COVID-19 - News digest as of 08.12.2020

1. South Africa to review petroleum product supplies after refinery shutdown

MOSCOW (MRC) -- South Africa will urgently conduct an assessment of petroleum products supply, the Department of Mineral Resources and Energy said on Saturday after the country's second-largest crude oil refinery shut down following a fire, said Hydrocarbonprocessing. The 120,000 barrel-per-day (bpd) Engen refinery in Durban, majority-owned by Malaysia's Petronas, ceased operations as investigations started into the cause of the fire on Friday. Engen said it was taking measures to ensure security of supply. The refinery shutdown comes at a crucial time for South Africa as it looks to kickstart an economy walloped by the COVID-19 pandemic. The South African Petroleum Industry Association (SAPIA) warned in May that the country was facing a diesel shortage due to a spike in demand as restrictions on movement eased.

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Crude oil futures dip as most of California enters lockdown

MOSCOW (MRC) -- Crude oil futures ticked down during midmorning trading in Asia Dec. 7 as the rally spurred by OPEC+ partially extending production quotas tapered off after most of California entered into a lockdown, reported S&P Global.

At 11:02 am Singapore time (0302 GMT), the ICE February Brent contract was down 18 cents/b (0.37%) from the Dec. 4 settle at $49.07/b while the NYMEX January light sweet crude contract was down 18 cents/b (0.39%) at $46.08/b. Both markers rose 2.07% and 1.60%, respectively, in the week ended Dec. 5, with the rally driven by the OPEC+ easing production quotas Dec. 3 by 500,000 b/d in January 2021.

The alliance will set output levels every month, aiming to release crude gradually onto the market without tipping it into a supply glut during an uncertain recovery from the pandemic, ministers said Dec. 3.

However, the sentiment soured Dec. 7 after the reimposition of lockdown measures in Southern California and large parts of the Central Valley on Dec. 5. The restrictions came after intensive care capacity in these regions fell below a 15% threshold, and are expected to remain in place for at least three weeks, according to media reports.

"Some of the shine is coming off the OPEC rally as the reality of Xmas lite sets in with the bulk of Californians, one of the US's biggest road fuel demand states, are set to enter wide-sweeping new virus lockdowns," said Stephen Innes, chief global market strategist at AxiTrader, in a Dec. 7 note.

"Oil being a prompt contract, it does not have the luxury to look through "Grinchy" holiday season-imposed lockdowns, like other forward-looking assets," he added.

Meanwhile, oil prices could also be influenced by news about the US stimulus package, seen by the market as key to injecting life into the ailing US economic picture and shoring up demand for oil.

The increasing agreement in the political sphere that further fiscal response is needed for a US economic recovery portends well for ratification of a US stimulus bill.

"The prospect for another US COVID-19 pandemic stimulus package before end-2020 rose substantially as senior Republican lawmakers warmed to the US$908bn proposal put forth by a bipartisan group of lawmakers as a basis for a deal," UOB analysts said in a Dec. 7 note.

"House Speaker Nancy Pelosi and Senate Democratic leader Chuck Schumer have already endorsed using the bipartisan proposal as the basis for negotiations while several Republican senators, including South Carolina's Lindsey Graham, a close ally of Trump, said that it contained elements for an agreement," they added.

As MRC invofmed 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% in 2020, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.

And in September 2019, six world's major petrochemical companies in Flanders, Belgium, North Rhine-Westphalia, Germany, and the Netherlands (Trilateral Region) announced the creation of a consortium to jointly investigate how naphtha or gas steam crackers could be operated using renewable electricity instead of fossil fuels. The Cracker of the Future consortium, which includes BASF, Borealis, BP, LyondellBasell, SABIC and Total, aims to produce base chemicals while also significantly reducing carbon emissions. The companies agreed to invest in R&D and knowledge sharing as they assess the possibility of transitioning their base chemical production to renewable electricity.

Ethylene and propylene are feedstocks for producing PE and PP.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,760,950 tonnes in the first ten months of 2020, up by 3% year on year. Only high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased. At the same time, PP shipments to the Russian market reached 978,870 tonnes in January-October 2020 (calculated using the formula: production minus exports plus imports minus producers' inventories as of 1 January, 2020). Supply of exclusively of PP random copolymer increased.
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Lotte Chemical restarts Daesan cracker in South Korea

Lotte Chemical restarts Daesan cracker in South Korea

MOSCOW (MRC) -- South Korea’s Lotte Chemical has restarted its fire-hit naphtha-fed steam cracker in Daesan, reported Chemweek.

Thus, the facility begins trial runs of naphtha on 7 December, and the company expects commercial production to be achieved on 8 December.

Lotte Chemical had initially planned to restart the cracker in September, then - in mid-November and finally - to early December.

As MRC wrote before, the cracker was shut on March 4 following an explosion, which injured more than 30 people.

Lotte Chemical has two steam crackers. The steam cracker in Daesan has a production capacity of 1.1 million mt/year of ethylene, 550,000 mt/year of propylene and 150,000 mt/year of butadiene, while the Yeosu steam cracker is able to produce 1.18 million mt/year of ethylene, 550,000 mt/year of propylene and 130,000 mt/year of butadiene.

We remind that Lotte Chemical shut down its Deasan cracker for maintenance turnaround on October 14, 2019. The cracker resumed production on November 10, 2019.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,760,950 tonnes in the first ten months of 2020, up by 3% year on year. Only high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased. At the same time, PP shipments to the Russian market reached 978,870 tonnes in January-October 2020 (calculated using the formula: production minus exports plus imports minus producers' inventories as of 1 January, 2020). Supply of exclusively of PP random copolymer increased.

Lotte Chemical runs two naphtha crackers in South Korea. One cracker is located in Daesan county in Seosan which can produce 1.1 million tonnes per year of ethylene with the other 1.2 million tonnes per year cracker in the southwestern city of Yeosu.
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Eni, Enel to build green hydrogen pilot projects to supply two refineries in Italy

MOSCOW (MRC) -- Eni and electricity utility company Enel say they will develop two green hydrogen pilot schemes aimed at supplying a pair of Eni’s refineries in Italy, said Chemweek.

The hydrogen will be produced using 10-megawatt (MW) electrolyzers powered by renewable energy, with both projects expected to start producing green hydrogen by 2022-2023, according to the Rome-based companies. Eni says the electrolyzers will be located near two of its refineries “where green hydrogen appears to be the best decarbonization option.” It did not specify which sites or the level of investment.

"This partnership in green hydrogen is part of Eni’s broader energy transition strategy. Our goal is to accelerate the reduction of our carbon footprint by implementing the best applicable low carbon solution, either green or blue, to reduce our direct emissions as well as switching to bio products to supply our clients," says Eni CEO Claudio Descalzi.

A closed loop system is planned, with the electrolyzers powered by renewable energy, with the refineries in the same locations, which will avoid “the construction of complex transport infrastructure to move hydrogen around,” says Enel CEO Francesco Starace. “We are looking forward to seeing green hydrogen supplying Eni’s refinery and biorefinery processes, and are working to have the first operating system in place before the end of our current three-year plan," he says.

Enel Group is also developing green hydrogen projects in Spain, Chile, and the US, with plans to expand its capacity to over 2 gigawatts by 2030, it says. Eni is studying other renewable hydrogen projects in Italy and the UK, where on 4 December it announced it had acquired a 20% stake in the UK’s ?6.0-billion (USD7.98-billion) Dogger Bank offshore wind development. The project will add 480 MW of renewable energy to Eni’s 2025 target of 5 GW of installed capacity from renewable sources.

As MRC reported earlier, in September 2020, Italy’s Eni proposed building bio-refineries in Abu Dhabi, according to the energy group’s chief executive Claudio Descalzi. The Italian oil major has been focusing on developing new clean technologies in recent years as it steps up preparations for a decarbonized future.

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 density 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, excluding producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.
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Borealis polyolefin sites gain sustainability certification, brings renewable range to market

MOSCOW (MRC) -- Borealis says it has gained ISCC Plus certification for four of its production sites in Europe, with two more expected to be certified by the first quarter of 2021, enabling it to bring its renewable range of polyolefins and hydrocarbons to market, reported Chemweek.

The company’s polyolefin facilities at Porvoo, Finland; Schwechat, Austria; and Kallo and Beringen in Belgium have gained the sustainability certification, while Borealis says its sites at Stenungsund, Sweden, and Burghausen, Germany, will follow in the next quarter.

The ISCC Plus standard for recycled and bio-based materials provides supply chain traceability, verifying companies to meet specific environmental and social standards, creating a chain of custody. “This enables Borealis to certify its mass balanced production of renewable feedstock, as well as chemically recycled feedstock, with a mass balance approach crucial to transitioning towards a more circular economy of the chemical industry,” it says.

The certification enables the company to produce and offer its renewable polyolefins range of circular products, as well as renewable hydrocarbons such as ethylene, propylene, C4s, phenol, and acetone, to the market for the first time.

“As a result of certifying each of its production sites, Borealis can progress with its large pipeline of projects to drive the transition to a circular economy: supplier contracts can be finalized, and customer contracts for feedstock explored,” it says. The company is targeting 100% of its consumer products and solutions to be made of recyclable, reusable, or with renewable content, by 2025.

As MRC informed previously, the 380,000-metric tons/year steam cracker at Porvoo, Finland, operated by Borealis, resumed normal operations in early December after the company declared force majeure following a technical failure on 11 November. The cracker was shut down to allow necessary repair works, according to Borealis. The company began restart operations on 23 November, 2020.

Ethylene and propylene are feedstocks for producing PE and PP.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,760,950 tonnes in the first ten months of 2020, up by 3% year on year. Only high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased. At the same time, PP shipments to the Russian market reached 978,870 tonnes in January-October 2020 (calculated using the formula: production minus exports plus imports minus producers' inventories as of 1 January, 2020). Supply of exclusively of PP random copolymer increased.

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.
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