IEA raises 2022 average crude oil price assumption to USD79.40 a bbl

IEA raises 2022 average crude oil price assumption to USD79.40 a bbl

MOSCOW (MRC) -- The International Energy Agency (IEA) has upped its average Brent crude oil price assumption for 2022 to USD79.40 a bbl, but predicted a rally may ease off as prices that hit a three-year high last month push up global production, reported Reuters.

The Paris-based IEA said on Tuesday that much of the uptick in supply is due to come from the United States.

A hurricane battered the main US production and export hub in the Gulf coast in late August, but US output made up for half the increase in global oil production last month.

But the IEA said in its monthly report that US production, despite climbing, would not return to pre-pandemic levels until the end of next year. It is due to account for 60% of non-OPEC+ supply gains in 2022.

"The world oil market remains tight by all measures, but a reprieve from the price rally could be on the horizon ... due to rising oil supplies," the IEA said.

"Current prices provide a strong incentive to boost (US) activity even as operators stick to capital discipline pledges."

The IEA's price assumption reflects forward prices for Brent crude. The agency does not always include a reference to price assumptions in its report, but does so when it considers the assumption important to understanding its oil supply and demand forecasts, the agency said.

The IEA price assumption of USD79.40 a bbl for Brent in 2022 is USD2.60 higher than in the agency's last monthly report. The agency's assumption for 2021 is USD71.50 a bbl.

"Global oil demand is strengthening due to robust gasoline consumption and increasing international travel as more countries re-open their borders," the IEA said.

But it said an uptick in coronavirus cases in Europe, weaker industrial activity and higher oil prices could dent demand.

The IEA kept its outlook for oil demand growth largely steady at 5.5 MMbpd for 2021 and 3.4 MMbpd next year.

As MRC wrote previously, Japan's largest refiner ENEOS currently sees a 150% year-on-year increase in fuel oil demand from the power sector for winter, but can only meet up to a 100% surge, said ENEOS Holdings Chairman Tsutomu Sugimor Nov. 25.

We remind that in the first week of June, 2021, Eneos Corp restarted the 168,000-bpd No.1 CDU at its Kashima refinery, east of Tokyo, after it was shut on May 11 due to system trouble. The refiner, which is a unit of Eneos Holdings Inc, restarted the 105,000-bpd No.3 CDU at its Mizushima-B refinery, western Japan, in early June, 2021. The CDU was shut on Feb. 25 for turnaround.

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,868,160 tonnes in the first nine months of 2021, up by 18% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market were 1,138,510 tonnes in January-September 2021, up by 30% year on year. Supply of propylene homopolymer (homopolymer PP) and block-copolymers of propylene (PP block copolymers) increased, whereas supply of injection moulding statistical copolymers of propylene (PP random copolymers) decreased significantly.
MRC

EU plans to cut methane emissions from oil and gas industry

EU plans to cut methane emissions from oil and gas industry

MOSCOW (MRC) -- The EU has drafted legislation to reduce methane emissions by forcing oil and gas companies to report their output and find and fix leaks of the gas that is the second-biggest cause of climate change, according to a draft seen by Reuters.

Oil and gas operators in the European Union would have to submit estimates for the methane emissions of their installations within 12 months after the regulation comes into force, the draft legislative proposal said. The European Commission is due to present the draft in December and it is still subject to change.

Once proposed by the Commission, the regulation needs to be negotiated by the European Parliament and member states, a process that can take up to two years. Two years after the regulation takes effect, operators would be required to report actual measurements of the emissions. They would also have to carry out regular surveys for the detection of methane leaks and their repair.

Brussels has faced pressure from campaigners and some investors to clamp down on methane emissions associated with imported gas, by forcing companies abroad to fix methane leaks to sell their gas into Europe - a requirement that was not included in the draft proposal. Methane is emitted from sources including leaky fossil fuel infrastructure, livestock farming and landfill sites. It has a higher heat-trapping potential than CO2 but it breaks down in the atmosphere faster, meaning deep cuts in methane emissions by 2030 could have a rapid impact on slowing global warming.

As per MRC, ConocoPhillips has long been committed to reducing emissions from its facilities, including the development of new technologies designed to better detect where the sources of these emissions are and allowing them to prioritize their resources to address larger leaks faster. “To battle fugitive methane emissions from our facilities more effectively, we knew we had to employ the latest technologies and use the best tools available to us” said Khalid Soofi, Geoscience Fellow at ConocoPhillips.

According to MRC's ScanPlast report, PP shipments to the Russian market were 1,138,510 tonnes in January-September 2021, up by 30% year on year. Supply of propylene homopolymer (homopolymer PP) and block-copolymers of propylene (PP block copolymers) increased, whereas supply of injection moulding statistical copolymers of propylene (PP random copolymers) decreased significantly.
MRC

Venezuelan petrochemicals arrive in US despite Washington efforts to limit trade

Venezuelan petrochemicals arrive in US despite Washington efforts to limit trade

MOSCOW (MRC) -- Venezuelan petrochemicals produced by joint ventures between state-run chemical firm Pequiven and foreign partners have arrived in the United States, despite Washington's efforts to limit trade with the OPEC oil and gas producer, reported Reuters.

At least two cargoes of methanol, a widely used industrial product whose prices have soared this year, have discharged at Houston area ports since October amid a rapid expansion of the South American country's global sales of petrochemicals and oil byproducts, according to tanker tracking and US customs data.

The shipments represent a new and unreported effort by Venezuela to boost revenues despite US sanctions on its oil industry that cut vital crude exports to the lowest in 77 years.

US sanctions were designed to oust President Nicolas Maduro, whose last election Washington views as a sham. Maduro insists the 2018 vote was free and fair.

Mitsubishi Corp resumed exports of methanol to the United States in 2021 from its Venezuelan joint venture Metor after a suspension of a couple years, a Mitsubishi spokesperson told Reuters. Metor's shareholders include Petroquimica de Venezuela, or Pequiven.

Venezuela's main oil port of Jose was listed as the point of origin on US customs records of one of the two methanol shipments, but both sailed directly from Venezuela, Refinitiv Eikon tracking data showed.

Methanol, produced in Venezuela from natural gas, can be found in everyday products including gasoline, paints, carpeting and plastics. US imports have outweighed exports in recent years, according to IHSMarkit.

On Oct. 7-11, tanker PVT Aurora discharged about 16,900 metric t of Venezuelan methanol in Texas. A portion of the cargo was handled by Intercontinental Terminals Company's (ITC) Deer Park chemicals terminal, according to Refinitiv Eikon data.

A second 20,000-ton cargo of Venezuelan methanol followed a similar route in November on tanker Sakura Advance, which discharged some of its cargo in Houston on Nov. 11-13 and another parcel at South Louisiana Port days later, according to the Eikon data.

Italy's Eni also produces methanol in Venezuela via Supermetanol, its 50:50 venture with Pequiven.

"Eni's affiliate holds a stake in a methanol plant located in Venezuela and deals with the marketing of its equity production in respect of all applicable laws and regulations related to economic and financial sanctions, trade embargoes and similar laws," an Eni spokesperson said.

Pequiven and PDVSA have ramped up exports of petrochemicals and oil byproducts that are not as valuable as crude and until recently had not been a priority, an analysis of internal data from the two companies showed.

US sanctions and warnings to traditional buyers of Venezuelan crudes sharply cut PDVSA's exports in recent years. But shipments of petrochemicals and oil byproducts have climbed, including exports of methanol, sulfur pastilles, urea, natural gasoline, light virgin naphtha and petroleum coke, according to the data. This was confirmed by three people familiar with the matter, who declined to be identified as they were not authorized to speak publicly.

Low prices offered to buyers for the petrochemicals from Venezuela have boosted exports, generating income that has partially been used by some of Pequiven's joint ventures to reopen and revamp production units, the people said.

A more reliable supply of natural gas by PDVSA to Pequiven's complexes also helped boost petrochemical output.

"The plants are in recovery process as proceeds from sales have allowed," one of the people said. "Even the United States is opening its doors to Venezuelan methanol."

From January to October, PDVSA and Pequiven exported about 1.75 MM tons of petrochemicals and byproducts, putting the trade on track this year to double the 1.03 MM tons exported for the whole of 2020, according to the internal data.

Shipments of methanol this year ranged between 20,000 and 60,000 metric t per month, mostly bound for the Netherlands, Spain, Japan and China, according to the data and the three people.

As MRC reported earlier, in April 2021, Origin Materials, Inc., the world’s leading carbon negative materials company, and Mitsubishi Gas Chemical, Inc., a global leader in basic and fine chemicals and advanced materials, announced a partnership to industrialize and manufacture advanced chemicals and materials built on the Origin Materials technology platform.

We also remind that Japan's Mitsubishi Corp will invest 2 trillion yen (USD17.54 B) by 2030 in alternative energies such as renewables and hydrogen to drive its decarbonization efforts and cut emissions.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,868,160 tonnes in the first nine months of 2021, up by 18% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market were 1,138,510 tonnes in January-September 2021, up by 30% year on year. Supply of propylene homopolymer (homopolymer PP) and block-copolymers of propylene (PP block copolymers) increased, whereas supply of injection moulding statistical copolymers of propylene (PP random copolymers) decreased significantly.
MRC

Reliance and Saudi Aramco call off deal amid valuation differences

Reliance and Saudi Aramco call off deal amid valuation differences

MOSCOW (MRC) -- Reliance Industries and Saudi Aramco have called off a deal for the state oil giant to buy a stake in the oil-to-chemicals business of the Indian conglomerate due to valuation concerns, sources with knowledge of the matter said, as per Reuters.

Talks broke down over how much Reliance's oil-to-chemicals (O2C) business should be valued as the world seeks to move away from fossil fuels and reduce emissions, they said. Instead, Reliance will now focus on signing multiple deals with companies to produce specialty chemicals for higher margins, one of the sources said.

Aramco, the world's top oil exporter, signed a non-binding agreement to buy a 20% stake in Reliance's O2C business for USD15 B in 2019. Last week, the companies announced they would re-evaluate the deal, ending two years of negotiations.

The collapse of the deal reflects the changing global energy landscape as oil and gas companies shift away from fossil fuel to renewables. Valuations of refining and petrochemical assets have gone down especially after the recent COP26 climate talks in Glasgow, a second source involved in the deal discussions said. Despite this, Reliance had stuck to the USD75 B valuation for the O2C business made in 2019, he said.

"Evaluation by consultants showed a significant cut in valuation...more than a 10% cut," he added. "Reliance has highlighted the difficulty of separating Jamnagar from the clean energy business as a reason to not complete the transaction, although we suspect business alignment and valuation were also key reasons," Bernstein wrote in a recent note, referring to Reliance's huge refining complex in Gujarat state. A second source familiar with due diligence said the procedure was halted in "early stage assessment".

Reliance was seeking advice from Goldman Sachs and Aramco was seeking help from Citigroup, sources said. The banks declined to comment. Jefferies has cut its valuation of Reliance's energy business to USD70 B from USD80 B, while Kotak Institutional Equities has cut the enterprise value of O2C business to USD61 B. Bernstein values that business at USD69 B.

Without confirming whether the deal has been called off, Saudi Aramco said it has a longstanding relationship with Reliance and will continue to look for investment opportunities in India. Reliance said it would continue to be Saudi Aramco's preferred partner for investments in the private sector in India and will collaborate with Saudi Aramco & SABIC for investments in Saudi Arabia. Reliance is the biggest Indian buyer of Saudi oil.

As per MRC, Reliance Industries (RIL) has taken off-stream one of its polypropylene (PP) plants in Jamnagar, India for a scheduled maintenance. Thus, this unit with an annual capacity of 400,000 tons/year of PP was shut on 5 August 2021 and will remain idle for approximately one month. The local supply is expected to take a hit from the shutdown, especially when demand is recovering from the COVID-19 outbreak.

According to MRC"s ScanPlast report, Russia"s estimated PE consumption totalled 1,868,160 tonnes in the first nine months of 2021, up by 18% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market were 1,138,510 tonnes in January-September 2021, up by 30% year on year. Supply of propylene homopolymer (homopolymer PP) and block-copolymers of propylene (PP block copolymers) increased, whereas supply of injection moulding statistical copolymers of propylene (PP random copolymers) decreased significantly.
MRC

Serbia agrees to sell HIP Petrohemija to to Gazprom Neft subsidiary

Serbia agrees to sell HIP Petrohemija to to Gazprom Neft subsidiary

MOSCOW (MRC) -- Serbia has agreed on all terms on the sale of the petrochemicals producer HIP Petrohemija to Russian-controlled Serbian oil and gas company NIS, according to SeeNews with reference to President Aleksandar Vucic's statement.

"Everything has been agreed and I can say that this is an important piece of news for the workers of the company," Vucic said in a video file posted on the website of Tanjug news agency on Wednesday.

Dragan Stevanovic, state secretary at the economy ministry, said last month that the government officially started talks for the sale of Petrohemija to NIS, in which Russia's Gazprom owns a 56.15% stake.

"A total of 10% of the costs of Petrohemija depends on the price of gas, and the only people with whom we can reach such an agreement are the Russians," Vucic said.

NIS placed the sole bid in the government tender for selecting a strategic partner in HIP Petrohemija in October. The strategic partner intends to inject EUR150 million (USD168 million) in the capital of HIP Petrohemija, acquiring a stake of up to 90% in the company's capital.

As MRC informed earlier, in 2014, HIP Petrohemija began preparations for the integration of production with the Serbian NIS. The expansion and deepening of the industrial and technological ties of the companies, initiated by the government, was to be completed by March 2014. The facilities of both companies are located in the town of Pancevo, northeast of Belgrade.

It was also reported that in late 2012, HIP Petrohemija completed the modernization and expansion of a high density polyethylene (HDPE) plant. The capacity of the new unit increased by 30% and became over 90,000 tonnes per year. Somewhat earlier, an ethylene plant with a capacity of 200,000 tonnes per year was put into operation. The HDPE plant and ethylene plant had been closed since early September 2011 when the renovation and expansion project began.

The Serbian government owns a 75.27% stake in the capital of HIP Petrohemija, NIS owns 20.86%, Russia's Lukoil controls 3.09%, while the remainder is in the hands of smaller shareholders.

HIP Petrohemija owns petrochemical complexes in Pancevo, Elemir and Crepaja. It specialises in producing high-density polyethylene (HDPE), low-density polyethylene (LDPE) and other petrochemical products with an annual production capacity of 700,000 tonnes.
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