EPCA 2020: Pandemic accelerates industry trends

MOSCOW (MRC) -- COVID-19 occurred at an already challenging time for the petrochemical industry and has required it to take some drastic actions, said the leaders of the world’s two biggest chemical companies, BASF and Dow, on Monday at the 54th European Petrochemical Association (EPCA) annual meeting, which is taking place in a virtual format, reported Chemweek.

The pandemic has also accelerated key industry trends, particularly those around sustainability and the environment, they said.

Martin Brudermuller, chairman and chief technology officer at BASF, said that COVID-19 had “intensified” a number of challenges that the petrochemical industry was facing before the crisis. These include the US/China trade conflict; the European Green Deal, which was announced in December 2019 and maps a route to climate neutrality by 2050, and will be linked to a planned EU chemicals strategy; and an “unfortunate supply and demand balance” that had flattened the industry’s cost curves, he said. Together they and the pandemic have created a perfect storm for the industry, Brudermuller said. “The current challenges are the biggest we have ever had in front of us,” he said.

The petrochemical industry is currently “in the spotlight” with governments and the public for being energy intensive, CO2 intensive, and the perceived source of plastic pollution in the oceans, Brudermuller said. Petrochemicals are an enabler for addressing these challenges, but “we struggle to convey” the message that the industry is a solution provider, he said.

Brudemuller identified five action items for petrochemical companies to get their message across: drive operational excellence, install a circular economy internally, transition to low-carbon operations, create transparency, and “do good and talk about it.”

For companies to install a circular economy, “we should be fast in implementation and ahead of regulation,” Brudermuller said. This can help the industry to shape “proper framework conditions that will allow us to succeed,” he said.

The low-carbon transformation “has to be at the top of our agenda, but we as an industry today lack the proper technology,” Brudermuller said. BASF is working in cooperation with various partners on technology initiatives such as producing pyrolysis oil from waste tires and electrification of steam cracker furnaces.

To create transparency around companies’ carbon footprint, “we have to link our efforts into the markets of our end customers,” Brudermuller said. He cited BASF’s decision to calculate a carbon footprint for each of its many products and make the data available to its customers.

It is not enough for the industry to comply with regulations and take part in individual and collective initiatives to address sustainability and climate change. Companies must also communicate this message to counteract an often-negative public perception, Brudermuller said. “As long as alarmism sets the agenda, we need to make the case,” he said. “As an industry, we have something to offer, including innovations and great products. BASF will be an action- and thought leader.”

Jim Fitterling, chairman and CEO of Dow, said that the pandemic is driving petrochemical companies to “rebuild resiliency” and has “forced a retrenchment.” Companies have canceled projects and rationalized capacity in an effort to achieve the lowest possible operating expenses.

“It will force us to be leaner and more focused,” Fitterling said. “The entire industry is defaulting to its strongest and most competitive positions. It is forcing a very quick and strategic pivot.” The winners will be companies that are “best positioned to take advantage of the upswing when it happens,” he said.

The biggest change brought by COVID-19 is an acceleration of two trends that the industry was already tackling -Environmental, Social, and Corporate Governance (ESG) and digitization - Fitterling said. At Dow, ESG “is at the heart of our ambition,” Fitterling said. ([The pandemic) has only strengthened our view that it’s the right strategy. Every stakeholder continues to push for more sustainable products and projects. We intend to move forward and will optimize our assets, and develop and use new technologies,” he said.

Fitterling also expects the pandemic to “unleash an unprecedented amount of collaboration” for the industry with customers, other companies, and other stakeholders. “ESG is a driving force and it is accelerating,” he said. “We can’t ignore what our stakeholders are telling us. The world needs our products, our voices, and our collaboration to get this right.”

Digitization, meanwhile, is becoming a key advantage for companies that implement it in the right way. “The pandemic has made it critical,” Fitterling said. “Data is the new fuel for our industry. It will be a competitive advantage for some companies but a liability for others.”

As MRC informed before, Dow says it will record a charge of between USD500-600 million in the third quarter for costs associated with the company’s ongoing restructuring program, and has outlined more details of its previously announced plan to close manufacturing facilities in the US and Europe to enhance its long-term competitiveness as the worldwide economy recovers from the COVID-19 pandemic.

We remind that Dow Chemical conducted a 45-day scheduled maintenance at its propane dehydrogenation (PDH)unit in Freeport, Texas, from 8 July, 2020. This PDH unit has the capacity of 750,000 mt/y of propylene.

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

According to MRC's ScanPlast report, Russia's overall PE production totalled 1,712,400 tonnes in the first seven months of 2020, up by 58% year on year. Linear low density polyethylene (LLDPE) accounted for the greatest increase in the output. At the same time, overall PP production in Russia increased in January-July 2020 by 24% year on year to 1,063,700 tonne. ZapSibNeftekhim accounted for the main increase in the output.

The Dow Chemical Company is an American multinational chemical corporation. Dow is a large producer of plastics, including polystyrene, polyurethane, polyethylene, polypropylene, and synthetic rubber.

EPCA 2020: Lessons learned from COVID-19 can boost industry recovery

MOSCOW (MRC) -- The European petrochemical industry faces short-term and longer-term challenges caused by or exacerbated by the COVID-19 pandemic. Speakers on Monday at the European Petrochemical Association’s (EPCA) 54th annual meeting, being held in a virtual format, said the crisis had been a learning experience for the industry, said Chemweek.

Bernard Pinatel, president/refining and chemicals at Total, said that for the industry to set its future priorities, it must learn from the crisis. He highlighted four main “takeaways” from the pandemic: uncertainty and how to deal with it, the need to diversify end-use markets and supply chains, the importance of internal and external communication, and the challenge of climate change.

Pinatel said that the immediate uncertainty caused by the pandemic “shows you just have to focus on what you control and be excellent. If you focus on that, it’s the best way to weather the storm and crisis,” he said. Petrochemical companies should focus on “costs, cash, how you allocate capital, and how you operate your assets” rather than looking to unknowns such as the shape and timing of the recovery, which are beyond the industry’s control.

The need for petrochemical companies to diversify end-use markets has been demonstrated by the uneven impact of COVID-19 with some customer industries, such as automotive, suffering more than others. Supplying polymers to the auto industry has been “a nightmare,” Pinatel said. "So, diversification is a must. A diversified portfolio is the best way to be resilient in a world of uncertainty,” he said.

There have been calls for less globalization of supply chains and the relocalization of production, because the crisis has highlighted some vulnerabilities. Pinatel rejects this as “a quick fix” and not a long-term solution. The industry should instead diversify its supply chains and not rely on a single country to source products, he said. Uncertainty has made clear communication more important than ever, Pinatel said. “COVID-19 is a test of leadership,” he said. “You have to be simple and straight to the point externally and internally. You have to act quickly, align quickly, and deliver very simple messages."

Digital technologies, developed and rolled out relatively recently, have played a crucial role in enabling communication in the crisis and could lead to fundamental operational changes for the petrochemical industry, Pinatel said. “Digitization may be a solution to operate industrial assets from remote locations,” he said. The industry, meanwhile, can and should address climate change as it emerges from the pandemic, Pinatel said. “The challenge is for the industry to recover, grow, and combine this with CO2 reduction. And we need to provide our customers with solutions to reduce their emissions,” he said.

Total has committed to reach net zero emissions by 2050. Pinatel cited the company’s recently announced project to convert its refinery site at Grandpuits, France, into a “zero oil platform.” This will involve transforming the site to make biobased products including sugar-based bioplastics. “The concept is completely designed around the circular economy,” he said.

The European petrochemical industry “will play a key role through innovation and technology to develop low-carbon solutions,” Pinatel said. “With this crisis, the industry has a role—to be at the forefront of tackling the climate change challenge,” he said.

Meanwhile, the crisis has shown the importance of the petrochemical industry and its products, many of which are used to tackle the pandemic, said Thomas Casparie, executive vice president/global chemicals at Shell. “Our industry is vital, but really the last few months have made this even more apparent,” said Casparie. The industry also showed its agility in being able to adapt immediately to the crisis, he said.

Petrochemical companies face many challenges including those that pre-existed the crisis, Casparie said. These include cyclical challenges on the supply side with large capacities coming onstream, particularly in Asia. Meanwhile, refineries are struggling to be profitable and Casparie sees possible upward pressure on the price of naphtha, the main feedstock for petrochemicals in Europe, in the long- and short term. “But refineries could increase their output of petrochemicals,” Casparie said.

Meanwhile, the industry must respond to changing expectations from customers and consumers for more sustainable products and operations. “Consumer expectations are changing,” Casparie said. “The world is demanding more sustainability, and our customers are responding to that. He cited the example of Unilever, which has committed to stop using fossil-based chemicals in its laundry and cleaning products by 2030.

According to MRC's DataScope report, Russian companies significantly raised their purchasing of PP in foreign markets in August partially because of a major increase in demand, imports were 21,200 tonnes versus 17,200 tonnes a month earlier. Thus, overall PP imports into Russia reached 143,200 tonnes in January-August 2020, compared to 120,100 tonnes a year earlier.

Venezuela PDVSA to install ship-to-ship hub away from shore

MOSCOW (MRC) -- Venezuela’s state-run oil firm PDVSA is informing customers about a new hub for doing ship-to-ship transfers for exports in a location away from shore, a shift that could mean higher costs and less supervision, according to three sources, said Hydrocarbonprocessing.

More than two-thirds of Venezuela’s oil exports leave from the Jose terminal on the country’s eastern coast, a large and heavily supervised facility with two monobuoys for exports and connected through pipelines to several crude upgraders. But with U.S. sanctions, PDVSA has since 2019 facilitated more crude exports via tanker transfers at Caquetios, an authorized ship-to-ship (STS) hub off the western coast near its Amuay refinery.

Some customers that were receiving Venezuela’s western crude grades off Amuay are now being directed to a spot about 12 miles north of Los Monjes islands in the Gulf of Venezuela, near the maritime border with Colombia and in front of the island of Aruba, according to the sources. It is not clear if the Caquetios STS area will remain in service.

PDVSA and Venezuela’s oil ministry did not reply to requests for comment. The nation’s maritime authority INEA did not immediately respond to requests for comment. The first vessel scheduled to receive crude at Los Monjes STS area is the Cape Bella V, which has remained outside Venezuelan waters waiting for a loading window, according to two of the sources and Refinitiv Eikon vessel tracking data.

It intends to load up to 1 MM barrels of Venezuelan Merey crude bound for an undisclosed destination, the sources added. Edge Maritime Inc, owner and commercial manager of the Cape Bella V, could not be reached for comment. Some of PDVSA’s customers have so far rejected the company’s proposal of moving their scheduled loading site from Amuay to Los Monjes because it is further from Venezuela’s shore, which increases the costs of tugboat services, maritime fuel and mandatory inspections, and also because is near the maritime border with Colombia, which could cause diplomatic conflict, the two sources said.

The Colombian government did not respond to a request for comment. But some shipowners not willing to load in Venezuelan waters might prefer this option to circumvent U.S. sanctions, the sources added.

The U.S. State Department and the U.S. Treasury Department, which oversees sanctions, did not immediately respond to requests for comment. The U.S. measures have been tightened this year in a bid to force Venezuela’s President Nicolas Maduro out of power after his 2018 re-election was considered a sham by most Western nations. They drove PDVSA’s oil exports from June through August to their lowest levels in almost 80 years.

But shipments have picked up in recent weeks, pushed up by long-term customers lifting as many crude cargoes as possible before a deadline imposed by Washington to wind down trade with Venezuela and a myriad of mostly inexperienced firms receiving PDVSA’s oil, according to the Eikon data and company documents.

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 resumed its low density polyethylene (LDPE) production after an unscheduled shutdown because of a technical issues at the ethylene unit. The plant"s customers said Angarsk Polymers Plant had brought on-stream its LDPE production by 28 August after the forced shutdown due to technical problems at its ethylene production. And the first shipments of polyethylene (PE) to customers began on 31 August. The outage lasted slightly over two weeks and began on 10 August The plant"s annual production capacity is about 75,000 tonnes.

According to MRC's ScanPlast report, June estimated LDPE consumption in Russia grew to 55,260 tonnes from 45,490 tonnes a month earlier. Kazanorgsintez raised its PE output after a spring shutdown for a scheduled turnaround. Russia's estimated LDPE consumption rose to 291,270 tonnes in January-June 2020, up by 5% year on year. Russian producers raised their production, and LDPE imports also increased.

We also remind that Russia's overall PE production totalled 1,712,400 tonnes in the first seven months of 2020, up by 58% year on year. Linear low density polyethylene (LLDPE) accounted for the greatest increase in the output. At the same time, overall PP production in Russia increased in January-July 2020 by 24% year on year to 1,063,700 tonne. ZapSibNeftekhim accounted for the main increase in the output.

Workers protest BP use of non-union labor at Toledo refinery

MOSCOW (MRC) -- Three dozen refinery workers represented by Toledo, Ohio’s local building trades union protested in front of their workplace in the city early Monday over BP’s hiring of non-union contractors from Texas to perform their work, reported Reuters.

BP is also considering using a mix of union and non-union labor for a multi-unit turnaround at the 155,000 barrel per day refinery in 2022, according to two sources familiar with the matter. The company plans to cut 15% of its workforce worldwide as part of chief executive Bernard Looney’s proposed shift to greater production of renewables away from oil and gas.

For the past two weeks non-union contractors have been working on an alkylation unit at the refinery, jointly owned by BP and Husky Energy, according to a source familiar with the matter. The work is expected to last two more weeks, the source said.

“BP is acting recklessly by bringing in out of state workers from Texas while we have high unemployment in the area,” said United Association Local 50 business manager Scott Lopez.

BP has traditionally employed local building trades laborers to perform refinery work in the region, Lopez said.

“The refinery is planning to invite qualified non-union contractors with proven safety and performance records to participate in sourcing activities for select refinery work,” according to BP spokeswoman Sarah Howell.

“We have a long history of providing thousands of good paying jobs to local workers and can only continue to do this if we have a competitive business,” Howell added.

As MRC wrote before, global oil demand may have already peaked, according to BP's latest long-term energy outlook, as the COVID-19 pandemic kicks the world economy onto a weaker growth trajectory and accelerates the shift to cleaner fuels.

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 ScanPlast report, Russia's overall PE production totalled 1,712,400 tonnes in the first seven months of 2020, up by 58% year on year. Linear low density polyethylene (LLDPE) accounted for the greatest increase in the output. At the same time, overall PP production in Russia increased in January-July 2020 by 24% year on year to 1,063,700 tonne. ZapSibNeftekhim accounted for the main increase in the output.

Sika expands mortar production in China

MOSCOW (MRC) -- Sika expanded its mortar production in China via commissioning a new facility in Chengdu, said the company.

Details on investment and plant capacity were not disclosed. Sika will benefit from strong demand in Chengdu, the capital of Sichuan province in southwestern China, as well as from the launch of new products and expansion of distributor network.

"Here in Chengdu we see a growing demand for Sika’s Building Finishing solutions due to large investments in the construction sector," Sika regional manager for Asia/Pacific Mike Campion said. "The strong business trend following the corona-related lockdown shows that we are on the right track: our mortar sales have increased significantly this year despite the crisis," Campion said.

"We will continue to expand the business and bring two additional plants onstream in the growing Chinese market over the next eighteen months," he added. Growth in China's construction industry amid the coronavirus pandemic will be backed by government investments in transportation and energy infrastructure, better intercity connections and reduction of environment pollution, Sika said.

Citing estimates, the company said construction in the world’s second-biggest economy is expected to grow 6.1% in 2021, with the average annual growth pegged at around 5% until 2029.

As MRC informed earlier, Sika is starting operations at a plant in Doha, Qatar, for the production of concrete admixtures. The country on the east coast of the Arabian peninsula is an attractive market thanks to large-scale infrastructure investment and a number of mega projects, both ongoing and planned.

According to MRC's DataScope report, Russian companies significantly raised their purchasing of PP in foreign markets in August partially because of a major increase in demand, imports were 21,200 tonnes versus 17,200 tonnes a month earlier. Thus, overall PP imports into Russia reached 143,200 tonnes in January-August 2020, compared to 120,100 tonnes a year earlier.

Sika is a specialty chemicals company with a leading position in the development and production of systems and products for bonding, sealing, damping, reinforcing, and protecting in the building sector and motor vehicle industry. Sika has subsidiaries in 101 countries around the world and manufactures in over 200 factories. Its more than 20,000 employees generated annual sales of CHF 7.09 billion in 2018.