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MOSCOW (MRC) -- The collapse in oil
demand from the COVID-19 pandemic is hastening the reckoning for those refiners
already struggling as new capacity overtakes demand, posing an existential
threat to many, particularly Europe’s ageing plants, said Chemweek.
Even
before the pandemic struck, which at its height destroyed over 20% of global oil
demand, analysts expected global refining capacity would have to rationalize,
particularly in Europe. According to consultants WoodMac, 1.4 million barrels
per day, or around 9%, of refining capacity is under threat of rationalization
in Europe in 2022-2023.
WoodMac declined to name specific refineries, but
in a list sent to its clients and seen by Reuters, BP’s 377,000 bpd Rotterdam
refinery, Total’s 102,000 bpd Grandpuits refinery in France and Petroineos’
200,000 bpd Grangemouth refinery in Scotland were among 11 plants mentioned. The
three companies did not immediately reply to a Reuters request for comment. Last
week, energy trader Gunvor said it was considering mothballing its loss-making
Belgian refinery.
Goldman Sachs expects global refinery utilization
rates in 2021-2024 to be 3% lower relative to 2019, heightening competition and
eventually leading to permanent plant closures in developed markets.It adds a
“risk weight” to capacities beyond 2021, forecasting a 6 million bpd net
capacity increase over the next five years, around 2 million bpd below the
International Energy Agency’s forecast.
European refining has seen
several waves of rationalizations, most recently in the wake of the 2008-2009
financial crisis. “In 2023 it could well be that two-thirds of the refineries in
Europe don’t make any money, or lose money on a cash basis,” Alan Gelder VP
Refining, Chemicals and Oil Markets at WoodMac said.
Strong labor unions
are making refinery closures in many European countries difficult. Two of
Europe’s biggest refiners, Total and Eni, have managed to shutdown some capacity
in the past decade, and to turn some sites into biofuel
operations.
Total, having already converted its La Mede refinery into
making biofuels, is considering a second biofuel facility in France. Capacity on
the U.S. Coast, Japan and some older, less sophisticated sites in Asia is also
under threat, WoodMac says. “On the U.S. east coast, refiners that process
lighter sweeter grades, like Trainer and Bayway, might be in trouble,” Kevin
Waguespack, refinery consultant at Baker O’Brien said.
He added that the
lack of access to cheap crude in the northeast was the U.S. region’s “Achilles
heel”. “Less competitive European refineries have been in trouble and the
pandemic will put another nail in the coffin for them,” said John Auers, a
refining analyst at consultancy Turner, Mason & Co. “Even before the
pandemic, the IMO was going to disadvantage some refiners that made a lot of
fuel oil that couldn’t afford to make upgrades,” Auers said.
The
International Maritime Organization (IMO) changed the rules on shipping fuel at
the start of the year so that all ships can only burn fuel with a maximum 0.5%
sulfur, unless they have sulphur-cleaning kits. At least one of the Australia’s
four remaining refineries could close unless the government steps in as the
pandemic hits demand, sources told Reuters.
As MRC informed earlier,
Enel Green Power (EGP), the renewable energy subsidiary of Italy’s Enel Group,
and Maire Tecnimont (Rome, Italy) have agreed to work together on the
development and construction of a green hydrogen production plant in the
US.
Ethylene and propylene are feedstocks for producing polyethylene (PE)
and polypropylene (PP).
According to MRC's ScanPlast report,
Russia's estimated polyethylene (PE) consumption totalled 1,990,280 tonnes in
the first eleven months of 2020, up by 1% year on year. Only high density
polyethylene (HDPE) shipments increased. At the same time, polypropylene (PP)
shipments to the Russian market reached 1 090,900 tonnes in the first eleven
months of 2020 (calculated using the formula: production, minus exports, plus
imports, excluding producers' inventories as of 1 January, 2020). Supply of
exclusively PP random copolymer increased. |
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