MOSCOW (MRC) -- Saudi Arabia’s sweltering summer may complicate the kingdom’s pledge to deepen oil production cuts, said Hydrocarbonprocessing.
Curbing crude output means lower production of associated gas, a byproduct of crude extraction, which Saudi Arabia uses to power air conditioners during the summer months and as feedstock for its petrochemical industry.
While industry sources do not question Saudi Arabia’s ability to deliver on the cuts and note that opening and shutting oil wells is technically easier for OPEC’s biggest producer than in other parts of the world, balancing the supply and demand of gas for the residential sector and industry is a delicate process.
OPEC and allies led by Russia, a group known as OPEC+, agreed last month to reduce output by about 9.7 million barrels per day (bpd) in May and June, a record cut aimed at shoring up sliding prices as coronavirus-related lockdowns crippled the global economy and demand for oil tanked.
In a further step, Saudi Arabia, Kuwait and the United Arab Emirates pledged this week to deepen their cuts by an extra 1.180 million bpd in June.
Because Saudi oilfields pumping lighter crude tend to produce more associated gas than fields with heavier and sour grades, where the cost of production is also higher, the Kingdom’s oil output will likely drift more towards these lighter quality grades, analysts and experts say, potentially worsening the current global glut of such barrels.
“The shutting down of (some) fields is not easy because of the gas,” said one Gulf oil industry source. “But we can reduce production capacity rates at some fields or bring forward field maintenance to reduce output.”
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