Saudi Arabia orders Aramco to lower oil capacity target

Saudi Arabia's government ordered state oil company Aramco to halt its oil expansion plan and to target a maximum sustained production capacity of 12 MM bpd, 1 MM bpd below a target announced in 2020, said Hydrocarbonprocessing.

Saudi Arabia for decades has been the main holder of the world's only significant spare oil capacity, providing a safety cushion for global supplies in case of major disruptions caused by conflict or natural disasters. In recent years, fellow member of the Organization of the Petroleum Exporting Countries the United Arab Emirates has also built-up spare capacity.

The kingdom is the world's largest oil exporter and is pumping around 9 million bpd, well below its around 12 million bpd existing capacity after it cut production as part of an agreement with OPEC and its allies last year. Saudi Arabia, the de facto leader of OPEC, and Russia have spearheaded efforts with allies in the OPEC+ producer group to cut output to balance markets in the face of rising supply from other big oil producers, such as the U.S.

"Aramco currently has spare capacity of 3 million bpd," a source with direct knowledge of the matter told Reuters. That gives Aramco plenty of scope to increase output if the market needs the oil, the source added. If needed, Saudi Aramco could always boost its capacity target later, the source said. "If the government decides to go the other way, the company is ready."

Aramco's lowered target did not reflect a change in the Saudi view of future oil demand, nor stem from any technical issue, the source said.

In the short term, there is unlikely to be strong enough demand for either Saudi Arabia or the UAE to pump closer to their capacity. OPEC has a more positive outlook on oil demand growth than other forecasters, and yet is expecting that most of the increase in demand over the next two years will be met by crude supply from non-OPEC+ producers.

In its latest monthly report, OPEC forecast that demand for its oil would grow about 1.3 million bpd by the end of 2025. That means the producer group would only be able to unwind a third of current OPEC cuts of close to 4 million bpd.

That would leave Saudi Arabia and the UAE sitting on sizeable spare capacity - which is expensive to build and maintain - at the end of 2025. Benchmark Brent crude futures LCOc1 were little changed on Tuesday, trading up 0.9% at $83.12 a barrel by 1804 GMT. Aramco shares closed up 0.2% at 31.30 riyals ($8.35).

Shares of top oilfield services provider SLB SLB.N tumbled about 7% and those of its U.S. rivals also fell on the news. Oilfield firms have been riding rising spending on international and offshore oil exploration and production, primarily from the Middle East and Africa, as U.S. shale firms keep a tight leash on drilling activity.

We remind, Saudi Arabia has forecast a budget deficit of 79 B riyals ($21.07 B) in 2024, slightly smaller than a deficit of 82 billion riyals projected for last year as lower crude production and global prices reduced revenue. Aramco in each of the last two quarters paid its shareholders near $10 B in performance-linked dividends announced earlier in 2023, on top of Brent-linked royalties and $19.5 B base dividends paid each quarter.

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Czech oil refiner Unipetrol will perform maintenance on its 109,000 bpd Litvinov oil refinery from April 4 to May 15, a company spokesperson said, as per Hydrocarbonprocessing.

Unipetrol is owned by Poland's Orlen and operates the Litvinov refinery and the 68,000 bpd Kralupy refinery, both in the Czech Republic.

A general maintenance turnaround at the company's petrochemical site was postponed until 2025, the company said, but some maintenance works on specific units at that site will be performed between March and May this year.

Litvinov is the latest oil refinery to announce maintenance for early 2024. Shell is performing maintenance on Europe's largest refinery - the over 400,000 bpd capacity Pernis plant in Rotterdam - from the end of January until April.

ExxonMobil began shutting down units at its 140,000 bpd Fos-sur-Mer refinery in France on Jan. 20 as part of a major shutdown.

The U.S. major's 191,000 bpd Rotterdam refinery is also set to undergo a full maintenance turnaround from the middle of February.

Refinery maintenance in Europe commonly occurs in springtime and autumn.

We remind, ORLEN Unipetrol Group (Prague, Czech Republic) announced it expansion into the segment of mechanical recycling by acquiring REMAQ, a leading player in the region of Central and Eastern Europe, in its group. An Italian-Czech company, REMAQ, s.r.o. was established in 2004. It focuses on production and trading with plastic recyclates, especially polypropylene, polyethylene and polystyrene.

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In January 2024, the phenolic resin market in the USA exhibited a bearish outlook, with prices consistently decreasing on a week-on-week basis over the past few months, said Chemanalyst.

This downward trend is predominantly driven by subdued demand for phenolic resin from downstream industries. The current market situation suggests that the reduction in product procurement frequency is linked to an oversupply scenario in the consumer market, coupled with a low consumption rate of resins, including phenolic resin.

In the United States, the prices of phenolic resin experienced a week-on-week decline. As of January 26, 2024, the assessed prices of Novolac Phenolic Resin FOB Louisiana stood at USD 2200/MT, reflecting a decrease of 8.3%. Cumulatively for the month, prices recorded a significant drop of over 18.5%. This decline is attributed mainly to weak demand from downstream sectors such as adhesive, coatings, molding, and insulation, both in the domestic and overseas markets. Consumers displayed hesitancy towards making new purchases of phenolic resin, likely influenced by existing high inventories.

On the other hand, the US economy maintained a surprisingly robust performance in the fourth quarter, concluding an exceptionally strong year in 2023. Both individuals and businesses continued to engage in significant spending, displaying resilience despite the presence of elevated interest rates that have caused distress among businesses. The latest data indicates the resilient performance of the US economy, as the GDP registered a growth rate of 2% or higher for the sixth consecutive quarter. Consumer activity played a significant role in driving the majority of the growth observed in the last quarter. For the entire year of 2023, the economy expanded by 2.5%, a notable increase compared to the 1.9% growth recorded in 2022.

Industry insiders suggest that subdued demand and surplus supply of phenolic resin are expected to persist for the majority of the upcoming months of Q1 2024. Additionally, the European chemicals sector is still struggling with challenges as consumers exhibit hesitancy in placing new orders, and persistent long-term economic uncertainty continues to hamper market sentiments.

In response to the consistently weak demand for polymers and resins, including phenolic resins, companies have found themselves compelled to accept cost-cutting measures, leading some to make the difficult decision to slow down manufacturing operations.

As per the ChemAnalyst database, it is expected that the prices of phenolic resin will continue to decrease in the coming weeks due to anticipated weakness in consumer demand. However, ongoing geopolitical tension in the Middle East could impact the upstream Naphtha and Phenol market due to possible supply distress, and eventually, the phenolic resins market could be impacted due to fluctuating manufacturing costs.

We remind, China's prominent petrochemical producer, Hebei Haiwei Group, has successfully resumed propylene production at its propane dehydrogenation plant in Hebei Province on January 28. The temporary shutdown was part of a scheduled maintenance initiative, as announced by the manufacturer. The specific unit affected by the maintenance was a propane dehydrogenation unit with an annual capacity of 500 thousand tons of propylene. The shutdown began on January 13 and was aimed at undertaking necessary repairs and ensuring the optimal performance of the facility.

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Alujain Corp.'s subsidiary, Alujain National Industrial Co. (LNIC), has taken a significant step in advancing its integrated propane dehydrogenation (PDH) and polypropylene (PP) project in Yanbu Industrial City, located in Saudi Arabia's Medina province, said Chemanalyst.

This milestone involves the awarding of a contract to Samsung Engineering Co. Ltd. for front-end engineering and design (FEED) services. The project aims to bolster the production of propylene and polypropylene in the region.

As of September 27, Samsung Engineering is tasked with providing FEED services for two key units within the project—a 600,000-tonne/year (tpy) PDH plant and a 500,000-tpy PP plant. Additionally, the scope of Samsung Engineering's responsibilities encompasses FEED services for the essential utilities and offsite infrastructure required for the entire project. The contract's total worth stands at $19.428 million. Notably, this contract follows Samsung Engineering's successful completion of preliminary FEED work for the PDH-PP project.

The decision to award the FEED contract for the PDH-PP project comes on the heels of LNIC's strategic move to license cutting-edge technologies for the venture. In early May, LNIC entered into a contract with Lummus Technology LLC, securing licensing rights to its proprietary C3 CATOFIN process technology for the planned PDH unit. This unit is designed to produce propylene, which will serve as the feedstock for the upcoming PP unit. The move underscores LNIC's commitment to adopting advanced technologies to enhance the project's efficiency and productivity.

Furthermore, on May 30, LyondellBasell Industries Holdings BV confirmed that it had been awarded a contract by LNIC. This contract includes the licensing of LyondellBasell's proprietary Spherizone process technology and the supply of its proprietary Avant ZN catalyst for the new PP unit within the PDH-PP project. These technologies represent state-of-the-art advancements in the production of polypropylene.

It's worth noting that LNIC's PDH-PP project is set to be established adjacent to the existing 400,000-tpy PDH-PP plant operated by National Petrochemical Industrial Co. (NatPet), another subsidiary of Alujain. This existing facility benefits from the service provider's proprietary Spheripol PP process technology, demonstrating Alujain's continued commitment to technological excellence.

In a November 2022 notice to investors, Alujain disclosed that upon completion, the new PDH-PP project is projected to yield over 600,000 tpy of PP, PP compounds, and specialized construction materials derived from PP derivatives. Additionally, it is expected to produce approximately 25,000 tpy of saleable hydrogen, contributing to the diversification of the product portfolio.

LNIC's forward-thinking approach extends beyond production capacity. The project includes the implementation of a grid to integrate the new units seamlessly with NatPet's existing facilities. This integration is intended to enhance the reliability, efficiency, and overall profitability of both subsidiaries.

Alujain, with an estimated total project cost of around $2 billion, envisions the new PDH-PP plant to commence operations during the first half of 2026. This strategic move not only aligns with the company's growth objectives but also reflects its commitment to sustainable development in the petrochemical industry. As the project progresses, it is poised to make a substantial impact on propylene and polypropylene production in the region, further cementing Alujain's position as a leader in the industry.

We remind, China's prominent petrochemical producer, Hebei Haiwei Group, has successfully resumed propylene production at its propane dehydrogenation plant in Hebei Province on January 28. The temporary shutdown was part of a scheduled maintenance initiative, as announced by the manufacturer. The specific unit affected by the maintenance was a propane dehydrogenation unit with an annual capacity of 500 thousand tons of propylene. The shutdown began on January 13 and was aimed at undertaking necessary repairs and ensuring the optimal performance of the facility.

mrchub.com

China's prominent petrochemical producer, Hebei Haiwei Group, has successfully resumed propylene production at its propane dehydrogenation plant in Hebei Province on January 28, said Chemanalyst.

The temporary shutdown was part of a scheduled maintenance initiative, as announced by the manufacturer. The specific unit affected by the maintenance was a propane dehydrogenation unit with an annual capacity of 500 thousand tons of propylene. The shutdown began on January 13 and was aimed at undertaking necessary repairs and ensuring the optimal performance of the facility.

This recent maintenance activity follows a similar occurrence in December when Hebei Haiwei Group resumed propylene production at the propane dehydrogenation unit in Hebei Province. The December shutdown was characterized as unscheduled maintenance, indicating the need for prompt repairs to address technical issues. In that instance, the same propane dehydrogenation unit with a 500 thousand tons per year propylene capacity was temporarily closed due to a technical breakdown. The swift action taken by Hebei Haiwei Group reflects its commitment to maintaining operational efficiency and addressing any unforeseen challenges promptly.

Established in 1992, Haiwei Group has become a key player in the petrochemical industry in China. The company is situated in Hebei Province and boasts a diverse portfolio of petrochemical products. Among the products manufactured by Haiwei Group are polypropylene, packaging film, polymer-modifiable bitumen, and various other petrochemical derivatives.

The resumption of propylene production is a significant milestone for Hebei Haiwei Group, marking the successful completion of the scheduled maintenance activities. Propylene, a crucial chemical compound, finds extensive applications in various industries, including the production of plastics and synthetic materials. Hebei Haiwei Group's ability to promptly restart production operations underscores its commitment to maintaining a steady and reliable supply of essential petrochemical products.

As a major contributor to China's petrochemical landscape, Hebei Haiwei Group's operational updates are closely monitored within the industry. The company's strategic location in Hebei Province positions it as a key player in the region's economic and industrial development. The diverse range of petrochemical products manufactured by Haiwei Group further solidifies its role as a comprehensive provider of essential materials for multiple sectors.

Hebei Haiwei Group's successful resumption of propylene production after scheduled maintenance reflects its dedication to operational excellence and reliable supply chain management. The proactive approach taken by the company in addressing both scheduled and unscheduled maintenance activities demonstrates its commitment to maintaining the efficiency and performance of its petrochemical facilities. The ongoing contributions of Hebei Haiwei Group to China's petrochemical sector underscore its significance in supporting the nation's industrial growth and meeting the demand for essential petrochemical products.

We remind, Alujain Corp.'s subsidiary, Alujain National Industrial Co. (LNIC), has taken a significant step in advancing its integrated propane dehydrogenation (PDH) and polypropylene (PP) project in Yanbu Industrial City, located in Saudi Arabia's Medina province. This milestone involves the awarding of a contract to Samsung Engineering Co. Ltd. for front-end engineering and design (FEED) services. The project aims to bolster the production of propylene and polypropylene in the region.

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