Crude oil market headed for surplus as Omicron coronovirus variant impact muted

Crude oil market headed for surplus as Omicron coronovirus variant impact muted

MOSCOW (MRC) -- Oil supply will soon overtake demand as some producers are set to pump at or above all-time highs, the International Energy Agency (IEA) said on Wednesday, while demand holds up despite the spread of the Omicron coronavirus variant, according to The Economic Times.

"This time around, the surge is having a more muted impact on oil use," the Paris-based IEA said in its monthly oil report.

"While the steady rise in supply could see a significant surplus materialise in 1Q22 and going forward, available data suggest that 2022 is starting off with global oil inventories well below pre-pandemic levels," it said.

The United States, Canada and Brazil are set to pump at all-time highs for the year while Saudi Arabia and Russia could also break their output records.

"World oil supply in 2022 has the potential for a massive Saudi-driven gain of 6.2 million bpd (barrels per day), provided the OPEC+ alliance continues to unwind the remainder of its record 2020 supply cut."

OPEC and other producers including Russia, a group known as OPEC+, is unwinding record output cuts put in place last year to counter a fall in demand caused by the pandemic.

Its plan calls for adding back 400,000 bpd of production per month to fully unwind the cuts by the end of September, although some countries are struggling to raise output, with OPEC+ in December falling 790,000 bpd short of its target.

Eased lockdown measures mean mobility remains robust, the IEA added, leading the energy watchdog to increase its oil demand estimate for last year and 2022 by 200,000 barrels per day (bpd).

"Supply disruptions and underperformance by OPEC+ are tempering growth expectations for 2022," it said.

But the IEA warned that with commercial oil and fuel stocks in OECD countries at their lowest levels in seven years, any dents in supply could render the oil market in 2022 volatile.

As MRC informed before, earlier this month, Saudi Aramco signed 10 agreements with South Korean firms to advance its downstream strategy and support the development of low-carbon energy solutions, while creating new financing options for the company.

We remind that in June 2020, Aramco finalized its USD69 billion acquisition of a 70% stake in Saudi Basic Industries Corp., the Middle East's biggest petrochemical maker. SABIC reported more than a fivefold year-on-year increase in its Q3 net profit to USD1.49 billion thanks to higher average sales prices.

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 2,265,290 tonnes in the first eleven months of 2021, up by 14% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market were 1,363,850 tonnes in January-November, 2021, up by 25% year on year. Supply of homopolymer PP and block-copolymers of propylene (PP block copolymers) increased, whereas supply of injection moulding PP random copolymers decreased significantly.
MRC

Reliance and Abu Dhabi Chem to jointly build first chlor-alkali plant n the UAE

MOSCOW (MRC) -- Reliance Industries Limited (RIL) has recently entered a joint venture with Abu Dhabi Chemical to build the first petrochemical plant to produce Chlor-alkali products in the UAE, according to CommoPlast.

The new plant will be located in Ruwais, UAE and will produce Ethylene Dichloride (EDC) and Polyvinyl Chloride (PVC).

The USD2 billion project is named TA’ZIZ EDC & PVC. Its output will meet the growing demand in the local market, as well and in Southeast Asia and Africa.

The project is preliminarily designed to produce 580,000 tons/year of EDC, which would need to use 790,000 tons of chorine per annum. The downstream PVC plant is expected to have an annual output of 360,000 tons/year.

Market sources said that the excess EDC supply would be exported to India, where the demand expands at a healthy pace.

As MRC informed before, in November 2021, Reliance Industries and Saudi Aramco decided to re-evaluate their agreement for the Middle Eastern producer to buy a stake in the refining and petrochemical business of India"s biggest private refiner, and both companies would look at broader areas of cooperation due to the changing energy scenario.

According to MRC's ScanPlast report, Russia's estimated consumption of unmixed PVC was 911,400 tonnes in January-November 2021, up by 7% year on year. The emulsion and suspension PVC market showed an increase in demand. November estimated consumption of SPVC in Russia totalled 79,340 tonnes versus 76,720 tonnes in October. Russian producers reduced their exports, and their output also increased after the completion of scheduled maintenance works.

Reliance Industries is one of the world's largest producers of polymers. The company produces polypropylene, polyethylene and polyvinyl chloride and other petrochemical products.
MRC

SABIC and ExxonMobil launch their joint petrochemical project in US Gulf Coast

MOSCOW (MRC) -- ExxonMobil and SABIC have announced the successful startup of Gulf Coast Growth Ventures world-scale manufacturing facility in San Patricio County, Texas, reported Reuters.

The new facility will produce materials used in packaging, agricultural film, construction materials, clothing, and automotive coolants. The operation includes a 1.8 MM metric tpy ethane steam cracker, two polyethylene (PE) units capable of producing up to 1.3 MM metric tpy, and a monoethylene glycol (MEG) unit with a capacity of 1.1 MM metric tpy.

“We built this state-of-the-art chemical plant ahead of schedule and below budget, by leveraging our global projects expertise in execution planning and delivery, while keeping everyone safe and healthy,” said Karen McKee, president of ExxonMobil Chemical Company. “This is a remarkable achievement that positions us well to help meet growing global demand for performance products while providing meaningful investment in the US Gulf Coast.”

ExxonMobil and SABIC have partnered together for 40 years on petrochemical projects. Gulf Coast Growth Ventures represents their first JV in the Americas. SABIC is the operating partner for two long-standing JV with ExxonMobil in the Kingdom of Saudi Arabia, Kemya in Jubail and Yanpet in Yanbu. Ownership interests in Gulf Coast Growth Ventures is evenly divided with 50% to ExxonMobil and 50% to SABIC. ExxonMobil is the site operator.

As MRC wrote previously, a little more than two years after announcing San Patricio County was selected as the site for its new ethylene cracker plant, ExxonMobil and Saudi Basic Industries Corp. celebrated the groundbreaking for the new facility (September 2019).

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

According to MR''s ScanPlast report, Russia's estimated PE consumption totalled 2,265,290 tonnes in the first eleven months of 2021, up by 14% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market were 1,363,850 tonnes in January-November, 2021, up by 25% year on year. Supply of homopolymer PP and block-copolymers of propylene (PP block copolymers) increased, whereas supply of injection moulding PP random copolymers decreased significantly.

ExxonMobil is the largest non-government owned company in the energy industry and produces about 3% of the world's oil and about 2% of the world's energy.

Saudi Basic Industries Corporation (Sabic) ranks among the world's top petrochemical companies. The company is among the world's market leaders in the production of polyethylene, polypropylene and other advanced thermoplastics, glycols, methanol and fertilizers.
MRC

PP imports into Kazakhstan increased by 10% in January-November 2021, exports down by 24%

MOSCOW (MRC) - Imports of polypropylene (PP) in Kazakhstan grew to 39,700 tonnes in first eleven months of this year, up 8% compared to the same period of 2020. PP exports increased more significantly by 24%, reported MRC analysts.

November PP shipments to Kazakhstan grew to 2,400 tonnes from 3,600 tonnes a month earlier, local converters decreased their purchasing of homopolymer PP in Russia and Azerbaijan. Overall PP imports into the country exceeded 39,700 tonnes in the first eleven months of the year, compared to 36,600 tonnes a year earlier. At the same time, the stable work of the local producer during this period of time allowed increasing the export sales of polypropylene by almost a quarter.

November imports of homopolymer PP and propylene copolymers increased to 2,100 tonnes and 300 tonnes, respectively, versus over 2,300 tonnes and 1,300 tonnes a month earlier, local companies reduced purchases pipe PP in Russia and PP-homo in Azerbaijan. Overall imports of homopolymer PP and propylene copolymers reached 28,600 tonnes and 11,200 tons, respectively, in January-November 2021, compared to 28,600 tonnes and 8,100 tonnes a year earlier.

November exports of PP from Kazakhstan increased to 1,600 tonnes against 800 tonnes in October. Kazakhstan's PP exports over the first eleven months dropped to 28,000 tonnes, whereas this figure was 22,700 tonnes a year earlier. About 92% of total exports accounted for Russia.


MRC

Shell to supply crude to Pemex newly aquired Texas refinery

Shell to supply crude to Pemex newly aquired Texas refinery

MOSCOW (MRC) -- Mexican state oil company Pemex on Thursday signed a long-term crude supply contract with Royal Dutch Shell Plc as part of its acquisition of the Deer Park refinery in Texas, reported Reuters.

Pemex and Shell in May announced the transaction, which is worth almost USD600 MM and will make the Mexican firm the sole owner of the refinery near Houston. The facility has capacity to process 340,000 bpd.

Shell will supply about 200,000 bpd of foreign and US crude to the plant for at least 15 years, according to a source and a July document seen by Reuters.

A Pemex unit expects to supply up to 115,000 bpd of Mexican crude to the refinery and receive about 230,000 bpd of refined products that could go to Mexico. The transfer secures for Mexico a greater supply of fuel produced by the plant while reducing sales to gasoline retailers in the US.

Pemex separately agreed to supply the adjacent Shell Chemical plant with feedstocks, and made two-year job offers to the plant's salaried workforce, two sources said.

Pemex Chief Executive Officer Octavio Romero in a statement pledged to operate the plant safely and protect its staff and the environment. The refinery's new board of directors held its first meeting on Thursday, he said.

If Pemex suspends or reduces the volumes that are part of its supply contract, it would have to pay Shell between $50 MM and USD190 MM depending on the year it does so, according to the July document.

Pemex's fuel production declined by almost half between 2016 and 2020 and its refineries ran at less than 50% of their capacity in 2020. In contrast, Deer Park ran at 78% of capacity in 2020.

As MRC wrote before, Mexico carried out the transaction as agreed: USD596 MM for the refinery's assets - equivalent to Shell's 50% stake in the JV's debt - as well as the liquidation of the USD596 MM that made up Pemex's stake in the refinery.

We remind that Royal Dutch Shell plc. said in November, 2021, that its petrochemical complex of several billion dollars in Western Pennsylvania is about 70% complete and in the process to enter service in the early 2020s. The plant's costs are estimated to be USD6-USD10 billion, where ethane will be transformed into plastic feedstock. The facility is equipped to produce 1.5 million metric tons per year (mmty) of ethylene and 1.6 mmty of polyethylene (PE), two important constituents of plastics.

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

According to MR''s ScanPlast report, Russia's estimated PE consumption totalled 2,265,290 tonnes in the first eleven months of 2021, up by 14% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market were 1,363,850 tonnes in January-November, 2021, up by 25% year on year. Supply of homopolymer PP and block-copolymers of propylene (PP block copolymers) increased, whereas supply of injection moulding PP random copolymers decreased significantly.

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.
MRC