Cameron LNG To initiate commissioning of train one liquefaction-export project

MOSCOW (MRC) -- Sempra Energy today announced that Cameron LNG has initiated the commissioning process for the support facilities and first liquefaction train of Phase 1 of its Hackberry, La., liquefaction-export project, as per Hydrocarbonprocessing.

"All major construction activities have been completed to begin the commissioning and start-up process to produce LNG from the first liquefaction train," said Joseph A. Householder, president and chief operating officer of Sempra Energy. "This is a significant milestone for this landmark U.S. energy infrastructure facility – an important step forward in advancing our strategic vision to become North America's premier energy infrastructure company."

Phase 1 of the Cameron LNG liquefaction-export project, which includes the first three liquefaction trains, is a USD10 billion facility with a projected export capability of 12 million tonnes per annum (Mtpa) of LNG, or approximately 1.7 billion cubic feet per day. All three trains are expected to be producing LNG in 2019.

The commissioning process includes testing of all support systems, combustion turbines and compressors, as well as the delivery of feed gas from the transmission pipeline and production of the first LNG. Once all of the steps of the commissioning process are approved by the Federal Energy Regulatory Commission (FERC) and successfully completed for the first liquefaction train, LNG production will start up, and then ramp up to full production for delivery to global markets.

Cameron LNG is jointly owned by affiliates of Sempra LNG & Midstream, Total, Mitsui & Co., Ltd., and Japan LNG Investment, LLC, a company jointly owned by Mitsubishi Corporation and Nippon Yusen Kabushiki Kaisha (NYK). Sempra Energy indirectly owns 50.2 percent of Cameron LNG.

Sempra Energy's share of full run-rate earnings from the first three trains at Cameron LNG are projected to be between USD365 million and USD425 million annually.

Cameron LNG Phase 1 is one of five LNG export projects Sempra Energy is developing in North America. Cameron LNG Phase 2, previously authorized by FERC, encompasses up to two additional liquefaction trains and up to two additional LNG storage tanks. Sempra Energy's other LNG development projects include Port Arthur LNG, Energia Costa Azul (ECA) LNG Phase 1 and ECA LNG Phase 2.

Sempra Energy, a San Diego-based energy services holding company with 2017 revenues of more than USD11 billion, is the utility holding company with the largest U.S. customer base. The Sempra Energy companies' approximately 20,000 employees serve more than 40 million consumers worldwide.

SK Innovation expects favorable market conditions in 4Q on solid demand

MOSCOW (MRC) - SK Innovation, owner of South Korea's top refiner SK Energy, said on Friday that market conditions are expected to be "favourable" in the fourth quarter on the back of firm demand, Reuters.

Middle distillates such as diesel are expected to support overall demand for the fourth quarter, the company said in an earnings statement. A week ago, S-Oil, South Korea's third-biggest refiner, said seasonal demand for heating and tight regional supply were expected to help boost refining margins in the fourth quarter.

Oil refining margins have been volatile, with fuel oil and gasoil cracks soaring on tightening supply and higher demand for low-sulphur gasoil ahead of the implementation of stricter marine fuel regulation by the International Maritime Organization (IMO). By contrast, a supply glut has weakened gasoline cracks.

"Current weakness in gasoline cracks is due to increased export volumes from China and impact of non-peak season ... but further falls are expected to be limited," Kang Dong-soo, head of corporate planning office at SK Energy, said in a call with analysts.

Demand from India and China, as well as lower inventories, is expected to keep gasoil cracks firm, he said. SK Innovation's July-September operating profit fell 12.7 percent to 836 billion won (USD741 million) due to a weaker Korean won and lower inventory-related gains, down from 958 billion won a year earlier, the statement said.

The company announced last year it would build a 40,000 barrels per day (bpd) Vacuum Residue Desulfurisation (VRDS) by 2020 in a bid to produce clear fuels ahead of tougher IMO sulphur regulations from 2020.

Kang said construction of the unit was 27 percent complete, and it was expected to generate an annual operating profit of up to 300 billion won once it comes online.

SK Innovation, which has a total refining capacity of 1.115 million barrels per day (bpd) in Ulsan and Incheon, ran at 92 percent capacity on average in the second quarter, slightly down from 94 percent during the same period a year earlier, the statement said.

Planned 4Q 2018 refinery outages not expected to constrain fuel availability

MOSCOW (MRC) -- The U.S. Energy Information Administration’s (EIA) latest analysis of planned refinery outages for the fourth quarter of 2018 finds that planned outages in the United States are not likely to cause a shortfall in the supply of petroleum products—including gasoline, jet fuel, and distillate fuel—relative to expected demand, either nationally or within any U.S. region, said Hydrocarbonprocessing.

EIA has reached this conclusion despite the current high level of U.S. gasoline demand, which so far in 2018 has been close to the record high seen in 2017.

EIA’s national and regional conclusions are the result of simulating regional monthly supply based on assumptions about refinery operations. The report considers planned shutdowns of refinery units as reported by Industrial Info Resources (IIR) and provides EIA's analysis of the implications of outages affecting ACDU, FCCU, CRU, HU, and CU.

Regional supply and demand balances are more valuable than U.S. national balances because pipeline infrastructure, geography, and marine shipping regulations constrain the amount of product that can flow between regions in the United States. Barring unusually high unplanned outages, planned outages that extend beyond schedule, or higher-than-expected demand, the supply of gasoline, jet fuel, and distillate fuel will be adequate in all regions through December.

Planned refinery maintenance in the East Coast will be moderate in the fourth quarter of 2018, except for outages as a result of maintenance on hydrocracking capacities in October, which will exceed 50% of regional capacity. In October, planned maintenance for crude distillation capacity will reach a peak average of 243,000 barrels per day (b/d), or 19% of regional capacity. Production losses associated with planned maintenance could be offset by movements from other regions, by imports, and by drawing down inventories.

Planned outages in the Midwest in the fourth quarter of 2018 will be moderate, except for crude distillation and coking capacities in October and reforming capacity in October and November, which are close to or exceed the previous 10-year maximum. Nevertheless, EIA expects supply of petroleum products to be adequate to meet domestic demand in the Midwest during the fourth quarter. Production losses from planned outages in October and November will average 235,000 b/d and 107,000 b/d in gasoline, 49,000 b/d and 24,000 b/d in jet fuel, and 164,000 b/d and 48,000 b/d in distillate fuel, respectively.

Planned outages in the Gulf Coast in the fourth quarter will be light, and regional inventories appear to be sufficient to offset lost production from those planned outages. More than half of the refining capacity in the United States is located in the Gulf Coast region, and as a result, the region produces far more petroleum products than it consumes. The Gulf Coast’s surplus production supplies other U.S. regions, mainly the East Coast and the Midwest, as well as international markets. EIA’s calculations indicate that planned refinery outages in the Gulf Coast will result in light production losses in petroleum products. Planned outages will result in production losses of 96,000 b/d in gasoline and 99,000 b/d in distillate fuel in October. For the fourth quarter, total estimated production loss as a result of the planned outages accounts for 4.3% of existing gasoline inventory, 2.2% of jet fuel inventory, and 8.4% of distillate inventory as of the week ending August 31, 2018. Regional inventories will likely be sufficient to account for lost in-region production.

Shell Canada sees cost advantage in LNG Canada expansion

MOSCOW (MRC) - An expansion of LNG Canada has a cost advantage over its rivals in the race to build more liquefied natural gas export capacity, but a go-ahead decision on phase two is likely still a few years away, Shell Canada's president said, as per Reuters.

The first phase of the C41 billion (USD31.3 billion) Royal Dutch Shell-led project was given the go-ahead last month, firing up a race among companies eager to be the next to tap into booming Asian demand for the gas that is supercooled into liquid form for export by tanker.

"What's in our favor now is expansions are typically lower capital cost," Michael Crothers, Shell Canada President, told the Reuters Global Commodities Summit. "I think that opens up an even more competitive opportunity for us and the partners."

That expansion cost saving adds onto the project's other advantages, including a relatively short shipping distance to key Asian markets and cheap feed gas. The question of when the second phase, which would double output at the 14 million tonne per annum (mtpa) plant to 28 mtpa, will be approved remains unclear, Crothers said.

"I'm sure Shell leadership would like to see demonstrated performance before we start to consider this too closely. So that's still probably a few years away," he said.

He added an LNG Canada expansion would have to compete with global rivals, including options in the U.S., Africa and Middle East, and would depend on the market for the fuel - though all signs point to sustained Asian demand.

LNG demand has risen sharply in recent years, led by China, gobbling up an anticipated surplus and fanning fears of a shortage by mid-next decade. This has projects around the world scrambling to secure the long-term deals they need to finance multi-billion dollar builds.

LNG Canada is a joint venture between Shell, Malaysia's Petronas, PetroChina Co Ltd, Mitsubishi Corp and Korea Gas Corp.

Big oil traders set to cash in on shipping fuel overhaul

MOSCOW (MRC) - The world's biggest oil traders are gearing up to cash in on big disruptions that could hit the shipping fuel market in just over a year due to new U.N.-mandated environmental rules, Reuters.

International Maritime Organization (IMO) regulations will cut the limit for sulphur in marine fuels globally from 3.5 percent to 0.5 percent from the start of 2020.

"We're going to hopefully facilitate the new rules in 2020 by helping out the industry and the participants in general to have a reasonably smooth transition," Marco Dunand, the chief executive of trading house Mercuria, told the Reuters Global Commodities Summit.

He said Mercuria was in talks to finance shipowners who want to install expensive sulphur cleaning kits called scrubbers, allowing them to burn cheaper high sulphur fuel. He declined to name those clients. The company is offering a package that would include providing compliant fuels via its subsidiary Minerva as well as fuel-price hedging.

Traders are widely expected to benefit as they thrive off efficiently moving products between regions with price dislocations. But the market currently lacks a benchmark for the new compliant fuel grade.

"There are legitimate concerns about this product being available in multiple locations," Vitol Group Chief Executive Russell Hardy told the summit. He added that planning for the changes in the absence of a futures market was complicating matters. "It's doable but we would like a bit of transparency," he said.

While S&P Global Platts, the agency that publishes benchmark physical fuel oil price assessments, plans to launch a set of new 0.5 percent sulphur prices starting in January, a paper market does not yet exist. "I think it will be a bit chaotic in the beginning of 2020 ... (but) we don't think it's going to be extremely disruptive," Gunvor CEO Torbjorn Tornqvist told the summit.

Other winners from the changes will be complex refineries that have invested in the right kit to turn high-sulphur products into low-sulphur, or sweet, ones. This leaves simple refiners that can't easily clean sulphur from petroleum products at a risk of losing out.