Upstream oil output slumps 7% in Q1 on COVID-19, technical issues

MOSCOW (MRC) -- UK oil production slumped by almost 7% on the year to 1.103 million b/d in the first quarter due to COVID-19 disruption as well as technical issues, said S&P Global.

The Q1 data from the Department for Business, Energy and Industrial Strategy (BEIS) showed crude oil production was down 6% on the year at 1.01 million b/d, while natural gas liquids output fell 14% to 93,000 b/d.

In March, the UK oil and gas industry moved to a minimal staffing regime at offshore facilities to protect workers' health, likely resulting in operators moderating production levels, although activity levels are now thought to be increasing.

Disruption in the North Sea oil industry is likely to have continued into the current quarter, although output may be supported by the cancellation of swaths of summer maintenance, both for health and cost-cutting reasons. The industry has also gradually adopted new testing regimes and work protocols to enable higher staffing levels.

The International Energy Agency this month forecast UK oil output would fall by 30,000 b/d this year, with the recent crash in oil prices likely to have a longer-term impact on production levels due to reduced investment in new production projects.

The majority of UK oil output is usually exported, with producers finding higher prices in Asia for grades such as Forties, generally the largest component in the Dated Brent benchmark.

UK consumption of indigenously produced crude and NGLs jumped by 37% on the year to 2.74 million mt, while total feedstock intake by UK refineries fell 6% to 14.21 million mt, BEIS said.

As MRC informed before, global oil consumption cut by up to a third in Q1 2020. What happens next in the oil market depends on how quickly and completely the global economy emerges from lockdown, and whether the recessionary hit lingers through the rest of this year and into 2021.

Earlier this year, BP said the deadly coronavirus outbreak could cut global oil demand growth by 40 per cent in 2020, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.

We remind that in September 2019, six world's major petrochemical companies in Flanders, Belgium, North Rhine-Westphalia, Germany, and the Netherlands (Trilateral Region) announced the creation of a consortium to jointly investigate how naphtha or gas steam crackers could be operated using renewable electricity instead of fossil fuels. The Cracker of the Future consortium, which includes BASF, Borealis, BP, LyondellBasell, SABIC and Total, aims to produce base chemicals while also significantly reducing carbon emissions. The companies agreed to invest in R&D and knowledge sharing as they assess the possibility of transitioning their base chemical production to renewable electricity.

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

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC

MOSCOW (MRC) -- Chemical railcar traffic in North America remains weak, said Chemweek.

Volume totaled 40,616 carloads during the week ended 23 May, down 1.9% from the previous week and down 15.8% year over year (YOY), according to data released by the Association of American Railroads (AAR).

On a four-week basis, volume declined 12.8% from 2019 and 11.8% from 2018 (chart), only slightly down from the respective 12.2% and 11.6% declines of the week ended 16 May. For the year to date, chemical railcar traffic in North America declined 3.1% from 2019 and 4.1% from 2018, deepening the deficits of 2.4% and 3.6% recorded during the previous week.

Chemical railcar traffic in the United States contributed 28,531 carloads to the total, down 14.4% YOY and up 0.5% from the previous week. For the year to date, US chemical railcar traffic is down 3.0%. Canadian chemical rail traffic totaled 11,138 carloads, down 20.7% YOY and down 8.7% from the previous week. For the year to date, Canadian chemical railcar traffic is down 3.3%.

Chemical railcar traffic in Mexico totaled 947 carloads, a YOY increase of 7.6% and a sequential increase of 14.4%. For the year to date, Mexican chemical railcar traffic is down 3.9%.

As MRC informed earlier, Chemical railcar traffic in North America showed some firming last week. Volume remained significantly down year-over-year (YOY), but the deficit did not deepen. On a four-week basis, volume declined 12% from 2019 and 11.3% from 2018 (chart), improving slightly from the 12.8% and 11.8% declines of the previous week.

As MRC informed earlier, Russia's output of products from polymers grew in April 2020 by 11.2% year on year due to quarantine restrictions. However, this figure increased by 3.4% year on year in the first four months of 2020. According to the Russian Federal State Statistics Service, April production of unreinforced and non-combined films decreased to 107,000 tonnes from 110,400 tonnes a month earlier. Output of films products grew in the first four months of 2020 by 12.5% year on year to 402,800 tonnes.
MRC

MOSCOW (MRC) -- The British Plastics Federation (BPF) has launched an online portal to help organisations across the UK locate suppliers in response to the coronavirus outbreak, said Britishplastics.

Companies who provide products vital to the UK’s response to Covid-19 are listed in one place, including those who can provide visors, ventilator parts, aprons, hand sanitiser bottles, clinical waste sacks and other key supplies. The BPF has been contacted by over 100 different organisations, including UK, Scottish and Welsh Governments, the NHS, and organisations across the country, to help source suppliers who can provide critical supplies for frontline NHS workers as well as staff in other key sectors, such as manufacturing.

These requests have predominantly been for Personal Protective Equipment (PPE), but include other items key in the fight against coronavirus such as bottles and closures for hand sanitiser. In response, the team at the BPF has been concentrating on helping to locate manufacturers and suppliers across the country in a coordinated attempt to protect the UK public.

As part of this effort, the BPF has helped play a role in ensuring millions of face shields, millions of hand sanitiser bottles, and hundreds of thousands of other urgent medical supplies have been provided to hospitals across England, Scotland and Wales.

Director General of the BPF, Philip Law, commented: “The BPF and its members have risen to the challenge faced by the NHS and industries across the country. “Member companies have stepped up to transform and expand their manufacturing operations, working longer and harder to ensure we can provide the protective equipment and medical supplies the UK needs.

“We are also working closely with the government to access the specialist manufacturing equipment that is urgently needed." Law added that the BPF has been working alongside a number of Government departments, including the Cabinet Office, the Department for Business, Energy, and Industrial Strategy, the Department for International Trade, and the Department of Health and Social Care to provide information and feedback during the crisis.

As MRC informed earlier, an estimated 11 million metric tons (MMt) of plastic waste enter the ocean every year and this will almost triple by 2040, to 29 MMt, if immediate and sustained action is not taken, according to a newly published in-depth report.

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC

1. Oil complex retreats as economic uncertainty clouds demand outlook

MOSCOW (MRC) -- The oil complex settled lower July 23 as demand outlook came under pressure amid growing economic uncertainty following a weak US jobs report, according to S&P Global. NYMEX September WTI settled 83 cents lower at USD41.07/b and ICE September Brent was down 98 cents on the day at USD43.31/b. Oil futures, which were already trending off overnight highs, turned lower ahead of US trading after US Labor Department data showed initial unemployment claims climbed to 1.416 million in the week ended July 18. "The recovery appears to be stalling as jobless claims rose for the first time since March and as continuing claims remain elevated," OANDA senior market analyst Edward Moya said. "The economy does not seem to be on sound footing anymore and with high uncertainty with the direction of the coronavirus, businesses will likely struggle to justify hirings."


MRC

MOSCOW (MRC) -- The EU's proposed plastic tax has been met with skepticism and confusion by some participants in the recycling sector, who said investment decisions that need to be made straight away cannot be taken until there is more clarity on how the tax will operate, reported S&P Global.

The proposed plastic tax, announced July 21 as part of the EU's larger Eur750 billion (USD870 billion) recovery fund, would look to levy Eur800/mt on non-recycled plastic packaging waste.

"At this stage, it is completely unmanageable because no one knows the details," one recycler said.

Ultimately, participants feared the levy would force the packaging sector away from plastic toward other forms of packaging such as glass, paper and aluminum, which they say can have a greater impact on the environment than plastic.

However, once it was clearer how the tax worked, recyclers did show some optimism that it would give a welcome boost to the recycled plastic market at a time when demand this summer had been low.

Three main areas of concern were put forward by market participants on the announcement of the tax.

The first was how the weight of non-recycled plastic packaging waste would be calculated, at which stage of the waste stream this would take place, and on whom the burden for reporting this information would fall.

"No one has good enough data on this. Will they count it at the recycler or finished product? They don't understand the differences between collection rates, recycling rates and yields," a PET recycler said.

This is a crucial aspect of the tax, which has yet to be clarified, since weight of waste input is different to the weight of usable output from a recycling plant. Additionally, some recyclers fear that if reporting this data falls solely on them, they will be responsible for the majority of investment, which would be difficult given the current economic climate.

The second area of concern is that individual EU member states would be responsible for reporting data and achieving the goals, but currently there is no harmonized approach toward effective recycling.

"There needs to be auditing of data provided to Eurostat," one polyolefin recycler said, suggesting this would be the source of data used to determine whether member states are liable for the tax. "Data reported to Eurostat varies from country to country and is inconsistent."

Currently, member states adopt different approaches to waste collection and sorting, to varying degrees of success. However, sources put forward that a one size fits all approach to taxation would only be effective if reporting standards and waste collection and sorting systems were harmonized across the EU.

The third area of concern is that effective recycling for many plastics used in packaging, such as polystyrene and polyvinyl chloride, are not advanced enough for participants in those markets to be able to adhere to the tax.

Recycling infrastructure in Europe has, for many years, focused on the PET market and, more recently, polyethylene. However, large sections of the PS and PVC industry are made up of packaging, and there is significantly less infrastructure in these markets to both effectively collect and to recycle these polymers.

"For PET it is manageable, but we need to figure out what to do with small flexibles and other polymers, that slip through the net. To meet this new EU target needs several million more tonnes (of all plastic) to be collected and recycled," another recycler said.

In order to boost recycling in these markets, participants suggested that countries had to move away from mixed curbside collection systems and into segregated waste streams, such as the deposit return schemes for PET bottles in many countries. This, however, requires significant investment at a government level.

As MRC informed before, members of the European Parliament (MEPs) are proposing ways to step up green energy storage solutions such as hydrogen or home batteries, in a report that was adopted in one of the Parliament’s voting sessions on Friday, 10 July. The proposals outlined in the report are set to play a crucial role in reaching the goals of the Paris Agreement on Climate Change, as more efficient energy-storage options in the EU will help "spur decarbonization," the EU Parliament says. In addition, since solar and wind have a variable electricity output, more storage solutions should become available to secure supply, MEPs say.

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC