Facing wave of closures, oil refiners turn to biofuels

MOSCOW (MRC) -- European and U.S. oil refineries face a wave of closures due to plateauing fuel demand, tightening environmental rules and overseas competition, prompting some owners to opt for an easier alternative - converting plants to produce biofuels, said Hydrocarbonprocessing.

The shock of the coronavirus epidemic crushed global oil demand and as some producers, including, say it might never recover to pre-crisis levels, the need to close refineries has accelerated. The International Energy Agency (IEA) said in a recent report that by 2030 around 14% of current refining capacity in advanced economies “faces the risk of lower utilization or closure."

That share could grow to 50% in 2040 under a more aggressive transition away from fossil fuels to electric vehicles, the IEA said. Shutting down refineries, some of which are 70 years old, is a costly process which requires dismantling heavy equipment and pipelines and remediating the land.

So owners are choosing alternative paths, including converting refinery sites to import terminals, putting them to other industrial uses or, in many cases, switching to cleaner biofuels by processing vegetable oil and waste oils. BP, Total and Eni, outlined in recent months plans to grow their biofuel capacities by two to five fold by 2030 while reducing their global oil refining footprints.

The switch is part of companies’ strategies to radically reshape and grow renewables and low-carbon businesses. Other European refiners including Repsol and independent Italian refiner Saras also plan to increase their capacity. Converting refineries to biofuels “makes a lot of sense,” said Rob Turner, partner at PWC specializing in the energy sector. "It allows plans to play a role in the energy transition, creates long-term value and mitigates the costs of a full shutdown and site cleanup."

Although refiners in other developed economies face a similar challenge, it is particularly difficult for Europe where local consumption has been in a steady decline and governments have accelerated efforts to curb carbon emissions. Already, three refineries in Europe have shut down in the wake of the coronavirus epidemic - Total’s Grandpuits plant in northern France, Neste’s Naantali plant in Finland and Gunvor’s Antwerp refinery. Total converted the La Mede refinery in southern France into a biodiesel plant in 2019.

Other refiners, whose profits have collapsed due to a sharp drop in demand due to the epidemic, are on the brink. Europe’s biofuel production capacity is expected to grow to around 8 MM tons per year from the current 3 MM tons per year, according to Barclays analyst Joshua Stone.

Finnish refiner Neste Oyj, which has invested heavily in renewables and has biofuel facilities in Europe and Singapore, has seen its shares soar in recent months while those of traditional refiners and energy companies dropped. Neste’s shares have gained over 55% so far this year while shares of Saras have tumbled 69%.

As MRC wrote before, on 15 October, The European Commissionadopted the EU's chemicals strategy for sustainability, describing it as the first step towards a zero-pollution ambition for a toxic-free environment announced in the European Green Deal.

We remind that Russia's output of chemical products rose in August 2020 by 5% year on year. At the same time, production of basic chemicals increased year on year by 5.3% in the first eight months of 2020, according to Rosstat's data. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the January-July output. August production of benzene fell to 102,000 tonnes from 95,300 tonnes a month earlier due to scheduled shutdowns for maintenance at several producers. Overall output of this product reached 918,300 tonnes over the stated period, down by 0.9% year on year.

At the same time, August production of primary polymers rose to 888,000 tonnes against 838,000 tonnes in July due to increased capacity utilisation at ZapSibNeftekhim, Stavrolen and Gazprom neftekhim Salavat. Overall output of polymers in primary form totalled 6,630,000 tonnes over the stated period, up by 15.2% year on year.
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UPM starts construction of EUR550-million biochemicals facility in Leuna, Germany

MOSCOW (MRC) -- UPM (Helsinki, Finland) has started construction of a new EUR550-million (USD645-million) biochemicals facility in Leuna, Germany, that will produce 220,000 metric tons/year of bio-monoethylene glycol (BioMEG) and lignin-based renewable functional fillers, said Chemweek.

The biorefinery, using wood as feedstock, is expected to come onstream by the end of 2022, it says. The facility will also produce bio-monopropylene glycol (BioMPG) and industrial sugars made from sustainably harvested beechwood sourced regionally in Germany, UPM says. The wood-based biochemicals investment is a “major milestone” in the company’s ongoing strategic transformation, it says. The technology and process has been developed by the company over the past 10 years, building mainly on its own innovation capabilities and working selectively with partners.

"The biorefinery in Leuna will be the nucleus for an entirely new and high-value growth business and opens totally new markets for UPM with large growth potential for the future,” says Jyrki Ovaska, executive vice president/technology at UPM. Awareness of climate change has increased customer demand for sustainable alternatives to fossil-based products, he says. The bioproducts will significantly reduce the carbon dioxide (CO2) footprint of end-use products such as plastics, textiles, rubber, cosmetics, and other industrial uses, according to the company. A project office has been established onsite, with COVID-19 having not disrupted work throughout the pandemic, according to UPM.

UPM reported annual sales in 2019 of EUR10.2 billion and first unveiled plans for an industrial-scale biorefinery in Germany earlier this year. Once production at the facility is fully ramped up and optimized, UPM expects it to achieve a targeted return on capital investment of 14%. The plant will be linked to existing chemicals infrastructure in Leuna and be in “close proximity” to customers, the company said earlier this year.

The global glycols market produces over 30 million metric tons/year (MMt/y) and is expected to grow annually by approximately 4%, according to UPM. The worldwide market for carbon black and silica combined is more than 15 MMt/y with expected annual growth of approximately 3%, it says. In February this year UPM and Ineos announced a long-term agreement to supply a renewable raw material for bio-attributed polymers to be produced at Ineos’ Cologne, Germany, site. UPM has been studying conceptual plans to build a biorefinery in Germany since 2017.

As MRC informed earlier, PTT Global Chemical (PTTGC) has announced that Auria Biochemicals Co., a joint venture of PTTGC and Myriant Corp. On 12 Apr. 2018, at a general meeting of Auria shareholders, a resolution was passed to dissolve the joint venture, which was established in 2013 to conduct research and development of bio-based chemicals in order to enhance Myriant's technology. Myriant is a wholly-owned subsidiary of PTTGC.

Ethylene is the main feedstock for the production of polyethylene (PE).

According to MRC"s ScanPlast report, Russia's estimated PE consumption totalled 1,496,500 tonnes in the first eight months of 2020, up by 5% year on year. Shipments of all ethylene polymers increased, except for linear low desnity polyethylene (LLDPE).
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Clariant re-launches pigments unit sale, with multiple bidders

MOSCOW (MRC) -- Clariant is relaunching the sale of its pigments unit, after putting the auction on hold as the coronavirus pandemic engulfed the world and disrupted talks with prospective buyers, reported Reuters with reference to the Swiss specialty chemicals company's statement.

The Muttenz-based company is expected to send out information packages to prospective buyers of the unit this month, and people familiar with the preparations added that buyout groups including PAI, Lone Star, Triton and SK Capital are expected to express interest.

The potential bidders declined to comment or were not immediately available for comment.

"We are continuing our transformation program which has so far seen the successful divestment of the Healthcare Packaging and Masterbatches businesses, by resuming the process for this planned divestment," a Clariant spokesman said.

Before the company said in April the sale process was delayed, the unit which makes dyes including for the car and building industries was expected to fetch up to 900 million Swiss francs (USD984 million), or around 8 times core earnings.

The impact of the pandemic has weighed on the business and it may now fetch less, one of the people said. Clariant said the business has successfully mitigated the pandemic's impact as well as boosted efficiency.

"As a result, Clariant Pigments remains a leading global player in the industry and as such, any convincing offer will have to reflect this leading position," the spokesman said.

Clariant's failed merger with Huntsman, in the face of activist investor resistance, and the joint venture it abandoned in August with Saudi Basic Industries (SABIC) have led to asset sales beyond what the Swiss company originally envisioned.

Clariant is concentrating on its faster-growing segments including catalysts, ingredients for shampoos, and chemicals for the oil and gas industries, while divesting commoditized operations.

As MRC reported before, in early September, 2020, the Competition Commission of India (CCI) cleared SABIC BV's incremental acquisition of a 6.51% shareholding in Clariant AG. The transaction, which will raise SABIC's stake in Clariant to 31.5%, is part of SABIC's growth strategy in specialties.

We remind that in May 2020, Clariant’s CATOFIN catalysts was selected by Advanced Global Investment Co. (AGIC), a joint venture between Advanced Petrochemical Company (APC) and SK Group, to build a PDH facility in the Middle East.

Propylene is the main feedstocks for the production of polypropylene (PP).

According to MRC's ScanPlast report, 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.

Clariant AG is a Swiss chemical company and a world leader in the production of specialty chemicals for the textile, printing, mining and metallurgical industries. It is engaged in processing crude oil products in pigments, plastics and paints.
MRC

Braskem forms first partnership for removing household plastic waste from landfill in Greater Sao Paulo

MOSCOW (MRC) -- Braskem has formed first partnership for removing household plastic waste from landfill in Greater Sao Paulo, as per the company's press release.

The partnership forged between Braskem and Tecipar, the Brazilian company specializing in environmental engineering, will avoid some 2,000 tons of plastic waste annually from being discarded in the landfill of Santana do Parnaiba, a city in the metropolitan area of Sao Paulo. This volume is equivalent to 36 million units of plastic packaging made from polyethylene (PE) and polypropylene (PP). The partnership reinforces Braskem's commitment to the Circular Economy and is aligned with the business strategy of the company, which is engaged in supporting the development of the recycling chain and its market.

The partnership supported the creation of a picking plant to separate solid and organic waste from materials collected by the public collection system in the cities of Barueri and Santana de Parnaiba. The plastic sorted by Tecipar is then taken to Braskem's partner recycling company. The recycled PE and PP resins will be used as raw materials for developing more sustainable solutions for the plastic industry.

This is the first agreement entered into by Braskem for the removal of plastic waste from landfills. To Fabiana Quiroga, Braskem's Circular Economy Director for South America, the initiative is an important step for the partnership network Braskem has been building with suppliers, clients, players in the plastics chain and society in general to minimize the environmental impacts and create value for products made from recycled plastic. "Brazil already has a very promising recycling market that creates jobs and income for many people and can help the country overcome one of its main challenges: waste management," she said.

Lucas Faveri, the environmental engineer responsible for the Tecipar waste picking plant, explains that the technology used in the partnership with Braskem is a semi-mechanized model that never has been used before in the state of Sao Paulo state and is scalable, while also helping municipalities to reduce their recycling costs and to increase their recycling rates. A recent survey conducted by the Sao Paulo State Court of Audit (TCESP) found that one-third of municipalities in Sao Paulo do not yet have recycling systems.

"Various initiatives focusing on increasing recyclability come up against the high operational cost of waste triage and collection systems. Information and economic feasibility are two very important factors in this process, and partnerships between companies, such as the one we are forging with Braskem, as well as the move towards more sustainable habits that we are seeing in society, drive us to innovate and to come up with much more efficient solutions," noted Faveri.

The support for technologies and systems that could facilitate recycling in Brazil is among the eight pillars of Braskem's commitment to the Circular Economy. In addition to the partnership with Tecipar, Braskem has been working with companies specializing in mechanical recycling. The company also has been investing in research and technology to leverage chemical recycling in the country. "It is a team effort in which the public's engagement in conscientious consumerism and proper disposal of plastic waste are paramount," said Fabiana.

The recycled PE and PP resins help to expand Braskem's portfolio of sustainable solutions, which are marketed under the I'm greenTM brand and used by major companies for producing plastic items with better environmental footprints. Examples are the recycled plastic chairs recently launched by Tramontina and the line of semiautomatic and automatic washing machines from Colormaq, which include components made from with post-consumer plastic resin.

As MRC reported previously, Brazilian petrochemical producer Braskem's 450,000 mt/year polypropylene (PP) plant in LaPorte, Texas, along the Houston Ship Channel completed its initial commercial production, as per the company's statement as of Sept. 10. "The launch of commercial production at our new world-class PP production line in La Porte clearly affirms Braskem's position as the North American polypropylene market leader," Braskem America CEO Mark Nikolich said in a statement. With a USD750 million investment, the new PP plant's construction started in October 2017 and was completed in June, 2020.

Braskem operates five other US PP plants in Texas, Pennsylvania, and West Virginia, with a cumulative capacity of 1.57 million mt/year that the company acquired. The new plant in La Porte, Texas, is Braskem America's first PP new build.

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.

Braskem S.A. produces petrochemicals and generates electricity. The Company produces ethylene, propylene, benzene, toluene, xylenes, butadiene, butene, isoprene, dicyclopentediene, MTBE, caprolactam, ammonium sulfate, cyclohexene, polyethylene theraphtalat, polyethylene, and polyvinyl chloride (PVC).
MRC

Belarus to export gasoline cargo via Russian port amid dispute with EU

MOSCOW (MRC) -- Belarus plans to ship at least one cargo of gasoline via Russia's Baltic port of Ust-Luga in October, four industry sources said, turning to a route it last used almost three years ago and avoiding ports in European Union states, said Hydrocarbonprocessing.

The move follows a mounting dispute with the EU. European foreign ministers agreed this week to impose sanctions on Belarusian President Alexander Lukashenko and other officials over an Aug. 9 election the West says was rigged. Belarusian Oil Company will ship 37,000 tons of gasoline from its Mozyr refinery via Ust-Luga port in October, the sources said, adding that trading firm Vitol was the buyer.

"This shipment is a test one," one trader said, adding it was not clear if more Belarusian cargoes would follow. It will be first shipment sent via the Russian port since January 2018. Vitol declined to comment. Belarusian Oil Company and Ust-Luga terminal operator JSC Portenergo did not immediately respond to requests for comment.

Belarus usually exports gasoline from its Mozyr and Novopolotsk refineries via the Lithuanian port of Klaipeda and Ventspils in Latvia, both in EU states on the Baltic. Some motor fuel is also supplied to Ukraine, which borders EU nations. The Belarus president, who has faced weeks of unrest and protests, threatened in August to divert oil products to Russian ports if EU sanctions were imposed and to stop EU states using his country as a transit route to Russia.

Russian Energy Minister Alexander Novak said last month that Belarus might redirect 4 MM to 6 MM tons of oil products through Russian ports. Belarus and Russia have in past years talked of diverting Belarusian oil products through Russian ports, although this has not previously translated into any long-term shift.

Russian President Vladimir Putin said in 2017 Belarusian products produced from Russian oil should be exported through Russian ports. Belarusia's Belneftekhim said in December 2017 it had signed a contract to export 72,000 tons of products via Russian ports but only one 37,000-ton cargo took that route, traders said.

According to MRC DataScope, July imports of polypropylene in Belarus decreased to 7,300 tonnes, while a month earlier this figure was about 11,000 tonnes, local companies reduced the volume of purchases of all types of propylene polymers in Russia. Total PP imports into the country reached 62,800 tonnes in January - July, compared with 64,600 tonnes year on year. The demand for homopolymer PP increased, but demand for propylene copolymers decreased.


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