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MOSCOW (MRC) -- Beginning February 13,
2021, a major winter weather system characterized by extreme cold spread across
much of the central United States, disrupting energy systems and causing serious
health and safety issues Hydrocarbonprocessing.
The
extreme weather particularly affected Texas, where utility customers experienced
widespread outages and rolling blackouts. The severe weather persisted through
much of the week, putting significant pressure on the petroleum complex along
the U.S. Gulf Coast, where the infrastructure has rarely needed to accommodate
sub-zero temperatures, as well as some states in the Midcontinent. Several Texas
refineries accounting for a significant share of total U.S. refining capacity
fully or partially shut down, numerous inland crude oil wells closed, and oil
pipeline infrastructure was disrupted. The extreme cold also affected petroleum
product pipelines; production and refinery operations in the Midwest and inland
regions of Texas; and briefly disrupted maritime traffic along the Houston Ship
Channel, a crucial waterway for crude oil and petroleum product trade
flows.
Although most of the extreme weather appears to have passed,
ongoing low temperatures are expected to continue through the week of February
22, according to updates from the U.S. Department of Energy’s Office of
Cybersecurity, Energy Security, and Emergency Response. The recovery timeline
for affected market participants remains unclear. Reported infrastructure
damages potentially indicate that operations could take multiple weeks before
returning to normal in several instances.
The Gulf Coast, which EIA
tracks as the Petroleum Administration for Defense District (PADD) 3, accounts
for more than half of total U.S. refinery capacity, and Texas alone accounts for
5.9 million barrels per day (b/d) of capacity, or about 32% of total U.S.
capacity. Weather-related disruptions occurred primarily at several refineries
in the Texas Gulf Coast refining region within PADD 3. By the peak of the
weather’s impact on February 17, several refineries had announced either
substantial or complete shutdowns as a result of external power outages,
constrained natural gas supplies, logistical disruptions, or damage to process
units because of the week’s cold temperatures and extreme weather. Other
refineries in the area that were not forced to shut down capacity still faced
similar complications and reduced run rates. In total, according to trade press
and company announcements, an estimated 3.7 million b/d, or 20% of total U.S.
refining capacity, was shut in as a result of the weather. As much as 5.7
million b/d (31% of total U.S. refining capacity) was affected by the weather to
some degree, either as shutdowns or continued operations, but with reduced
utilization. Most of the disruptions and shutdowns were announced on or about
February 15 among refiners in the Beaumont/Port Arthur, Houston, and Corpus
Christi regions of Texas, although refinery issues extend across several
states.
Based on the U.S. Energy Information Administration’s (EIA)
Weekly Petroleum Status Report (WPSR), gross inputs of crude oil and other
feedstock to U.S. refineries declined 2.7 million b/d (17.5%) to 12.6 million
b/d for the week ending February 19, 2021. The shutdowns resulted in a weekly
decline in the gross inputs to Gulf Coast refineries of 2.4 million b/d (27.5%)
to 6.3 million b/d, the largest weekly decline since the impact of Hurricane
Harvey in September 2017 (Figure 1). The closures will likely continue to affect
petroleum markets in the coming weeks, reducing demand for crude oil and
production of refined products such as motor gasoline and distillate fuel
oil.
We remind that the
COVID-19 outbreak has led to an unprecedented decline in demand affecting all
sections of the Russian economy, which has impacted the demand for
petrochemicals in the short-term. However, the pandemic triggered an increase in
the demand for polymers in food packaging, and cleaning and hygiene products,
according to GlobalData, a leading data and analytics company. With Russian
petrochemical companies having the advantage of access to low-cost feedstock,
and proximity to demand-rich Asian (primarily China) and European markets for
the supply of petrochemical products, these companies appear to be
well-positioned to derive full benefits from an improving market environment and
global economy post-COVID-19.
We also remind that in
December 2020, Sibur, Gazprom Neft, and Uzbekneftegaz agreed to cooperate on
potential investments in Uzbekistan including a major expansion of
Uzbekneftegaz’s existing Shurtan Gas Chemical Complex (SGCC) and the proposed
construction of a new gas chemicals facility. The signed cooperation agreement
for the projects includes “the creation of a gas chemical complex using
methanol-to-olefins (MTO) technology, and the expansion of the production
capacity of the Shurtan Gas Chemical Complex”.
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). Supply of exclusively PP random copolymer
increased. |
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