COVID-19 - News digest as of 11.03.2021

1. India asks refiners to diversify, cut reliance on Middle East oil after OPEC+ decision

MOSCOW (MRC) -- India has asked state refiners to speed up the diversification of oil imports to gradually cut their dependence on the Middle East after OPEC+ decided last week to largely continue production cuts in April, reported Reuters with reference to two sources. India, the world's third biggest oil importer and consumer, imports about 84% of its overall crude needs with over 60% of that coming from Middle Eastern countries, which are typically cheaper than those from the West. Most of the OPEC+ producers, led by world's top exporter Saudi Arabia, last week decided to extend most output curbs into April. India, hit hard by the soaring oil prices, has urged producers to ease output cuts and help the global economic recovery. In response, the Saudi energy minister told India to dip into strategic reserves filled with cheaper oil bought last year.


MRC

MOSCOW (MRC) -- Oil prices fell after a large jump in US crude inventories in the aftermath of last month's Texas winter storm, but price declines were limited due to an upbeat forecast for global economic recovery, reported Reuters.

Brent crude lost 30 cents, or 0.4%, at USD67.22 a barrel by 11:31 a.m. EST (1631 GMT) and US West Texas Intermediate crude shed 38 cents, or 0.6%, at USD63.63 a barrel.

US crude oil stocks jumped 13.8 million barrels last week, far exceeding forecasts for a 816,000-barrel rise, as the nation's oil industry continued to feel the effects of a winter storm mid-February that stalled refining and forced production shut-ins in Texas.

Producers appear to be coming back online faster than refiners, swelling inventories, analysts said.

Crude production rose to 10.9 million barrels per day, rebounding to near levels before the freeze, while refinery utilization rates jumped 13 percentage points, but that only brought overall capacity use to 69%, far below seasonal averages for this time of year.

“This could be a little bit of a headwind for prices because the production number is coming up faster than people thought,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.

The pandemic-hit global economy is set to rebound with 5.6% growth this year and expand 4% next year, the Organisation for Economic Cooperation and Development (OECD) said in its interim economic outlook. Its previous forecast had been for growth of 4.2% this year.

"When it comes to lifting market sentiment, there is very little that can rival an upgrade to the post-COVID economic recovery," said Stephen Brennock of broker PVM.

Oil prices have been steadily rallying for several months as OPEC+ - consisting of the Organization of the Petroleum Exporting Countries and allies - kept supply curbs in place. After briefly touching USD70 per barrel earlier this week, Brent crude has edged off.

OPEC+ agreed last week to largely maintain production cuts in April.

Saudi Arabia's foreign minister said that the kingdom and Russia were keen for fair oil prices and will continue their cooperation in the framework of the OPEC+ group.

As MRC informed previously, oil producers face an unprecedented challenge to balance supply and demand as factors including the pace and response to COVID-19 vaccines cloud the outlook, according to an official with International Energy Agency's (IEA) statement.

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, says GlobalData.

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 241,030 tonnes in January 2021 versus 217,890 tonnes a year earlier. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, PP shipments to the Russian market reached 141,870 tonnes in January 2021 versus 123,520 tonnes a year earlier. Supply of homopolymer PP and PP block copolymers increased.
MRC

MOSCOW (MRC) -- The UAE's Abu Dhabi National Oil Co. has signed an agreement with Malaysia's Petronas to explore collaboration in the oil and gas sector of Abu Dhabi and in the low-carbon energy industry in the first such partnership between the two national oil producers, according to S&P Global.

"Under the terms of the agreement, ADNOC and Petronas will jointly explore opportunities for collaboration in the exploration, development, and production of conventional and unconventional hydrocarbon resources in the emirate of Abu Dhabi," ADNOC said in a statement March 10.

This is ADNOC's first partnership with Petronas and builds on the national oil producer's pivot toward Asia, which consumes most of its oil.

The two companies will also assess collaboration in the domestic and international downstream and trading sectors, as well as clean technology, the companies said.

"ADNOC and Petronas have also agreed to explore potential partnership opportunities in trading, including the optimization of crude and feedstock supply and refined product offtake," ADNOC said.

"In addition, they will look to collaborate to identify technology solutions as well as on hydrogen and research and development in areas of mutual interest including enhanced hydrocarbon recovery and Carbon Capture Utilization and Storage (CCUS)."

ADNOC has been striking a number of hydrogen deals with Asian countries.

The national oil producer said March 4 it is exploring opportunities to work with South Korea's GS Energy on blue hydrogen and carrier fuel export such as blue ammonia.

Japan's Ministry of Economy, Trade and Industry struck the first fuel ammonia cooperation deal with ADNOC in January as Tokyo intends to develop its supply chain of blue ammonia, possibly in the Middle East by the late 2020s.

ADNOC is also partnering with Abu Dhabi sovereign wealth funds Mubadala Investment Co. and ADQ to develop a hydrogen industry in the UAE.

ADNOC currently produces around 300,000 mt/year of hydrogen for its downstream operations and plans to expand it to more than 500,000 mt/year.

The Abu Dhabi company also plans to boost its capacity to capture CO2 from its own gas plants to 5 million mt/year of CO2 by 2030, from 800,000 mt/year now.

Separately, Petronas signed with Abu Dhabi-based clean energy company Masdar, which is owned by Mubadala, a memorandum of understanding for collaboration in renewables and hydrogen in Asia and the Middle East.

"Both parties will explore joint participation in large-scale solar and wind opportunities for utilities, commercial and industrial customers, focusing primarily on Asia," Petronas said.

"The partnership will also explore opportunities for the joint production of green hydrogen. Petronas is gearing toward commercializing low-carbon hydrogen produced from its existing facilities and is pursuing commercial production of green hydrogen in the near future."

In November 2020, Petronas announced its commitment toward net-zero carbon emissions by 2050.

Petronas New Energy, the renewables arm of the parent company, currently has over 1 GW of solar capacity in operation and development in India and Southeast Asia.

As MRC reported previously, in early May, 2020, Abu Dhabi National Oil Company (ADNOC) began a gradual restart of its Ruwais oil refinery complex after a scheduled maintenance shutdown. The Ruwais complex, which has capacity of 835,000 barrels per day, was shut down early this year, the ADNOC spokesman said.

And in late July 2019, ADNOC said its Ruwais refinery west cracker was offline for maintenance.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 241,030 tonnes in January 2021 versus 217,890 tonnes a year earlier. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, PP shipments to the Russian market reached 141,870 tonnes in January 2021 versus 123,520 tonnes a year earlier. Supply of homopolymer PP and PP block copolymers increased.

Petronas, short for Petroliam Nasional Berhad, is a Malaysian oil and gas company wholly owned by the Government of Malaysia. The Group is engaged in a wide spectrum of petroleum activities, including upstream exploration and production of oil and gas to downstream oil refining; marketing and distribution of petroleum products; trading; gas processing and liquefaction; gas transmission pipeline network operations; marketing of liquefied natural gas; petrochemical manufacturing and marketing; shipping; automotive engineering; and property investment.
MRC

MOSCOW (MRC) -- Reliance Industries Ltd (RIL) is planning to shut polyvinyl chloride (PVC) plant in India for maintenance in April 2021, reported CommoPlast with reference to market sources.

The unit in Dahej with an annual capacity of 315,000 tons/year would be taken offline by 5 April 2021 and would resume operating on 20 April.

The producer is currently carrying out maintenance work at the 360,000 tons/year PVC plant in Hazira, which is expected to come back online on 15 March 2021.

As MRC informed earlier, RIL undertook planned shutdown at its PVC plant in Dahej in late May, 2017, and the facility remained off-line for around 3 weeks. Located at Dahej in Gujarat, India, the plant has a production capacity of 315,000 mt/year.

According to MRC's DataScope report, imports of suspension polyvinyl chloride (SPVC) into Russia slightly exceeded 500 tonnes in January, down by 68% year on year. At the same time, exports decreased by 15%. January SPVC imports to Russia fell to 500 tonnes from 1,600 tonnes and 6,000 tonnes in January and December 2020, respectively. High PVC prices in the foreign markets and long New Year holidays put serious pressure on import purchases of PVC from Russian companies.

Reliance Industries is one of the world's largest producers of polymers. The company produces polypropylene, polyethylene and polyvinyl chloride and other petrochemical products.
MRC

MOSCOW (MRC) -- India has asked state refiners to speed up the diversification of oil imports to gradually cut their dependence on the Middle East after OPEC+ decided last week to largely continue production cuts in April, reported Reuters with reference to two sources.

India, the world's third biggest oil importer and consumer, imports about 84% of its overall crude needs with over 60% of that coming from Middle Eastern countries, which are typically cheaper than those from the West.

Most of the OPEC+ producers, led by world's top exporter Saudi Arabia, last week decided to extend most output curbs into April.

India, hit hard by the soaring oil prices, has urged producers to ease output cuts and help the global economic recovery. In response, the Saudi energy minister told India to dip into strategic reserves filled with cheaper oil bought last year.

"We have asked companies to aggressively look for diversification. We cannot be held hostage to the arbitrary decision of Middle East producers. When they wanted to stabilize the market we stood by them," said a government source.

India had not cancelled any shipment of crude oil from the Middle East in 2020 when oil demand collapsed due to COVID-19, the source said. Already OPEC's share in India's oil imports declined to a historic lows during April 2020-January 2021, the first ten months of this fiscal year.

While initial costs could be high, the strategy will pay off in the long term, the source said.

Two oil refiners confirmed that the government had asked them to expedite efforts to diversify crude import sources.

One plan is to import oil from new producer Guyana, the sources said. The country's top refiner Indian Oil Corp has also renewed its oil import contract with Russia, they added. India hopes to resume Iranian oil imports this year.

India's oil ministry and IOC did not respond to requests from Reuters for comment.

Iraq and Saudi Arabia are the two biggest oil suppliers to India. This year, Iraq has cut annual supply volumes while Kuwait has shortened the duration of contracts with Indian buyers to 9 months.

After OPEC's last week decision, crude oil prices rose to over USD71 per barrel although the prices eased to USD69.08 a barrel by 1027 GMT. Saudi has also raised April official selling price of its oil for Asia.

"A beginning has to be made. No one had imagined that U.S. oil will account for a significant share in our crude basket. We are trying for shorter-term contracts with new countries and sellers," the first source said.

"The world was together during the pandemic but now it seems some producers are working for their own economies," said the first source.

As MRC informed before, Indian Oil has just announced plans to expand the capacity of its refinery at Panipat, India, from 15 million metric tons/year (MMt/y), to 25 MMt/y. The company will also build a polypropylene (PP) unit and a catalytic dewaxing unit at the site. The cost of the project is 329.46 billion Indian rupees (USD4.45 billion). The plan is the latest in a series of projects approved by Indian Oil to improve integration with petrochemicals at the company's refinery sites. The capacity of the planned PP facility has not been disclosed.

According to MRC's ScanPlast report, 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.
MRC