Japanese refiners to sell assets and speed structural reform as on expectations of weaker demand due to COVID-19 impact

MOSCOW (MRC) -- Japanese refiners plan to sell assets and speed structural reform and overseas expansion as fuel demand is expected to fall at a faster pace due to a prolonged impact from the COVID-19 pandemic and an accelerating global decarbonization trend, reported Reuters.

The dual headwinds of the pandemic and stronger pressure to cut carbon dioxide have forced Japan's top refiner Eneos Holdings and second-ranked Idemitsu Kosan to downgrade their profit goals for the three years to March 2023.

"There has been a significant environmental change since 2019, with the unprecedented coronavirus crisis, green recovery and Japan's declaration of becoming carbon neutral," Idemitsu President Shunichi Kito told a news conference last week after the company released its earnings.

"We have taken a much harder look at future scenario," he said, pointing to the revised estimate of domestic fossil fuel demand contracting 30% by 2030 from 2019 levels, instead of its 2019 assumption of 20%.

To get funds to realign its portfolio and trim CO2 emissions, Eneos will exit coal mining by selling stakes in mines in Canada and Australia, and scale down its upstream oil assets. Idemitsu said it will also downsize its coal assets by cutting out investments in new projects.

The two energy companies will also accelerate structural reform, they said, shifting away from coal and oil to renewable energy and cleaner fuels such as hydrogen, while beefing up their overseas operations in Asia.

The moves are similar to those of global energy majors such as Royal Dutch Shell. Shell has said it plans to curb its emissions through the rapid growth of its low-carbon businesses, including biofuels and hydrogen.

"Our goal is to provide clean energy through a new energy management system using renewable energy with storage battery and electric vehicles (EVs), and to supply CO2-free hydrogen and synthetic fuels using cheaper renewable power to be generated abroad," Eneos President Katsuyuki Ota said last week.

Idemitsu will focus on low-carbon fuels such as ammonia and plant-derived black pellets - advanced wood pellets that can be used in place of coal - while expanding renewable energy projects, including geothermal and biomass. Idemitsu also aims to turn its refineries into bases to recycle solar panels, make lithium battery materials and import and store ammonia.

To seek growth overseas, Eneos may raise its stake in Vietnam National Petroleum Group (Petrolimex) (PLX.HM), while Idemitsu will expand natural gas development in Southeast Asia, such as in Vietnam where it operates the Nghi Son refinery.

We remind that, as MRC informed earlier, ENEOS Corporation restarted its naphtha cracker in Kawasaki on 1 February 2021. The company shut this cracker with an annual capacity of 515,000 tons/year of ethylene, 300,000 tons/year of propylene, and 105,000 tons/year of butadiene on 4 December, 2020, for repairment after a technical issue reported at the butadiene separation unit and initially planned to resume operations on 28 December, 2020.

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 576,270 tonnes in the first three month of 2021, up by 4% year on year. Low density polyethylene (LDPE) and high density polyethylene (HDPE) shipments increased. At the same time, PP shipments to the Russian market totalled 410,890 tonnes in January-March 2021, up by 56% year on year. Supply of homopolymer PP and PP block copolymers increased.

Japan's largest refiner JXTG Nippon Oil & Energy was renamed ENEOS Corporation on 25 June, 2020, as part of a wider re-organization of the parent company JXTG Holdings. The move, which also involved renaming the parent company to ENEOS Holdings upon approval at its annual shareholders meeting in June 2020, comes as it strives to be a more comprehensive energy and materials company under its 2040 vision announced in May, 2019. JXTG Holdings was formed as a result of a merger between JX Holdings and TonenGeneral in April 2017. This followed the establishment of JX Holdings as a result of the merger between Nippon Oil and Nippon Mining Holdings in April 2010.
MRC

North Huajin selects Dupont Clean Technologies to provide license, basic engineering and technical services for petchem complex

MOSCOW (MRC) -- North Huajin Refining and Petrochemical Company, LTD. (North Huajin) has signed contracts with Refining Technology Solutions, LLC, a subsidiary of DuPont Clean Technologies (DuPont) for the license, basic engineering, and technical services for a new combined IsoTherming kerosene/diesel hydrotreater (KDHT), according to Hydrocarbonprocessing.

The grassroots hydrotreater is one of many units included as part of the greenfield fully integrated refining and petrochemical complex that will be located in Liaodong Bay New Area, Panjin, Liaoning Province, China. North Huajin commissioned DuPont for an IsoTherming® KDHT unit with a nameplate capacity of 1,600 kmta (37,000 bpd), capable of producing fuels compliant with both Jet 3 fuel standard and China VI diesel.

IsoTherming hydrotreaters enable refiners to produce high-quality, low-sulfur fuels that comply with increasingly stringent environmental requirements, but at lower energy consumption rates and operating costs than trickle bed hydroprocessing units. The IsoTherming® technology is commercially proven to process a wide range of feedstocks, from kerosene to vacuum gas oil, including 100 percent light cycle oil. The units are designed to provide refiners with consistent savings on utilities in the magnitude of 30-60% compared to trickle bed technologies and the potential of 30 percent capital cost savings or more.

The greenfield complex is a key part of the revitalization of the rustbelt region of northeast China. In addition, by selecting the IsoTherming® technology for this hydrotreater, the refinery will minimize CO2 emissions due to lower energy requirement within the unit in comparison to trickle bed technologies. This decrease in emissions will further assist China in its goal to become carbon neutral by 2060.

Startup of the IsoTherming® KDHT unit at the Panjin site is expected to take place by the end of 2023.

As MRC reported earlier, DuPont is to invest around USD 5 m at facilities in Germany and Switzerland to increase capacity for automotive adhesives. The investment will expand capacity to support growing demand for advanced mobility solutions for vehicle electrification. New equipment has been delivered and installed that will increase manufacturing capacity as well as accelerate delivery of product samples to customers.

We remind that DuPont is also investing USD400 million in the production capacity of Tyvek nonwoven fabric made from high density polyethylene (HDPE) at its site in Luxembourg. A new building and a third work line at the production site will be constructed. The launch of new facilities is scheduled for 2021.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 576,270 tonnes in the first three month of 2021, up by 4% year on year. Low density polyethylene (LDPE) and high density polyethylene (HDPE) shipments increased.

The DuPont Corporation, founded in the USA in 1802, operates in more than 70 countries. The company produces specialty chemicals, offers goods and services for agriculture, food production, electronics, communications, security and protection, construction, transport and light industry. In Russia, DuPont has 100% control over the DuPont Khimprom plant since 2005, and in 2006 established a joint venture between DuPont - Russian Paints and Russian Paints.
MRC

Russia sells Antipinsky oil refinery as part of bankruptcy proceedings

MOSCOW (MRC) -- Russia's largest standalone oil processing plant, the Antipinsky oil refinery, was sold for almost 111 billion roubles (USD1.50 billion) as part of bankruptcy proceedings, an online sale platform showed, reported Reuters.

The online platform showed that a company called Rusinvest completed the purchase of the plant located in West Siberia. Most of Russia's oil refineries are controlled by big oil companies, such as Rosneft and Lukoil.

The refinery, which has a capacity of 7.5 million tons per year, filed for bankruptcy in 2019 after having halted operations on several occasions because of a lack of funds to pay for crude oil deliveries.

Russia's largest bank, Sberbank, had been the refinery's main creditor.

As MRC wrote before, in June 2019, SOCAR Energoresurs, a joint venture between Russia’s largest lender Sberbank and a group of investors, has acquired an 80% stake in Russia’s Antipinsky oil refinery.

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 576,270 tonnes in the first three month of 2021, up by 4% year on year. Low density polyethylene (LDPE) and high density polyethylene (HDPE) shipments increased. At the same time, PP shipments to the Russian market totalled 410,890 tonnes in January-March 2021, up by 56% year on year. Supply of homopolymer PP and PP block copolymers increased.

JSC Antipinsky Refinery was founded in July 2004 on the territory of one of the major oil and gas producing constituents of the Russian Federation - Tyumen Region, where most of Russian oil (64%) and natural gas (91%) reserves are concentrated.
MRC

COVID-19 - News digest as of 18.05.2021

1. DuPont invests in automotive adhesives expansion in Germany and Switzerland

MOSCOW (MRC) -- DuPont is to invest around USD 5 m at facilities in Germany and Switzerland to increase capacity for automotive adhesives, said Chemengonline. The investment will expand capacity to support growing demand for advanced mobility solutions for vehicle electrification. New equipment has been delivered and installed that will increase manufacturing capacity as well as accelerate delivery of product samples to customers. "As we see continued recovery of the global automotive market, we’re closely collaborating with our customers in Europe to deliver innovative advanced mobility solutions to meet their business needs,” said Tina Wu, Vice-President and General Manager, Advanced Solutions, DuPont Mobility & Materials. "This investment reinforces our commitment to increase capacity and accelerate growth in hybrid and fully-electric vehicles."


MRC

Crude oil futures slightly up on optimism over stronger demand from US and Europe

MOSCOW (MRC) -- Crude oil futures were slightly higher, but rangebound, during mid-morning trade in Asia May 18, as optimism over increased oil demand from the US and Europe kept the market afloat, reported S&P Global.

At 11:24 am Singapore time (0324 GMT), the ICE Brent July contract was up 17 cents/b (0.24%) from the May 17 settle at USD69.63/b, while the June NYMEX light sweet crude contract was up 10 cents/b (0.15%) at USD66.37/b.

The market brushed aside news of Asia's worsening COVID-19 situation and turned its attention towards the recovery in the US, where a rebound in economic activity has propped up downstream oil product demand.

Apple mobility data showed that US driving activity was up by around 1% in the week to May 14, reaching a nine-month high that is 142.04% of the January 2020 baseline.

Furthermore, the US Transportation Security Administration said the number of people passing through US airports on May 16 was 1.85 million, the highest since March 2020. This is just 30% lower than the equivalent seen on the same day in May 2019, indicating that US domestic air travel demand is recovering.

The market is also optimistic of Europe's prospective oil demand as major economies are gradually easing their mobility restrictions. The UK took a major step out of its lockdown on May 17, allowing social gatherings in limited numbers, activities such as indoor dining and replacing the ban on international travel with a more lenient set of rules.

Meanwhile, Italy, on May 17, announced it is pushing back its nightly coronavirus curfew by an hour to 11 pm from May 18 and is easing other mobility restrictions in areas where infections are low. France is also set to push back its nightly curfew by two hours to 9 pm from May 19, while lifting some restrictions on leisure venues and outdoor dining.

Over in Asia, concerns over renewed mobility restrictions in India, Japan and Southeast Asia were mollified by hopes that oil demand from the region's economic powerhouse China will remain strong.

As MRC informed earlier, 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 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 the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 576,270 tonnes in the first three month of 2021, up by 4% year on year. Low density polyethylene (LDPE) and high density polyethylene (HDPE) shipments increased. At the same time, PP shipments to the Russian market totalled 410,890 tonnes in January-March 2021, up by 56% year on year. Supply of homopolymer PP and PP block copolymers increased.
MRC