MOSCOW (MRC) -- The Philippine unit of Royal Dutch Shell said on Thursday it will permanently shut one of the country’s two oil refineries, blaming a pandemic-led slump in margins, with other regional closures likely to follow, reported Reuters with reference to analysts.
Pilipinas Shell Petroleum Corp said its 110,000-barrel-per-day (bpd) Tabangao facility in Batangas province, which began operations in 1962, was no longer economically viable and would be turned into an import terminal.
Singapore’s complex refining margin, the bellwether in measuring profitability at Asian refineries, has been mostly negative since March prompting many refiners to cut output or temporarily shutter operations.
In the United States and Europe, refiners are permanently halting processing or weighing lasting shutdowns.
“We definitely see the possibility of more closures in Asia over the next 6-12 months,” said Mia Geng, consultant at FGE, adding that refineries in Japan, Australia and New Zealand could be likely candidates for closure.
“Given the uncertainties in demand and our subdued margin outlook, it would be challenging for those less complex and efficient refineries to continue running.”
The oil refining industry is well on track to registering more than 1 million bpd of global closures this year alone, although not all of them will come into effect in 2020, according to consultancy JBC Energy.
“The picture is fairly telling, with even the most complex refining margins down to just around 10% of their former levels, while steam cracking economics are currently at least around the 50% (of former levels) mark,” JBC said in a note.
The permanent closure of Tabangao comes after both of the Philippines’ refineries halted operations as coronavirus lockdowns pummelled oil demand.
“Due to the impact of the COVID-19 pandemic on the global, regional and local economies, and the oil supply-demand imbalance in the region, it is no longer economically viable for us to run the refinery,” Pilipinas Shell Chief Executive Officer Cesar Romero said.
The other local refinery, Petron Corp’s 180,000-bpd facility in Bataan province, has been on a scheduled turnaround since May and will restart on Sept. 1.
Energy Secretary Alfonso Cusi sought to allay concern over domestic fuel supply saying Pilipinas Shell is expected to fill its market share through imports of refined products.
Wood Mackenzie research director Sushant Gupta said the challenging environment would put pressure on weaker Asian refineries, particularly ones in mature markets, or with little or no integration with petrochemicals.
“We could see closures becoming a reality in many markets,” he said in a note.
As MRC reported earlier, oil major Royal Dutch Shell plans to buy a 50% stake in Indian-based Nayara Energy’s up to USD9 billion planned petrochemical project. Global oil majors are looking at expanding foothold in the vast Indian market, where local refiners are investing billions of dollars to boost their petrochemical capacities.
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.
Royal Dutch Shell plc is an Anglo-Dutch multinational oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the biggest company in the world in terms of revenue and one of the six oil and gas "supermajors". Shell is vertically integrated and is active in every area of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading.
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