EPCA 2020: Supply-chain firms show resilience, aim to build stability

MOSCOW (MRC) -- Chemical distributors, logistics providers, and transportation firms face similar market challenges to their counterparts in the chemical manufacturing industry caused by COVID-19, said Chemweek.

They also need to adapt to trends such as digitization and sustainability that the pandemic has accelerated and intensified. Speakers at a logistics and supply chain panel, held on Tuesday as part of the European Petrochemical Association (EPCA) annual meeting, taking place this year in a virtual format, nevertheless agreed that the crisis has made chemical supply chains more agile and innovative than ever before.

Christian Kohlpaintner, CEO of chemical distribution market leader Brenntag, said that that 2020 has been “an interesting ride” for all participants in chemical supply chains, and that companies had managed to maintain business continuity. “We kept the shop open, all of us with few exceptions,” Kohlpaintner said. Brenntag faced, particularly in the early days of lockdown, “massive swings in demand from customers and suppliers” and the imposition of border controls, at a time when it had to prioritize the safety of its employees and business partners, Kohlpaintner said. “We did everything to maintain financial strength while helping customers and suppliers to navigate through the crisis,” he said. Meanwhile, the measures taken to protect employees meant “we had the best safety performance ever,” Kohlpaintner said.

Kohlpaintner listed three hypotheses for supply chain companies and logistics providers that, in his view, have arisen from the crisis: a shift from “just in time to just in case,” a move from segregation to integration, and a repositioning of sustainability strategies “from the fringe to the core." Adopting a just-in-case approach means learning from COVID-19 and getting ready for the next “abnormally strong challenge,” Kohlpaintner said. “We have to be smart and create stable supply chains to be prepared for the next crisis,” he said.

Brenntag relied on its global presence and network of supply chains to cope with COVID-19 as the pandemic spread west from China and the rest of Asia to Europe and the Americas. “It helped us to have early warnings, so products could be supplied to customers from different supply chains,” Kohlpaintner said.

Meanwhile, customer/supplier interfaces will become more integrated and less segregated in a process driven by digitization. Brenntag has seen “strong flexibility, even on the customer and supplier side,” and a huge increase in the use of digital technologies during the pandemic, Kohlpaintner said. “This more integrated view of our value chains will continue,” he said. Sustainability will be at the core of supply chain companies’ plans following the crisis, Kohlpainter said. “Sustainability needs to be considered a clear driver of our strategy,” he said. All the changes driven by the pandemic, including the closure of logistics sites to cut costs and long-term changes to the working environment, have sustainability implications, he said.

Jan Arnet, CEO of chemical transportation and logistics provider Bertschi, gave an account of how the company has demonstrated resilience during the pandemic, its staff adapting quickly to home-working practices and office processes moving successfully online as the company introduced measures to protect other employees such as drivers and cleaners. “Without that external push [COVID-19], it would have taken us one and a half years to make these changes,” Arnet said.

The key enablers were digitized IT systems and solution-oriented action. According to Arnet, “this current innovative spirit” can be leveraged to increase automation, flexibility, and focus in supply chains partly through “diversification of sourcing without adding complexity and reducing working capital without losing opportunity.”

Gina Fyffe, CEO at petrochemical shipping and trading company Integra, said that COVID-19 had “changed the conversation” about supply chains, focusing attention on building resilience. For the future, areas of focus include supply sources, inventories, and infrastructure, she said. “COVID-19 has taught us that our supply chains are global and that national agendas such as trade and tariff barriers can backfire,” said Fyffe. “We have the opportunity to renew, adapt, learn, and amend."

As MRC informed earlier, European petrochemical industry faces short-term and longer-term challenges caused by or exacerbated by the COVID-19 pandemic. Speakers on Monday at the European Petrochemical Association’s (EPCA) 54th annual meeting, being held in a virtual format, said the crisis had been a learning experience for the industry.

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

According to MRC's ScanPlast report, Russia's overall PE production totalled 1,712,400 tonnes in the first seven months of 2020, up by 58% year on year. Linear low density polyethylene (LLDPE) accounted for the greatest increase in the output. At the same time, overall PP production in Russia increased in January-July 2020 by 24% year on year to 1,063,700 tonne. ZapSibNeftekhim accounted for the main increase in the output.
MRC

MOSCOW (MRC) -- Noble Energy shareholders have approved a deal to sell the oil and gas producer to Chevron Corp, making Chevron the No. 2 U.S. shale oil producer and giving it international natural gas reserves close to growing markets, as per Hydrocarbonprocessing.

The all-stock deal values Noble Energy at around USD4.2 billion, excluding USD8 billion in debt, and the vote cements the first big energy deal since the coronavirus crushed global fuel demand. The addition of Noble will boost Chevron's U.S. shale oil holdings, making it the No. 2 producer behind EOG Resources, according to data from Rystad Energy. It also adds nearly 1 billion cubic feet of natural gas reserves close to growing markets. Noble's Leviathan in Israeli waters, one of the world's biggest offshore gas discoveries of the last decade, began pumping gas from the field late last year.

The deal has become even cheaper for Chevron since it was announced in July with a value of $5 billion, as shares of both companies have traded down alongside oil. Activist investor Elliott Management Corp, which took an undisclosed stake in Noble but never came out publicly against the deal, declined on Friday to say how it voted its shares or whether it has sold or kept its stake. The deal is expected close early this quarter.

It comes during a tumultuous year for the oil and gas industry and "the hurdles remain high for corporate deals," said Jennifer Rowland, analyst with Edward Jones. "Any deal that requires significant cost savings or a higher oil price to justify the price paid will not be well-received."

Chevron last year walked away from a deal for Anadarko Petroleum and took a USD1 billion break fee, a decision that looked even better as oil prices cratered.

As MRC reported earlier, Chevron Phillips Chemical, part of Chevron Corporation, declared force majeure Sept. 1 on its polyethylene (PE) products after assessing the impact of Hurricane Laura to its Gulf Coast PE operations.

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. HDPE accounted for the main decrease in imports.

Headquartered in San Ramon, California, Chevron Corporation is the the second-largest integrated energy company in the United States and among the largest corporations in the world. Chevron is involved in upstream activities including exploration and production, downstream activities including refining, marketing and transportation, and advanced energy technology. Chevron is also invested in power generation and gasification processes.
MRC

MOSCOW (MRC) -- Lummus Technology has been awarded a contract by Enter Engineering Pte. Ltd. for the Shurtan Gas Chemical Complex in Uzbekistan, according to Hydrcarbon Engineering.

Lummus’ scope includes the design and supply of four proprietary Short Residence Time (SRT) VI and VII type cracking furnaces, which will more than double the production of ethylene at Shurtan’s facility.

“Our advanced SRT ethylene furnaces optimise reliability in capacity, yield, run-length and energy efficiency,” said Leon de Bruyn, President and CEO of Lummus Technology. “We are grateful to continue our partnership at Shurtan and look forward to working with Enter Engineering to expand the ethylene production while reducing relative emissions and operating costs at the Shurtan Gas Chemical Complex.”

As MRC reported earlier, in June, 2017, CB&I announced it had been awarded a technology contract by Shurtan Gas Chemical Complex LLC (SGCC) for a grassroots ethylene complex to be built in southern Uzbekistan. The scope of work includes the license and basic engineering of an ethylene unit, which will use four proprietary SRT heaters, a Hexene-1 unit and a polypropylene unit. The Hexene-1 unit will use CB&I's Comonomer Production Technology for the production of Hexene-1 from low-cost C4s, and the polypropylene unit will use CB&I's Novolen gas-phase polypropylene technology for the production of full range polypropylene products.

We remind that in October 2015, Lotte Chemical Corp., the petrochemical unit of South Korea’s No. 5 conglomerate Lotte Group, announced the completion of the construction of a gas chemical complex in Uzbekistan, a major overseas project it had pursued as part of an effort to diversify profit sources. The joint development project, dubbed "the Surgil Project," was clinched in 2007 between a Korean consortium led by Lotte Chemical and the state-owned oil and gas company Uzbekneftegaz in a 50-50 ownership to build a nearly 100-hectare production line for high-density polyethylene (HDPE), polypropylene (PP) and gas development.

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

According to MRC's ScanPlast report, Russia's overall PE production totalled 1,712,400 tonnes in the first seven months of 2020, up by 58% year on year. Linear low density polyethylene (LLDPE) accounted for the greatest increase in the output. At the same time, overall PP production in Russia increased in January-July 2020 by 24% year on year to 1,063,700 tonne. ZapSibNeftekhim accounted for the main increase in the output.
MRC

MOSCOW (MRC) -- COVID-19 occurred at an already challenging time for the petrochemical industry and has required it to take some drastic actions, said the leaders of the world’s two biggest chemical companies, BASF and Dow, on Monday at the 54th European Petrochemical Association (EPCA) annual meeting, which is taking place in a virtual format, reported Chemweek.

The pandemic has also accelerated key industry trends, particularly those around sustainability and the environment, they said.

Martin Brudermuller, chairman and chief technology officer at BASF, said that COVID-19 had “intensified” a number of challenges that the petrochemical industry was facing before the crisis. These include the US/China trade conflict; the European Green Deal, which was announced in December 2019 and maps a route to climate neutrality by 2050, and will be linked to a planned EU chemicals strategy; and an “unfortunate supply and demand balance” that had flattened the industry’s cost curves, he said. Together they and the pandemic have created a perfect storm for the industry, Brudermuller said. “The current challenges are the biggest we have ever had in front of us,” he said.

The petrochemical industry is currently “in the spotlight” with governments and the public for being energy intensive, CO2 intensive, and the perceived source of plastic pollution in the oceans, Brudermuller said. Petrochemicals are an enabler for addressing these challenges, but “we struggle to convey” the message that the industry is a solution provider, he said.

Brudemuller identified five action items for petrochemical companies to get their message across: drive operational excellence, install a circular economy internally, transition to low-carbon operations, create transparency, and “do good and talk about it.”

For companies to install a circular economy, “we should be fast in implementation and ahead of regulation,” Brudermuller said. This can help the industry to shape “proper framework conditions that will allow us to succeed,” he said.

The low-carbon transformation “has to be at the top of our agenda, but we as an industry today lack the proper technology,” Brudermuller said. BASF is working in cooperation with various partners on technology initiatives such as producing pyrolysis oil from waste tires and electrification of steam cracker furnaces.

To create transparency around companies’ carbon footprint, “we have to link our efforts into the markets of our end customers,” Brudermuller said. He cited BASF’s decision to calculate a carbon footprint for each of its many products and make the data available to its customers.

It is not enough for the industry to comply with regulations and take part in individual and collective initiatives to address sustainability and climate change. Companies must also communicate this message to counteract an often-negative public perception, Brudermuller said. “As long as alarmism sets the agenda, we need to make the case,” he said. “As an industry, we have something to offer, including innovations and great products. BASF will be an action- and thought leader.”

Jim Fitterling, chairman and CEO of Dow, said that the pandemic is driving petrochemical companies to “rebuild resiliency” and has “forced a retrenchment.” Companies have canceled projects and rationalized capacity in an effort to achieve the lowest possible operating expenses.

“It will force us to be leaner and more focused,” Fitterling said. “The entire industry is defaulting to its strongest and most competitive positions. It is forcing a very quick and strategic pivot.” The winners will be companies that are “best positioned to take advantage of the upswing when it happens,” he said.

The biggest change brought by COVID-19 is an acceleration of two trends that the industry was already tackling -Environmental, Social, and Corporate Governance (ESG) and digitization - Fitterling said. At Dow, ESG “is at the heart of our ambition,” Fitterling said. ([The pandemic) has only strengthened our view that it’s the right strategy. Every stakeholder continues to push for more sustainable products and projects. We intend to move forward and will optimize our assets, and develop and use new technologies,” he said.

Fitterling also expects the pandemic to “unleash an unprecedented amount of collaboration” for the industry with customers, other companies, and other stakeholders. “ESG is a driving force and it is accelerating,” he said. “We can’t ignore what our stakeholders are telling us. The world needs our products, our voices, and our collaboration to get this right.”

Digitization, meanwhile, is becoming a key advantage for companies that implement it in the right way. “The pandemic has made it critical,” Fitterling said. “Data is the new fuel for our industry. It will be a competitive advantage for some companies but a liability for others.”

As MRC informed before, Dow says it will record a charge of between USD500-600 million in the third quarter for costs associated with the company’s ongoing restructuring program, and has outlined more details of its previously announced plan to close manufacturing facilities in the US and Europe to enhance its long-term competitiveness as the worldwide economy recovers from the COVID-19 pandemic.

We remind that Dow Chemical conducted a 45-day scheduled maintenance at its propane dehydrogenation (PDH)unit in Freeport, Texas, from 8 July, 2020. This PDH unit has the capacity of 750,000 mt/y of propylene.

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

According to MRC's ScanPlast report, Russia's overall PE production totalled 1,712,400 tonnes in the first seven months of 2020, up by 58% year on year. Linear low density polyethylene (LLDPE) accounted for the greatest increase in the output. At the same time, overall PP production in Russia increased in January-July 2020 by 24% year on year to 1,063,700 tonne. ZapSibNeftekhim accounted for the main increase in the output.

The Dow Chemical Company is an American multinational chemical corporation. Dow is a large producer of plastics, including polystyrene, polyurethane, polyethylene, polypropylene, and synthetic rubber.
MRC

MOSCOW (MRC) -- The European petrochemical industry faces short-term and longer-term challenges caused by or exacerbated by the COVID-19 pandemic. Speakers on Monday at the European Petrochemical Association’s (EPCA) 54th annual meeting, being held in a virtual format, said the crisis had been a learning experience for the industry, said Chemweek.

Bernard Pinatel, president/refining and chemicals at Total, said that for the industry to set its future priorities, it must learn from the crisis. He highlighted four main “takeaways” from the pandemic: uncertainty and how to deal with it, the need to diversify end-use markets and supply chains, the importance of internal and external communication, and the challenge of climate change.

Pinatel said that the immediate uncertainty caused by the pandemic “shows you just have to focus on what you control and be excellent. If you focus on that, it’s the best way to weather the storm and crisis,” he said. Petrochemical companies should focus on “costs, cash, how you allocate capital, and how you operate your assets” rather than looking to unknowns such as the shape and timing of the recovery, which are beyond the industry’s control.

The need for petrochemical companies to diversify end-use markets has been demonstrated by the uneven impact of COVID-19 with some customer industries, such as automotive, suffering more than others. Supplying polymers to the auto industry has been “a nightmare,” Pinatel said. "So, diversification is a must. A diversified portfolio is the best way to be resilient in a world of uncertainty,” he said.

There have been calls for less globalization of supply chains and the relocalization of production, because the crisis has highlighted some vulnerabilities. Pinatel rejects this as “a quick fix” and not a long-term solution. The industry should instead diversify its supply chains and not rely on a single country to source products, he said. Uncertainty has made clear communication more important than ever, Pinatel said. “COVID-19 is a test of leadership,” he said. “You have to be simple and straight to the point externally and internally. You have to act quickly, align quickly, and deliver very simple messages."

Digital technologies, developed and rolled out relatively recently, have played a crucial role in enabling communication in the crisis and could lead to fundamental operational changes for the petrochemical industry, Pinatel said. “Digitization may be a solution to operate industrial assets from remote locations,” he said. The industry, meanwhile, can and should address climate change as it emerges from the pandemic, Pinatel said. “The challenge is for the industry to recover, grow, and combine this with CO2 reduction. And we need to provide our customers with solutions to reduce their emissions,” he said.

Total has committed to reach net zero emissions by 2050. Pinatel cited the company’s recently announced project to convert its refinery site at Grandpuits, France, into a “zero oil platform.” This will involve transforming the site to make biobased products including sugar-based bioplastics. “The concept is completely designed around the circular economy,” he said.

The European petrochemical industry “will play a key role through innovation and technology to develop low-carbon solutions,” Pinatel said. “With this crisis, the industry has a role—to be at the forefront of tackling the climate change challenge,” he said.

Meanwhile, the crisis has shown the importance of the petrochemical industry and its products, many of which are used to tackle the pandemic, said Thomas Casparie, executive vice president/global chemicals at Shell. “Our industry is vital, but really the last few months have made this even more apparent,” said Casparie. The industry also showed its agility in being able to adapt immediately to the crisis, he said.

Petrochemical companies face many challenges including those that pre-existed the crisis, Casparie said. These include cyclical challenges on the supply side with large capacities coming onstream, particularly in Asia. Meanwhile, refineries are struggling to be profitable and Casparie sees possible upward pressure on the price of naphtha, the main feedstock for petrochemicals in Europe, in the long- and short term. “But refineries could increase their output of petrochemicals,” Casparie said.

Meanwhile, the industry must respond to changing expectations from customers and consumers for more sustainable products and operations. “Consumer expectations are changing,” Casparie said. “The world is demanding more sustainability, and our customers are responding to that. He cited the example of Unilever, which has committed to stop using fossil-based chemicals in its laundry and cleaning products by 2030.

According to MRC's DataScope report, Russian companies significantly raised their purchasing of PP in foreign markets in August partially because of a major increase in demand, imports were 21,200 tonnes versus 17,200 tonnes a month earlier. Thus, overall PP imports into Russia reached 143,200 tonnes in January-August 2020, compared to 120,100 tonnes a year earlier.
MRC