COVID-19 - News digest as of 08.07.2020

1. 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.


MRC

MOSCOW (MRC) - Ukrainian company Karpatneftekhim (Kalush, Ivano-Frankivsk region) has increased prices of suspension polyvinyl chloride (SPVC) and high density polyethylene (HDPE) for July deliveries to the domestic market by USD70-80/tonne under the pressure from higher feedstock prices, according to the ICIS-MRC Price Report.

According to the company's customers, SPVC prices for July deliveries rose on average by USD75-80/tonne tonne compared with the level a month earlier. HDPE prices increased by USD70/tonne compared with the level in mid-June.

Demand for polyvinyl chloride and HDPE from the domestic market has grown significantly in the past two months.
Both the seasonal factor and the introduction of import duties on polymers in the amount of 18% in June played a role in increasing demand.

Karpatneftekhim is one of the largest enterprises of Ukraine's petrochemical complex. Currently, the plant can produce annually 300,000 tonnes of PVC, 200,000 tonnes of caustic soda, about 180,000 tonnes of chlorine, as well as 250,000 tonnes of ethylene and 100,000 tonnes of polyethylene.
MRC

MOSCOW (MRC) -- A fire hit the catalytic cracking unit at Venezuelan state oil company PDVSA’s 310,000 barrel-per-day Cardon refinery, Falcon state Governor Victor Clark said, while two people familiar with the matter said gasoline output was halted , said Reuters.

The unit stopped working around noon, less than a month after it restarted with the help of equipment imported from Venezuela’s ally Iran, according to the sources, threatening an aggravation of fuel shortages that have plagued the South American country for months. Clark added that the fire was quickly controlled and that there were no injuries.

Catalytic cracking units are crucial for the production of finished fuel in most refineries. Cardon had been producing between 15,000 and 30,000 bpd of gasoline since restarting in mid-June, according to three people with knowledge of the matter, who spoke on condition of anonymity.

The rest of Venezuela’s 1.3 million bpd refining network is mostly offline. The country received several fuel shipments from Iran in late May and early June, but has not imported gasoline since then. Efforts to restart gasoline output at the 146,000 bpd El Palito refinery have not yet been successful.

U.S. prosecutors last week filed a lawsuit to seize gasoline aboard four vessels Iran is trying to send to Venezuela. PDVSA did not respond to a request for comment on gasoline output at Cardon.

As MRC informed earlier, PDVSA recently restarted the catalytic cracker at its 310,000 barrel-per-day (bpd) Cardon refinery, a necessary step for producing gasoline. It is also aiming to restart gasoline output at the 146,000 bpd El Palito refinery.

As MRC informed before, Russian state oil company Rosneft's decision to cease operations in Venezuela and sell its assets there to a Russian government-owned company was a "maneuver" made in reaction to collapsing oil prices, a US State Department official said earlier this year.

We remind that Angarsk Polymers Plant, part of Russian oil giant Rosneft, has shut down its low density polyethylene (LDPE) production for a scheduled turnaround. The plant"s customers said Angarsk Polymers Plant took off-stream its LDPE production for the scheduled maintenance on 22 June. The outage is scheduled to last for one month. The plant"s annual production capacity is about 75,000 tonnes.

According to MRC's ScanPlast report, April estimated LDPE consumption in Russia decreased to 52,270 tonnes from 55,160 tonnes a month earlier. Kazanorgsintez reduced its capacity utilisation. Russia's estimated LDPE consumption rose to 191,000 tonnes in January-April 2020, up by 5% year on year. Russian producers raised their production significantly, and LDPE imports also increased.
MRC

MOSCOW (MRC) -- Denmark has approved a request from the developer of the Nord Stream 2 gas pipeline from Russia to Germany for permission to lay the line in Danish waters using ships with anchors, reported S&P Global with reference to the Danish Energy Agency's statement July 6.

In early June, Nord Stream 2 asked - as a precautionary measure - for an amendment to its Danish pipelaying permit to allow the potential use of pipelay ships that use anchors for positioning.

"The Danish Energy Agency has decided that Nord Stream 2 may use pipelaying vessels with anchors in connection with construction of the Nord Stream 2 pipelines," the agency said in a statement.

The Gazprom-owned Nord Stream 2 operating company had hoped to bring Nord Stream 2 online by the end of 2019, but first permitting issues in Denmark and then the US sanctions meant the project has been delayed.

The 55 Bcm/year pipeline is crucial to Russia's plans to scale down from 2021 the use of the Ukrainian transit corridor in its gas supplies to Europe.

Just 160 km (99 miles) of Nord Stream 2 is left to lay in Danish waters out of the total 2,460 km length.

According to the original Danish permit from October last year, pipelaying ships, such as the Pioneering Spirit used by Switzerland-based Allseas to lay much of the pipeline before the US sanctions forced it to halt work, should have dynamic- or self-positioning capabilities.

"The Danish Energy Agency has - at the request of Nord Stream 2 - made a decision to change the condition of using pipelaying vessels with self-positioning," it said.

"The change means that the company can use pipe-laying vessels with anchors, either independently or in combination with self-positioning pipelaying vessels."

In the decision, the Danish Energy Agency emphasized that the remaining part of the pipeline to be constructed in Denmark is outside the area where bottom trawling, anchoring and seabed intervention are discouraged due to the risk posed by dumped chemical warfare agents.

Nord Stream 2 has said the technique of using anchored ships was used successfully during the installation of the already operational Nord Stream pipelines in Danish waters, and for the Nord Stream 2 pipelines already installed in German waters.

However, being anchored would slow significantly the progress of a ship laying the pipeline, while ships with dynamic positioning are able to lay pipe at a much faster rate.

The Danish approval comes as the US is also pressing to introduce expanded sanctions against the project that would target more companies involved in building the line's final segment, including service providers and insurers.

Last week, German Chancellor Angela Merkel said it was "right" to complete the pipeline, saying the US sanctions "did not correspond" to Germany's interpretation of international law.

"We believe that the type of extraterritorial sanctions imposed by the US is not in line with our understanding of the law," Merkel said.

"We have to concede, however, that this will make the construction process more difficult," she said. "Nevertheless, we believe that it is right to complete this project, and we are acting in this spirit.

As MRC reported earlier, Denmark expects to rule "within four weeks" on a request from the developer of the Nord Stream 2 gas pipeline from Russia to Germany for permission to lay the line in Danish waters using ships with anchors, a spokesman for the Danish Energy Agency said June 17.

We remind that Gazprom neftekhim Salavat shut down its dioctyl phthalate (DOP) production for a scheduled maintenance. Market participants and a plant"s representative said Gazprom neftekhim Salavat took off-stream its DOP production for a long scheduled turnaround. The outage began on 12 May and lasted for about 30 day.

According to MRC's ScanPlast report, Russian producers of unmixed PVC decreased capacity utilisation in April. However, Russia's overall PVC output totalled 351,000 tonnes in January-April 2020, up by 2% year on year.
MRC

MOSCOW (MRC) -- CPC Corporation has restarted its No. 4 naphtha cracker in Linyuan on 6 July 2020, just four days after a technical glitch that forced the company to declare emergency shutdown, reported CommoPlast with reference to market sources.

The unit has an annual capacity of 380,000 tons/year of ethylene and 193,000 tons/year of propylene.

Sources added that the producer has only restarted the furnace and yet to reveal the timeline target to reach on-spec cargoes.

The company also operates another cracker at the same site - No. 3 cracker, which has an ethylene capacity of 720,000 mt/year and propylene capacity of 370,000 mt/year.

As MRC informed previously, CPC Corporation took one of its naphtha crackers off-stream on 8 November 2019 for major maintenance work. The No. 4 cracker was expected to remain offline for about 65 days. The shutdown resulted in a production loss of 67,671 tons of ethylene and 34,370 tons of propylene.

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.

CPC Corporation, Taiwan, is engaged in the exploration, production, refining, procurement, transportation, storage, and marketing of oil and gas. The company provides fuel oil, including automotive unleaded gasoline and diesel fuel, low-sulfur fuel oil, marine distillate fuels, marine residual fuels, and aviation fuel; petrochemicals, such as ethylene, propylene, butadiene, benzene, para-xylene, and ortho-xylene; liquefied petroleum gas products comprising liquefied petroleum gas, propane, butane, and a propane/butane mixture; lubricants, motor oil, industrial oil, grease, and marilube oil; SNC products, including petroleum ether, naphtha, toluene, xylene, crude octene, methyl alcohol, normal paraffin, viscosity-graded asphalt cement, and sulfur; and natural gas.
MRC