COVID-19 - News digest as of 03.11.2020

1. Indiian October gasoline, gasoil sales exceed pre-coronavirus levels

MOSCOW (MRC) -- India’s gasoil consumption in October rose 6.6% from a year earlier, the first such increase since COVID-19 restrictions were imposed in late March, preliminary data showed on Sunday, signaling a pick-up in industrial activity, reported Reuters. Diesel sales by the country's three state fuel retailers totaled 6.17 million tons in October, according to provisional data compiled by Indian Oil Corp (IOC), the country's biggest refiner and fuel retailer. Sales of gasoil, which account for about two-fifths of India’s fuel demand, rose 27.5% from September.



MRC

Saudi Aramco to pay bumper dividend despite profit tumble

MOSCOW (MRC) -- Saudi Aramco is sticking with plans to pay a bumper third-quarter dividend of USD18.8bn despite the pandemic cutting the group’s earnings by 45%, said FT.

The kingdom’s state energy company on Tuesday reported third quarter net income of USD11.8bn, down from USD21.2bn in the same period in 2019. The figure, however, beat the USD10.6bn that analysts forecast, according to a consensus compiled by the company.

“We saw early signs of a recovery in the third quarter due to improved economic activity,” chief executive Amin Nasser said in a statement.

Government-imposed lockdowns and travel bans this year triggered a drop in oil demand, crude prices and refining margins hurting profits in the three months to September 30. Market turmoil has rocked the entire sector with big oil companies forced to cut thousands of jobs, increase debt and slash dividend payouts.

Although the state-controlled oil company has reported results that are better than its international peers, Saudi Aramco, which made its stock market debut in December 2019, is facing its toughest year in decades.

Mr Nasser warned of “headwinds” still facing global energy markets. The quarterly payout of USD18.8bn, the vast majority of which goes to the government, Saudi Aramco’s largest shareholder, is in line with a commitment to hand back USD75bn to investors this year.

However, the dividend exceeds the free cash flow of USD12.4bn that Saudi Aramco generated in the period, meaning the group’s borrowings are likely to have to rise to pay for it. Gearing, which it defines as a measure of the degree to which operations are financed by debt, has already risen from minus 4.9 per cent in the first quarter to 21.8 per cent.

This is far greater than the company’s target of 5-15 per cent, which Neil Beveridge at Bernstein said “raises questions of sustainability”. Saudi Aramco attributed the huge increase largely to its acquisition of a majority stake in Saudi chemicals player Sabic, from the kingdom’s public investment fund, this year for USD69bn.

The country’s biggest revenue earner is under increasing pressure to cut outgoings to help buffer the kingdom, which faces a ballooning budget deficit. The company is scaling back foreign expansion plans, dramatically cutting costs, extending project timelines and suspending drilling activity. It has also cut hundreds of foreign staff.

Capital spending in the three-month period fell to USD6.4bn from USD8.1bn a year ago. Although Saudi Arabia believes the worst of the crisis is behind it with oil prices rebounding from April’s lows below USD20 a barrel, Brent crude has failed to hold consistently above USD40 a barrel.

The kingdom, the world’s largest oil exporter, is part of an alliance of producer countries, including Opec nations and Russia, that seek to bolster a fragile market through record production cuts. The curbs of 9.7m b/d, which came into effect in May, have since eased to 7.7m b/d and producers are due to decide whether they can afford to unwind the curbs further in January. Saudi Aramco shares rose 0.4 per cent in early trading on the domestic Tadawul stock exchange.

As MRC wrote befire, in June, Aramco said it had completed the share acquisition of a 70% stake in SABIC from the Public Investment Fund, the sovereign wealth fund of Saudi Arabia, for a total purchase price of Riyals 259.125 billion (USD69.1 billion). Combined, in 2019 Aramco and SABIC recorded petrochemicals production volume of nearly 90 million mt, including agri-nutrient and specialty products.

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

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). At the same time, PP shipments to the Russian market reached 767,2900 tonnes in the eight months of 2020 (calculated using the formula - production minus exports plus imports - and not counting producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.

MRC

Eneos to close Chita petrochemical plant in October 2021

MOSCOW (MRC) -- Japan's biggest oil refiner Eneos Holdings Inc said last Tuesday it planned to stop production of petrochemical products at its Chita plant in central Japan in October next year, said the company in its press release, citing falling local demand and stronger competition in Asia.

The company will hold talks with rival Idemitsu Kosan Co Ltd to transfer some of its production facilities at the plant, including those for paraxylene (PX), to Idemitsu, it said in a statement.

The end of production at the Chita plant would reduce Eneos' PX capacity by 400,000 tonnes a year, leaving it with a total paraxylene output capacity of more than three million tonnes a year, Eneos executive vice president Junichi Iwase said.

"We will continue to review our production and supply structure to reflect changing environment," Iwase told reporters in Tokyo, without elaborating further.

Eneos plans to keep all employees of Chita plant through transfer to other locations, he added.

Four of Japan's biggest refiners have merged into two in recent years and cut operations as they seek business from a shrinking, aging population that consumes less fuel because of more efficient vehicles and gasoline-electric hybrids.

The COVID-19 pandemic has piled on the pressure, collapsing fuel demand, especially in jet fuel.

Eneos Chairman Tsutomu Sugimori said a week earlier that demand of crude products could decline more rapidly than it had anticipated as a result of the pandemic and refiners would need to think about their production capacity and structure to reflect the change.

Eneos, formerly JXTG, unveiled last year its long-term strategy with an assumption that domestic oil demand would halve by 2040, or fall 2% annually.

As MRC reported earlier, Eneos Corp, permanently shut the 115,000 barrels-per-day (bpd) crude distillation unit at its Osaka refinery on September 30 as planned. The refiner, which was formerly known as JXTG Nippon Oil & Energy Corp and is now under Eneos Holdings Inc, is shifting its joint venture with PetroChina Co to Eneos’ Chiba refinery after shutting the venture’s Osaka refinery.

PX is a feedstock for the production of purified terephthalic acid (PTA). PTA is used to produce polyethylene terephthalate (PET), which, in its turn, is used in the manufacturing of plastic bottles, films, packaging containers, in the textile and food industries.

According to ICIS-MRC Price report, consumption of PET chips by Russian converters decreased in October, which is generally in line with the current season. Market participants reported weak demand in the Russian PET chips market at the end of last month and expect its further decline in early November. The revival of the domestic PET market is expected in the second half of November, before the New Year holidays.

Eneos Holding (formerly known as JXTG) is Japan's largest oil company. Its activities include the exploration, import and refining of crude oil; production and sale of petroleum products (ethylene, propylene, butadiene, styrene, paraxylene, orthoxylene, etc.), including fuels and lubricants. In recent years, the company has been expanding its production facilities in other countries. Its products are sold under the ENEOS brand. On June 25, 2020, JXTG, founded in April 2017 after the merger of two Japanese companies, JX Holding and TonenGeneral, changed its name to Eneos Holdings, while its subsidiary JXTG Nippon Oil & Energy changed its name to Eneos.
MRC

Crude futures rise on ECB stimulus expectations, robust US economic data

MOSCOW (MRC) -- Crude oil futures rose during mid-morning trade in Asia Oct. 30, as traders took advantage of weak crude prices to pick up some bargains following an overnight plunge, with indications of a new round of monetary stimulus from the European Central Bank and better-than-expected US economic data also providing relief to markets, reported S&P Global.

At 11.14 am Singapore time (0259 GMT), ICE Brent December crude futures were up 25 cents/b (0.66%) from the Oct. 29 settle to USD37.90/b, while the NYMEX December light sweet crude contract was up 25 cents/b (0.69%) at USD36.42/b.

ICE Brent and NYMEX crude futures had dived 3.76% and 3.26% to settle at USD37.65/b and USD36.17/b, respectively on Oct. 29, as the market digested the demand-side implications of nation-wide lockdowns in Germany and France, Europe's largest and second largest economy, respectively.

Reflecting on uptrend in prices, Vandana Hari, chief executive officer at Vanda Insights told Platts Oct. 30: "Like yesterday, traders in Asia are taking advantage of the low prices to carry out some bargain hunting."

Meanwhile, ANZ analysts attributed the rise in prices to robust US economic data and the possibility of an ECB stimulus in December, saying in an Oct. 30 note: "The release of GDP for US showing a record strong rebound in Q3 saw crude oil reverse some of (their losses). Sentiment was also supported by the ECB signalling a new package of monetary stimulus in December."

The ECB had said in an Oct. 29 statement that when it meets again in December, it will "carefully assess the incoming information" relating to the pandemic and "recalibrate its instruments, as appropriate, to respond to the unfolding situation and to ensure that financing conditions remain favorable to support the economic recovery and counteract the negative impact of the pandemic on the projected inflation path."

Furthermore, US Commerce department data had shown that GDP had surged 33.1%, or USD1.64 trillion, to USD21.16 trillion in the third-quarter, while the US Labor Department data showed that the country's weekly unemployment claims had fallen 40,000 to 751,000 in the week ended Oct. 24.

Hari, however, stressed that economic data are backward looking and therefore will not offer significant comfort to markets, especially when they are staring down the barrel of subdued demand due to a resurgence in coronavirus cases in the US and amid European lockdowns.

"With demand-side fundamentals still looking bleak, the only thing that could put a floor on prices right now is a supply-side response...the market wants to hear from OPEC+ leaders Saudi Arabia and Russia that the alliance will reconsider the scheduled roll-back in production quotas," Hari said. "Time is running out for the OPEC+ to make a decision."

Meanwhile, analysts said that the market also gained some support from the larger-than-expected shut-ins caused by Hurricane Zeta in the US Gulf Coast. According to data by the US Bureau of Safety and Environmental Enforcement, as of Oct. 29, 1.57 million b/d of crude output, or 84.8% of the US Gulf's crude capacity, had been shuttered and 35% of the region's platforms and rigs, or 231 facilities, had been evacuated.

However, this support may be transient, as the latest advisory from the National Hurricane Center issued late Oct. 29 showed that Zeta, which has now degraded into a Post-Tropical Cyclone, should dissipate on Oct. 30, paving the way for the region's production to resume.

As MRC informed earlier, as of midday Oct. 29, the storm had shut in an estimated 1.57 million b/d of crude production reflecting 84.8% of US Gulf output, according to the US Bureau of Safety and Environmental Enforcement. The Category 2 storm also caused disruptions at Shell's 227,400 b/d Norco Refinery, PBF Energy's 190,000 b/d Chalmette Refinery and potentially others, but damages were limited and the restart processes have begun, the companies said.

We remind that Royal Dutch Shell plc. said in October, 2020, that its petrochemical complex of several billion dollars in Western Pennsylvania is about 70% complete and in the process to enter service in the early 2020s. Currently under construction, the plant is in Beaver County, about 48 km northwest of Pittsburgh, and will be self-sustained with its natural gas power plant and water treatment facility. The plant’s costs are estimated to be USD6-USD10 billion, where ethane will be transformed into plastic feedstock. The facility is equipped to produce 1.5 million metric tons per year (mmty) of ethylene and 1.6 mmty of polyethylene (PE), two important constituents of plastics.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,594,510 tonnes in the first nine months of 2020, up by 1% year on year. Only high denstiy polyethylene (HDPE) shipments increased. At the same time, PP shipments to the Russian market reached 880,130 tonnes in the nine months of 2020 (calculated using the formula: production minus exports plus imports, exluding producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.
MRC

Lummus supplying ethylene cracking furnaces to Baltic Chemical Plant

MOSCOW (MRC) -- Lummus Technology will supply 14 cracking furnaces for a Gas Chemical Complex that is part of the Ethane-rich Gas Processing Complex (GCC EGPC) located near Ust-Luga, Leningrad Oblast, Russia, on the Gulf of Finland, said Hydrocarbonengineering.

The contract is awarded within the framework of an EPC Contract for the GCC EGPC project between China National Chemical Engineering & Construction Corporation Seven, LTD (CC7), and the Baltic Chemical Plant LLC. Lummus' scope includes engineering and supply of the company's proprietary Short Residence Time (SRT®) VI cracking furnaces. The equipment is expected to yield a total ethylene product amount (ethylene crackers 1 and 2) of up to 3 million tpy, will be supplied under the ethylene technology license agreement entered in between Baltic Chemical Plant LLC, a Project Operator (and a subsidiary of RusGazDobycha), and Lummus Technology in 2019.

The cracking furnace is the core process element of an ethylene plant. The process inside a cracking furnace is based upon pyrolysis of hydrocarbons (ethane/propane mixture) in the presence of steam with release of cracked gas. The gas is further fed into the olefins recovery section to produce polymer grade ethylene used as feedstock for polyethylene production as well as other byproducts.

"The Gas Chemical Complex Project relies on the most advanced, highly-efficient and eco-friendly process solutions available in the world. At the current stage of the project, the team is dealing with purchasing long-lead equipment. The benefits offered by Lummus Technology include significant reduction in the output of by-products and specific consumption of utilities. The process also offers feedstock flexibility as it is possible to feed of up to 10% propane in case of ethane shortage," shared Konstantin Makhov, General Director of Baltic Chemical Plant LLC.

"This is the second major award announced recently for our world-class SRT ethylene furnaces, which optimise reliability in capacity, run-length and energy efficiency. It is another step forward in our services for the Baltic Chemical Plant and builds on our experience in Russia, which is among our key markets and where we are recognised as a leading licensor of this technology," said Leon de Bruyn, President and CEO of Lummus Technology.

"This is the first experience of partnering between Lummus Technology and CC7 for ethylene integration project both in Russian and international markets. Following the Process Design Package Contract covering the ethane cracking unit engineering for Baltic Chemical Plant signed in November 2019, a new equipment engineering & supply contract has been now signed. The relationships between the two companies have been evolving, and cooperation experience gained in this project will build a reliable foundation for future strategic partnership in the international market," underlined Long Haiyang, Vice-President at CC7.

As per MRC, Lummus Technology has been awarded a contract by Enter Engineering Pte. Ltd. for the Shurtan Gas Chemical Complex in Uzbekistan. 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.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,594,510 tonnes in the first nine months of 2020, up by 1% year on year. Only high denstiy polyethylene (HDPE) shipments increased. At the same time, PP shipments to the Russian market reached 880,130 tonnes in the nine months of 2020 (calculated using the formula: production minus exports plus imports, exluding producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.
MRC