Global recession will hasten refinery rationalization

MOSCOW (MRC) -- Coronavirus and the cyclical slump in petroleum consumption are accelerating a long-term rationalization of the global refining industry and a shift eastwards in its center of gravity to Asia, said Hydrocarbonprocessing.

Refinery margins for making middle distillates such as gasoil and jet fuel have plunged to their lowest since 2009 as lockdowns and recession have cut fuel consumption by millions of barrels per day. Much of this is cyclical and will unwind if and when the major economies and their fuel consumption recover and stocks of gasoline and diesel return to more normal levels.

But the crisis is compounding the long-term challenge for smaller, older and simpler refineries, especially in North America and Europe, faced with a growing competition from more modern mega-refineries in Asia. Refinery margins, the difference between the prices at which refineries purchase crude and sell refined products, have historically aligned with the business cycle.

At the top of the cycle, capacity constraints become binding and refiners struggle to make enough fuel, fattening margins. When the cycle turns down, there is too much capacity, and margins shrink. But the present recession is the worst for nearly a century and the impact has been concentrated in the petroleum-dominated transport sector because of lockdowns, so refiners have faced unprecedented cyclical pressure.

In April, U.S. refiners were forced to cut their crude processing by 20% compared with the previous five-year average as fuel consumption slumped, and refiners in other parts of the world have faced similar problems. Pressure on margins has been particularly acute in this instance, however, because the expanded OPEC+ group of major crude exporters and U.S. shale producers have also cut their output of crude oil.

Consequently, the production-consumption balance for crude has tightened faster than the balance for fuels such as gasoline and distillate. Crude stocks are falling while fuel stocks remain bloated for the time being. Refiners are now being squeezed on both sides of their business: there are too many refineries chasing not enough crude (raising input prices) and too few fuel users (depressing output prices). The result is low crude processing rates, lots of idle capacity, poor margins and poor profitability across the global refining sector.

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.
MRC

MOSCOW (MRC) -- Borealis says it has signed two long-term power purchase agreements (PPAs) to source renewable electricity from Finnish wind farm operator Ilmatar Energy for its integrated petrochemical production facility at Porvoo, Finland, reported Chemweek.

The purchase agreements have been made jointly with Neste, Borealis’ long-term partner in Porvoo, Borealis says. The purchase and supply of more than 20 megawatts of wind power over the next decade will enable the company to increase the share of renewable power in its overall electricity consumption at its Porvoo complex to 13%, it says. The purchase volume will comprise the annual output of approximately four wind turbines, with Ilmatar to build onshore wind farms scheduled to start delivering the electricity by mid-2022, it adds.

Borealis aims to source at least half of its overall electricity supply from renewable sources for its polyolefins, hydrocarbon, and energy businesses by 2030, it says. The PPAs also support the aim of the chemical industry in Finland to be carbon neutral by 2045, it adds.

Indirect carbon dioxide (CO2) emissions at its facilities in Porvoo will be reduced by approximately 16 kilotons/year, according to Borealis.

The company needs to take “meaningful action” to reach its energy and climate targets by 2030, says Martijn van Koten, executive vice president/base chemicals and operations at Borealis. “The long-term power purchase agreement with Ilmatar is the first of its kind for us.”

The petchem facility at Porvoo includes a steam cracker producing ethylene, propylene, and butadiene, a phenol and aromatics plant, two polyethylene (PE) plants, a polypropylene (PP) plant, a compounding unit, and an innovation center.

As MRC informed earlier, Borealis has maintained its cracker in Stenungsund (Sweden) offline longer than initially anticipated, after it was shut following a force majeure declaration at the site on May 11, 2020. Sources said that the unit has been offline longer than initially expected with no confirmed startup date. The Stenungsund cracker has an ethylene capacity of 625,000 tonnes and a propylene capacity of 150,000 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 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.

Borealis is a leading provider of innovative solutions in the fields of polyolefins, base chemicals and fertilizers. With headquarters in Vienna, Austria, Borealis currently employs around 6,500 and operates in over 120 countries.
MRC

MOSCOW (MRC) -- US industrial gases major Air Products and two Saudi partners, ACWA Power and NEOM, are planning to develop a USD5bn green hydrogen-based ammonia production facility in northwest Saudi Arabia, said the company.

The joint venture project is the first partnership for NEOM with leading international and national partners in the renewable energy field and it will be a cornerstone for its strategy to become a major player in the global hydrogen market. It is based on proven, world-class technology and will include the innovative integration of over four gigawatts of renewable power from solar, wind and storage; production of 650 tons per day of hydrogen by electrolysis using thyssenkrupp technology; production of nitrogen by air separation using Air Products technology; and production of 1.2 million tons per year of green ammonia using Haldor Topsoe technology. The project is scheduled to be onstream in 2025.

Air Products will be the exclusive off-taker of the green ammonia and intends to transport it around the world to be dissociated to produce green hydrogen for the transportation market.

"Harnessing the unique profile of NEOM’s sun and wind to convert water to hydrogen, this project will yield a totally clean source of energy on a massive scale and will save the world over three million tonnes of CO2 [carbon dioxide] emissions annually and eliminate smog-forming emissions and other pollutants from the equivalent of over 700,000 cars," said Seifi Ghasemi, CEO of Air Products.

The announcement came after Air Products and Germany-based chemical engineer thyssenkrupp on Monday signed an agreement to develop plants that will produce hydrogen by water electrolysis.

In May, Air Products agreed to collaborate with Danish chemical technologies firm Haldor Topsoe on large-scale ammonia, methanol and/or dimethyl ether (DME) projects.

In January 2020, Air Products announced another addition to the pipeline is coming with an SMR to be built in Texas City, Texas. When the Texas City facility is added to the GCP system, customers will be reliably served by over 1.7 billion feet of hydrogen per day from 24 connected production facilities.

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) -- Dow has agreed to sell the rail infrastructure assets and related equipment at six major sites in North America to Watco Companies (Pittsburg, Kansas), a transportation services company operating in North America and Australia, reported Chemweek.

Dow expects the deal, which is slated to close in the fourth quarter, to yield over USD310 million in cash. Watco will provide Dow with rail services from the assets under a long-term agreement.

“Today’s announcement is part of an on-going review of our ownership of non-product producing assets and is driven by our commitment to apply a best-owner mindset to everything we do,” says Jim Fitterling, chairman and CEO of Dow. “The transaction will liberate cash from our balance sheet that we will use to pay down debt and invest in our core value-generating businesses.”

The assets are located at Dow’s sites in Plaquemine and St. Charles, Louisiana; Freeport and Seadrift, Texas; and Ft. Saskatchewan and Prentiss, Alberta, Canada. Fourteen Dow employees and the management of about 400 contract workers are expected to transition to Watco upon close of the transaction, says Dow.

As MRC informed earlier, Dow Chemical will restart three idled polyethylene (PE) plants in Texas and Argentina and two elastomers plants in Louisiana as demand begins to rebound. And the company expects economic recovery to take hold in the second half of 2020 as gradual emergence from coronavirus pandemic-related shutdowns continues.

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.

The Dow Chemical Company is an American multinational chemical corporation headquartered in Midland, Michigan, United States. Dow is a large producer of plastics, including polystyrene (PS), polyurethane, polyethylene, polypropylene, and synthetic rubber.
MRC

MOSCOW (MRC) -- Khimprom (Cheboksarsk, Russia) says it has decided to expand calcium hypochlorite capacity, citing strong domestic demand, said Chemweek.

Khimprom started up its calcium hypochlorite production line at Cheboksarsk at the end of 2018, the first plant to make the product in Russia. The facility originally had a capacity of 15,000 metric tons/year but Khimprom says that technical adjustments have enabled it to run the plant at a rate of 18,000 metric tons/year. The planned capacity for the latest expansion has not been disclosed.

The company says it produces inorganic and organic chemicals, including organochlorine, organophosphorus, and organosilicon products, as well as rubber chemicals, surfactants, and reagents. Khimprom says it is also Russia’s biggest producer of hydrogen peroxide. Its other products include chlorine and caustic soda, as well as isopropyl alcohol.

As MRC informed earlier, May production of sodium hydroxide (caustic soda) in Russia was 112,000 tonnes (100% of the basic substance) versus 101,000 tonnes a month earlier. Overall output of caustic soda totalled 543,000 tonnes in the first five months of 2020, up by 1.4% year on year.
MRC