Asia distillates-gasoil cracks climb amid hopes for stronger demand

MOSCOW (MRC) -- Asian refining margins for 10 ppm gasoil rose on Monday, hovering close to multi-month highs touched last week, buoyed by expectations for firmer demand and tighter supplies in coming months, reported Reuters.

Refining margins, also known as cracks, for 10 ppm gasoil climbed to USD7.34 per barrel over Dubai crude during Asian trading hours, compared with USD7.01 a barrel in the last trading session on Thursday. Cracks for the benchmark gasoil grade in Singapore have surged 22.7% so far this month, Refinitiv Eikon data showed.

The regional gasoil market is expected to strengthen further as countries roll out wider vaccinations in coming days that would boost economic recovery and fuel demand, market watchers said. Cash differentials for gasoil with 10 ppm sulfur content were at a narrow premium of USD0.01/bbl to Singapore quotes, compared with a discount of $0.04/bbl on Thursday.

Global oil and fuel prices are picking up as demand returns to pre-pandemic levels amid easing coronavirus lockdowns in key countries like China and India and signs of increasing road travel in several countries. However, there are questions over how quickly refiners with idled capacity can respond to increased demand. Analysts say the recovery pace will vary by region and fuel type, and that jet fuel demand will remain the weakest performer until more international air travel resumes.

As MRC informed before, slumping fuel consumption during the pandemic is accelerating the long-term shift of refining capacity from North America and Europe to Asia, and from older, smaller refineries to modern, higher-capacity mega-refineries. The result is a wave of closures, often centering on refineries that only narrowly survived the previous closure wave in the years after the recession in 2008/09.

We remind that PetroChina has nearly doubled the amount of Russian crude being processed at its refinery in Dalian, the company's biggest, since January 2018, as a new supply agreement had come into effect. The Dalian Petrochemical Corp, located in the northeast port city of Dalian, was expected to process 13 million tonnes, or 260,000 bpd of Russian pipeline crude in 2018, up by about 85 to 90 percent from the previous year's level. Dalian has the capacity to process about 410,000 bpd of crude. The increase follows an agreement worked out between the Russian and Chinese governments under which Russia's top oil producer Rosneft was to supply 30 million tonnes of ESPO Blend crude to PetroChina in 2018, or about 600,000 bpd. That would have represented an increase of 50 percent over 2017 volumes.

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

Nigerians win UK court OK to sue Shell over oil spills

MOSCOW (MRC) -- The UK Supreme Court on Friday allowed a group of 42,500 Nigerian farmers and fishermen to sue Royal Dutch Shell (RDS) in English courts after years of oil spills in the Niger Delta contaminated land and groundwater, said Hydrocarbonprocessing.

Senior judges said UK-domiciled Shell, one of the world's biggest energy companies, did have a common law duty of care, in the latest case to test whether multinationals can be held to account for the acts of overseas subsidiaries. The ruling comes almost two years after a seminal ruling by the Supreme Court in a case involving mining company Vedanta. The judgment allowed nearly 2,000 Zambian villagers to sue Vedanta in England for alleged pollution in Africa.

That move was seen as a victory for rural communities seeking to hold parent companies accountable for environmental disasters. Vedanta ultimately settled out of court in January. Nigeria's Ogale and Bille communities allege their lives and health have suffered because repeated oil spills have contaminated the land, swamps, groundwater and waterways and that there has been no adequate cleaning or remediation.

Represented by law firm Leigh Day, they argued that Shell owed them a duty of care because it either had significant control of, and was responsible for, its subsidiary SPDC. Shell countered that the court had no jurisdiction to try the claims.

SPDC is the operator of oil pipelines in a joint venture between the Nigerian National Petroleum Corporation which holds a 55% stake, Shell which holds 30%, France's Total with 10%, Italy's Eni with 5%. A Shell spokesman said the decision was disappointing.

Shell has blamed sabotage for oil spills. It said in its annual report published last March that SPDC, which produces around 1 million barrels of oil per day, saw crude oil spills caused by theft or pipeline sabotage surge by 41% in 2019. Shell CEO Ben van Beurden said last week that the firm would take "another hard look at its onshore oil operations" in the west African country.

The ruling is the second judgement against Shell this year regarding claims against its Nigerian operations. In a landmark Dutch ruling two weeks ago, an appeals court held Shell responsible for multiple oil pipeline leaks in the Niger Delta and ordered it to pay unspecified damages to farmers, in a victory for environmentalists.

Leigh Day said that the amount of compensation sought would be quantified as the case enters the trial stage. In 2015, Shell agreed to pay out 55 million pounds ($83.4 million) to the Bodo community in Nigeria in compensation for two oil spills, which was the largest ever out-of-court settlement relating to Nigerian oil spills.

As MRC wrote previously, 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.

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

Ingevity chairman Richard Kelson passes away

MOSCOW (MRC) -- Ingevity says that its chairman Richard Kelson passed away on 13 February at the age of 74, according to Chemweek.

The cause of death has not been disclosed. The company says its “board will select a new chairman over the next several days who will preside over the regularly scheduled board meetings later this week.”

Kelson had been Ingevity’s chairman since its spin-off from WestRock in 2016. He was named interim president and CEO in February 2020 following the resignation of Michael Wilson, and held the role until the appointment of John Fortson, Ingevity’s current president and CEO, on 1 September 2020.

Ingevity’s board, management, and employees have expressed their deepest condolences to Kelson’s family, and the company says it will make a donation in his memory to the Penn Center for Research on Coronavirus.

As MRC reported earlier, in November 2020, Ingevity said it intends to challenge a decision of the US District Court for the District of Delaware regarding a patent-infringement complaint brought by Ingevity against BASF.

And in December 2020, BASF said it would pursue antitrust claims in a US court in Delaware related to Ingevity’s business practices in the evaporative emissions control market. The case concerns BASF’s EvapTrap-branded scrubbers for evaporative emissions control.

We remind that BASF said late last week it was restarting one of its steam crackers at its Ludwigshafen complex in Germany after operations were halted last Wednesday due to a technical issue. The naphtha cracker produces ethylene and propylene, and is one of two crackers on the site. One has a production capacity of 420,000 metric tons/year, with the other’s capacity at 240,000 metric tons/year, according to IHS Markit data.

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

Marathon Oil lays off 5% of workforce as part of cost-cut plans

MOSCOW (MRC) -- Marathon Oil Corp has laid off around 100 U.S. employees, or about 5% of its total workforce, a company spokeswoman told Reuters, days after the oil and gas producer cut salaries for top executives and board members, said Reuters.

Although oil prices have raced back above the pre-pandemic level of $60 per barrel in recent months, producers are focusing on improving balance sheets instead of raising output, as demand forecasts hinge on vaccine rollouts.

Marathon Oil's spokeswoman said the company's actions were part of its "commitment to continuously optimize our cost structure."

It had about 2,000 full-time employees worldwide at the end of 2019, according to its latest available employment figures, with 74% working in the United States.

World oil demand in 2021 will rebound more slowly than previously thought, the Organization of the Petroleum Exporting Countries (OPEC) said on Thursday, adding to a series of downgrades as the impact of the pandemic lingers.

The company is expected to join other U.S. oil producers in posting an annual loss when it reports fourth-quarter results on Feb. 17.

As MRC informed previously, Marathon Petroleum Corp plans to operate the gasoline-producing fluidic catalytic cracker (FCC) at its 585,000 barrel-per-day (bpd) Galveston Bay Refinery in Texas City, Texas. The 140,000 bpd FCC restarted on Sunday, 12 April, after repairs following a March 23 brief power outage that shut the unit.

Propylene is the main feedstock for the production of polypropylene (PP).

According to MRC's DataScope report, last month, Russian companies actually kept the November volume of external PP purchases, imports amounted to 21,300 tonnes. Thus, overall PP imports into Russia reached 224,000 tonnes in January-December 2020, compared to 182,800 tonnes a year earlier. Purchasing of all grades of propylene polymers in foreign markets increased, with homopolymer PP imports accounting for the most noticeable rise.
MRC

OMV to build green hydrogen plant at Schwechat refinery-petchem complex

MOSCOW (MRC) -- OMV (Vienna, Austria) says it will invest jointly with sustainability-focused bank Kommunalkredit (Vienna) in the construction of an electrolysis plant for the production of green hydrogen at OMV’s Schwechat refinery in Austria, reported Chemweek.

A total of about EUR25 million (USD30 million) will be invested, with OMV and Kommunalkredit to split the cost equally.

The 10-megawatt (MW) polymer electrolyte membrane (PEM) electrolysis facility will produce up to 1,500 metric tons/year of renewable hydrogen, it says. The plant is expected to come online in the second half of 2023. The hydrogen will be used to hydrogenate bio-based and fossil fuels, substituting grey hydrogen at the refinery, it says.

The new plant will cut OMV’s carbon footprint by up to 15,000 metric tons/year of carbon dioxide (CO2), OMV estimates. “We deliberately opted for green hydrogen production on an industrial scale as we see the potential it holds, for lower-carbon road use as well as for reducing CO2 emissions in industrial operations,” says OMV’s Thomas Gangl, chief downstream operations officer. The company's previously announced climate targets include reaching net-zero carbon emissions in its operations by 2050 or sooner.

OMV and its majority-owned subsidiary Borealis also have their ongoing ReOil pilot plant situated at Schwechat. The plant produces synthetic oil out of waste plastic, which is fed into the refinery to produce feedstock for Borealis' adjacent olefins and polyolefins plants.

As MRC informed earlier, OMV (Vienna, Austria) says it is investing EUR40 million (USD48 million) to expand and modernize a steam cracker and associated units at its refining and petrochemicals complex at Burghausen, Germany. The upgrade will increase the site’s ethylene and propylene production capacity by 50,000 metric tons/year. Following a planned turnaround of the refinery, the revamped cracker and petchem units are expected to start operations in the third quarter of 2022. Initial groundwork is already underway ahead of the upgrade.

Ethylene and propylene are feedstocks for producing PE and 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, exluding producers' inventories as of 1 January, 2020).
MRC