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Shell closing Convent, Louisiana, refinery as pandemic takes toll

November 06/2020

MOSCOW (MRC) -- Royal Dutch Shell announced it was closing its refinery in Convent, Louisiana, the largest such US facility and first on the US Gulf Coast to shut down since the coronavirus pandemic devastated worldwide demand, reported Reuters.

The shutdown will occur this month after Shell failed to find a buyer.

The refinery is the ninth in North America targeted for a shutdown or to be idled since the pandemic, which has dealt a heavy blow to fuel demand globally. The United States is the world"s largest fuel consumer.

Shell said it failed to find a buyer for the 211,000-barrel-per-day refinery after announcing plans to sell it in July.

�After looking at all aspects of our business, including financial performance, we made the difficult decision to shut down the site,� Shell spokesman Curtis Smith said in an emailed statement.

Refining margins have been down substantially since the pandemic started. The gasoline refining margin is currently at USD8.79 per barrel, below the threshold where most refiners can profit.

Once the shutdown is complete, Shell will continue to try to divest the refinery, the company said. It expects to sell all but six refineries and chemical plants globally and is considering closing facilities it cannot sell, the company told investors on its quarterly earnings call this week.

"We recognize the market is not great at the moment in terms of divesting assets ... if it"s not possible, we"ll consider closing and shutting down. That"s ultimately, the last option we"d like to pull," said chief financial officer Jessica Uhl.

The company said in 2019 it would structure its operations to match the future market for downstream products with a focus on its chemicals business.

In February, Shell sold its 156,400 bpd Martinez, California, refinery and logistics assets to PBF Energy for $960 million plus the price for oil and refined products on hand.

Shell said it will open a selective voluntary severance program to potentially create other roles for workers.

Convent"s closure adds to the almost 2 MMbpd of refinery capacity globally that has been permanently shuttered globally due to the coronavirus pandemic.

Another 1.4 MMbpd is temporarily out of commission or being converted in terminal and other facilities, US refiner Phillips 66 said on its third quarter earnings call earlier this week.

Late last month PBF Energy said it will shut most refining units at its Paulsboro, New Jersey, refinery.

Elsewhere, Canada�s Come-by-Chance plant in Newfoundland and Labrador has been idled since May. HollyFrontier shut down its Cheyenne, Wyoming, refinery, Marathon Petroleum began closing refineries in Martinez, California, and Gallup, New Mexico, while Calcasieu Refining idled its Lake Charles refinery in southwest Louisiana.

Phillips 66 announced plans to shut its plant in Arroyo Grande, California, in 2023 and plans to reconfigure its San Francisco Refinery to produce renewable fuels.

It is unusual for an oil company to sell a refinery that it has already idled, in part because the value of the asset is deemed to be lower if it is not operating.

North Atlantic Refinery Limited is actively trying to sell its Come-by-Chance refinery, after a deal with Irving Oil fell through last month for undisclosed reasons.

"Refineries aren"t light switches, they"re extremely expensive to shut and restart," said Zachary Rogers, senior oil analyst at Rapidan Energy Group.

"The fact it"s shutting down (for however long) underscores the weakness of refining economics as COVID persists," he added.

As MRC informed before, Royal Dutch Shell plc. said earlier this month that its petrochemical complex of several billion dollars in Western Pennsylvania is about 70% complete and in the process to enter service in the early 2020s. The plant�s costs are estimated to be USD6-USD10 billion, where ethane will be transformed into plastic feedstock. The facility is equipped to produce 1.5 million metric tons per year (mmty) of ethylene and 1.6 mmty of polyethylene (PE), two important constituents of plastics.

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

According to MRC"s ScanPlast report, Russia"s estimated PE consumption totalled 1,594,510 tonnes in the first nine months of 2020, up by 1% year on year. Only high denstiy polyethylene (HDPE) shipments increased. At the same time, PP shipments to the Russian market reached 880,130 tonnes in the nine months of 2020 (calculated using the formula: production minus exports plus imports, exluding producers" inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.

Royal Dutch Shell plc is an Anglo-Dutch multinational oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the biggest company in the world in terms of revenue and one of the six oil and gas "supermajors". Shell is vertically integrated and is active in every area of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading.
Author:Margaret Volkova
Tags:PP, PE, crude and gaz condensate, PP random copolymer, propylene, HDPE, ethylene, petrochemistry, Phillips 66, Shell, Russia, USA.
Category:General News
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