Shell closing Convent, Louisiana, refinery as pandemic takes toll

MOSCOW (MRC) -- Royal Dutch Shell announced it was closing its refinery in Convent, Louisiana, the largest such US facility and first on the US Gulf Coast to shut down since the coronavirus pandemic devastated worldwide demand, reported Reuters.

The shutdown will occur this month after Shell failed to find a buyer.

The refinery is the ninth in North America targeted for a shutdown or to be idled since the pandemic, which has dealt a heavy blow to fuel demand globally. The United States is the world's largest fuel consumer.

Shell said it failed to find a buyer for the 211,000-barrel-per-day refinery after announcing plans to sell it in July.

“After looking at all aspects of our business, including financial performance, we made the difficult decision to shut down the site,” Shell spokesman Curtis Smith said in an emailed statement.

Refining margins have been down substantially since the pandemic started. The gasoline refining margin is currently at USD8.79 per barrel, below the threshold where most refiners can profit.

Once the shutdown is complete, Shell will continue to try to divest the refinery, the company said. It expects to sell all but six refineries and chemical plants globally and is considering closing facilities it cannot sell, the company told investors on its quarterly earnings call this week.

"We recognize the market is not great at the moment in terms of divesting assets ... if it's not possible, we'll consider closing and shutting down. That's ultimately, the last option we'd like to pull," said chief financial officer Jessica Uhl.

The company said in 2019 it would structure its operations to match the future market for downstream products with a focus on its chemicals business.

In February, Shell sold its 156,400 bpd Martinez, California, refinery and logistics assets to PBF Energy for $960 million plus the price for oil and refined products on hand.

Shell said it will open a selective voluntary severance program to potentially create other roles for workers.

Convent's closure adds to the almost 2 MMbpd of refinery capacity globally that has been permanently shuttered globally due to the coronavirus pandemic.

Another 1.4 MMbpd is temporarily out of commission or being converted in terminal and other facilities, US refiner Phillips 66 said on its third quarter earnings call earlier this week.

Late last month PBF Energy said it will shut most refining units at its Paulsboro, New Jersey, refinery.

Elsewhere, Canada’s Come-by-Chance plant in Newfoundland and Labrador has been idled since May. HollyFrontier shut down its Cheyenne, Wyoming, refinery, Marathon Petroleum began closing refineries in Martinez, California, and Gallup, New Mexico, while Calcasieu Refining idled its Lake Charles refinery in southwest Louisiana.

Phillips 66 announced plans to shut its plant in Arroyo Grande, California, in 2023 and plans to reconfigure its San Francisco Refinery to produce renewable fuels.

It is unusual for an oil company to sell a refinery that it has already idled, in part because the value of the asset is deemed to be lower if it is not operating.

North Atlantic Refinery Limited is actively trying to sell its Come-by-Chance refinery, after a deal with Irving Oil fell through last month for undisclosed reasons.

"Refineries aren't light switches, they're extremely expensive to shut and restart," said Zachary Rogers, senior oil analyst at Rapidan Energy Group.

"The fact it's shutting down (for however long) underscores the weakness of refining economics as COVID persists," he added.

As MRC informed before, Royal Dutch Shell plc. said earlier this month 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. 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 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.

Royal Dutch Shell plc is an Anglo-Dutch multinational oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the biggest company in the world in terms of revenue and one of the six oil and gas "supermajors". Shell is vertically integrated and is active in every area of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading.
MRC

BP oil, gas output to fall 40% by 2030 amid transition to carbon energy company

MOSCOW (MRC) -- BP expects its oil and gas production to fall by at least 1 million b/d of oil equivalent or 40% over the next decade, as it transitions to a lower carbon energy company, reported S&P Global with reference to the company's statement.

Under a new strategy, BP said it will boost investment on low carbon projects such as renewables, bioenergy by 10-fold to around USD5 billion/year by 2030 as part of plans to become a "net zero" emitter.

The move will see BP's upstream oil and gas production fall from 2.6 million boe/d in 2019 to around 1.5 million boe/d while its refining throughput is expected to fall from 1.7 million b/d in 2019 to around 1.2 million b/d.

"BP has been an international oil company for over a century - defined by two core commodities produced by two core businesses. Now we are pivoting to become an integrated energy company - from IOC to IEC," CEO Bernard Looney said in a statement.

As a result, BP said it expects its emissions from its operations and those associated with the carbon in its upstream oil and gas production to be lower by 30-35% and 35-40%, respectively.

BP had already flagged plans for the "most wide-ranging reorganization in (BP's) history" on February 5, announcing ambitious targets for the oil major to become a net-zero carbon emitter by 2050 or sooner.

As MRC informed previously, global oil demand may have already peaked, according to BP's latest long-term energy outlook, as the COVID-19 pandemic kicks the world economy onto a weaker growth trajectory and accelerates the shift to cleaner fuels.

Earlier this year, BP said the deadly coronavirus outbreak could cut global oil demand growth by 40 per cent in 2020, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.

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

ccording 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

COVID-19 - News digest as of 05.11.2020

1. Mitsubishi Chemical reports loss on weak demand in automotive sector, forecasts full-year net loss

MOSCOW (MRC) -- Mitsubishi Chemical Holdings reports a net loss of Yen 49.68 billion (USD474.7 million) for the company's fiscal first half ended 30 September, swinging from net income of Yen 81.3 billion a year earlier, according to Chemweek. Mitsubishi registered a third-quarter operating loss of Yen 28.1 billion, compared with an operating profit of ?130.5 billion a year earlier. Revenue decreased 17.6% year on year (YOY) to Yen 1.5 trillion. The company says that during the first half of the fiscal year, demand was slower YOY, particularly for automotive applications, owing to the impact of the COVID-19 pandemic. Notwithstanding a recent pickup in demand, business conditions remain challenging, says Mitsubishi.


MRC

COVID-19 pandemic provides opportunities for polyolefins: Borealis CEO

MOSCOW (MRC) -- The coronavirus pandemic has provided some opportunities hygiene products, but there are also risks in other petrochemical products, Borealis CEO Alfred Stern told S&P Global following their third quarter results Nov. 4.

The company saw polyolefin sales volumes increase in the third quarter compared with the same quarter in 2019, as hygiene and healthcare segments experienced strong demand amid the coronavirus pandemic. Demand from the automotive and pipes sector was subdued in early summer but climbed higher in Q3, with automotive demand recovering to 90% of 2019 levels.

"Demand for hygiene products has continued higher, we manufacture material to make non-woven facemask and PPE, as you can imagine there is good demand from those segments but also across the entire hygiene sector," Alfred said.

The CEO added that the company would seek sales opportunities in new segments in the coming year to maneuver through the low European price environment for polyolefins. Borealis expects demand for healthcare and hygiene applications to remain strong in Q4, while a full recovery in automotive demand was expected nearer the end of 2021.

"When we look at our demand situation, we are actually quite positive about where we stand this year and I expect those opportunities will continue to exist next year, is it in all the same sectors the we sold in the past? No, we will not come out [of the pandemic] in the same place so this will require some agility and finding some new laces of business."

However, Borealis was anticipating continued pressure in its upstream business which had experienced low margins amid the coronavirus pandemic. "The biggest struggle I see is the supply/demand imbalance and how the feedstock markets develop, this will not be resolved in 2021, we will continue to see a lower margin and a lower price environment in 2021 with opportunities across demand."

As MRC informed before, Borealis has recently announced that its new naphtha cavern in Porvoo, Finland has been safely commissioned as of October 2020. Having invested around EUR25 million in the construction of this 80,000 m3 facility, Borealis can now source and store naphtha for its Porvoo operations from the global market in a more flexible, cost-efficient, and secure way. The cavern can also accommodate renewable naphtha, making it possible for Borealis customers in future to draw on certified renewable polypropylene (PP) and polyethylene (PE), as well as renewable base chemicals, ethylene, propylene and phenol.

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.

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

Price rally extends as supply outlooks tighten following US crude draw

MOSCOW (MRC) -- Oil futures settled higher Nov. 4 as the market eyed tightened supply outlooks following a US inventory draw and the possibility of extended OPEC+ production cuts, reported S&P Global.

NYMEX December WTI climbed USD1.49 to settle at USD39.15/b and ICE January Brent was up USD1.52 at USD41.23/b.

US commercial crude stocks moved 8 million barrels lower in the week ended Oct. 30 to 484.43 million barrels, US Energy Information Administration data showed Nov. 4. The draw puts inventories at the lowest since the week ended April 3 and leaves them just 6.8% above the five-year average for this time of year, marking the narrowest surplus since early April.

The US crude draw was the largest weekly downturn since late August, and added to a tightening supply narrative that has been supportive of markets in recent days.

The market is increasingly pricing in the prospects that the OEPC+ group will approve an at least three-month extensions of their current levels of production cuts through March 2021.

OPEC, Russia, and other key partners in a supply accord are scheduled to taper their collective 7.8 million b/d production cuts by more than one-quarter to 5.8 million b/d from January, having banked on a robust rebound in oil demand from the coronavirus pandemic in the second half of the year. But a rising global caseload and the return of broad lockdowns across Europe have put these assumptions in doubt, producing a consensus within the alliance that the increase in production needs to be delayed, delegates told S&P Global Platts on Nov. 3.

NYMEX December RBOB settled 3.01 cents higher at USD1.1462/gal and December ULSD climbed 3.66 cents to USD1.2977/gal.

Total gasoline inventories climbed 1.54 million barrels to 227.67 million barrels, EIA said, putting them more than 4% above the five-year average - the largest surplus since mid-August. The build comes as gasoline demand continued to trend downward, with the four-week moving average falling to 8.44 million b/d - the lowest since the week ended June 26 and more than 10% behind year-ago levels.

The front-month ICE New York Harbor RBO crack against Brent pulled back around 4 cents in afternoon trading to USD5.06/b, on pace to close just off two-month low of USD5/b seen Nov. 2.

The outcome of the US presidential election had yet to be determined late Nov. 4 as mail-in ballots continued to be counted. The future of US energy and climate policy hangs on the races for president and several tightly contested US Senate seats.

In the longer term, a Donald Trump victory could be supportive for oil prices, analysts said.

"A Trump win is bullish for oil prices as he will prevent Iranian oil from returning to the market in 2022 with continued sanctions. This also means it is less risky for OPEC+ to make more production cuts without the concern they will be undermined by this supply," SEB Bank's Chief Commodities Analyst, Bjarne Schieldrop, said.

But a Biden presidency is expected to be more supportive of stimulus spending, fostering faster economic growth and a weaker dollar, according to S&P Global Platts Analytics -- both bullish for oil prices. However, with Republicans likely to retain control of the Senate, the administration's ability to pass a stimulus bill may be curtailed. Also, longer term, Biden would embrace a shift to clean energy through climate policy, tougher environmental regulations and restrictions on federal oil and gas permitting.

ICE US Dollar Index futures were holding at around 93.4 late Nov. 4, down from a five-week high 94.15 on Nov. 2.

As MRC informed earlier, as of midday Oct. 29, the storm Zeta 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