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Power outages disrupt Midcontinent and Gulf Coast petroleum markets

March 05/2021

MOSCOW (MRC) -- Beginning February 13, 2021, a major winter weather system characterized by extreme cold spread across much of the central United States, disrupting energy systems and causing serious health and safety issues Hydrocarbonprocessing.

The extreme weather particularly affected Texas, where utility customers experienced widespread outages and rolling blackouts. The severe weather persisted through much of the week, putting significant pressure on the petroleum complex along the U.S. Gulf Coast, where the infrastructure has rarely needed to accommodate sub-zero temperatures, as well as some states in the Midcontinent. Several Texas refineries accounting for a significant share of total U.S. refining capacity fully or partially shut down, numerous inland crude oil wells closed, and oil pipeline infrastructure was disrupted. The extreme cold also affected petroleum product pipelines; production and refinery operations in the Midwest and inland regions of Texas; and briefly disrupted maritime traffic along the Houston Ship Channel, a crucial waterway for crude oil and petroleum product trade flows.

Although most of the extreme weather appears to have passed, ongoing low temperatures are expected to continue through the week of February 22, according to updates from the U.S. Department of Energys Office of Cybersecurity, Energy Security, and Emergency Response. The recovery timeline for affected market participants remains unclear. Reported infrastructure damages potentially indicate that operations could take multiple weeks before returning to normal in several instances.

The Gulf Coast, which EIA tracks as the Petroleum Administration for Defense District (PADD) 3, accounts for more than half of total U.S. refinery capacity, and Texas alone accounts for 5.9 million barrels per day (b/d) of capacity, or about 32% of total U.S. capacity. Weather-related disruptions occurred primarily at several refineries in the Texas Gulf Coast refining region within PADD 3. By the peak of the weathers impact on February 17, several refineries had announced either substantial or complete shutdowns as a result of external power outages, constrained natural gas supplies, logistical disruptions, or damage to process units because of the weeks cold temperatures and extreme weather. Other refineries in the area that were not forced to shut down capacity still faced similar complications and reduced run rates. In total, according to trade press and company announcements, an estimated 3.7 million b/d, or 20% of total U.S. refining capacity, was shut in as a result of the weather. As much as 5.7 million b/d (31% of total U.S. refining capacity) was affected by the weather to some degree, either as shutdowns or continued operations, but with reduced utilization. Most of the disruptions and shutdowns were announced on or about February 15 among refiners in the Beaumont/Port Arthur, Houston, and Corpus Christi regions of Texas, although refinery issues extend across several states.

Based on the U.S. Energy Information Administrations (EIA) Weekly Petroleum Status Report (WPSR), gross inputs of crude oil and other feedstock to U.S. refineries declined 2.7 million b/d (17.5%) to 12.6 million b/d for the week ending February 19, 2021. The shutdowns resulted in a weekly decline in the gross inputs to Gulf Coast refineries of 2.4 million b/d (27.5%) to 6.3 million b/d, the largest weekly decline since the impact of Hurricane Harvey in September 2017 (Figure 1). The closures will likely continue to affect petroleum markets in the coming weeks, reducing demand for crude oil and production of refined products such as motor gasoline and distillate fuel oil.

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.

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 Uzbekneftegazs 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 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (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.
Author:Anna Larionova
Tags:petroleum products, PP, PE, neftegaz, petrochemistry.
Category:General News
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