Nord Stream 2 warns of sanctions risk to gas link completion as European dissent grows

MOSCOW (MRC) -- The developer of the Nord Stream 2 gas pipeline said July 20 the investments needed to complete the 55 Bcm/year link could be blocked if the US imposed sanctions against companies involved in the project, reported S&P Global.

In a hardening of its position against Russian energy export projects, the US State Department on July 15 updated part of its Countering America's Adversaries Through Sanctions Act (CAATSA) legislation from August 2017.

Companies involving in building the Nord Stream 2 link to Germany and the second line of the TurkStream pipeline to southern Europe -- both still under construction - can now be targeted, whereas before they were exempted from potential measures under the CAATSA legislation.

European opposition to the latest US move has become increasingly strong in recent days, with the EU and governments of individual member states again saying European energy policy was a matter for Europe alone.

Congress is also considering another iteration of Nord Stream 2 sanctions, called the Protecting Europe's Energy Security Clarification Act, which would target more companies involved in building the project's final segment, including vessel insurers and service companies doing surveying, trenching, welding and other tasks.

In emailed comments, a Nord Stream 2 spokesman said US sanctions - if imposed - could directly hit more than 120 companies from more than 12 European countries.

"In an economically difficult time, the sanctions would block investments of around Eur700 million ($800 million) for the completion of the pipeline," the spokesman said.

"These sanctions would also undermine investments of approximately Eur12 billion in EU energy infrastructure," he said.

That is made up of Eur8 billion in investments in Nord Stream 2 as well as a further Eur3 billion in investments by European companies in downstream infrastructure in Germany and Eur750 million in the Czech Republic.

Any sanctions to be imposed under the terms of the CAATSA legislation are discretionary, however, and can only be imposed after coordination with US "allies".

Asked directly whether work on completing Nord Stream 2 would be suspended as a result of the latest sanctions guidance, the project spokesman said: "Nord Stream 2 is a fully permitted project, constructed in accordance with applicable national and international legislation."

"A total of over 2,300 km out of approximately 2,460 km of the Nord Stream 2 pipeline had been laid by December 20, 2019, when our contractor Allseas was forced to suspend the pipelay due to the threat of sanctions by the US," he said.

"Therefore, we are forced to look for new solutions to lay the remaining 6% of our pipeline."

Opposition to the sanctions update from the US's European allies continues to strengthen.

On July 17, the EU High Representative Josep Borrell said he was "deeply concerned" at the growing use of sanctions by the US against European companies and interests.

"As a matter of principle the EU opposes the use of sanctions by third countries on European companies carrying out legitimate business. Moreover, it considers the extraterritorial application of sanctions to be contrary to international law," Borrell said.

The mood among those countries home to five of Nord Stream 2's key investors has also become increasingly reactive.

Five European energy companies -- France's Engie, Austria's OMV, Anglo-Dutch Shell, and Germany's Uniper and Wintershall Dea - have co-financed the project, each committing to pay Eur950 million.

German foreign minister Heiko Maas said that by announcing measures that threaten European companies with sanctions, "the US Administration is disrespecting Europe's right and sovereignty to decide itself where and how we source our energy".

"European energy policy is decided in Europe and not in Washington," Maas said.

Austria's foreign ministry said it too rejected US moves to threaten extraterritorial sanctions against Nord Stream 2. "Among trusted partners, we believe in direct talks, not unilateral measures," it said.

France went a step further, with a parliamentary official calling on the EU to react.

"It is time for Europe to assert its power. It cannot tolerate such an attack on its energy sovereignty," Claude Kern, rapporteur for the French Senate Committee on European Affairs, said July 17.

The committee said there was no legal justification for "US interference" with companies operating on European soil and that the US may "in no way" sanction companies operating in the EU in accordance with the law of the EU and its member states.

Not all of Europe is unhappy with the US policy, however. Ukraine's Naftogaz said it welcomed the latest sanctions guidance.

"This decision demonstrates US continued support for Ukrainian and European security," it said. "Naftogaz will continue to work closely with US and European partners to counter Nord Stream 2 and protect the collective interests of the transatlantic community."

Nord Stream 2 is crucial to Russian plans to scale down from 2021 the use of the Ukrainian transit corridor in its gas supplies to Europe.

As MRC reported earlier, Denmark approved a request from the developer of the Nord Stream 2 gas pipeline from Russia to Germany for permission to lay the line in Danish waters using ships with anchors on July 6, 2020.

We remind that Gazprom neftekhim Salavat shut down its dioctyl phthalate (DOP) production for a scheduled maintenance. Market participants and a plant"s representative said Gazprom neftekhim Salavat took off-stream its DOP production for a long scheduled turnaround. The outage began on 12 May and lasted for about 30 day.

According to MRC's DataScope report, imports of suspension polyvinyl chloride (SPVC) into Russia totalled 13,800 tonnes in the first half of 2020, up by 5% year on year, whereas exports grew by 7% year on year.

COVID-19 - News digest as of 22.07.2020

1. U.S. refineries see fewer breakdowns in pandemic-cut production

MOSCOW (MRC) -- U.S. refineries have sustained fewer mechanical outages as production has fallen because of the coronavirus pandemic in 2020, according to data from energy intelligence service Industrial Info Resources, said Hydrocarbonprocessinmg. Average unplanned mechanical maintenance for crude units resulted in 95,000 barrels of capacity offline in April, May and June, compared with 254,000 barrels offline on average in the prior-year period. Because of reduced travel caused by the COVID-19 pandemic, U.S. refinery utilization fell from record highs to 68% of 19 million barrels per day in April. Utilization rose to 78.1% by the first week of July.


Oil prices dip as US coronavirus surge clouds demand outlooks

MOSCOW (MRC) -- Oil futures dipped July 17 as rising coronavirus cases prompted demand growth concerns, and global production is set to climb, reported S&P Global.

NYMEX August WTI settled down 16 cents at USD40.59/b and ICE September Brent was 23 cents lower at USD43.14/b.

The US reported over 77,000 new coronavirus infections July 16, a single-day record, according to Johns Hopkins University's Coronavirus Resource Center. The impact of the surge in new cases on oil demand is unclear. Some states, including Texas and California, have backtracked their reopening plans in a bid to slow the resurgent pandemic, but coronavirus hotspot Florida so far has shown no signs of instituting new lockdowns. Meanwhile, reopenings are continuing in less-afflicted states; New York City is set to move into Phase 4 July 20, as planned, bringing the entire state into the final phase of reopening.

"The virus situation is still bad in the US, but it doesn't seem like a return of harsh coronavirus lockdowns will happen," OANDA senior market analyst Edward Moya said. "WTI crude seems like it will continue to consolidate until a clearer picture of the demand outlook emerges."

NYMEX August ULSD settled 88 points lower at USD1.2191/gal and August RBOB shed 94 points to close at USD1.2245/gal.

The backwardation in front- to second-month NYMEX RBOB futures weakened to 1.54 cents/gal, the lowest since July 6. RBOB crack also retreated July 17. Platts prompt pipeline unleaded 87 crack against WTI fell to USD6.775/b, the lowest since June 4, and the ICE New York Harbor RBOB crack versus Brent fell to USD7.46/b, the lowest since June 1.

Amid uncertain demand outlooks, the market is also weighing the impact of rising OPEC production.

OPEC+ confirmed at its key July 15 Joint Ministerial

OPEC+ officials have in recent days sought to assure the market that the easing of quotas by 2 million b/d will

The Russian energy ministry has urged oil producers to send additional volumes to domestic refineries as output limitations under the OPEC+ deal ease starting August, deputy energy minister Pavel Sorokin said July 17.

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.

Maruzen completes maintenance at naphtha cracker in Chiba

MOSCOW (MRC) -- Japan's Maruzen Petrochemical, a subsidiary of Cosmo Energy Holdings, has restarted its naphtha cracker following a maintenance turnaround, as per Apic-online.

A Polymerupdate source in Japan informed that, the company resumed operations at the cracker on July 12, 2020. The cracker was shut for maintenance on May 11, 2020.

Located at Chiba in Japan, the cracker has an ethylene production capacity of 525,000 mt/year and propylene capacity of 280,000 mt/year.

As MRC reported earlier, Maruzen Petrochemical said in August, 2018, it would replace naphtha cracking furnaces at its 525,000 tonnes-per-year naphtha cracker in 2020 for an undisclosed sum. Two new bigger furnaces will be installed during a planned maintenance shutdown in around May-June 2020, a company spokesman said then.

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.

Sichuan Petrochemical shuts HDPE plant in China for unscheduled turnaround

MOSCOW (MRC) -- Sichuan Petrochemical, part of PetroChina Company, has taken off-stream its high density polyethylene (HDPE) unit in Pengzhou, Sichuan, according to Apic-online.

A Polymerupdate source in China informed that the company has undertaken an unplanned shutdown at the unit on July 16, 2020. Further details on duration of the shutdown could not be ascertained.

Located at Sichuan province of China, the HDPE unit has a production capacity of 300,000 mt/year.

Sichuan Petrochemical also operates a cracker with an ethylene capacity of 800,000 mt/year at the same site.

As MRC reported earlier, the company undertook an emergency shutdown at its naphtha cracker in Sichuan province of China on July 11, 2018 owing to a gas leak at its natural gas supply pipeline. Further details on duration of the outage could not be ascertained.

According to MRC's DataScope report, June HDPE imports to Russia decreased to 19,300 tonnes from 22,100 tonnes a month earlier, shipments from Uzbekistan and Europe fell down. Overall HDPE imports into the country totalled 147,400 tonnes in the first six months of 2020, down by 14% year on year. Film grade and pipe grade HDPE accounted for the greatest decrease in shipments.

PetroChina Company Limited, is a Chinese oil and gas company and is the listed arm of state-owned China National Petroleum Corporation, headquartered in Dongcheng District, Beijing. It is China's biggest oil producer.