How China manages refined fuel exports

How China manages refined fuel exports

China's refined fuel exports are likely to sink in 2022 to the lowest in seven years as the country seeks to maintain ample domestic supplies while refinery output posts a rare decline, said Reuters.

Regional rivals like India and South Korea are the probable primary beneficiaries of China's export cuts, which allow them to step up to fill shortages in Europe and elsewhere after the Ukraine crisis strained global fuel markets.

Beijing manages exports of gasoline, diesel and jet fuel under a quota system, issuing several batches of allocations over a year and viewing product shipments to global markets as a tool to manage domestic supply and demand balances.

Most quotas go to state oil groups, including China National Petroleum Corp, China Petrochemical Corp, China National Offshore Oil Corp, Sinochem Holdings and China National Aviation Fuel Company. Mega refiner Zhejiang Petrochemical Corp is the only private company with export allowances.

Through 2019 the government specified quotas by product, but since then it has allowed exporters to decide what to export from a general allocation.

Exports of very low sulphur fuel oil, a marine fuel that meets International Maritime Organization standards, are managed under a separate quota system. Bunker fuel volumes from bonded zones - which are considered as exports - have been rising since 2020 as China works to build its eastern port of Zhoushan into a regional shipping fuel hub that rivals Singapore.

As per MRC, five major Chinese companies including two of the country's largest oil producers will delist from the New York Stock Exchange. Sinopec and PetroChina -- two of the world's biggest energy firms -- will apply for "voluntary delisting" of their American depositary shares, the companies said in separate statements. The Aluminum Corporation of China, also known as Chalco, as well as China Life Insurance and a Shanghai-based Sinopec subsidiary.
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Pemex requests USD6.5 bn more funding for refinery

Pemex requests USD6.5 bn more funding for refinery

Mexico's state-oil company Pemex requested this week almost USD6.5 bn in additional funding from the government to pay for works at the"'Dos Bocas" refinery this year, according to a document and two sources familiar with the matter, said Reuters.

The additional funding is to cover works not initially included in the project's proposal, higher construction and startup costs, according to the document and sources. Mexican President Andres Manuel Lopez Obrador considers the new refinery a signature project and has argued it will help the country cut a longstanding dependence on gasoline and diesel imports.

The additional funding would take the refinery's price tag to USD14.6 B, the documents and the sources said, far above the original budget of USD8.9 B. The document, seen by Reuters, cites higher costs for building "associated" components in infrastructure needed to operate the refinery as the main reason for the increase.

Petroleos Mexicanos' (Pemex) board approved - by a majority but not unanimous vote - to request USD5.6 B from the government to continue the works, as well as USD853 MM for costs associated with the start-up of the Olmeca refinery, commonly known as Dos Bocas after the area where it is being built.

Pemex will own and operate the refinery, Mexico's eighth. Pemex, Mexico's finance ministry and energy ministry did not immediately respond for a request for comment. Up until June, USD10.3 B had been spent on the refinery, the document showed.

In April, sources close to the project told Reuters the refinery would cost at least USD14 B while other reports have put the final price tag several billion dollars higher. Lopez Obrador said in June the refinery would end up costing significantly more than the USD8.9 B that had been approved initially. At the time he estimated a price tag of USD11 B and USD12 B.

We remind that n late January, 2022, Pemex signed a long-term crude supply contract with Royal Dutch Shell Plc as part of its acquisition of the Deer Park refinery in Texas. Pemex and Shell in May, 2021, 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.
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Europe heading into winter with low storage levels of diesel

Europe heading into winter with low storage levels of diesel

Europe is heading into winter with seasonally low levels of diesel in storage tanks, with major implications for the continent's industries and drivers in the run-up to EU sanctions on Russian crude oil and refined product supplies, said Hydrocarbonprocessing.

Diesel, along with other distillate fuels such as heating oil and gasoil, are the lifeblood of industry with uses ranging from powering factories to heating homes, in addition to being used as a motor fuel. When Russia, which supplies Europe with about 60% of its import requirement, invaded Ukraine on Feb. 24, the diesel market went into shock as it priced in a possible cutoff of those supplies.

The six-month spread in European diesel futures went into a record backwardation of nearly USD600/t. In a backwardated market, current prices trade at a premium to prices for future deliveries, which makes it uneconomical for traders to put diesel into storage and book a profit. "No one in their right mind would put diesel into tanks at those levels," one European trader said. The result has been that European distillate stocks held by refiners are trending much lower than their historical averages.

Stocks of diesel and gasoil in commercial sites in the Amsterdam-Rotterdam-Antwerp (ARA) hub are also well below their historical average, data from Dutch consultancy Insights Global shows. The spread currently stands at about USD100 a ton, still well above levels for this time of year.

Compounding the situation further, extremely hot and dry weather in Europe has led to unseasonably low water levels on the Rhine river, a key waterway for moving barges carrying fuel from the massive oil refineries and tank farms in ARA to Germany, France and Switzerland.

Water levels at the gauge point of Kaub in Germany currently stand at 42 cm, and Germany's electronic waterway information service for inland shipping, or ELWIS, forecasts levels to drop further to 34 cm in the coming days. According to consultants FGE Energy, 240,000 barrels per day (bpd) of oil products traversed the Rhine to be unloaded in Germany in 2021, more than 10% of the country's oil demand.

At current levels, barge owners are opting to load their vessels at about a quarter or less of their 2,000-3,000 ton capacity to avoid grounding into the riverbed. This has created major bottlenecks along the route and has raised barge freight rates in some areas to record highs. While oil products also move through pipeline and by rail into Germany, those are already operating at full capacity, FGE says. Trucking is an option, but high fuel costs make this option uneconomical, they added.

"With the river levels so low there's no point in having product in ARA as you can't move it down the Rhine, and backwardation is discouraging having product in tank," one European trader said. "A major disruption to an important gasoil/diesel supply route from ARA to inland Europe could not come at a worse time," FGE said. The market is already tight due to refinery outages in Austria, which along with Germany and Switzerland will be looking to build heating oil stocks ahead of winter.

Soaring natural gas prices which are encouraging a switch to oil products for power generation could also tighten the market further, FGE said. The International Energy Agency on Thursday raised its forecast for oil demand growth for this year by 380,000 bpd to 2.1 MMbpd citing the gas-to-oil switch.

As per MRC, Wood, the global consulting and engineering company, has secured a new contract with INEOS in excess of USD100 MM to deliver engineering, procurement and construction management (EPCm) services for Project One, a new state-of-the-art petrochemicals complex in Antwerp, Belgium, which will deliver an ethane cracker with the lowest carbon footprint in Europe. Effective immediately, the 4-yr contract will be delivered by Wood’s Projects business unit. The scope is focused on the outside battery limit facilities for the ethane cracker and follows the successful completion of front-end engineering design for the facility. Wood’s integrated project management team will also continue to oversee the project, working closely with the INEOS project team.
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Covestro declares force majeure in Germany

Covestro declares force majeure in Germany

Covestro declared force majeure on 10 August on several products due to a chlorine leak according to a company source, said the company.

According to the letter, a partial resumption of chlorine supplies is anticipated on 31 August and a full resumption of chlorine supply is expected on 30 November.

The end date is unknown for resumption of operations for downstream production plants beyond 31 August according to the same letter.

As per MRC, Covestro is expanding its production capacities for thermoplastic polyurethane (TPU) Films in the Platilon range, as well as the associated infrastructure and logistics and schedules to complete the new facilities as early as the end of 2023.

We remind that Covestro closed the sale of its European polycarbonates (PC) sheets business to the Munich-based Serafin Group effective January 2, 2020. This includes key management and sales functions throughout Europe as well as production sites in Belgium and Italy.

Covestro (formerly Bayer MaterialScience) is an independent subgroup within Bayer. It was created as part of the restructuring of Bayer AG from the former business group Bayer Polymers, with certain of its activities being spun off to Lanxess AG. Covestro manufactures and develops materials such as coatings, adhesives and sealants, polycarbonates (CDs, DVDs), polyurethanes (automotive seating, insulation for refrigerating appliances) etc. With 2021 sales of EUR 15.9 billion, Covestro has 50 production sites worldwide and employs approximately 17,900 people (calculated as full-time equivalents).
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Citgo Petroleum posts record USD1.28 B profit

U.S. oil refiner Citgo Petroleum reported second quarter earnings that surged to USD1.28 B, the highest quarterly profit in its history, on higher crude processing volumes and stronger margins, said Hydrocarbonprocessing.

The results reflect a sharp turnaround after back-to-back annual losses in 2020 and 2021. Demand and prices for gasoline, diesel and jet fuel have soared this year on the U.S. recovery and global shortages caused by Russia's invasion of Ukraine.

The eighth largest U.S. refiner's three plants processed 776,000 barrels of oil per day (bpd), up from 732,000 bpd a year earlier, it said. It sold a record 130,000 barrels per day of unbranded gasoline to retailers, the company's parent posted on Twitter. Refinery utilization rates, a key measure of efficiency, rose to 101% from 95% in the first quarter this year, it said. The utilization rates topped those of rivals, some of whom also posted record earnings in the June quarter.

A spokesperson was not immediately available to comment on the tweets. A subsidiary of Venezuelan state-run oil firm PDVSA, Citgo is run by boards appointed by Juan Guaido, who Washington recognizes as Venezuela's legitimate leader.

The company last year returned to profitability after deep losses during the coronavirus pandemic. Its first quarter USD245 million profit was more than 10 times the year-ago level on higher processing volumes, higher exports and stronger margins.

On Thursday, Citgo said it was offering to buy USD286 million in notes due in 2024 and repay nearly $483 million of a term loan facility. Its net debt to capitalization ratio fell to 28% from 47%, its parent said. The debt reductions signaled that Citgo could soon resume paying dividends to its parent, a practice that was stopped after its 2019 split from state-run PDVSA and the naming of ad hoc boards that oversee Venezuela's foreign assets.

In a tweet, the ad hoc parent said the company's debt agreements required it to pay down debt "before being able to send dividends." Citgo ended the period with USD2.2 billion in cash and proceeds from an accounts receivable securitization, according to the PDVSA ad hoc Twitter posts.

Citgo is protected by U.S. executive orders from creditors trying to seize Venezuela's foreign assets. It would be willing to resume Venezuelan heavy crude imports if the U.S. government authorizes the flow, Citgo's CEO said in July. The crude imports are key to feeding its refineries' deep conversion units.

As per MRC, Citgo Petroleum is willing to resume imports of Venezuelan crude, suspended since 2019 by Washington's sanctions on its parent company PDVSA, if the U.S. government authorizes the flow. Since March, top U.S. and Venezuelan officials have been engaged in political negotiations that could lead to Washington easing oil trading sanctions that have hit the OPEC country's production and exports. OPEC and the French government, representing Europe, have called for Washington to allow Venezuelan and Iranian crude to flow to consuming nations that are struggling to replace Russian energy supplies during the war in Ukraine.
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