COVID-19 - News digest as of 26.06.2020

1. Indian Oil reports drop in quarterly petchem earnings

Indian Oil Corporation posted a consolidated net loss of Rs 7,782 crore for the quarter ended March 31 on a one-time loss of Rs 11,304.64 crore. It is the refiner's first quarterly loss in more than four years, said Economictimes. The company had posted a net profit of Rs 6,004.88 crore in the corresponding quarter last year. On the other hand, the revenue of the company declined 3.35 per cent year-on-year (YoY) to Rs 1,42,371.85 crore during the quarter under review. “The holding company is consistently valuing its inventories at cost or net realizable value (NRV) whichever is lower. For this purpose, NRV is derived based on the actual realisation in the specified subsequent period as per regular practice,” IOCNSE -2.01 % said in a regulatory filing. It further added that due to the coronavirus pandemic and changes in oil market scenarios there was a significant fall in oil prices which led to write-down in valuation of inventories below cost for the specified period of Rs 6,855.35 crore.


PP production in Russia increased by 26% in January-May

MOSCOW (MRC) - Production of polypropylene (PP) in Russia increased to about 765,300 tonne in first five months of this year, up 26% year on year, compared to the same period of 2019. ZapSibNeftekhim accounted for the main increase in the output, according to MRC's ScanPlast report.

May PP production in the country grew to 162,900 tonnes, compared with 129,600 tonnes in April; SIBUR Tobolsk, ZapSibNeftekhim and Poliom increased their capacity utilisation. Russia's overall PP production reached 765,300 tonnes in the first five months of 2020, compared to 608,900 tonnes a year earlier. Four out of eight producers increased their capacity utilisation, with a new producer -ZapSibNeftekhim - accounting for the main increase in capacity utilisation.

The structure of PP production by plants looked the following way over the stated period.

SIBUR Tobolsk shut its facilities for scheduled preventive repairs in mid-March - mid-April. As a result, supply of homopolymer PP into Russia grew to 38,500 tonnes in May, compared with 17,500 tonnes in May 2019. The Tobolsk plant's total PP production reached 168,600 tonnes in the first five months of 2020, down by 19% year on year.

ZapSibNeftekhim produced about 44,100 tonnes of polypropylene in May compared with 32,600 tonnes in April. The plant's overall output totalled 193,100 tonnes in the first five months of 2020.

Omsk Poliom reduced its capacity utilisation in May, having produced about 14,300 tonnes of PP, compared to 13,000 tonnes a month earlier.
Total PP production at the plant over the reported period was about 78,900 tonnes, down 12% year on year.

Nizhnekamskneftekhim produced about 19,000 tonnes of propylene polymers in May versus 18,000 tonnes a month earlier. The Nizhnekamsk plant's overall output of polymer exceeded 92,000 tonnes in the first five months of 2020, compared to 87,300 tonnes a year earlier.

Tomskneftekhim produced about 13,100 tonnes of polypropylene in May to 13,400 tonnes in April. Total PP production by the producer increased to 64,400 tonnes in January-May 2020, up 3% year on year.

May PP production at Ufaorgsintez decreased to about 9,900 tonnes from 11,200 tonnes a month earlier. The Ufa plant's overall output of polymer reached 53,500 tonnes in January-May 2020, down 4% year on year.

Neftekhimiya (Kapotnya) produced more than 13,000 tonnes of PP in May, compared to 12,600 tonnes a month earlier. The plant's overall PP output reached 62,600 tonnes in the first five months of 2020, up by 2% year on year.

Stavrolen (Lukoil) produced 10,900 tonnes of propylene polymers in May versus 11,300 tonnes in April. In general, the total production of polymers of propylene in the first five months of this year at the Budenovsk enterprise reduced to 52,100 tonnes against 45,000 tonnes a year earlier.

Valero appoints new CFO

MOSCOW (MRC) -- Valero Energy appoints current Executive VP and General Counsel Jason Fraser as its new Executive VP and CFO, effective July 15, according to Seeking Alpha.

Fraser will succeed Donna Titzman, who will retire after serving as CFO since 2018; she joined the company in 1986.

Fraser joined Valero in 1999 and has been General Counsel since January 2019.

As MRC reported earlier, Valero Energy Corp’s Memphis, Tennessee, crude oil refinery is operating at two-thirds of its 180,000 barrel-per-day (bpd) capacity because of low demand in the COVID-19 pandemic. The Memphis refinery cut production by as much as 50% in early April and has been raising production gradually since then.

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.

US ethane price to soar in 2021 on declining availability, rising demand

MOSCOW (MRC) -- A fall in US ethane availability by 2021 due to the effects of the COVID-19 pandemic and the collapse in oil prices will coincide with an increase in demand for the gas as feedstock from petrochemical producers, leading to tighter market fundamentals and a forecast rise in US ethane prices, reported Chemweek with reference to IHS Markit.

The major slowdown in upstream activity as oil and gas producers shut down unprofitable production due to the low oil price means US crude output is expected to fall from its recent peak of 13 million b/d to 9 million b/d in 2021, with associated gas output to plunge by about 10 billion cubic feet/day. Ethane supply will fall from 2.7 million b/d in 2019 to 2.6 million b/d in 2021, says IHS Markit’s Midstream Oil and NGL Insight report.

"This number is a big shift from our view prior to the COVID-19 pandemic, which estimated ethane supply for 2021 to be about 3 million b/d," it says. "At the same time, ethane demand is expected to increase, both from higher operating rates and from new cracker startups, as global demand recovers from the COVID-19 pandemic, increasing the need for ethylene. Nonetheless, total ethane demand will still be lower than previously expected," it says.

An expected worldwide post-pandemic recovery in demand for petchem products will prop up ethane demand by 2021, resulting in US ethane rejection falling by an estimated 300,000 b/d from 900,000 b/d in 2019 to 600,000 b/d in 2021, and further to almost 450,000 b/d in 2023, according to the report.

Tighter ethane fundamentals and higher natural gas prices going into 2021 as dry gas plays ramp up production to cover the anticipated shortfall in associated gas production will result in higher ethane prices, with IHS Markit forecasting ethane prices to increase from 18.7 cts/gal in 2020 to 32.5 cts/gal in 2021, "as all available ethane from regions closer to the US Gulf Coast will be required to meet demand." The result is a "double whammy for ethane prices, with the gas price floor rising and ethane markets tightening," it says.

Access to low-cost ethane feedstock has been a driving force behind the US petrochemicals investment boom that has seen a wave of new steam crackers and other associated petchem facilities built on the US Gulf Coast in recent years, with US producers benefiting significantly from substantial cost advantages over more costly naphtha-based facilities in Europe and Asia.

As MRC informed earlier, in 2017, INEOS and China’s SP Chemicals agreed long term supply agreement for ethane from US Shale Gas. Agreement includes construction of new carrier ship, the largest ethane carrier ever built.

We remind that in January 2019, INEOS announced Antwerp as the location for its new petrochemical investment. The EUR3 billion investment will be the biggest ever made by INEOS and is first cracker to be built in Europe in 20 years. The investment is a game changer for the chemical sectors and will bring huge benefits to the Belgium and wider European economies. Thus, Antwerp, Belgium will be the location for its multi-billion Euro project for an ethane gas cracker and world-scale PDH unit in Europe.

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.

Venezuela PDVSA weighs plan to pay for refinery work with fuel, byproducts

MOSCOW (MRC) -- Officials from Venezuelan state oil company Petroleos de Venezuela have spoken with private contractors about paying for work fixing the country’s refineries with fuel and byproducts, reported Reuters with reference to a half dozen people familiar with the talks.

The possibility of in-kind compensation comes as US sanctions on PDVSA and severe cash-flow problems at the company have complicated its ability to pay third-party contractors, whose help it needs to revamp gasoline output at its 1.3 million barrel-per-day refining network, which is mostly halted.

The outages have contributed to widespread fuel shortages in recent months, which President Nicolas Maduro’s government temporarily alleviated by importing gasoline from ally Iran.

But the shortages have made it hard for farmers to harvest their crops and for doctors to get to hospitals.

“We want to attend to a humanitarian issue, because there are many people suffering,” said one of the people, who spoke on condition of anonymity because the talks were not yet public.

PDVSA has racked up sizable debts to contractors due to failure to make promised payments for work on oilfields and to infrastructure, which has led to the suspension of many projects and left many private contractors struggling with a lack of cash flow. The company has not recently published figures on its total debts to contractors.

The person said the private companies involved planned to discuss the plan with the US Treasury Department’s Office of Foreign Assets Control (OFAC), which enforces sanctions, to try to obtain a license permitting the activities despite the broad sanctions on PDVSA.

The US Treasury Department declined to comment. Neither PDVSA nor Venezuela’s oil ministry responded to requests for comment.

Payment in fuel could pave the way for those private contractors to export the products themselves. That could boost Venezuela’s oil exports by cutting sanctioned PDVSA out of the process, a bet that customers and shippers would be willing to interact with non-sanctioned private companies.

To be sure, that part of the plan likely would not hold up without an OFAC license. The Trump administration has sanctioned several oil and shipping companies for dealing with Venezuela in recent months to ratchet up efforts to oust Maduro, a socialist who has overseen an economic collapse and stands accused of corruption and human rights violations.

It is also weighing sanctions on a Venezuelan shipping magnate who coordinated a gasoline shipment to the country in April, which he described as “humanitarian work.”

Maduro blames the US sanctions for the fuel shortages and the once-prosperous OPEC nation’s economic woes. Washington has pressured PDVSA’s remaining customers not to send gasoline to the country in exchange for crude, a practice known as a swap that Venezuela had long used to supply the internal market.

The company has recently restarted the catalytic cracker at its 310,000 barrel-per-day (bpd) Cardon refinery, a necessary step for producing gasoline. It is also aiming to restart gasoline output at the 146,000 bpd El Palito refinery.

The sanctions have hindered PDVSA’s ability to pay contractors through bank transfers. In-kind payments are not the first method the company has come up with to overcome this obstacle: last year, it paid suppliers and contractors with euros in cash.

But cash has dried up as crude output continues to fall. Venezuela produced just 411,000 barrels per day on June 15 and an average of 421,000 in the first two weeks of June, according to an oil ministry document seen by Reuters. That was down from 573,000 in May, according to figures the country provided to OPEC.

The people said the products PDVSA could pay the contractors include fuel oil, jet fuel and petcoke - a byproduct of the refining process.

As MRC informed before, Russian state oil company Rosneft's decision to cease operations in Venezuela and sell its assets there to a Russian government-owned company was a "maneuver" made in reaction to collapsing oil prices, a US State Department official said earlier this year.

We remind that Angarsk Polymers Plant, part of Russian oil giant Rosneft, has shut down its low density polyethylene (LDPE) production for a scheduled turnaround. The plant"s customers said Angarsk Polymers Plant took off-stream its LDPE production for the scheduled maintenance on 22 June. The outage is scheduled to last for one month. The plant"s annual production capacity is about 75,000 tonnes.

According to MRC's ScanPlast report, April estimated LDPE consumption in Russia decreased to 52,270 tonnes from 55,160 tonnes a month earlier. Kazanorgsintez reduced its capacity utilisation. Russia's estimated LDPE consumption rose to 191,000 tonnes in January-April 2020, up by 5% year on year. Russian producers raised their production significantly, and LDPE imports also increased.