PBF Energy sees jet fuel demand capping industry-wide refinery runs

MOSCOW (MRC) -- Depressed demand for jet fuel could cap refinery utilization rates across the entire industry, according to executives at PBF Energy, the fourth-largest U.S. oil refiner by capacity, said Hydrocarbonprocessing.

Demand for gasoline and distillates has recovered by 80% to 90% since the worst of the coronavirus pandemic, but jet fuel demand has only rebounded 30%, according to the Energy Information Administration. Because refineries cannot make products like diesel without producing jet fuel as well, they will restrain output, PBF Chief Executive Thomas Nimbley said on Friday.

"I'm not convinced that we could get to full utilization in this industry if jet demand is where it is today," Chief Executive Thomas Nimbley said on an earnings call. Running refineries at full tilt would reduce the ability for refiners to contain the production of jet fuel.

Other independent U.S. refiners are running near 80% utilization, but PBF is still operating below that and will continue to do so until it sees demand return in key markets, Nimbley said.

Executives defended the company's acquisition of Shell's refinery in Martinez, California, despite reporting gross margins of only USD1 million in the second quarter in the West Coast.

"We had negative cracks in April, which severely impacted our earnings on the West Coast," Nimbley said. Gasoline demand rebounded in recent weeks in California, he said, and physical crack spreads were approximately USD13 in San Francisco and Los Angeles earlier this week.

Nimbley disagreed with the idea that California has too much refinery capacity. "I think we're going to be fine in California over the long haul," he said. However, he noted that the pandemic will result in a permanent reduction in U.S. refining capacity.

As MRC informed earlier, PBF Energy, the fourth-largest U.S. oil refiner by capacity, is holding processing near 70% of throughput even as more states relax stay-at-home orders, boosting demand for motor fuel. The gasoline crack spread RBc1-CLc1, which drifted negative in March as the coronavirus pandemic sharply cut air and road travel, has recovered to USD11.42 per barrel this week. However, fuel demand is off 23% in the United States over the last four weeks.

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.

And 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) -- China Sinochem Group’s Quanzhou 32.5 billion yuan (USD4.64 billion) petrochemical expansion project is aiming to start trial operations in late August, the company said, later than the May-June time-scale previously expected, reported Reuters.

The state-backed oil and chemical group is adding 60,000 barrels per day (bpd) of crude processing capacity at an existing 240,000 bpd refinery in Fujian province, as well as 1 million tonnes ethylene and 800,000 tonnes aromatic capacity per annum.

“There are less than 100 days until the trial production of ethylene units on August 30. Workers are striving to catch up with the deadline while meeting quality requirements,” a statement from Sinochem Quanzhou refinery on its Wechat said on Monday, 13 july.

Reuters reported in January, citing sources, that the Quanzhou project was expected to start in mid-2020.

Sinochem did not give reasons for the delay in its statement on Monday.

But Sinopec Group, whose engineering subsidiary was in charge of the construction of the Quanzhou project, said in late June the work had faced delays of as much as six months.

It cited “a tight schedule, overwhelming tasks and delays of drawings as well as arrivals of equipment”.

Construction at the Quanzhou expansion project began in September 2018.

In June, 2020, Sinopec Corp started a new refinery, comprising a 200,000 bpd crude oil refining unit and 800,000 tonnes ethylene facility, in the neighbouring province Guangdong.

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) -- Formosa to deepen run cut, reduce refinery propylene output at Mailiao, Taiwan, said Chemweek.

Will reduce propylene production by up to 50,000 metric tons in August from normal monthly operational rate of over 80,000 metric tons.

As MRC informed earlier, Formosa Petrochemical slashed runs at its 540,000-bpd Mailiao oil refinery to about 68%, down from 80%, following last week’s shutdown of a secondary unit due to a fire. Even before the fire, Formosa had previously said that its gasoline exports this year would be about half of its 2019 volumes as the pandemic has hit demand from overseas markets. Any impact from a reduction in Formosa’s gasoline shipments would be mitigated by ample supplies in the region, said a trader who tracks petrol. Two of the units with a total capacity of 1.73 million tons per year (MMtpy) are operating at full capacity and the largest unit at 1.2 MMtpy is running at about 90% of its capacity, said Lin. The 1.2 million tpy cracker is scheduled to undergo maintenance in August.

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) -- The ongoing flood of crude oil into China is obscuring the fact that demand in the rest of Asia remains weak, and that countries in the world's top-consuming region didn't join China is stocking up when prices slumped, reported Reuters.

China's crude imports set consecutive records in May and June, and will remain at high levels in July and likely August too, as the massive volumes of oil bought during a brief price war in April enter the country.

China imported 12.9 million barrels per day (bpd) in June, eclipsing the prior all-time high of 11.3 million bpd in May, according to official data.

Imports for July may set a new record high, with Refinitiv Oil Research estimating 13.04 million bpd will be offloaded in the month.

Tracking China's imports has been made more tricky by the sheer volume of tankers heading to, or waiting at, ports. Delays in discharging cargoes mean that August's figures may get a bit of a boost from the earlier buying spree.

Crude prices plunged to the lowest in 17 years in late April after Saudi Arabia and Russia, the leading producers in the group known as OPEC+, disagreed on whether to extend and deepen output cuts in a bid to support prices.

The Saudis said they would sell as much oil as they could, and the sheer volume of oil being made available, coupled with the economic hit from the spreading novel coronavirus pandemic, saw benchmark Brent futures drop as low as USD15.98 a barrel on April 22, some 78% down from this year's peak of USD71.75 in early January.

While the price war didn't persist, with OPEC+ agreeing to extend and deepen output cuts, it did last long enough to give refiners an opportunity to stock up with bargain-basement crude.

However, it appears that only Chinese refiners took up the offer, and perhaps trading houses with access to storage tanks, with many Asian buyers apparently more worried about the demand hit from the coronavirus than they were tempted by the low crude prices.

India, the second-largest crude importer in Asia behind China, is forecast by Refinitiv to have imported 3.68 million bpd in July, a recovery from June's 3.33 million bpd.

However, these levels are still well below the 4.1 million to 4.7 million bpd range of India's oil imports in the months leading up to the coronavirus pandemic.

Japan's appetite for crude is struggling to recover, with just 2.16 million bpd of imports expected for July, up slightly from June's 1.93 million. The weakness in Japan means that South Korea is overtaking its rival in crude imports, with Refinitiv estimating 2.47 million bpd of imports in July, up a touch from 2.45 million bpd in June.

However, both countries are still down by more than 10% from the import levels that prevailed prior to the pandemic.

A further sign of Asia's struggles outside of China is Singapore, the island state that is home to three refineries with a combined processing capacity of about 1.4 million bpd, and which produce mainly for export markets.

Singapore is expected to import 580,000 bpd in July, down from 870,000 bpd in June, which was already down on the more normal level of 910,000 bpd in April.

The weakness in Asia outside China begs the question as to what happens when the surge of cheap crude that China bought during the price war comes to an end?

Is the economic recovery from the coronavirus enough to boost demand across the region, or will the risk of a second wave, and the ongoing first wave in countries like the United States and Brazil, serve to dampen demand?

The rebound in crude prices since OPEC+ acted to lower production is also perhaps a factor in limiting potential demand growth, with refinery margins weak in Asia outside of China.

A Singapore hydrocracker refinery currently has a profit margin of USD1.15 a barrel, well below levels of around USD2-USD6 that prevailed in the first quarter of this year.

Refineries may be finding it challenging to pass on higher crude costs, given demand for refined fuels is still running well below pre-coronavirus levels.

As MRC wrote previously, rour large new crackers are poised to start operations in China in the next 3-6 months, in a sharp expansion of the country's petrochemical cracker sector. State-controlled Sinochem today said it has commissioned the 3mn t/yr condensate unit at its Quanzhou complex in Fujian province. The key upstream facility produces naphtha for use as a cracker feedstock.

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) -- SK Capital Partners, a private investment firm focused on the specialty materials, chemicals and pharmaceuticals sectors, has announced it has signed a definitive agreement to acquire the specialty polymers business from Baker Hughes, reported Chemweek.

The business, with manufacturing operations at Barnsdall, Oklahoma, produces specialty low molecular weight olefin polymers, including a range of differentiated functional polymers and premium, high melting point polyethylene waxes. Over its 85-year history, the business has been dedicated to innovation and has developed a strong reputation as a premium specialty supplier and solutions provider to its diverse customer base, SK Capital says.

Mario Toukan, a managing director of SK Capital, said, “The specialty polymers business is a pioneer in the development of specialized polymerization technologies. We see tremendous opportunity for growth by further developing functional, solutions-oriented products that solve problems and create significant value for customers.”

“SK has extensive corporate carveout expertise and we look forward to partnering with management to transform the business into a world-class independent specialty chemical company with an intense focus on operational excellence,” added Jonathan Borell, a managing director of SK Capital. “As an independent company, the specialty polymers business will be able to build upon and enhance its reputation as a reliable provider of innovative and high-quality polymers.”

SK Capital and Baker Hughes are working together to execute a seamless transaction plan to continue to serve the specialty polymers business’s customer base reliably and safely, the companies say. The transaction is expected to close in the second half of 2020. Morgan, Lewis & Bockius acted as legal counsel to SK Capital and committed debt financing was provided by KeyBanc Capital Markets. Evercore acted as financial advisor and King & Spalding served as legal counsel to Baker Hughes.

As MRC informed earlier, SK Capital (New York, New York) is acquiring a majority interest in Techmer PM (Clinton, Tennessee), a designer and producer of engineered compounds and polymer modifiers. John Manuck, president and CEO of Techmer, says access to the resources of SK Capital will allow Techmer to grow beyond North America.

We remind thatn SK Global Chemical, a subsidiary of SK Innovation, plans to shut down its production processes for ethylene and ethylene propylene diene monomer (EPDM) within its naphtha cracking center in Ulsan, South Korea. The 200,000-t/y naphtha cracker, which started commercial operation in 1972, and the EPDM unit, which began commercial operation in 1992, will be mothballed from December 2020 to shift the company's focus to high-value added chemicals.

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