COVID-19 - News digest as of 24.11.2020

1. Japan oil refiners chief expects gasoline demand to fall and OPEC+ to delay plan to boost output

MOSCOW (MRC) -- Sugimori, who chairs Japan's biggest oil refiner Eneos Holdings Inc, said that Japan's gasoline demand may fall deeper again in December and January due to the recent surge in the COVID-19 infections, reported Reuters. Japanese gasoline demand is expected to decline only by 2% in November from a year earlier. But the drop may expand to as much as 9% in December-January, he said, matching the fall seen in August when the number of coronavirus cases spiked. The head of the Petroleum Association of Japan (PAJ) said on Friday he expects a grouping of OPEC and its allies, known as OPEC+, will likely delay a plan to boost output in January and stick to existing curbs of 7.7 million barrels per day (bpd). "Given the weaker oil demand amid the resurgence of COVID-19 infections, OPEC+ is likely to keep the current curbs ... after January," Tsutomu Sugimori, president of PAJ, told a news conference.


Siemens, Deutsche Bahn launch local hydrogen trains trial

MOSCOW (MRC) -- Siemens Mobility and Deutsche Bahn have started developing hydrogen-powered fuel cell trains and a filling station which will be trialed in 2024 with view to replace diesel engines on German local rail networks, said Hydrocarbonprocessing.

The prototype, to be built by Siemens, is based on electric railcar Mireo Plus which will be equipped with fuel cells to turn hydrogen and oxygen into electricity on board, and with a battery, both companies said. Siemens mobility chief executive Michael Peter told Reuters the train combined the possibility to be fed by three sources in a modular system - either by the battery, the fuel cell or even existing overhead lines, depending on where it would run.

German railway operator Deutsche Bahn has not electrified 40% of its 33,000 kilometer (km) long network, on which it runs 1,300 fossil-fuel emitting diesel locomotives. Rail transport must be decarbonized over the long-term under European Union and national climate targets.

"Our hydrogen trains are able to replace diesel-fueled trains in the long term," Peter said. The new prototype will be fueled within 15 minutes, have a range of 600 km and a top speed of 160 km/hour. It will be tested between Tuebingen, Horb and Pforzheim in Baden Wuerttemberg state.

The main target market are operators of regional networks that typically re-order lots of 10 to 50 trains, Peter said. "We see a market potential of 10,000-15,000 trains in Europe that will need to be replaced over the next 10-15 years, with 3,000 alone in Germany," he said.

Each train will cost between five and 10 million euros (USD5.9-USD11.9 million), creating a market potential of 50-150 billion euros overall. The Berlin government expects green hydrogen to become competitive with fossil fuels over the long term and to play a key role in decarbonizing industry, heating and transport.

As MRC informed earlier, the downstream oil and gas industry is under intense pressure to improve efficiency, reduce greenhouse gas (GHG) emissions, comply with strict environmental regulations, and demonstrate that it can be part of a sustainable future. At the same time, plant operators face the ever-present challenge of lowering costs and maintaining profitable operations.

As MRC informed earlier, in late October, 2020, Siemens Smart Infrastructure and WUN H2 GmbH signed a contract to build one of the largest hydrogen production plants in Germany. It will be built in Wunsiedel in the north of Bavaria. With a power intake of six megawatts in the initial development phase, the plant will run solely on renewable energy and will be CO2-free. The electrolysis plant from Siemens Energy will have the capacity to produce over 900 tons of hydrogen per year in this first phase. When fully expanded, it will be able to supply up to 2,000 tons. Groundbreaking is scheduled for the end of this year and commissioning at the end of 2021.

We remind that in mid-October, 2020, Linde GmbH and Shell announced an exclusive collaboration agreement on ethane-oxidative dehydrogenation (E-ODH) technology for ethylene production. The catalytic process is an alternative route to ethane steam cracking, offering the potential of economic advantages, acetic acid co-production and significantly lower overall carbon footprint through electrification of power input.

Ethylene is the main feedstock for the production of polyethylene (PE).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,594,510 tonnes in the first nine months of 2020, up by 1% year on year. Only high denstiy polyethylene (HDPE) shipments increased.

UN-led pact commits oil and gas firms to tackle methane emissions

MOSCOW (MRC) -- Dozens of oil and gas companies have committed to report more accurately on and, ultimately, reduce emissions of the potent greenhouse gas methane which is liable to leak from oilfields and pipelines, said Hydrocarbonprocessing.

Oil majors such as BP, Royal Dutch Shell, Eni, Equinor and Total have signed up for the Oil and Gas Methane Partnership (OGMP) under the umbrella of the United Nations, the European Union and non-governmental organization (NGO) the Environmental Defense Fund.

Methane has over 80 times the heat trapping potential of carbon dioxide during its first 20 years in the atmosphere and recent analysis of satellite data suggests leaks from the oil and gas sector are much bigger than initially thought. The new standard aims to deliver a 45 per cent reduction in the industry’s methane emissions by 2025, and a 60-75 per cent reduction by 2030.

While OGMP says its 62 members represent 30% of the world’s oil and gas production, U.S. oil and gas majors such as Chevron and Exxon are not involved. Nor are any Russian producers nor any national oil companies apart from the United Arab Emirate’s Adnoc.

The OGMP comes on top of individual corporate pledges to reduce methane leaks, and the Oil and Gas Climate Initiative (OGCI) which is overseen by the firms themselves and includes U.S. majors and some national oil companies. It has also set a target of reducing methane intensity to 0.25% by 2025 across its members’ operations.

The OGMP says it differs from other initiatives in that it requires members to report methane emissions at an asset level, rather than across the whole company, and in that it covers facilities in joint ventures, even if the operator of such sites has not subscribed to OGMP.

It puts more pressure on oil and gas producers to actually measure methane leaks, rather than extrapolate from engineering calculations, and also covers a company’s whole supply chain - crucial for methane-heavy commodities like gas, which often travels hundreds of kilometers through complex infrastructure.

The OGMP will publish a annual public report on companies’ performance against targets, said Manfredi Caltagirone, energy and climate manager at the UN environment program. The EU, the world’s biggest gas import market which gets most of its gas from Russia, is currently revamping its own methane regulations.

As MRC informed previously, 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 estimated PE consumption totalled 1,594,510 tonnes in the first nine months of 2020, up by 1% year on year. Only high denstiy polyethylene (HDPE) shipments increased. At the same time, PP shipments to the Russian market reached 880,130 tonnes in the nine months of 2020 (calculated using the formula: production minus exports plus imports, excluding producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.

Output of chemical products in Russia grew by 6.3% in Jan-Oct 2020

MOSCOW (MRC) -- Russia's output of chemical products rose in October 2020 by 7.2% year on year. At the same time, production of basic chemicals grew in the first ten months of 2020 by 6.3% year on year, according to Rosstat's data.

According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the January-October output.

Production of benzene went up to 106,000 tonnes in October 2020, compared to 92,300 tonnes a month earlier. In September, several producers shut down their production capacities for schedule turnarounds. Overall output of this product reached 1,116,600 tonnes over the stated period, down by 1.8% year on year.

October production of sodium hydroxide (caustic soda) were 109,000 tonnes (100% of the basic substance) versus 108,000 tonnes a month earlier. Overall output of caustic soda totalled 1,054,600 tonnes in the first ten months of 2020, down by 1.6% year on year.

1,985,000 tonnes of mineral fertilizers (in terms of 100% nutrients) were produced in October versus 2,014,000 tonnes a month earlier. Overall, Russian plants produced about 20,500,000 tonnes of fertilizers in January-October 2020, up by 3.5% year on year.

Last month's production of polymers in primary form grew to 857,000 tonnes from 852,000 tonnes in September. Overall output of polymers in primary form totalled 8,340,000 tonnes over the stated period, up by 17% year on year.

Cepsa chemicals earnings rise on higher margins

MOSCOW (MRC) -- Cepsa (Madrid, Spain) has reported a 50% rise year on year (YOY) in third quarter clean EBITDA for its chemicals business to EUR92 million (USD109 million), also up 7% sequentially from the second quarter, due mainly to higher margins in its linear alkylbenzene (LAB) segment and a rebound in phenol/acetone margins, said Chemweek.

The improvement in the quarter was driven by the "strong performance" of LAB, currently in high demand as a raw material for detergents given the COVID-19 pandemic, and higher margins in all business lines, it says. Chemical product sales volumes were down 4% YOY at 693,000 metric tons, but up slightly on the second quarter.

LAB sales volumes at 178,600 metric tons were up slightly on the prior-year period and the second quarter, but registered higher margins, “especially the Spanish and Canadian plants,” Cepsa says. Product sales volumes in the phenol/acetone segment of 369,500 metric tons were 8% lower YOY and 3% down on the second quarter, impacted by a decrease in global demand due to the pandemic, although margins improved. Sales of solvents were flat YOY at 144,700 metric tons and up 8% sequentially, also with better margins, it adds.

Growth capital expenditure (capex) in the third quarter totaled €8 million, mainly on the revamping of the company’s LAB plant at Puente Mayorga, Spain.

The company’s chemical business performed “extremely well, proving to be resilient in the most adverse scenarios, and highlighting the importance and benefits of diversification in the current macroeconomic context,” Cepsa says. Despite its refining business remaining under pressure with European margins at recent record lows, the strategic locations of its refineries, their operational flexibility and strong integration with the chemicals and marketing businesses “provides greater optionality to optimize margins and mitigate exposure to the Iberian market,” it says.

Cepsa’s group clean EBITDA of EUR277 million for the third quarter was down 51% YOY but an improvement of 54% over the second quarter of this year. Clean net income on a current cost of supply basis was EUR39 million, plunging 77% compared to the prior-year period but swinging from a loss of EUR93 million in the second quarter.

As MRC informed earlier, Cepsa (Madrid, Spain) reports a 30% rise year on year (YOY) to EUR86 million (USD101 million) in clean EBITDA on a current cost of supply (CCS) basis for its chemicals business in the second quarter, due to a rebound in margins and volumes in the phenol/acetone segment and “high demand” in the detergents sector.

According to MRC's ScanPlast report, Russia's estimated consumption of PC granules (excluding imports and exports to/from Belarus) rose in the first three quarters of 2020 by 32% year on year to 75,600 tonnes (57,200 tonnes a year earlier).