Saudi Arabian oil exports to drop in May as demand slides

MOSCOW (MRC) -- Saudi Arabia’s crude oil exports in May are expected to drop to about 6 million barrels per day (bpd), the lowest in almost a decade, and domestic refining output is likely to fall as the coronavirus crisis hits demand, reported Reuters with reference to industry sources and analysts.

The world’s top oil exporter will cut crude production by 23% to about 8.5 million bpd in May and June, under a supply reduction pact with OPEC+ alliance to shore up prices hammered by demand destruction due to the coronavirus-related lockdowns.

Saudi crude oil exports for May are expected to be about 6 million bpd, industry sources said, with Asia taking about 4 million bpd. Exports to the United States are seen at less than 600,000 bpd, one source said.

Falling oil output means lower production of associated gas, a byproduct when extracting crude. Gas is used as a feedstock in the petrochemical industry and for power generation.

Saudi Arabia has increasingly sought to generate more power from gas to save crude for exports.

But lower global oil demand means more cheap crude available for domestic use, which could mean burning more oil this summer when power demand soars with the use of air-conditioners.

In 2019, when Saudi Arabia was producing about 9.9 million bpd, it burnt 550,000 bpd of crude in the summer, falling from 700,000 bpd in previous years. But industry sources now expect usage to rise slightly above 2019’s levels.

Broadly, domestic demand for oil and its products was expected to be weaker.

"Overall demand in the kingdom is going to be very weak ... because of COVID-19 and we are going to see lower industrial demand," said Amrita Sen, co-founder of the Energy Aspects consultancy, adding that low oil prices and budget cuts would drive the Saudi economy into recession.

Saudi refineries, which usually process about 2.4 million bpd of crude, were likely to use less as product demand falls.

Under OPEC+ cuts, Saudi Arabia would likely prioritise output of light oil over heavy oil, said Sadad al-Husseini, an energy consultant and former senior executive at Saudi Aramco.

He said this was because light oil fields tended to produce more associated gas and heavy oil was usually more costly to extract as it tended to come from offshore.

"We should see steady Arab Light, Arab Extra Light, and some Arab Medium supplies making up most of (Saudi) production," he said.

This could increase the global glut of lighter oil, which is produced in abundance by US shale firms.

As MRC wrote before, Saudi Aramco’s plan to buy USD15-billion stake in Reliance Industries hydrocarbon business may not go through due to the rising risk of collapsing oil prices, US-based brokerage Bernstein has warned.

Apart from Reliances oil to chemicals business, Aramco also agreed last year to buy the controlling stake in SABIC from the kingdom’s wealth fund for USD69.1bn, sealing one of the biggest-ever deals in the global chemical industry.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.

Saudi Aramco is an integrated oil and chemicals company, a global leader in hydrocarbon production, refining processes and distribution, as well as one of the largest global oil exporters. It manages proven reserves of crude oil and condensate estimated at 261.1bn barrels, and produces 9.54 million bbl daily. Headquartered in Dhahran, Saudi Arabia, the company employs over 61,000 staff in 77 countries.
MRC

Bulgaria seeks to boost tax controls over Lukoil Bulgarian unit

MOSCOW (MRC) -- ulgaria’s parliament backed bolstering tax controls over the country’s biggest fuels seller, owned by Russia’s Lukoil, as the government looks to boost revenue depleted by the state of emergency over coronavirus, said Reuters.

Under the changes, expected to be finally approved next Tuesday, Lukoil Bulgaria will have one month to apply to register as separate tax entities its six fuel depots along with a 400-km long fuel pipeline that runs from the LUKOIL Neftochim Burgas oil refinery across the country.

Finance Minister Vladislav Goranov said the changes were needed to improve transparency and proper collection of excise duties from fuel sales in times when the state finances are strained from the coronavirus crisis.

Lukoil Bulgaria, which controls the major fuel depots and has over 220 petrol stations, said it might be forced to halt operations as it would not have enough time to comply.

The customs office considers the six depots and the pipeline as one tax fuel depot at present.

The company’s current licence will be revoked if it fails to apply for new separate licences within a month and will have until the end of November at the latest to bring the new separate tax fuel depots up to customs office standards.

“In these times, when the budget is under pressure because of the crisis from the pandemic, we have to be as diligent as possible to collect what is due,” Goranov told reporters.

“It is virtually impossible for the customs officers to ensure reliable controls on a pipeline that can contain 27 million litres of fuels - which is the whole country’s consumption for several days - and which is linked with several fuel depots,” he said.

Lukoil Bulgaria said in a statement it would not have enough time to install costly metering equipment and software and that it has always been a diligent taxpayer.

In July 2011, the customs office stripped LUKOIL Neftochim Burgas oil refinery of key operational licences for its failure to install on time product metering needed to enable officials to monitor production and calculate precisely due taxes.

The refinery appealed the decision and had its licences restored in early 2012 after installing proper metering and reaching an out-of-court agreement with the customs office.

As MRC informed previously, Stavrolen (part of Lukoil), Russia's major polyolefins producer, resumed its polypropylene (PP) production in Budennovsk after a long scheduled turnaround. The plant's customers said Stavrolen had fully resumed its PP production after the long scheduled maintenance by 15 October 2019. The outage began on 6 September. The start-up of the plant"s high density polyethylene (HDPE) production took place with a week delay.

According to MRC's ScanPlast report, estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, 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.

Lukoil is one of the leading vertically integrated oil company in Russia. The main activities of the company include operations for exploration and production of oil and gas, production and sale of petroleum products. Lukoil is the second largest private oil Company worldwide by proven hydrocarbon reserves. Lukoil's structure includes one of the largest Russian petrochemical plant - Stavrolen.
MRC

Mexico gives oil firms more time to get permits due to coronavirus

MOSCOW (MRC) -- Mexico’s oil regulator will extend the time companies have to secure needed permits and plan approvals through the end of this month because of the coronavirus pandemic, it said in a statement, reported Reuters.

Deadlines will be suspended until at least May 31, according to the regulator known as the National Hydrocarbons Commission.

Since last month, the commission’s governing body has been holding virtual sessions in an effort to prevent project delays.

As MRC informed earlier, Mexico’s state oil company Petroleos Mexicanos increased crude production to 1.745 million barrels per day (bpd) in March while processing more at its domestic refineries, according to official data seen by Reuters. Mexico agreed to a 100,000-bpd output cut as part of an initiative by the OPEC+ group to push up plummeting oil prices by withdrawing barrels from an oversupplied market. The cuts will be put in place this month. Mexico’s energy minister, Rocio Nahle, said the nation would cut output only during May and June.

We also remind that in 2016, Pemex shut its steam cracker at its Cangrejera complex for maintenance on February 15. The cracker was idle for about 14 days. The conducted repairs at the cracker were a part of planned maintenance.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, 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.

Pemex, Mexican Petroleum, is a Mexican state-owned petroleum company. Pemex has a total asset worth of USD415.75 billion, and is the world's second largest non-publicly listed company by total market value, and Latin America's second largest enterprise by annual revenue as of 2009. Company produces such polymers, as polyethylene (PE), polypropylene (PP), polystyrene (PS).
MRC

Westlake Chemical Q1 earnings up

MOSCOW (MRC) --Westlake Chemical Corporation’s first-quarter sales fell by nearly 5%, year on year on the back of lower selling prices, said the company.

Net profit, however, doubled on the back of a tax benefit related to the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed in March to alleviate the coronavirus pandemic aftermath, while earnings before interest, tax, depreciation and amortisation (EBITDA) rose.

Net income rocketed due to a tax rate benefit of USD62m from the carry-back of federal net operating losses, as permitted under the CARES Act enacted in March 2020.

The firm’s olefins division posted income from operations of USD62m, up from USD37m in Q1 2019, due to higher polyethylene (PE) sales and lower feedstock costs.

In its vinyls division, income from operations fell to USD73m, down from USD101m a year earlier, due to lower sales for caustic soda and polyvinyl chloride (PVC) due to the global slowdown caused by the coronavirus pandemic.

In February 2018, as MRC informed before, Westlake Chemical announced plans to expand its capacities for the production of PVC and VCM at three of its chemical facilities. Two of the plants are located in Germany (Burghausen, Gendorf) and one is located in Geismar, Louisiana. The expansions in Burghausen and Geismar are expected to be completed in 2019. The Gendorf expansions are expected to be completed in 2020 and 2021.

Ethylene and propylene are feedstocks for producing PE and PP.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, 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.

Westlake Chemical Corporation is an international manufacturer and supplier of petrochemicals, polymers and building products with headquarters in Houston, Texas. The company's range of products includes: ethylene, polyethylene, styrene, propylene, chlor-alkali and derivative products, PVC suspension and specialty resins, PVC Compounds, and PVC building products including siding, pipe, fittings and specialty components, windows, fence, deck and film.
MRC

CVR Energy to explore converting refining units for renewable diesel production

MOSCOW (MRC) -- CVR Energy Inc is looking to convert certain units in its refineries to renewable diesel production to reduce its exposure to the cost of renewable fuel credits (RINs), the company said, as per Hydrocarbonprocessing.

The project, which would involve using excess hydrogen capacity and converting some desulfurization units for renewable diesel production, is still in its early stages, the refiner’s chief executive said on its first quarter earnings call.

“The fact of the matter is we have existing assets and excess hydrogen,” said David Lamp, president and CEO of CVR. CVR Energy’s RINs expense in the first quarter of 2020 was USD19 million compared with USD13 million in the same period last year.

The company now estimates that its RINs expense will be approximately USD65 million to USD75 million in 2020. "We continue to try to mitigate our RIN exposure, which is still way too high,” said Lamp.

The refiner reported a net loss of USD87 million, or 87 cents per diluted share, for the first quarter of 2020, compared with a net income of USD101 million in the prior year period. Under the Renewable Fuel Standard, refineries must blend billions of gallons of ethanol into their gasoline each year or buy credits from those that do.

The 10th U.S. Circuit Court of Appeals ruled in January that Environmental Protection Agency exemptions for small refineries can only be used as extensions for refineries that had secured them continuously each year since 2010.

Oil refiners HollyFrontier Corp and CVR Energy, both of which had received waivers the court considered inappropriate, had sought a rehearing in the case but were denied in April.

Ethylene and propylene are feedstocks for producing PE and PP.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, 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