Shell Plc’s trading unit Shell Western Supply and Trading, along with US refiners Valero Energy and Marathon Petroleum, are rushing to secure Ecuadorian barrels after America banned imports of Russian crude, according to Hydrocarbonprocessing.
Ecuador’s state oil company EP Petroecuador held back-to-back meetings this week in Louisiana with several refiners and trading houses, according to Petroecuador’s oil trading manager, Pablo Noboa.
Fuelmakers and trading companies are seeking to plug a supply gap in an already tight market, sparking a hunt to replace the Russian barrels. Oil prices have been swinging wildly on mounting concerns over the Russian invasion of Ukraine. Brent futures are trading at about USD100 after surging to a 14-year high earlier this month. The ban on Russian oil includes straight-run fuel oil, a feedstock used to replace heavy crude that’s similar to what Ecuador produces.
“US refiners and traders are eager to sign mid-and long-term supply contracts after Russia invaded Ukraine,” Noboa said in an interview in New Orleans. “When oil in the global market is scarce, it makes sense to try to secure a steady supply.”
The prospect of US restrictions on Russian crude had refiners in Texas asking suppliers in Mexico and Brazil about long-term availability and prices even before the invasion of Ukraine. Brazil, which typically supplies fuel oil to Singapore and Europe, sold one cargo to the US Gulf Coast in February.
Marathon, the largest US fuelmaker, is seeking 11 to 22 cargoes of Ecuadorian heavy sour oil over 11 months, starting as soon as June, Noboa said. Jamaica’s state-owned oil company Petrojam Ltd is looking for a similar arrangement for 11 cargoes and Shell Western is seeking to extend an existing 3-year supply contract that expires in December 2023. Marathon and Valero didn’t immediately return emails seeking comment.
Shell is willing to pay more for the oil as long as it can load from Ecuador’s OCP terminal that handles larger vessels, he said. Valero is also seeking to secure a supply contract. Shell declined to comment.
Since the invasion of Ukraine, Petrojam has been reaching out to countries including Guyana and Argentina, to secure additional supplies of crude oil and fuels. It’s talking to Nigerian National Petroleum Corp. about supplying 4 MM bbl of crude annually, and is “currently in dialogue with Petroecuador and Ecopetrol in Colombia to establish term supply agreements,” General Manager Winston Watson said in a statement.
Ecuador, a former OPEC member, plans to boost oil production amid rising crude prices. “It’s now or never, we won’t have this window of opportunity of good prices” again, Petroecuador chief Italo Cedeno said late Tuesday in an online presentation. With the help of the private sector, the company plans to increase production by more than half in four years, to 763,000 bpd.
As MRC wrote before, Shell faces writedowns on USD400 MM in Russian downstream assets, it said, having announced USD3 B worth of other projects previously. The oil major announced on Feb. 28 that it would quit its ventures in Russia with Gazprom and related entities including the flagship Sakhalin 2 LNG plant and the Nord Stream 2 pipeline project.
We remind that Shell Chemicals expects its new petrochemical complex in southwest Pennsylvania to come online by the end of 2022, Royal Dutch Shell CFO Jessica Uhl said February 3, during the company's Q4 2021 earnings call.
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