Asian Refiners Strive to Finish Processing Unit
At SK Energy’s largest refinery in South Korea, engineers are rushing to complete a new processing unit ahead of schedule as the firm looks to boost sales of low-emission fuels before new marine fuel standards take effect in just one month.
In Japan, the country’s second-biggest refiner Idemitsu Kosan Co is taking a more cautious stance, increasing capacity for low sulphur fuel oil (LSFO), but also relying on blending to produce IMO2020 compliant bunker fuel.
The different approaches come as refiners across the world grapple with the shipping industry’s most drastic fuel transition since it moved from burning coal to oil early last century.
New International Maritime Organization (IMO) rules from Jan. 1, 2020 prohibit ships from using fuels containing more than 0.5% sulphur, compared with 3.5% now, unless they are equipped with exhaust-cleaning “scrubbers”.
The changes affect demand from 50,000 merchant ships consuming about 4 million barrels of marine fuel a day.
When completed in January, three months earlier than planned, SK Energy’s 40,000 barrels-per-day vacuum reside desulphurisation (VRDS) will be its first plant solely devoted to producing compliant LSFO.
“We conservatively expect (the new unit) to create 200 billion won ($170 million) worth of profits annually depending on market conditions,” Lee Duk-hwan, project leader of SK Energy’s optimization operation office, told reporters during a site visit.
“If market conditions are favourable we see 300 billion won worth of profits,” Lee said.
The unit will start commercial operations in March after making fuels on a trial-basis.
The refiner has so far relied on its trading arm to create useable blends from a mix of produced and purchased fuels and oil.
With shipping companies delaying fuel orders until the last minute, global refiners do not have clear indications of what fuels will be most in demand. Refiners also have not been able to guarantee the quality and compatibility of fuels they supply, the Chamber of Shipping of America said.
Idemitsu Kosan is planning to increase capacity at its 190,000-barrel-a-day Chiba refinery’s residue crude hydro-desulphurizing unit, to boost output of LSFO or other IMO-compliant fuels.
Japan’s second-biggest refiner is also upgrading its fluid catalytic cracking unit to produce other light products such as gasoline to offset declining HSFO demand, a refinery manager, Hiroshi Kondo, told reporters during a recent site visit.
However, the company is still assessing demand for alternative fuels and has been blending products to produce IMO2020 compliant marine fuel.
“We will only make selective and concentrated investments in the areas where we see growth or to meet new environmental regulations such as IMO2020,” Kondo said.
Idemitsu plans to spend up to 12 billion yen ($110 million) on the changes at Chiba from next June, a company spokesman said.
The moves are all aimed at boosting profitability amid volatile margins as the market gears up for the change.
2-----------------Vietnam Signs Oil Supply Deal with SOCAR
Vietnam’s state-run Binh Son Refining and Petrochemical Co (BSR) has inked an agreement with Azeri state energy company SOCAR to buy five million barrels of crude in 2020, BSR said.
SOCAR Trading will provide five million barrels of Azeri Light crude to BSR’s Dung Quat refinery during the first half of 2020, BSR said in a statement on its web site.
The company said Azeri crude would also become one of its strategic crude oil products from 2020, following Vietnam’s abolishment of an import tax on crude oil which took effect from November.
BSR said it would import 8 million to 10 million barrels of West Texas Intermediate and Bonny Light crude oil in 2020 for its Dung Quat refinery.
Vietnam has been relying more on imported crude due to a slowdown in domestic output as reserves at its existing fields decline, and as China’s increasingly assertive stance in the region hampers offshore exploration.
The country’s crude oil imports during the first 11 months of this year rose 66% from a year earlier to 7.44 million tonnes (54.54 million barrels), government data showed.
3---------------------Turkey and Azerbaijan to Take Gas to Europe
Turkey and Azerbaijan formally marked the completion of the Trans-Anatolian Natural Gas Pipeline (TANAP), a milestone in a major project to help reduce Europe’s dependence on Russian gas.
TANAP comprises the longest stretch of the $40 billion Southern Gas Corridor, a series of pipelines that will carry gas from Azerbaijan’s Shah Deniz II field to Europe.
The $6.5 billion TANAP crosses the breadth of Turkey, east to west, and could transport up to 16 billion cubic metres (bcm) of Azeri gas a year. Europe is allocated 10 bcm, with 6 bcm earmarked for the Turkish market. Capacity could be increased to 31 bcm with additional investment.
An inauguration ceremony was held in the Turkish town of Ipsala on the Greek border and attended by Turkey’s President Tayyip Erdogan and Azerbaijan’s President Ilham Aliyev.
It marked the completion of the transfer infrastructure to Greece as well as the whole TANAP pipeline. TANAP’s first section, ending at a Turkish discharge point in Eskisehir, was completed last year.
“Aside from insuring the energy needs of our country with TANAP, we aimed to contribute to Europe’s energy supply security,” Erdogan said.
The pipeline connects to the Trans-Adriatic Pipeline (TAP), which is still under construction and will then transfer up to 10 bcm gas to Greece, Albania and Italy.
“The real responsibility from now on lies with our neighbours on the other side of the border. The Trans-Adriatic Pipeline needs to be completed as soon as possible to start the transfer of gas to Europe,” said Erdogan, adding that it was expected to be completed in 2020.
TANAP’s shareholders are Azeri state energy company SOCAR (51%), Turkish pipeline operator BOTAS (30%), BP (12%) and SOCAR Turkey (7%).
Separately, Erdogan said Turkey and Russia would launch the Turkstream pipeline with a ceremony in Istanbul on Jan. 8. Russia is Turkey’s largest gas supplier.
The first part of the pipeline is designed to supply Turkish domestic customers, while the second part is expected to run further - from Bulgaria to Serbia and Hungary.
4--------------U.S. Suspends Oil Export Terminal Application Review
U.S. maritime officials have suspended a review of oil refiner Phillips 66’s application for a U.S. Gulf Coast deepwater export terminal for additional information, but the company said it would continue outreach efforts to win over residents.
Phillips 66 is one of five companies that have applied for U.S. permits to build offshore facilities to load shale onto supertankers for export to Asia, Latin America and Europe.
The Maritime Administration and the U.S. Coast Guard issued so-called stop clock letters this month that temporarily halt reviews of its proposed Bluewater Texas Terminals, a 1.92 million barrel-per-day (bpd) project off Corpus Christi, Texas. They also suspended reviews of Sentinel Midstream LLC’s planned export terminal off Freeport, Texas, regulatory filings showed.
Phillips 66, which sought permits in May, planned to start construction on its project in the third quarter of next year and begin service in late 2021, according to regulatory filings.
Phillips 66 spokesman Dennis Nuss did not respond to a question on whether the suspension will delay the start-up.
U.S. officials called on Phillips 66 to engage with local officials and residents near the Corpus Christi project, citing “several dozen potentially affected property owners that were unaware of the proposed project.”
Phillips 66 has held “dozens” of meetings with local residents, elected officials and others and plans to continue such efforts, Nuss said.
“We’ve never heard from anyone,” said Deborah Galatzan, a property owner in Aransas Pass who expressed concern about the impact on businesses and the environment. She attended a July meeting where Phillips 66 officials discussed the project but called details provided “very sketchy and vague.”
Sentinel does not expect the suspension to affect its project and anticipates regulators will resume the review in the near future, Chief Executive Jeff Ballard said. Sentinel has said it expects to begin operations in early 2022.
Maritime officials previously suspended reviews of projects owned by pipeline operator Enbridge Inc and Swiss trader Trafigura AG in June and February, respectively.
5-------Asia LNG Price Dips
Asian spot prices for liquefied natural gas (LNG) slipped as new supply offers kept coming on the market amid subdued demand.
The average LNG price for January delivery into northeast Asia LNG-AS was estimated at around $5.60 per million British thermal units (mmBtu), $0.10/mmbtu down.
Buying activity was limited in both Asia and Europe as gas stocks were high, market sources said. But supply offers were ample.
“It’s a slow grind down,” one LNG trader said. “At the moment, I don’t see a reason for prices to start rising in December.”
Two of Australia’s projects were selling strips of cargoes.
Australia Pacific LNG (APLNG) has offered one cargo a month for loading over 2020.
Ichthys LNG plant has offered five cargoes for loading between December and April.
Australia’s producer Woodside Energy was selling a late December cargo from Pluto LNG, a source said.
Another Australian project, Gorgon, was expected to end its planned maintenance on one of its trains after a production reduction for more than a month.
Nigeria LNG closed a tender for two December cargoes, while Russia’s Novatek might have offered up to four cargoes on the spot market, sources said.
On the demand side, an announcement of South Korea’s energy ministry that the country will idle up to a quarter of its coal-fired power plants between December and February did not prevent prices from falling.
The impact of the closure is expected to be limited at the moment as Korea Gas Corporation (KOGAS) has purchased over a dozen cargoes for winter supply earlier this autumn. However, future winter purchases will depend on the weather, an industry source said.
Some demand came from Mexico where state power utility CFE was looking for five cargoes for delivery during January and February.
India’s Gujarat State Petroleum Corp (GSPC) was seeking a late December cargo, while Reliance Industries has bought a cargo for the first half of January delivery, market sources said.
Pakistan LNG announced that commodity trader Gunvor submitted the lowest bids for four out of five cargoes for delivery in January. The remaining cargo will be supplied by DXT Commodities.
In Europe, several deals were done for delivery from end December to early February at discounts over $0.40 per mmBtu to the Dutch gas benchmark, an LNG trader said.
6-------------Saudi Aramco IPO Oversubscribed
Saudi Aramco’s initial public offering (IPO) was on course to be oversubscribed but not by a huge margin, according to figures released so far by the lead manager before a Dec. 4 close for institutional investors to submit offers.
Bids received from institutional and retail investors totalled $44.3 billion, lead manager Samba Capital said, about 1.7 times the value Saudi Arabia aims to raise from selling a 1.5% stake in the state-owned oil giant.
Although the IPO has received more than enough bids, the level of interest is relatively muted compared to other emerging market IPOs and subdued even when compared to the listing of a top Saudi bank in 2014 that was oversubscribed many times over.
If Riyadh hits its target of raising 96 billion riyals ($25.6 billion) or more it would still be a world record IPO, valuing the company at about $1.7 trillion.
But this is lower than the $2 trillion valuation originally touted by Saudi Crown Prince Mohammed bin Salman, who has put the sale at the heart of his programme to raise cash for ambitious plans to diversify the kingdom’s oil-reliant economy.
Riyadh scaled back its original IPO plans, scrapping an international roadshow to focus instead on pushing the offering among wealthy Persian Gulf Arab allies. It has stayed quiet on when or where it might list the stock abroad, which had been central to the plans that were first announced in 2016.
Bankers said roadshows in New York and London were cancelled after international investors baulked at the proposed valuation.
In the first update on institutional interest, Samba said the value of bids had reached 118.86 billion riyals ($31.7 billion), with the bulk coming from Saudi companies and funds, while foreign investors accounted for just 10.5% of offers.
Sources told Reuters the sovereign wealth funds of Abu Dhabi and Kuwait, both OPEC oil producers like Saudi Arabia and close political allies, planned to invest.
The retail tranche, which closed to subscribers, attracted bids worth 47.4 billion riyals ($12.64 billion), around 1.5 times the amount of shares offered to them.
The level of interest is relatively modest when compared to the listing of Saudi Arabia’s National Commercial Bank in 2014 when the retail portion was 23 times oversubscribed.
Alibaba’s listing in Hong Kong this month had bids for 40 times as many shares to those on offer.
7=======Gazprom Quarterly Profit Falls
ussian state gas producer Gazprom posted a third-quarter net profit of 212 billion roubles ($3.32 billion), down 45% from the same period a year ago on lower export volumes and weaker gas prices in its core European market.