Sonatrach started a negotiation with the Spanish energy company on the price of gas

MOSCOW (MRC) -- The director general of the Algerian state hydrocarbon company Sonatrach, Toufik Hakkar, revealed on Friday that he has started a negotiation with the Spanish energy company Naturgy on the price of gas and said he is not concerned if the lack of agreement leads to arbitration in late July international, said Cincodias.

In statements to the local press during a visit to the town of In Amenas, on the border with Libya, he recalled that "relations with Spanish companies regarding gas commercialization exceed 50 years", and insisted that "the contractual clauses between both parties they allow the periodic revision of the prices based on the evolution of the energy market ".

"There are other clauses that allow finding solutions to disputes through bilateral negotiations, but also recourse to international arbitration if an understanding is not reached at the end of the deadlines set for the negotiations. It is not a fatality, but rather one of the solutions enshrined in the contracts, to resolve disputes, "explained the senior officer of the Algerian company.

If we go to this extreme "we will give our reasons and we will enforce them. We are not afraid of this process which we will reach in a position of strength," Hakkar stressed before warning that Sonatrach has already been successful in this type of procedure in the past.

In line with this argument, the manager reiterated that this type of contract is signed for periods of up to 30 years, but it includes a degree of flexibility that allows the quantities supplied to be reviewed, as well as the prices. "The clauses are systematically reviewed every 2 to 3 years, to allow both parties to adapt to the new market data," as well as each of them to "defend their economic interests and their achievements," he said.

Naturgy is a partner of Sonatrach in the Med-Gaz gas pipeline -which unites the two countries- and Sonatrach has been able to buy back the shares of the Spanish company, which in Hakkar's opinion "shows the will of both parties to preserve their good relations".

"We have had nine negotiation meetings since Naturgy asked to revise down the prices of Algerian gas, this is not a short-term controversy that will lead us to the breakdown of these relations," he concluded. Algeria is mired in a serious economic crisis since the abrupt drop in oil and gas prices in 2014, which it mistakenly considered to be circumstantial.

The crisis has been exacerbated by the collapse of prices as a result of the coronavirus health crisis, which has sunk the price of oil and gas, materials that account for 95 percent of Algerian exports.

As MRC informed before, in January 2020, Turkey and Algeria announced that they will jointly establish a petrochemicals plant in Adana on the Mediterranean coast. Turkey’s Ronesans Holding and Algeria’s state-owned energy company Sonatrach will take part in the project, Arkab said on the margins of the Turkey-Algeria Business Forum. The petrochemical facility is estimated to cost around USD1.4 billion, according to the Algerian minister, who also said stakes of Ronesans Holding and Sonatrach in the project will be 66 percent and 34 percent, respectively. The facility is planned in Seyhan industrial zone for petrochemical development and will have production capacity of 450,000 tons per year of polypropylene (PP).

According to MRC's ScanPlast report, PP shipments to the Russian market totalled 347,440 tonnes in January-April 2020 (calculated by the formula production minus export plus import). Supply exclusively of PP random copolymer increased.
MRC

Crude prices tick up with stock markets as Fed offers new support

MOSCOW (MRC) -- Crude oil prices rose with the stock markets on June 15 after the US Federal Reserve offered additional economic support following a morning of mostly negative trading amid coronavirus resurgence fears from Beijing to Texas, reported S&P Global.

After crude prices fell by about 4% to start the day, they eventually jumped back into positive territory.
Despite new lockdowns amid outbreaks in Beijing, Chinese officials insisted things are under control and another Wuhan is not developing. Also, US President Donald Trump has not shown signs of supporting new lockdown measures as coronavirus cases rise in several states, including Florida, Texas and Arizona.

Meanwhile, the Federal Reserve said it would start buying individual corporate bonds as part of its emerging lending program to help boost the economy. The Fed previously was only purchasing exchange traded funds.

Front-month NYMEX WTI rose 86 cents/b to USD37.12/b and ICE August Brent traded up 99 cents/b to USD39.72/b.

As for refined products, NYMEX July RBOB jumped 4.14 cents/gal to USD1.1657/gal and July ULSD ticked up by 3.56 cents/gal to USD1.1370/gal.

"Crude has moved back up to the price level where it's more linked to all the other stuff in the markets," said Dan Pickering, the founder of Pickering Energy Partners, an energy investment firm. "Oil has moved from dramatically oversold to closer to fair, and now we're in a holding pattern waiting to see how the world recovers."

Barring any specific shocks to oil markets, crude priced from USD35/b to USD40/b will move largely at the whims of the stock markets, he added. "We had really awful prices, and then a really impressive recovery to what's still a dismal price."

Bullish sentiment also emerged from reports that Iraq is finally living up its part of the OPEC+ production cuts as Baghdad signaled it would sharply cut back on oil exports in June. OPEC's second-largest oil producer has been one of the biggest violators of the production quotas.

While crude oil was buoyed by the ongoing OPEC+ efforts to keep more barrels off the market, prices are still sitting below USD40/b out of concerns of an extended first wave and eventual second wave of the coronavirus pandemic.

"Oil prices will remain very sensitive to the evolving COVID situation, despite the best efforts of producers around the world to rebalance the market," said Craig Erlam, senior market analyst for OANDA.

The question now is whether the continued presence of the coronavirus thus far during the summer will weigh more on oil prices and global crude demand, said Bjornar Tonhaugen, Rystad Energy's head of oil markets.

"Now, amid a spike in new confirmed cases in the US and Asia, the thought has started sinking in for many traders: 'Hey, COVID-19 is not really gone, what happens now with demand?' " Tonhaugen said.

"Markets move in waves of fear and greed and, after greed has enjoyed a long joy ride, fear has started sprouting again," he added.

With OPEC+ doing its part to balance global supply and demand, arguably the biggest wild card is what happens next with US shale as producers begin to undo well shut-ins that were implemented in April and May.

While US oil production has plunged from record highs by close to 2 million b/d and the US drilling rig count is at its lowest level in more than a decade, Tonhaugen said, "We believe there will be a gradual reactivation of shut-in production, which will be sufficient in the coming months for US production to stabilize and grow from its current levels."

That is true in areas such as the Bakken Shale, but especially in Texas and the Permian Basin.

In fact, the pandemic has triggered a large spike in drilled-but-uncompleted wells, called DUCs, in the Permian, according to a new Rystad analysis.

The US has added more than 750 DUCs in the last three months, including nearly 500 just in the Permian, Rystad said. At the current pace of hydraulic fracturing, those roughly 750 wells would take about two years to all come online, the analysis said, potentially adding more oil volumes just as crude prices are fighting to recover.

US DUC totals exceeded 5,700 wells at the end of May 2020, the highest level since late 2017, Rystad said.

"In the second half of 2020 we might see a modest rebound in fracking without extra drilling," said Artem Abramov, Rystad head of shale research, in the report.

As for Pickering, he said oil priced over USD30/b means that some shut-in wells will come back online, and when and if NYMEX WTI rises above USD40/b, some DUCs will bring on more barrels.

"It's definitely a risk that at these prices oil is coming back on the market," Pickering said.

As MRC informed previously, 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 ScanPlast report, Russia's estimated PE consumption totalled 721,290 tonnes in the first four month of 2020, up by 4% year on year. Low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) shipments grew partially because of the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market totalled 347,440 tonnes in January-April 2020 (calculated by the formula production minus export plus import). Supply exclusively of PP random copolymer increased.
MRC

BASF Total shut steam cracker at Port Arthur, Texas

MOSCOW (MRC) -- An unexpected outage occurred at BASF Total Petrochemical’s joint-venture (JV) olefins unit at Port Arthur, Texas, on Thursday afternoon, according to Chemweek.

The cause of the outage is being investigated, with a compressor shutdown cited as a possible factor, according to a Texas Commission on Environmental Quality filing.

Total’s refinery near the olefins plant has also drastically reduced rates. The outage had little effect on Friday’s US spot ethylene market.

Few olefins plants are shut but many have reduced rates. Overall operating rates for the US Gulf Coast region are estimated at around 85%. Against this backdrop, ethylene exports are scheduled to be taking more than 75,000 metric tons out of the US market this month from the Houston Ship Channel, with seven cargoes scheduled to leave the Enterprise export terminal during June and one cargo scheduled to lift from Targa’s export terminal, all bound for Asia.

The JV’s steam cracker at Port Arthur has a production capacity of more than 1 million metric tons/year of ethylene and 544,000 metric tons/year of propylene, according to IHS Markit data.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 721,290 tonnes in the first four month of 2020, up by 4% year on year. Low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) shipments grew partially because of the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market totalled 347,440 tonnes in January-April 2020 (calculated by the formula production minus export plus import). Supply exclusively of PP random copolymer increased.
MRC

Sinopec starts up new Zhanjiang refinery complex

MOSCOW (MRC) -- Top Chinese state refiner Sinopec Corp said on Tuesday it had started up a USD6 billion new refinery and petrochemical plant in south China, making it the country’s third integrated complex to start operations in the past 18 months or so, reported Reuters.

The Sinopec venture, situated in coastal city of Zhanjiang, comprises a 200,000 barrel per day (bpd) crude oil refinery and an 800,000 tonne-per-year ethylene facility, built at a cost of 44 billion yuan (USD6.2 billion), Sinopec said in a statement.

Two other complexes with combined refining capacity of 800,000 bpd have started up since early 2019, one built by privately-controlled Hengli Petrochemical Corp and the other by Zhejiang Petrochemical Corp.

Sinopec said its project would bring new investment worth 200 billion yuan to Guangdong province and thousands more jobs by supporting the manufacture of high-grade plastics, electronics and chemicals.

The new plant operates a 300,000 tonnage crude oil terminal and also berths that can dock vessels with capacity to carry 100,000 tonnes of refined products, Sinopec said.

As MRC informed earlier, in October 2019, Sinopec SABIC Tianjin Petrochemical Co. (SSTPC), a 50-50 joint venture of Sinopec and SABIC, began construction on an ethylene expansion project in Tianjin Province, China. The project will boost the company's ethylene capacity to 1.3-million t/y from 1-million t/y currently. Cost and a schedule for the project were not given.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 721,290 tonnes in the first four month of 2020, up by 4% year on year. Low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) shipments grew partially because of the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market totalled 347,440 tonnes in January-April 2020 (calculated by the formula production minus export plus import). Supply exclusively of PP random copolymer increased.

China Petrochemical Corporation (Sinopec Group) is a super-large petroleum and petrochemical enterprise group established in July 1998 on the basis of the former China Petrochemical Corporation. Sinopec Group"s key business activities include the exploration and production of oil and natural gas, petrochemicals and other chemical products, oil refining.
MRC

Iranian gas exports to Turkey to resume by end-June

MOSCOW (MRC) -- Iranian gas exports to Turkey will resume by the end of this month, Iranian foreign minister Mohammad Javad Zarif said June 15, said S&P Global.

Register Now Speaking at a press conference in Istanbul with his Turkish counterpart Mevlut Cavusoglu, Zarif said he had received assurances that repairs to the pipeline, which has been closed since March 31, will be completed and that gas flows will be reinstated. Cavusoglu, who spoke at length on other bilateral issues, did not comment on the pipeline.

Flows through the Iran-Turkey gas pipeline were halted early March 31 following an explosion subsequently claimed as a sabotage attack by the Kurdistan Workers' Party (PKK).

The PKK has attacked the pipeline on at least 11 previous occasions when repairs were completed within a few days, prompting speculation that Turkey was stalling repairs in order to pressure Iran to improve their terms under which Turkey imports gas, and to allow state gas importer Botas to import cheap spot LNG cargoes in place of Iranian gas.

Turkey's deputy energy minister Alparslan Bayraktar told a conference in Istanbul in February that Turkey planned to use the availability of cheap spot LNG to persuade its long-term gas suppliers to lower their prices.

Ten days ago Iran's NIGC said Tehran had rejected Ankara's claim that the explosion was a force majeure event, and that the company expected flow to be restarted on June 21 at the earliest.

Turkey imports gas from Iran under an agreement signed in 1996 for up to 10 Bcm/year, which began operation in 2001 and was later reduced to 9.6 Bcm/year.

Disagreements over the terms of the contract and frequent cuts in supply to due to problems in Iran have seen the two countries resort to international arbitration on at least two occasions.

The contract ends in July 2026 with Ankara expected to be unlikely to renew unless the terms are competitive with spot market LNG prices and offer flexibility to allow for future market fluctuations.

Ethylene and propylene are feedstocks for producing PE and PP.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 721,290 tonnes in the first four month of 2020, up by 4% year on year. Low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) shipments grew partially because of the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market totalled 347,440 tonnes in January-April 2020 (calculated by the formula production minus export plus import). Supply exclusively of PP random copolymer increased.

MRC