS Markit data.

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

McDermott awarded EPFC contract for storage tanks in Canada

MOSCOW (MRC) -- McDermott International Ltd. announced CB&I Storage Solutions has been awarded a large* contract by a major EPC contractor for the engineering, procurement, fabrication and construction (EPFC) of 14 tanks in Burnaby, British Columbia, said Hydrocarbonprocessing.

The tanks are part of the Trans Mountain Expansion Project, which will increase the nominal capacity of the Trans Mountain Pipeline System from 300,000 to 890,000 barrels of oil per day. The scope of the contract includes 14 flat-bottom atmospheric storage tanks of various sizes up to 185 feet (56.4 meters) in diameter. The engineering and installation of the tanks will be performed by Canadian workers.

"This award demonstrates the confidence major international contractors place in our world-class storage and EPFC solutions," said Cesar Canals, Senior Vice President of CB&I Storage Solutions. "For more than a century, CB&I Storage Solutions has maintained a strong track record of execution excellence in Canada."

The award will be reflected in McDermott's second quarter 2020 backlog. *McDermott defines a sizeable contract as between USD50 million and USD250 million.

As MRC informed earlier, Haldia Petrochemicals (HPL), a flagship company of The Chatt­erjee Group (TCG), alo­ng with its international partner Rhone Capital has acquired US-based Lummus Technology at an enterprise value (EV) of USD2.725 billion (around Rs 20,590 crore) from McDermott International. In the joint acquisition, HPL’s share is at 57 per cent, the balance would be held by Rhone Capital. Under the new dispensation, Lummus Technology wou­ld function as a ‘standalone’ autonomous entity.

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.

CB&I Storage Solutions is the world's leading designer and builder of storage facilities, tanks and terminals. With more than 59,000 structures completed throughout its 130-year history, CB&I Storage Solutions has the global expertise and strategically-located operations to provide its customers world-class storage solutions for even the most complex energy infrastructure projects.
MRC

Krauss Maffei opens new plant in Jiaxing

MOSCOW (MRC) -- Krauss Maffei has opened its new plant in Jiaxing, with which the company plans to double its production capacity in China, said the company.

More than 600 customers and partners came to the opening ceremony of the new Chinese plant. In an exhibition, they saw ten different machine types and 16 different applications. These included machines that are developed and manufactured in China for the Chinese market, such as the PX Agile series of electrical injection molding machines, the ZE GP-Agile twin-screw extruders and a mixing and dosing machine. Among the processes presented were LSR processing, colorform and metal injection molding as well as special applications such as precision injection molding, optical lenses and freely sprayed high-gloss surfaces. The “Pioneering Plastics” innovation and development forum took place parallel to the exhibition, presenting new technologies and trends in the industry.

The new location in Jiaxing currently has more than 58,000 m? of floor space; another 37,000 m? property is reserved for future use. It offers space for research and development, technical design, manufacturing and logistics - and this for extrusion, injection molding and reaction technology. This means that Jiaxing within the Krauss Maffei Group will become another comprehensive functional headquarters outside of Germany.

"China and the rest of the world face the challenges that the corona pandemic poses for the manufacturing industry and the related industrial chains. In the meantime, the emerging new technologies and megatrends - intelligent manufacturing, digital services and solutions - bring new opportunities for our industry, ”said CUI Xiaojun, CEO of Krauss Maffei China. "The new plant in Jiaxing is another important milestone in Krauss Maffei's more than 180-year history, with which we want to further expand the Chinese market, improve our local capacities and create value for customers in China and worldwide."

The new plant is located in the Jiaxing Economic and Technological Development Zone in the Greater Bay Area, a regional economic cluster that China is currently expanding into a metropolitan region with great ambitions. The opening was actually scheduled for early February, but had to be postponed due to the coronavirus pandemic.

It was previously reported that NPP Polyplastic, the largest Russian manufacturer of thermoplastic composite materials, signed an agreement with KraussMaffei Berstorff GmbH in 2016 to modernize the production facilities of the Russian company.

As MRC informed earlier, Russia's output of chemical products rose by 4.4% year on year in May 2020 . Thus, production of basic chemicals increased year on year by 5.4% in the first five months of 2020. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the output in January-May. Production of benzene was 110,000 tonnes in May 2020, which equalled the figure a month earlier. Overall output of this product reached 615,000 tonnes over the stated period, up by 1.7% year on year.

Krauss Maffei, the world's only provider of turnkey equipment for injection molding, extrusion and reaction technology, has merged its business divisions as well as the former brands KraussMaffei, KraussMaffei Berstorff and Netstal, under the auspices of the single brand KraussMaffei.
MRC