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Aramco and TotalEnergies to Build $11 Billion Saudi Petrochemicals Plant

Saudi Arabian Oil Company (Aramco) and TotalEnergies will join forces to build a new petrochemicals complex in Saudi Arabia, the French energy group said on Thursday.

The project involves investment of about $11 billion, of which $4 billion will be funded through equity by Aramco (62.5%) and TotalEnergies (37.5%), the statement said.

The investment decision is subject to closing conditions and approvals, with construction scheduled to begin in the first quarter of 2023 and commercial operation targeted for 2027.

The planned Amiral complex, integrated with the existing Saudi Arabia Total Refining and Petrochemical (SATORP) refinery located in Jubail on Saudi Arabia’s eastern coast, will be owned and operated by Aramco and TotalEnergies.

The overall complex, including adjacent facilities, is expected to create 7,000 jobs locally.

The petrochemicals facility will enable SATORP to convert its refinery off-gases and naphtha, as well as ethane and natural gasoline supplied by Aramco, into higher-value chemicals.

The complex will eventually provide feedstock to other petrochemicals and speciality chemical plants in the Jubail industrial area, requiring an estimated $4 billion of additional investment.

Yahoo! by Dominique Vidalon, December 2022

U.S. Buying 3 Million Oil Barrels For Reserves—Suggesting End To Gas Price Crisis

The Department of Energy announced Friday it would purchase 3 million barrels of oil to replenish the U.S. strategic reserve and strengthen energy security, as oil (and related gas) prices have dropped since the summer, when the administration tapped the reserve to counter an energy crisis sparked in part by Russia’s invasions of Ukraine.

The purchase, following an announcement by President Joe Biden in October, is an opportunity to buy the oil at a fixed price before repurchasing it for less than the average of $96 it sold for, the Department of Energy said in a statement.

Secretary of Energy Jennifer Granholm noted in May that the buyback process would coincide with lower oil prices—and consequently lower gas prices—which spiked following Russia’s invasion of Ukraine in February.

On Friday, the international benchmark Brent Crude futures measured at $77.16 per barrel, down from $96.96 at the time of Biden’s announcement in October.

The national average price of a gallon of gasoline in the U.S. is $3.178, according to a tracker by the American Automobile Association, down from last month’s average of $3.743.

The 3 million barrels represent 15% of the average number of barrels consumed per day in 2021 (19.89 million).

Crucial Quote

“As we are thoughtful and methodical in the decision to draw down from our emergency reserve, we must be similarly strategic in replenishing the supply so that it stands ready to deliver on its mission to provide relief when needed most,” Granholm said.

Surprising Fact

Following a subsequent decision by Biden in October to release an additional 15 million barrels after a record release of 180 million barrels in March, the U.S. strategic oil reserve dropped below 400 million barrels for the first time since 1984, according to the Energy Information Administration.

Key Background

The Department of Energy announced the purchase following a global energy crisis fueled by Russia’s invasion of Ukraine, which resulted in a spike in gas prices and the U.S. banning imports of oil, natural gas, coal and petroleum products from Russia. Other causes of the price spike were a refusal by OPEC+ to decrease production and diminishing U.S. refining capacity. Biden projected the U.S. will produce 1 million barrels per day by the end of the year and will continue repurchasing oil to replenish the Strategic Petroleum Reserve when prices fall to $70 a barrel.

Forbes by Ty Roush, December 22, 2022

ARA independent oil product stocks hit 17-month high (Week 51 – 2022)

Independently-held oil product inventories at the Amsterdam-Rotterdam-Antwerp (ARA) hub rose in the week to 21 December, marking their highest point since mid-July 2021, according to consultancy Insights Global.

High freight rates are working to restrict the outflow of products from the region.

Handysize clean product tankers moving product to northwest Europe frop the Baltic were assessed on 21 December.

Gasoil stocks drove the weekly increase, the largest build-up in supply since November 2021.

This was probably down to a ramp up in imports. Open-origin diesel cargoes were assessed on 21 December, three-times their value of a year earlier.

Still, some diesel demand is pulling the product up the Rhine River into strategic reserves, as German buyers look to replenish stocks at the end of the year.

Cargoes carrying gasoil unloaded at ARA from the US, Saudi Arabia, Russia and India in the week.

Gasoline inventories also grew.

High freight rates are making the transatlantic arbitrage route less workable, and ARA exports to west Africa have dropped notably on the year again pressured by high freight costs.

Cargoes carrying gasoline arrived at ARA from Russia, the UK, Italy and Sweden in the week.

At the heavier end of the barrel can be attributed to a hike in imports.

Cargoes unloaded fuel oil at ARA from Denmark, Finland, France and Sweden. High freight rates are again making the arbitrage route to Singapore less economic, allowing stocks to build in Europe.

Reporter: Georgina McCartney

ARA Independent Oil Product Stocks Hit 17-Month High (Week 50 – 2022)

Independently-held oil product stocks at the Amsterdam-Rotterdam-Antwerp (ARA) hub gained in the week to 14 December. The rise was driven by an increase in gasoil inventories.

Gasoil stocks gained on the week, as companies look to build up stocks for the colder weather, with an expectation of heating oil demand increasing. Cargoes carrying the product arrived at ARA from Germany, India, Spain and Russia.

Companies are probably seeking to make last minute profits from discounted Russian diesel before the EU’s ban on all Russian oil products in early February.

Diesel cargoes of restricted origin — excluding Russian sources — were last assessed on 14 December to the unrestricted origin equivalent.

Jet stocks also rose on the week, marking its highest point since mid-April.

Inventories probably rose with higher imports from China, with ARA-receipts of Chinese jet fuel. Cargoes also arrived from Russia and departed the hub for Norway.

Independently-held gasoline stocks shed on the week. Imports into ARA have slowed owing to higher freight rates, a factor also contributing to a less economically workable transatlantic arbitrage route.

Benchmark Eurobob oxy gasoline barge cracks are currently pricing at a discount to North Sea Dated, pressuring any interest in moving product around.

Also at the lighter end of the barrel, naphtha stocks gained on the week, probably bolstered by reduced demand for the gasoline blending pool, with cracks so weak.

Demand from the petrochemical sector remains lacklustre, allowing for stocks of the product to build.

No cargoes carrying naphtha departed ARA on the week, but volumes arrived from Algeria, France, Norway, Russia and the UK.

Reporter: Georgina McCartney

Trafigura Reports Record $7B Profit Despite Decline in Oil, LNG Trading

Commodity trader Trafigura Group Pte. Ltd. said Thursday the outage at the Freeport LNG terminal in Texas has removed much needed supply and “significant flexibility” from its portfolio, but said the scale of its operations have offset issues and helped it turn in record profits for 2022.

Trafigura, a dominant trader in the global liquefied natural gas market, has a three-year offtake agreement for 0.5 million tons/year with Freeport that expires in March. The plant has been offline since June, when an explosion halted operations. Freeport expects to resume service by the end of the year. 

The trading firm said it was able to capitalize on extreme volatility in the global commodity market following a reshuffle of energy supply flows after Russia invaded Ukraine in February.

Trafigura reported $7 billion in profits for fiscal 2022, which ended Sept. 30, versus fiscal 2021  earnings of about $3 billion. Revenue was up by 38% over the same time to $318.5 billion. 

Unsettled 2023 Oil, Gas Trading?

Looking ahead, the company expects the crude oil and natural gas markets to remain unsettled next year. Europe will need “to import huge volumes of LNG in 2023 given the massive reduction” in Russian imports, management said.

“For liquefied natural gas to continue to flow to Europe as opposed to other demand centers, the price will need to remain elevated, and we expect security of supply to remain paramount for customers in Europe through next winter and beyond.”

The sharp profit gain came despite a year/year decline in oil and petroleum products trading. The decline resulted from terminating long-term contracts for Russian crude and other fuels following international sanctions. 

Trafigura said it traded an average of 6.6 million b/d of oil and petroleum products during the year, down from 7 million in 2021. 

Trafigura also said a steep increase in margin requirements by futures exchanges and clearing brokers during a volatile year “substantially increased the cost of moving physical cargoes.” That reduced liquidity in the physical and financial markets and “exacerbated volatility.”

The firm said it used its capacity on pipelines in the United States to carry natural gas from the Permian Basin to liquefaction plants on the Gulf Coast. Cargoes were mostly moved across the Atlantic to Trafigura’s regasification slots in Europe. 

“From here, our LNG and natural gas team was able to trade and deliver the molecules to where they were needed,” the firm said.  “In many instances, the gas went into leased storage ahead of the winter.”

Overall, for LNG, Trafigura said it traded 13 million metric tons of oil equivalent, down 7% from last year. Traded natural gas volumes were flat at 23.7 million metric tons of oil equivalent.

NGI by Jamison Cocklin, December 13, 2022

Green Hydrogen Corridor For Economic Growth in Northern and Western Cape

The Western Cape and Northern Cape have signed a Memorandum of Understanding to develop a green hydrogen corridor and hub.

The MoU contains heads of agreement on the principles and areas of cooperation towards creating the Western SADC Green Hydrogen Corridor.

Western Cape Premier Alan Winde said the MoU is the beginning of the development of a green hydrogen economy based on critical relationships – in this case with the Northern Cape and the role players in the private sector.

“We cannot afford to wait for solutions to be delivered to us to address the dual challenges of the climate and the energy crisis, both of which continue to worsen. We, along with our strategic partners, must create and jump on opportunities,” said Winde.

He toured the mothballed Saldanha Steel plant which will form a crucial component of the planned Western SADC Green Hydrogen Corridor. The Western Cape will also be able to take advantage of the planned new bulk export port at Boegoebaai in the Northern Cape.

“This project will secure foreign direct investment, earn foreign revenue as well as generate economic growth and jobs. There must be a sense of urgency in this project, given the seriousness of the challenges we are facing,” added Winde.

Meanwhile the Public Investment Corporation (PIC) said it has now adopted a hydrogen investment strategy to unlock value through funding and provision of early-stage capital to develop the hydrogen value chain in South Africa. The PIC strategy will beto leverage the more than 200 hydrogen projects announced worldwide.

The PIC believe it will take approximately R4.3 trillion ($250 billion) in investment to develop a hydrogen economy in South Africa. The South African Hydrogen Roadmap identifies the PIC as a potential co-investor with other finance institutions into hydrogen projects.

The Roadmap identifies hydrogen as the next frontier in clean energy technology because of the promise it holds for extensive value chain applications. These include industralisation, job creation, localised manufacturing and the potential for SA to become one of the largest exporters of green hydrogen in the world.

South Africa’s high solar radiation levels and large area of coastline for wind deployment creates significant renewable energy potential. Hydrogen can augment renewable energy production by offering a way to store and transport excess energy produced from RE sources.

South Africa also hosts the world’s largest platinum group metal resources which would benefit from the demand brought about by a well-developed hydrogen sector.

Increasing global demand for green hydrogen could contribute to economic growth
Western Cape Finance and Economic Opportunities Minister Mireille Wenger said green hydrogen is emerging decarbonisation solution that would create benefits for the country as a whole. “By working together the Western Cape and Northern Cape are perfectly position to explore the potential of green hydrogen and increasing demand through production, bulk exports, and by attracting foreign direct investment which will contribute to economic growth and job creation in the context of ensuring a just energy transition,” said Wenger.

Wesgro, the Western Cape official tourism, trade and investment promotion agency also welcome the MoU. Wesgro CEO Wrenelle Stander said the world’s attention is on achieving net-zero carbon emissions by 2050, with trillions of dollars being invested into the renewable energy and energy efficiency required to meet the target.

“At this pivotal moment we have a unique opportunity access a large piece of the investment pie. South Africa’s energy crisis has catapulted our capability in the global race for energy transition,” said Stander.

By Esi Africa, December 9, 2022

ARA Stocks Story (Week 49 – 2022)

Independently-held oil product stocks at the Amsterdam-Rotterdam-Antwerp (ARA) hub shed in the week to 7 December, pressured by a drop in gasoline inventories.

Gasoline stocks were down on the week, but levels remain higher on the year. Cargoes carrying the road fuel departed ARA for Brazil, Spain and west Africa, and volumes also rose to the US, where stock building has restarted, cutting away at European supply.

The US usually accumulates volumes in March and April, but has started importing volumes earlier this year. But it is unlikely that the transatlantic arbitrage route is open owing to high freight rates.

Gasoil stocks gained on the week. Cargoes carrying gasoil arrived at ARA from China, India, Russia and Singapore. The spike in China-origin cargoes probably drove the increase. ARA-bound Chinese gasoil deliveries are scheduled to grow in November, by the end of the year, according to Vortexa.

At the heavier end of the barrel, an increase in fuel oil, driving stocks of the product up, was not enough to offset the drop in gasoline inventories.

Cargoes unloaded fuel originating from northwest Europe, the UK and Poland, while volumes departed the region to Ireland, the Mediterranean and west Africa.

Weakened bunkering demand probably pushed stocks up.

Jet stocks shed on the week. Growing demand up the Rhine is working to cut away at stocks, as well as an increase in UK demand for stock building.

But inventories may drop in the coming weeks with a small peak in demand during the holidays.

Reporter: Georgina McCartney

The Vopak Pacific Canada Project Has Reached a Significant Project Milestone

The Vopak Pacific Canada project has reached a significant project milestone with the final determination of its Federal environmental effects evaluation review. Vopak Development Canada Inc., a wholly-owned subsidiary of Royal Vopak, is investigating the opportunity to construct, own and operate a bulk liquids storage facility located on Ridley Island within the lands and waters under the jurisdiction of the Prince Rupert Port Authority.

The Prince Rupert Port Authority, Environment and Climate Change Canada, and Transport Canada (together called the “Federal Authorities”) have determined, in accordance with the requirements of Section 67 of the Canadian Environmental Assessment Act, 2012 (“CEAA 2012”) and Section 82 of the Impact Assessment Act (IAA), that the Vopak Pacific Canada Project is not likely to cause significant adverse environmental effects. Throughout the environmental review process, Federal Authorities consulted with the Indigenous Nations on the project’s potential impacts to the environment, Indigenous peoples, and their Interests and Rights.

This project received its Environmental Assessment Certificate from the British Columbia Environmental Assessment Office in April 2022.

This concludes both the Federal and Provincial environmental review processes, which is a prerequisite for the Federal Authorities to consider the required authorizations for the project to proceed. Vopak continues to work toward obtaining remaining permits and making a Final Investment Decision on the project.

By Tank Storage Mag, December 6, 2022

Global Oil Market Signals Short-Term Weakness Ahead of EU Ban on Russian Oil

The global oil market is signaling a potential shift, as traders and analysts worry about reduced crude demand and an oversupplied market in the coming months.

After months of strength, crude futures are flirting with lows not seen all year as top oil consumer China enters additional COVID-19 lockdowns while central banks hike interest rates to combat inflation.

Front-month global oil prices in the last week have traded weaker than future-dated contracts, while prices for physical crude grades throughout the world have declined, market participants said.

“Differentials are confirming what outright prices have been implying – there is a demand deficit and/or supply surplus,” said Tamas Varga of oil broker PVM.

The murkier environment comes at a fraught time for the market. On Dec. 5, a European Union ban on Russian crude imports is set to start, along with a plan by the G7 nations to force shippers to comply with a price cap on Russian oil sales.

Meanwhile, OPEC+ – the grouping of the Organization of the Petroleum Exporting Countries (OPEC) and allied producers including Russia – is set to meet to consider output levels on Dec. 4.

The changes are evident in the market’s structure – a comparison of near-term versus longer-dated contracts. In the last week, crude futures contracts have flipped in and out of contango, where the prompt price of a commodity is lower than the future price, which suggests short-term weakness.

The front-month U.S. crude futures contract traded as low as 38 cents weaker than the second-month contract , the weakest differential since November 2020, Refinitiv Eikon data showed. The front-month contract for the Brent international benchmark traded as low as 6 cents below the second-month , the weakest since August.

The inter-month spread for December and January Dubai swap flipped into contango last week for the first time in one and half years.

WEAKER DEMAND FROM ASIA

In China, traders are worried about oversupply if China and India continue importing large amounts of discounted Russian oil. At the same time, additional COVID restrictions are expected to weigh on demand.

Offers of Angolan and other West African crude oil to China, a main customer, are a barometer of physical crude demand from the country. China’s Unipec, a major world oil trader, offered for sale several cargoes of crude shipments set to load in December, in a rare sign of slackening interest.

Meanwhile, Norway’s Equinor this week offered a cargo of Angolan Pazflor crude for a discount of $2.50 a barrel to dated Brent, down more than a dollar in a week. Spot prices for crude out of Oman – a key supplier to China – have fallen to 82 cents over Dubai crude from as high as $15.06 a barrel in early March.

OVERSUPPLIED

Oil storage in several regions is building, said Norbert Rucker, head of economics and next generation research at Swiss wealth manager Julius Baer.

In addition, European refiners have found themselves oversupplied with crude as an expected shortage owing to the looming EU ban on Russian oil has yet to materialise.

The premium for North Sea crude Forties to dated Brent reached an all-time high of $5.40 in July, but has narrowed sharply to just 75 cents this week. Forties usually sets the value of dated Brent.

In the United States, WTI Midland prices have weakened to just a 20-cent premium to crude futures, falling from a premium of more than $2 about a month ago. That’s even though inventories at Cushing, Oklahoma, a key storage hub in the United States, are at a two-month low.

Reporting by Stephanie Kelly in New York, Muyu Xu in Singapore, Noah Browning and Alex Lawler in London and Arathy Somasekhar in Houston;

Reporter: Kenneth Maxwell

Port of Hamburg to Get Green Energy Import Terminal

Air Products and Mabanaft announced their intention to build Germany’s first large-scale, green energy import terminal in the port of Hamburg.

The project was announced on 17 November at a ceremony in Hamburg, which was supported by German Federal minister for economic affairs and climate action Robert Habeck and first mayor of Hamburg Dr. Peter Tschentscher.

This announcement follows a Memorandum of Understanding that Air Products and the Hamburg Port Authority signed in February 2022.

The planned import terminal is to be located at #Mabanaft’s existing tank terminal in the German port and the purpose is to provide hydrogen to Germany in 2026.

This location offers access to green ammonia from large-scale green hydrogen production facilities operated by Air Products and its partners around the world.

According to Port of Hamburg, it is aimed to convert the ammonia to green hydrogen via Air Products’ facilities in Hamburg, before distributing it to buyers locally and across northern Germany.

“Together with Mabanaft, we look forward to further progressing our plans of importing needed-renewable energy into Germany, through our planned facility,” commented Air Products’ chairman, president and CEO, Seifi Ghasemi.

He added, “As the world’s largest producer of hydrogen, Air Products is in an excellent position to meet demand, having committed billions of dollars to produce renewable energy at locations around the world.”

By Tank Storage Mag, December 1, 2022