Nigeria to shut down its oil refineries in upgrade effort

MOSCOW (MRC) -- Nigeria has decided to shut down all its oil refineries as it works to secure funding and a model to upgrade them, reported Reuters with reference to the head of Nigerian National Petroleum Corporation's (NNPC) statement.

The three refinery sites in Africa’s largest oil exporter have worked only sporadically due to years of underinvestment. It has been working to revamp them, but has struggled to find external financing to do so.

“Today, after proper scoping, which was not done in the past, we know exactly what to do to get them back on stream,” NNPC head Mele Kyari said.

Nigeria, Africa’s largest oil exporter, is scrambling to cut nearly USD5 billion from its budget amid an oil price crash brought on as coronavirus lockdowns slashed global demand and a market-share battle between Russia and Saudi Arabia flooded the world with oil. This week it also sought nearly USD7 billion from international lenders.

In statements posted on Twitter, Kyari said the oil industry will look to cut costs and extend payments wherever possible to survive oil prices that hit 18-year lows late last month.

Running Nigeria’s refineries is costly, as they are decades old and poorly maintained, and even world-class refineries are cutting output due to falling fuel prices.

While Kyari said they had secured funding without providing details, several previous deals - including with oil traders - to fund repairs have fallen through, and a source close to the discussions told Reuters other funding had yet to be confirmed.

Kyari said NNPC was pursuing “a different model” for the refineries, including the type used by Nigeria LNG, which is run by international companies such as Shell, Total and Eni alongside NNPC.

Price caps have forced NNPC to import nearly all the gasoline the nation comsumes. While Kyari also said Nigeria had eliminated subsidies, experts said that the retention of price caps meant the government could incur costs again when international fuel prices rebound.

Kyari also expressed optimism that a meeting this week between OPEC and other producers could yield a fresh deal to shore up oil prices. The group is due to hold a video conference on Thursday at 1400 GMT.

“We believe the ongoing engagements between global oil producers will bring back demand and once that happens, the market will balance and fully recover by year-end,” he said.

As MRC wrote before, Shell said Monday it will not move ahead with its planned equity interested in the Lake Charles LNG project in Louisiana, citing difficult market conditions, and that its partner, Energy Transfer, would instead take over as the project's developer.

As MRC informed earlier, Shell Singapore restarted its naphtha cracker in Bukom Island in early December 2019, following a two months maintenance shutdown since the beginning of October 2019. Thus, this cracker was taken off-stream for the turnaround on 1 October 2019. The cracker is able to produce 960,000 tons/year of ethylene and 550,000 tons/year of propylene.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 215,390 tonnes in the first month of 2020, up by 23% year on year. Shipments of all grades of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) increased due to higher capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 127,240 tonnes in January 2020, up by 33% year on year. ZapSibNeftekhim's homopolymer PP accounted for the main increase in shipments.
MRC

MOSCOW (MRC) -- Asia Pacific oil refineries are finding that processing cuts are not keeping pace with sharp drops in fuel margins, which hit record lows this month, caused by the demand decline from the economic dislocations of the coronavirus outbreak, said Hydrocarbonprocessing.

Analysts at Wood Mackenzie, JBC Energy, Energy Aspects, Rystad Energy, IHS Markit and FGE estimate that Asian refineries will cut their processing by between 2 million to 4 million barrels per day (bpd) in April. For the whole of the second quarter, the cuts will average between 2 million to 2.7 million bpd, the analysts said.

“While refineries scramble to cut runs to catch up with the massive demand losses, product oversupply will continue in the near future as there’s just been too big of a demand loss,” said Sandra Octavia, analyst at Energy Aspects.

The Asian cuts are occurring amid a global oil demand contraction as lockdowns to limit the coronavirus spread wreak havoc on gasoline, diesel and jet fuel consumption.

“We estimate that total product demand is globally down by 22.5 million barrels per day (bpd) year-on-year for April, while refiners have cut runs by 14.1 million bpd year-on-year,” said Paola Rodriguez-Masiu, senior oil analyst at Rystad Energy.

Indonesia and Australia, the biggest fuel importers in the Asia Pacific, are reducing their intake in April and planning run cuts at their refineries. At the same time, India, the world’s third-largest crude importer, has ramped up fuel exports despite poor margins and deepened refinery run cuts to cope with a fuel supply surge.

Australia’s gasoline and diesel imports in April could fall by as much as 150,000 bpd from a year earlier, IHS Markit analyst Matthew Chew said.

Japan’s fuel demand is also set to fall further as its government widened measures this week to prevent coronavirus from spreading. Refiner’s efforts to cut their yield of jet fuel and gasoline, both of which have negative profit margins with gasoline at a record low, has caused diesel output to surge, causing the 10ppm gasoil crack to slump.

Margins for 0.5% sulphur fuel oil used in shipping hit record lows last week. “The steep deterioration in demand we expect to happen in the West in April and May will also have a big impact on product pricing in Asia and put additional pressure on the region’s margins,” said Neil Crosby, lead refining analyst at JBC Energy.

Unless deeper production cuts take place, refining margins will continue to sink as refiners dump excess fuel in global markets, with more ships needed to store oil as onshore storage tanks have all been booked, the analysts said.

More than 12 tankers were booked in late March to store refined products off Europe, sending freight rates soaring.

As MRC informed earlier, the coronavirus disease 2019 (COVID-19) pandemic and the crude oil crash are interacting in complex ways to transform the propylene market. The lower cost to produce propylene will not translate directly into greater availability. With populations around the world ordered to limit travel in order to contain the pandemic, fuel demand is way down, and crude oil refining - the cheapest source of propylene - is under pressure to cut back operations.

Propylene is the main feedstock for the production of polypropylene (PP).

According to MRC's ScanPlast report, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.
MRC

MOSCOW (MRC) -- As people around the world continue to make major adjustments and tough decisions related to the COVID-19 crisis, GPA Midstream Association, GPSA, and their member companies are tirelessly working to ensure that midstream employees are taking appropriate precautions and following strict COVID-19 protocols so that midstream operations, considered critical infrastructure by the Department of Homeland Security, are not interrupted, said Hydrocarbonprocessing.

"Companies in energy's midstream sector transform raw natural gas into valuable products that other industries can use, and that goes well beyond natural gas that people use in their homes and businesses for energy," said GPA Midstream President and CEO Joel Moxley. "Several components of health care and hygiene products wouldn't exist without natural gas and natural gas liquids, so we're all stepping up to ensure that midstream can help meet those and many other critical needs during this global pandemic.

"GPA Midstream is actively working and coordinating with our federal agency and state agency partners to ensure our members are aware of the latest guidance and statements regarding activities surrounding the coronavirus. Both associations and our members will continue to follow the guidance of the Centers for Disease Control and Prevention to ensure our employees remain safe and our operations remain reliable."

As mRC informed earlier, the coronavirus disease 2019 (COVID-19) pandemic and the crude oil crash are interacting in complex ways to transform the propylene market. The sharp decline in crude oil pricing has lowered the cost of propylene feedstocks and flattened the production cost curve, he says. Indeed, naphtha cash costs have fallen low enough to be favored over liquefied petroleum gas (LPG).

Propylene is the main feedstock for the production of polypropylene (PP).

According to MRC's ScanPlast report, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.
MRC

MOSCOW (MRC) - Royal Dutch Shell said on Wednesday it would start large-scale maintenance of its Pernis refinery in the Netherlands in mid-April, more than two weeks earlier than previously planned, reported Reuters.

The maintenance would mean the 404,000 barrel per day refinery, Europe’s largest, would be shut temporarily, it said.

The previous maintenance plan involved starting on May 4 and was expected to last through May and June.

Shell said it would be taking precautionary measures during the turnaround like working in small teams and keeping a safe distance between workers to prevent the spread of the new coronavirus.

It also said it had been able to almost halve the number of employees on site.

As MRC informed earlier, Shell Singapore restarted its naphtha cracker in Bukom Island in early December 2019, following a two months maintenance shutdown since the beginning of October 2019. Thus, this cracker was taken off-stream for the turnaround on 1 October 2019. The cracker is able to produce 960,000 tons/year of ethylene and 550,000 tons/year of propylene.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 215,390 tonnes in the first month of 2020, up by 23% year on year. Shipments of all grades of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) increased due to higher capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 127,240 tonnes in January 2020, up by 33% year on year. ZapSibNeftekhim's homopolymer PP accounted for the main increase in shipments.
MRC

MOSCOW (MRC) -- ExxonMobil Corp’s Baton Rouge, Louisiana, refinery is operating at two-thirds of its 502,500-barrel-per-day capacity because of demand destruction from the coronavirus pandemic, said sources familiar with plant operations, said Reuters.

The refinery’s two 110,000-bpd gasoline-producing fluidic catalytic crackers are operating and the refinery’s 23,000-bpd hydrocracker is undergoing maintenance that can be performed while the unit is operational.

Exxon spokesman Jeremy Eikenberry declined comment. Exxon shut the 80,000-bpd PSLA-7 crude distillation unit (CDU) at the Baton Rouge refinery on March 30.

PSLA-7 is one of four CDUs at the refinery doing the primary breakdown of crude oil into hydrocarbon feedstocks for all other production units. One of the other CDUs at the Baton Rouge plant is the same size as PSLA-7, and two have larger crude processing capacities.

As MRC informed before, in September 2019, ExxonMobil announced plans to spend GBP140 million over the next two years in an additional investment program at its Fife ethylene plant, which has a capacity of more than 800,000 t/y.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).

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