Shell expects 1%-2% annual cut in oil output as energy transition prioritized

MOSCOW (MRC) -- Shell expects its oil production to decrease by 1%-2% annually as it prioritizes spending on transition projects in an acceleration of its strategy to achieve net zero emissions by 2050, reported S&P Global with reference to the company's statement on Feb. 11.

In a strategy update, Europe's largest oil and gas company said it was likely that its oil production had already peaked in 2019 and its CO2 emissions in 2018. The further decline in oil production would result from asset sales and natural decline, it said.

Sketching out its near-term investment plans, it said it expects spending in the traditional upstream segment to fall behind spending in "transition pillar" areas, comprised of the LNG-focused Integrated Gas division, as well as chemicals and oil products.

In the near term, it expects annual upstream capital expenditures of USD8 billion, with capex in the transition pillar businesses of USD8 billion-USD9 billion, and USD5 billion-USD6 billion of capex in the "growth" business of marketing, renewables and energy solutions.

It also set out interim targets toward the goal of net zero emissions by 2050. Using 2016 as a baseline, it said it would cut its emissions by 6%-8% by 2023, 20% by 2030 and 45% by 2035, before reaching 100% in 2050.

"Our accelerated strategy will drive down carbon emissions and will deliver value for our shareholders, our customers and wider society," CEO Ben van Beurden said in a statement.

As MRC wrote before, Shell’s chemicals business has reported strong fourth-quarter earnings of USD367 million on a current cost of supply (CCS) basis, swinging from a loss of USD78 million in the prior-year period, reflecting “higher realized margins in base chemicals and intermediates from a stronger price environment”. The earnings are also substantially higher sequentially on the company’s third-quarter segment earnings of USD131 million.

We remind that Royal Dutch Shell has reported an outage at its olefins plant in Deer Park, Texas, USA, on 5 January, 2021. The plant flared for 16 hours following unspecified process upset. Maximum steam cracker operating rate in Texas falls to 89%.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, excluding producers' inventories as of 1 January, 2020).

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

MOSCOW (MRC) -- Borealis says it has agreed to source renewable energy generated by a new wind farm to power its production operations at its manufacturing site in Stenungsund, Sweden, reported Chemweek.

The company has signed a purchase agreement with Finnish state-owned energy player Gasum to source power for a period of 10 years from Sweden’s Stena Renewable, which owns and operates the onshore Kronoberget wind farm, located around 250 kilometers from the facilities at Stenungsund. Delivery of renewable electricity to Stenungsund began on 1 January 2021, it says. The power purchase agreement is the fourth and largest to date by Borealis, which says it aims to source half of its total electricity consumption from renewable sources in major business areas by 2030.

Borealis estimates it will source 2,000 gigawatt hours (GWh) from the wind farm over the 10-year period. The wind farm, commissioned in December 2019, generates a total output of approximately 200 GWh/year.

The company says it aims to source 50% of its energy needs for its polyolefins and hydrocarbon and energy business areas from renewable sources by 2030. The renewable electricity generated within the framework of the agreement with Gasum will reduce its indirect Scope 2 carbon dioxide emissions at Stenungsund by approximately 10,000 metric tons/year, it says.

The Stenungsund site features a flexible-feed, 625,000-metric tons/year steam cracker producing main products ethylene and propylene, which are used to produce high-density polyethylene (HDPE), low-density polyethylene (LDPE), and Borstar PE products.

As MRC wrote before, Borealis began to restart of its 625,000-metric tons/year steam cracker at Stenungsund, Sweden, in early January, 2021, but the declaration of force majeure remained in place then. The process of restarted lasted for several weeks. Force majeure at Stenungsund was declared after a fire started at the cracker on 10 May last year. A restart of the cracker was initially planned for the fourth quarter of 2020. The force majeure was lifted on 29 January, 2021.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, excluding producers' inventories as of 1 January, 2020).

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

MOSCOW (MRC) -- The February contract price of propylene was settled in Europe up by EUR85/tonne from the previous month. But due to a deficit in the region, all European producers announced a greater increase in export prices of polypropylene (PP) to be shipped to the CIS markets in February, than the rise of monomer prices, according to ICIS-MRC Price report.

Negotiations on February prices of European PP began in the first days of the month. All market participants reported that European producers have gone for a significant increase in export prices for propylene polymers due to a serious deficit in the European market. In some cases, prices have increased at the level of EUR230/tonne.

For several months now, all producers in Europe have had serious export restrictions, which were largely a result of the shortage of propylene in the region. For the second month in a row, several producers do not sell PP to the markets of the CIS countries.

Deals for February shipments of homopolymer PP were done in the range of EUR1,250-1,310/tonne FCA, whereas last month's deals were done in the range of EUR1,040-1,100/tonne FCA. Deals for block copolymers of propylene (PP block copolymers) started from EUR1,270/tonne FCA and more, versus EUR1,100/tonne FCA a month earlier.
Some producers this week announced an additional increase in export prices by another EUR100/tonne compared to the previous week.

The situation with Middle Eastern PP was similar, local producers also raised their export prices under the pressure of higher crude oil prices and strong demand. Since December, from month to month, the quotas for shipments to the markets of the CIS countries have been constantly decreasing.

The deals for shipments of the Middle Eastern homopolymer PP were done in the range of USD1,380 - 1,420/tonne CIF, while a month earlier the deals were agreed in the range of USD1,280 - 1,360/tonne CIF.
MRC

1. Rohm warns of global feedstock crunch for methacrylates market

MOSCOW (MRC) -- Rohm (Darmstadt, Germany) says the methacrylates market is facing “a global shortage of several petrochemical raw materials” as a result of global business and service disruptions, which could lead to extended product lead and delivery times, reported Chemweek. The company says its methacrylates monomer team is “currently addressing a number of challenges” and that it remains in close contact with its suppliers in order to “effectively manage supply and continue production” of its product portfolio for customers. Rohm says in its latest market update it is monitoring and managing “external constraints in intercontinental logistics, including container shipping shortages, and limited availability of packaging materials.” Seasonal high water levels at the Rhine river in Europe have put “additional stress on the supply chain of raw materials and finished goods,” it says.





MRC

MOSCOW (MRC) -- Crude oil futures were lower during mid-morning trade in Asia Feb. 11 on the back of a build in US gasoline inventories and despite the sharp drop in crude oil stocks, reported S&P Global.

At 10:55 am Singapore time (0255 GMT), ICE April Brent crude futures fell 37 cents/b (0.6%) from the Feb. 10 close at USD61.10/b while the NYMEX March light sweet crude contract was 34 cents/b (0.58%) lower at USD58.34/b.

US commercial crude oil inventories fell 6.6 million barrels to 469 million barrels in the week ended Feb. 5, according to the latest weekly report by the US Energy Information Administration released late Feb. 10. However, total motor gasoline inventories, said to be one of the key determinants in gauging demand sentiment for the overall fuel complex, rose by 4.3 million barrels.

"Crude oil stockpiles fell to their lowest level since March 2020. However, sentiment was curtailed by a rise in gasoline inventories," ANZ analysts said in a note Feb. 11.

Oil prices have hit highs in recent trading sessions, due to an amelioration of bullish factors such as vaccine rollouts, expectations of demand recovery, and OPEC+ production cuts. This has led some analysts to warn that the market may be in danger of overheating.

Some noted that the higher prices may induce producers to supply more, thereby sending prices south instead.

"Oil prices couldn't hold onto its gains possibly on the expectation that Saudi Arabia could roll back their unilateral February/March production cuts and that OPEC could signal more production coming back online at the March meeting given the sizzling recovery in oil prices," Stephen Innes, chief global markets strategist at Axi, said in a note Feb. 11.

Beyond the short term, market participants still hold much optimism and believe that the pace of demand recovery will be such that supply will not be able to keep up.

French oil major Total said in its Q4 earnings call on Feb. 9 that global shortfall in supply could be 10 million b/d from now till 2025.

"There is a risk of supply crunch in the mid-term," Helle Kristoffersen, Total's president for strategy and innovation said on the call.

"We have seen in 2020 how OPEC managed to bring back market discipline. We've seen the cracks in the US shale model, and we've seen a continued underinvestments in the oil industry as a whole," he added.

As MRC informed before, Total posted better than expected earnings in the fourth quarter as oil prices stabilized, and said it would change its name as part of a push to diversify and grow renewable power and electricity production. The French oil and gas major, which like rivals suffered in 2020 as fuel consumption tumbled during the pandemic, said it would rebrand as TotalEnergies as it tries over the next decade to reduce oil products to a third of its sales from over half now.

We remind that in November 2019, Total disclosed that itis evaluating construction of a new gas cracker at its Deasan, South Korea, joint venture (JV) with Hanwha Chemical.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, excluding producers' inventories as of 1 January, 2020).
MRC