Oil Refining Latest News Week Ending 20 October 2017
Paul Willbourne
Refining Technology, Chemicals and Catalyst Consultant for Europe, Russia and Middle East with focus on Iran
The week has been an interesting week as far as energy goes, with several announcements covering new greener fuels or greener generating plans. The OPEC position has not changed, but given the sales of crude coming from non-OPEC providers increasing, the impacts on crude oil pricing are not at all clear. Maybe OPEC will strengthen their reduction in crude oil supply over the longer term?
Refining & Chemicals News
Petrochina seems to be showing some interest in Iraq’s Nassiriya refinery, following meetings with the oil minister, Jabar al-Luabi, in Baghdad. Investment is being slated for the local oilfields and the goal is to have this processed by the refinery, following its investment and improvement.
Seven people have been detained following the explosion mentioned last week in my report, which killed four people following maintenance activity on a tank in the Izmir refinery. Four of those have since been arrested and three released without charge.
The first cargo of low sulphur diesel has been sold by BPCL, with more expected to follow. Whilst this is not genuine low sulphur diesel, it is lower in sulphur than typical Indian cargoes, 50ppm sulphur versus e.g. European norms of 10ppm. This appears to be a fortunate overhang of diesel stocks which are typically built for the monsoon season, in that part of the world.
A likely expansion in the joint venture between Total and Saudi Aramco seems to be being discussed. This could increase the capacity of the joint venture refinery to 440,000 barrels a day and appears to be favoured by both parts of the joint venture. The refinery known as SATORP only started operation in 2014, so this is a sure feeling everything is looking rosy for the future.
The quality of crude oil being produced from Venezuela and sold on to customers including those based in the US has been getting worse recently. Partially this seems to be due to insufficient treatment of the crude oil before export meaning the cargoes contain water, salts and other chemicals causing problems with processing. Some customers have cancelled cargoes for the future or have demanded significant discounts.
Geo-politics and Energy News
The amount of crude oil being exported from the US seems set to rise, against the backdrop of OPEC production cuts which many commentators felt would bring the crude oil price into more attractive territory. The shale oil revolution seen in the US has really kicked the market, meaning that the expected results of OPEC sanctions have not been seen. Where does this leave the crude oil market in the future, especially considering the contango situation that persists?
The future of the Iran nuclear deal has been thrown into doubt by actions taken by President Trump. Although he was never a supporter of the deal that was agreed between his predecessor and the European Union, it seems to have been thrown more into doubt by the semantics that he uses in decrying the agreement. The unpredictability of the response of the US, throws into doubt what the next steps will be, despite statements from the European powers that they will stand by the agreement brokered before Trump became president. The geopolitical fallout from this latest round of posturing means there is a risk for the whole Middle East market in the future.
The greatest band for US oil seems to be being realised in the Asian markets, with US crude trading at a significant discount from the main providers for this market, so much so that Asia has purchased nearly 4 million barrels of oil for delivery in December of this year.
An explosion offshore Louisiana, has resulted in seven injuries and one person unaccounted for. It seemed to be caused by the ignition of cleaning chemicals, with discussions about whether to allow the remaining oil to burn off safely, and how the search and rescue for the one person still missing continues.
As noted above, Asian markets seem to be attracted to US oil from shale wells, especially in the case of India, both the low and the high sulphur versions thereof. This may be due to a desire for the country to expand the portfolio of oil it purchases, rather than concentrating on the Middle East as a major supplier. Also the current price discount for US crude makes it financially more attractive and India is spending some time proving the suitability of US crude.
https://www.hydrocarbonprocessing.com/news/2017/10/newest-outpost-for-us-crude-exports-india
Risk premium trading has returned to several grades of oil being sold from Iraq, due to increased tensions and fighting in the region. This has been exacerbated following the unilateral decision by President Trump to stop support of the Iranian nuclear deal, which is still being supported by the other actors. It is not clear whether the US has the power to stop this agreement, despite the support of the others. It may take a long time for this to come out in the wash and the impact on oil prices to become clear.
News has broken that Italian police have managed to break a smuggling ring bringing fuel stolen from refineries in Libya to Europe. The source was purported to be thefts from the Zawiya refinery.
The Iranian oil ministry has stated that they feel that US oil companies should be allowed to re-enter the Iranian market, as many of the Europeans have. The oil minister, Bijan Zanganeh said that the market is not closed off to American entrants, despite America not prolonging the nuclear agreement.
Following the elections in Iraqi Kurdistan, the future does not seem that it will be smooth. The regime in Baghdad disputes the right of Kurdistan to trade oil independently. That, combined with other technical issues seems to be limiting the amount of crude that can go out of country via the pipeline to Turkey. There is still no agreement on how any revenue sharing between Baghdad and Kurdistan may work leading to the governments in the region stopping oil being purchased direct from the Kurdish group. It feels like a long haul to reach some kind of agreement.
Environmental News
Shippers see choppy waters ahead post implementation of the IMO sulphur target, due for 2020. The risk is that this would involve investment in refining storage, tanks, vessels and they would need to happen now, to ensure the fleet is ready for implementation of these new rules in 2020. It is unsure what an impact this will have on shipping as the new rules take place.
https://www.hydrocarbonprocessing.com/news/2017/10/opportunity-or-disaster-traders-see-choppy-waters-due-to-shipping-sulfur-cap
Gasoline powered cars may become a fleeting memory in the Paris of the future, according to the Mayor of the city. This would take precedence over the previously announced plans to make the city both gasoline and diesel free by 2040. The timeframe proposed by the mayor is 2030.
Shell appears to be making great strides towards rechargeable electric vehicles being recharged on the forecourt of petrol stations. Shell’s view is that this becomes feasible with the new types of high-capacity charging they would be providing at forecourts. By charging to 80% within half-an-hour, this also has the added benefit of making people use the forecourt for purchasing food and other household consumables.
The potential impact of the Brexit discussions as the UK leaves the EU, many have secondary impacts with the stopping of membership of Euratom. Considering the decisions made around Hinkley Point nuclear power stations, the Brexit future may have an impact on Hinkley and any other nuclear power stations that are slated, and may also impact Britain’s environmental credentials going forward.
News of a contract between Iranian producers of solar panels and a Norwegian firm. The future seems to be geared towards renewable technologies produced in Iran so this may be the start of a deeper relationship between Iran and forward-thinking renewables focused companies in the West.
Floating wind farms may be the future of this type of green energy especially when combined with the idea of battery-based storage, which seems to be getting some traction. This investment by Statoil seems to be in keeping with their future drive for cleaner, greener fuels.
What is your view on the points that I have mentioned above? Please add your views and comments and I will certainly be pleased to understand how you might interpret the points I have raised and the articles that I've commented on.
You can reach me via my site www.downstreamadvantage.co.uk and by email at [email protected]; I look forward to your views and comments.