COVID-19 - News digest as of 13.01.2022

1. Crude oil prices hit two-month high on tight supply and easing concerns about Omicron impact on demand

MOSCOW (MRC) -- Oil prices hit two-month highs on Wednesday on tight supply and easing concerns about the potential hit to demand from the Omicron coronavirus variant, reported Reuters. US Federal Reserve Chairman Jerome Powell on Tuesday said that the economy of the United States, the world's biggest oil consumer, should weather the current COVID-19 surge with only "short-lived" impact and is ready for the start of tighter monetary policy. Brent crude futures were up 47 cents, or 0.6%, at USD84.19 a barrel by 1430 GMT. US West Texas Intermediate (WTI) crude futures were up 66 cents, or 0.8%, at USD81.88.

MRC

MOSCOW (MRC) -- Exxon Mobil Corporation’s Baytown refinery in Texas continues to produce at reduced rates after a fire broke out at a reformer feed hydrotreater on Dec 23,2021, reported Reuters.

The Baytown refinery is one of the largest refining and petrochemical facilities in the United States, with a crude processing capacity of 560,500 barrels per day.

The fire took place at the refinery’s hydrotreater unit, which had been closed due to a leakage in the bypass line. Reformer feed hydrotreater eliminates sulfur and other contaminants from partially refined oil to produce refined products.

The fire affected a gasoline-producing unit, which could affect premium gasoline prices. The fire could hinder the Baytown refinery’s production for months, in turn, affecting the gasoline supply when the US refining capacity has already been reduced. Beside this, it affected a toluene benzene unit and a nearby cooling tower.

Although there were no fatalities, a few workers were hospitalized with injuries. While workers were relocated from that refinery section, the rest of the facility continued its operations.

This is the second fire incident at the Baytown refinery in two years. In 2019, a fire broke out at a polypropylene (PP) recovery unit, in which plastic is purified for production.

The cause of the fire has not yet been determined.

Exxon's Baytown facility is home to a chemical plant, an olefins plant and the country's fourth-biggest oil refinery, with capacity to process 560,500 bpd of crude.

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 2,265,290 tonnes in the first eleven months of 2021, up by 14% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market were 1,363,850 tonnes in January-November, 2021, up by 25% year on year. Supply of homopolymer PP and block-copolymers of propylene (PP block copolymers) increased, whereas supply of injection moulding PP random copolymers decreased significantly.

ExxonMobil is the largest non-government owned company in the energy industry and produces about 3% of the world's oil and about 2% of the world's energy.
MRC

MOSCOW (MRC) - Poland's largest refiner PKN Orlen said it will sell some Lotos assets to companies including Saudi Aramco, reported Reuters.

Saudi Aramco will buy a 30% stake in Lotos Asfalt, one of the largest manufacturers of bitumen in Europe which also owns the Lotos oil refinery in Gdansk, in a deal including a fixed payment of 1.15 billion zlotys and variable elements. It will also acquire 100% stakes in two other units.

Orlen has also signed a deal with Aramco for oil supplies of 200,000-337,000 barrels per day, adding more purchases to those agreed earlier. Deliveries under the new contract will start this year, PKN's chief executive told journalists.

Poland's Unimot and Hungary's Rossi Biofuel will also purchase some Lotos assets, PKN Orlen added.

Critics say selling Lotos's assets would result in letting more international competitors into Poland, but Orlen and the government argue that taking over the smaller rival will improve company's market position, its bargaining power and investment capacities.

"This new company...is a great opportunity for Poland...to successfully face the challenges we are facing today. The challenges related to the energy transformation, to global changes when it comes to new sources of energy and fuels," Poland's state assets minister told journalists.

"I am convinced that Orlen will be strengthened by these Lotos assets, but also strengthened by cooperation with Saudi Aramco," Jacek Sasin added.

PKN Orlen announced plans to buy Lotos in 2018, but had to meet conditions set by the European Commission. It agreed to sell some Lotos assets to address competition concerns.

As MRC informed earlier, in May 2016, PKN ORLEN signed a contract with Saudi Aramco for the supply of ca. 200 thousand tonnes of crude oil monthly to its refineries. The contract was effective since May 1st to December 31st 2016, with an option of automatic renewal for successive years. The oil is processed by all PKN ORLEN's refineries in Poland, the Czech Republic and Lithuania. This was the first direct long-term contract with a supplier from the Gulf region in the history of the Polish company.

We remind that Orlen Unipetrol (part of PKN Orlen), a major Czech producer of petrochemical products, will expand the capacity of its steam cracker in Litvinov (Czech Republic) by installing a new furnace. The new cracker will be built by Technip Energies in Zaluzi, the largest chemical plant in the Czech Republic, and is due to be commissioned in 2022. Orlen is investing over 700 mln Czech crown (CZK) in the project.

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 2,265,290 tonnes in the first eleven months of 2021, up by 14% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market were 1,363,850 tonnes in January-November, 2021, up by 25% year on year. Supply of homopolymer PP and block-copolymers of propylene (PP block copolymers) increased, whereas supply of injection moulding PP random copolymers decreased significantly.

PKN Orlen is a leading player on the fuels and energy markets, and the largest company in Central and Eastern Europe, listed in prestigious global rankings such as Fortune Global 500, Platts TOP250 and Thompson Reuters TOP100. The ORLEN Group operates in 6 home markets – Poland, the Czech Republic, Germany, Lithuania, Slovakia and Canada.
MRC

MOSCOW (MRC) -- Rabigh Refining and Petrochemical Company (Petro Rabigh) has announced that it has submitted a capital reduction application file and a capital increase application file to the Saudi Capital Market Authority, according to TNG News.

The company said in a statement on “Tadawul Saudi Arabia”, Monday, that it obtained the approval of the lenders regarding the capital reduction and capital increase in accordance with the requirements of the relevant financing agreements.

She explained that the capital reduction and increase are subject to the relevant regulatory approvals, including the approval of the company’s extraordinary general assembly, noting that it will announce any material developments in a timely manner in accordance with the relevant regulations.

On December 7, 2021, the company submitted an amendment to the Board of Directors’ recommendation to increase the company’s capital through a rights issue, to be a recommendation to reduce the capital by an amount of 1.205 billion riyals, and then increase it by offering rights shares with a total value of 7.95 billion riyals.

The amendment includes the board of directors’ recommendation regarding the capital structure, after the board of directors studies the company’s financial position and takes into account the accumulated losses of 13.76% of the company’s capital.

The company said in a previous statement, that the recommendation included reducing the capital by 13.76%, to become after the reduction about 7.55 billion riyals, instead of 8.76 billion riyals.

The method of reduction is through canceling about 120.5 million ordinary shares, by canceling one ordinary share for every 7.3 ordinary shares, bringing the number of shares after the reduction to 755.49 million shares.

The reduction will contribute to amortizing the company’s accumulated losses, and the company does not expect the capital reduction to have a material negative impact on the company’s financial, operational or regulatory obligations, operations or performance.

As MRC wrote previously, the company conducted a 55-day scheduled turnaround at its polypropylene (PP) units in Rabigh since end-February 2020. And in June 2021, Petro Rabigh said it had no overhaul schedule for its PP plant. The company operates two lines at this plant, which can produce 350,000 mt/year of PP each.

Besides, the company has a 300,000 mt/year high density polyethylene (HDPE) unit, a 160,000 mt/year low density polyethylene (LDPE) unit and a 600,000 mt/year linear low density polyethylene (LLDPE) plant at the same site.

According to MRC's ScanPlast report, PP shipments to the Russian market were 1,363,850 tonnes in January-November, 2021, up by 25% year on year. Supply of homopolymer PP and block-copolymers of propylene (PP block copolymers) increased, whereas supply of injection moulding PP random copolymers decreased significantly.

PetroRabigh, a joint venture between Saudi Aramco and Japan's Sumitomo Chemical, has an annual output capacity of 18 million tonnes of refined products and 2.4 million tonnes of petrochemicals. Thus, the complex currently has a cracker to produce 1.6-million t/y of ethylene, as well as downstream production of polyethylene, polypropylene, propylene oxide, ethylene glycol and butene-1.
MRC

MOSCOW (MRC) -- Honeywell announced that Lukoil -Permnefteorgsintez, a subsidiary of Lukoil, will use a range of Honeywell UOP process technologies at its refinery to convert low value vacuum gasoil into high value products such as gasoline and propylene, said Hydrocarbonprocessing.

Phase one of the project includes the installation of a new UOP vacuum distillation unit and a UOP FCC unit that is tailored to increase production of propylene at the refinery while improving gasoline yield. A UOP Merox unit will also be installed that will treat the liquefied petroleum gas (LPG) streams and reduce the level of mercaptans in the LPG and UOP propylene recovery unit to produce propylene with certain quality requirements for its further use.

The Honeywell UOP Merox process uses a highly efficient design to economically achieve ever-tightening sulfur specifications. The UOP Merox process extracts low molecular weight mercaptans from gas and LPG streams. The Merox process does not require feed or caustic filters and offers greater than 99.5% on-stream availability.

UOP will provide technology licensing, design services, key equipment and state-of-the-art catalysts and adsorbents for this project at the refinery in the Perm region of Russia. When completed, the conversion capacity of the complex is expected to exceed 1,800,000 metric tpy of vacuum gasoil.

"These best-in-class UOP technologies will allow LUKOIL to increase production of propylene and gasoline at its Perm refinery while benefiting from low capital and operating costs,” said Laura Leonard, vice president and general manager, UOP Process Technologies. “UOP constantly invests in its FCC technology development to meet the most ambitious needs of our customers. I’m proud, that Lukoil elected to continue its success story with UOP FCC technology, which is already being employed at several Lukoil refineries."

Earlier it was also reported that Lukoil plans to invest more than 300 billion rubles in the coming years. in the development of a petrochemical cluster in the Stavropol Territory, the core of which is the Stavrolen petrochemical enterprise. The development program, among other things, provides for the technical re-equipment of the pyrolysis complex, which will increase its capacity to 420 thousand tons of ethylene per year. The modernization program also includes the reconstruction of a PE production unit, the capacity of which will increase to 405,000 tons per year, and a polypropylene (PP) production unit, which will increase the production of its copolymers to 120,000 tons per year. In addition, Lukoil plans to launch the production of linear polyethylene (LDPE) and metallocene grades.

Lukoil is one of the leading vertically integrated oil companies in Russia. The main activities of the company include exploration and production of oil and gas, production and sale of petroleum products. Lukoil is the second largest private oil company in the world in terms of proven hydrocarbon reserves. The structure of Lukoil includes one of the largest petrochemical enterprises in Russia - Stavrolen.
MRC