Tag: WTI

Saudi Aramco is looking to invest in more chemical plants in China this year and next, adding to deals it’s already clinched in the country to secure long-term buyers for its crude.    

The world’s largest crude exporting company is targeting additional facilities that can turn oil into chemicals, Chief Executive Officer Amin Nasser said. Aramco sees demand for goods such as plastics outlasting the growth in consumption for gasoline and diesel amid the energy transition.

“We are looking currently at a number of investments in China that will be announced in due course this year and next year,” Nasser said on an earning call Tuesday. He also mentioned South Korea and India as potential investment destinations. 

Aramco is already in talks to buy a 10% stake in China’s Hengli Petrochemical Ltd. and is seeking similar deals with two other Chinese companies. It closed a separate $3.4 billion deal for a stake in Rongsheng Petrochemical Co. last year.

The Saudi state-run company aims to eventually turn about 4 million barrels a day of crude into chemicals, from about 2 million currently, Nasser said. It’s looking to upgrade existing facilities in Saudi Arabia to be able to process more oil into petrochemicals, he said. 

On Wednesday, Aramco agreed to boost its stake in Saudi Arabia-based Rabigh Refining and Petrochemical Co. with a $702 million deal.

Energy Transition

Nasser pointed to China’s push into energy transition technologies like solar panels and batteries that use more plastics and other products derived from oil as factors attracting investment. 

“Our strategic drive to convert liquid into chemicals remains unchanged,” Chief Financial Officer Ziad Al-Murshed said on the same call Tuesday. “Our highest priority is to do this in China for two reasons. One is it is the biggest market and, two, it is where the liquid-to-chemical expansions are happening.”

A big part of that push involves freeing up for exports as much as 1 million barrels a day of crude that it uses domestically for electricity generation. Aramco wants to ramp up gas production by 60% by the end of the decade, in part, for use in power plants in place of oil.

The company is also looking to boost trading in liquefied natural gas by tapping into supply deals globally and buying more stakes in export terminals outside Saudi Arabia, Nasser said. 

Aramco last month signed an initial agreement for a stake in Sempra’s Texas LNG export plant in a deal that would include fuel shipments from the project. It has also agreed a 20-year non-binding contract to take 1.2 million tons per year of the liquefied fuel from NextDecade Corp.’s planned project in Texas.

By: Bloomberg , Anthony Di Paola / Thursday, August 08, 2024

The global chemicals market has been growing rapidly, with demand for chemicals expected to rise by 3-3.5% in the medium term compared to 1-1.5% for crude oil.

The increase in demand for olefins and aromatics, along with a long-term expected flattening of gasoline and kerosene demand, is causing refiners globally to serve the demand for petrochemicals by accelerating refining and petrochemical units’ integration. Fluctuating oil prices have forced them to increase focus on maximizing margins, and improve profitability per barrel.

The relevance of crude oil to chemicals (COTC) technologies has grown, given how they turn low value oil into high value chemicals in existing refineries.

The technology promises to maximize intermediate petrochemical output to a 60-80% yield range from a barrel of crude oil. This is much higher than the 10% yield from a non-integrated conventional refinery and a 15-25% yield range in integrated petrochemical units.

The strategies predominantly adopted in COTC plants include:

1. Direct processing of crude oil in steam cracking
2. Integrated hydro-processing/de-asphalting and steam cracking
3. Processing of middle distillates and residues using hydrocracking technology

Such strategic shifts have been found to increase margins, while also raising integration, complexity, and output volumes at a disruptive scale. It is estimated that two large-scale 200,000 barrel-per-day COTC complexes can boost the annual capacity additions of ethylene and propylene to 6.4 MMT and 4.4 MMT. This can also help reduce carbon footprint.

The major players in COTC technology

COTC continues to garner the attention of integrated refineries and chemicals producers in Asia Pacific, China, the Middle East and Eastern Europe. However, despite its growing popularity, only a few well-equipped integrated oil companies globally are looking to deploy this technology to make inroads in the petrochemical industry. These include some large companies in the U.S., Middle East and China.

Proximity to demand centers in India, Africa, and China is making the Middle East extremely favorable for COTC investments.

Saudi Aramco: The leading oil major is developing two catalytic technologies — thermocracking and catalytic conversion technology — that promise yields of around 70% of chemicals from the barrel. It is also working strategically with Tsinghua University in Beijing to develop a pilot, single stage catalytic conversion process.

Sinopec : The Chinese company recently made a breakthrough in single step crude-to-chemicals process.
Hengli Petrochemical: In 2019, the company’s complex in Dalian, China, was one of the first mega-projects with COTC technologiesto come online.
Shell: Shell Catalysts & Technologies has increasingly focused on deploying COTC technologies and is leveraging refinery petrochemical integration.
ExxonMobil: The oil and gas giant, with major operations in the U.S. and Singapore, has developed a technology to produce very light crude and feed directly to steam cracker to produce smaller and lighter hydrocarbons.
Reliance Industries: A global-scale $9.3 billion investment in COTC at its Jamnagar complex in India has been planned. Saudi Aramco has a 20% stake in Reliance’s projects.
Total: The French oil major is a global contender for COTC.

The major contractors that have implemented COTC technologies for refiners

Honeywell UOP and Axens have been leaders in driving technology improvements in this space.
Chevron Lummus Global has been a major technology partner for Saudi Aramco as well as McDermott, accelerating commercialization of Aramco’s proprietary thermal crude to chemicals technology.
Siluria Technologies is another major COTC provider that has partnered with Saudi Aramco to jointly develop COTC and oxidative coupling of methane (OCM) technologies to produce polyolefins.
McDermott, a major EPC contractor, has implemented more than 100 hydroprocessing plant designs globally through its joint venture with Chevron Lummus.

The risks of adopting COTC technology

Industry-wide disruption due to COVID-19 has caused Saudi Aramco and SABIC to conserve cash flow and budgets and reassess plans for the $20 billion COTC project at Yanbu. They are now considering an integration of their existing facilities with a world-scale mixed feed steam cracker and downstream olefin derivative units.
While China sees a big demand for COTC in the form of two large projects — Hengli Petrochemicals (42% conversion per barrel of oil) and Zhejiang Petroleum and Chemical (COTC phase 1, achieved 45% conversion per barrel of oil), and higher adoption, the risk of oversupply with more investments might add further pressure on the margins of para-xylene in the aromatics market of the Asia Pacific.

The outlook

By expanding the usage of crude oil in the chemical industry, COTC is expected to change and possibly disrupt the market landscape by 2025-2030. National and independent oil companies are expected to invest further in this segment as COTC adoption grows. Existing petrochemical producers may not be able to match the scale and scope of COTC units but can collaborate with regional players or partner with technology providers to independently pursue COTC.

Thus, we see that when there have been challenges of overcapacity, the threat from peak oil demand, the adoption of COTC could serve as a much-needed lifeline for sustenance in the future.

By: gep / 08/07/2024

 Global energy trader Gunvor Group on Thursday said it will join VARO Energy to build a large scale sustainable aviation fuel manufacturing facility at the Gunvor Energy Rotterdam site through a proposed joint venture.

Under the agreement, VARO and Gunvor will equally share the costs and risks to develop the plant until the final investment decision. Following a joint final investment decision and regulatory approvals, they will form a project company equally owned by both, Gunvor said.

Since VARO’s intial announcement on the project in September last year, there has been significant progress and the Front-End Engineering Design phase is expected to be completed in the last quarter this year, the energy trader said.

The manufacturing facility in Rotterdam, with capacity of 350 kt per annum, aims to produce enough sustainable aviation fuel to meet up to 7% of the European Union’s requirement by 2030, Gunvor said.

The facility is designed to process various feedstocks and produce either sustainable aviation fuel or hydrotreated vegetable oil, allowing flexibility based on market conditions and regulatory requirements, it said.

Located at Gunvor Energy Rotterdam’s brownfield site, the facility will benefit from existing infrastructure, including transport, pipelines, utilities, port facilities, and proximity to key Northern European markets, Gunvor said.

Gunvor operates a 75,000 barrel-per-day oil refinery at Rotterdam.

By: Reuters / August 02, 2024

Enterprise Products Partners L.P. (NYSE: EPD) today announced that it is moving forward with a key expansion project along the Houston Ship Channel in response to continued strong customer demand for natural gas liquids export capacity. At the Enterprise Hydrocarbons Terminal (“EHT”), the company is adding refrigeration capacity that will increase propane and butane export capabilities by approximately 300,000 barrels per day (“BPD”). In addition to providing incremental capacity for liquefied petroleum gas (“LPG”), the expansion will increase instantaneous loading rates for propane and butane, while making additional capacity available for propylene exports. The expanded service is expected to begin by the end of 2026.

The need for increased LPG capacity at EHT is being driven by the success Enterprise has had in contracting the company’s flexible product capacity at its Neches River Terminal (“NRT”) being developed in Orange County, Texas, adjacent to the company’s Beaumont East refined products terminal. Phase 1 of the NRT buildout includes the addition of a new loading dock, an ethane refrigeration train with a nameplate capacity of 120,000 BPD, and a 900,000-barrel refrigerated tank that will accommodate loading rates up to 45,000 barrels per hour. Phase 1 is expected to begin service in the second half of 2025.

Phase 2 includes a second refrigeration train that will allow Enterprise to load up to 180,000 BPD of ethane, 360,000 BPD of propane, or a combination of the two. The second phase is expected to begin service in the first half of 2026.

Growth capital associated with the EHT and NRT projects fits within the company’s existing forecasted growth capital expenditure ranges for 2024-2026.

A.J. “Jim” Teague, co-chief executive officer for Enterprise’s general partner, said, “Enterprise has received significant interest in ethane and LPG exports systemwide. Additional interest in expanded capacity reflects continued demand for U.S. hydrocarbons and Enterprise’s ability to quickly and economically expand our footprint to meet those needs.”

Enterprise Products Partners L.P. is one of the largest publicly traded partnerships and a leading North American provider of midstream energy services to producers and consumers of natural gas, NGLs, crude oil, refined products and petrochemicals. Services include: natural gas gathering, treating, processing, transportation and storage; NGL transportation, fractionation, storage and marine terminals; crude oil gathering, transportation, storage and marine terminals; petrochemical and refined products production, transportation, storage, and marine terminals and related services; and a marine transportation business that operates on key U.S. inland and intracoastal waterway systems. The partnership’s assets include more than 50,000 miles of pipelines; over 300 million barrels of storage capacity for NGLs, crude oil, refined products and petrochemicals; and 14 billion cubic feet of natural gas storage capacity. Please visit www.enterpriseproducts.com for more information.

This press release includes “forward-looking statements” as defined by the Securities and Exchange Commission. All statements, other than statements of historical fact, included herein that address activities, events, developments or transactions that Enterprise and its general partner expect, believe or anticipate will or may occur in the future are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from expectations, including required approvals by regulatory agencies, the possibility that the anticipated benefits from such activities, events, developments or transactions cannot be fully realized, the possibility that costs or difficulties related thereto will be greater than expected, the impact of competition, and other risk factors included in Enterprise’s reports filed with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. Except as required by law, Enterprise does not intend to update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.

by Business Wire / Jul 30, 2024

The ongoing electrification drive and the EV revolution have elicited dire forecasts about the imminent demise of the nearly two-century old oil & gas industry.

Last year, Bloomberg predicted that global demand for road fuel will peak in 2027 at an all-time high of 49 million barrels per day before entering terminal decline. Bloomberg says that rapid adoption of electric vehicles, shared mobility and ever-improving fuel efficiency are the biggest bear catalysts for oil, with EVs expected to displace a staggering 20 million barrels per day in oil demand by 2040, or 10x the current estimate.
 

And, the Chinese EV sector is expected to play a big part in disrupting the global fossil fuel industry. China’s oil market is closely watched by energy experts not only due to its sheer size but also because of the ongoing EV revolution in the Middle Kingdom. According to Lu Ruquan, president of state-owned China National Petroleum Corp.’s Economics & Technology Research Institute, EVs will displace more than 20 million metric tons of crude demand this year, good for 10% of the country’s gasoline and diesel consumption.

At a time when internal combustion engine (ICE) vehicle sales continue to decline, retail sales of new-energy cars (NEV) in China, including electric vehicles and plug-in hybrids, rose 28.6% to 856,000 units in June from a year earlier, thanks to continued high demand for NEVs with by government subsidies, tax breaks and steep discounts helping bring buyers back into showrooms after a sluggish start to the year.

Not surprisingly, Big Oil companies are betting the farm on another pivotal energy sector: petrochemicals. Petrochemicals, which go into plastics, polyester and many other cheap and lightweight commodities that underpin modern life, could help oil companies stay afloat long after demand for transport fuels has peaked. As we have reported before, among the major energy agencies, the International Energy Agency (IEA) tends to be the most pessimistic about the long-term oil demand outlook.

Over the medium-and long-term, only the IEA sees global oil demand peaking before 2030, even in its most optimistic forecast (high growth). However, the IEA says an oil demand peak doesn’t necessarily mean a rapid plunge in fossil fuel consumption is imminent, adding that  it will probably be followed by “an undulating plateau lasting for many years.” The Paris-based energy watchdog has predicted that oil demand will grow to 105.45mn barrels per day in 2030, from 102.24mn bpd last year, with 2.8mn bpd–more than 85% of the overall increase in demand–coming from petrochemicals.

A 2023 review of the major oil and gas and chemicals companies found that over the next three years, Exxon Mobil Corp.(NYSE:XOM) plans to invest over $20 billion in expanding plastic production; CPChem will spend $14.5 billion andDow Inc. (NYSE:DOW) plans to invest USD 10 billion.

A lot of those petrodollars are flowing into the Chinese market. According to Ciarán Healy, oil market analyst at the IEA, ~6.7mn bpd, or 6.5 per cent of all global oil use, currently goes to supply China with petrochemicals. The International Energy Agency has reported that 90% of China’s increased oil demand from 2021 to 2024 comes from chemical feedstocks like LPG, ethane, and naphtha. IEA notes that between 2019 and 2024, additional Chinese production capacity for ethylene and propylene will exceed the combined current capacities of Europe, Japan, and South Korea. Between 2018 and 2023, China’s output of synthetic fibers alone rose by 21 million metric tons–enough to spin more than 100 billion T-shirts a year. A new breed of private refiners such as Hengli Petrochemical and Rongsheng Petrochemical has emerged in China whereby they are spending billions of dollars building plants specializing in chemicals, rather than gasoline and diesel.

Ironically, petrochemicals are crucial for the green energy transition, with EVs typically using more thermoplastics, foams, fibers and rubber pads than ICE vehicles. Indeed, US chemical practice leader at Deloitte David Yankovitz has told the Financial Times that EV makers are substituting plastic resins for metal parts to make lighter cars. Yankovitz says that roughly three-quarters of all emissions-reduction technologies require chemicals, most of which are oil-derived. China has met much of that demand through domestic processing of imported crude. But the US shale oil boom has also formed a mutually reinforcing “symbiosis” with growing Chinese demand for petrochemicals. According to ICIS data, between 2019 and 2023, the U.S. was the only major producer to boost its polymer exports into China,

Exxon is currently building a petrochemical complex in southern China’s Guangdong province, as well as expanding its own chemical production at existing facilities on the US Gulf Coast. According to Exxon, the chemical complex will produce performance polymers used in packaging, automotive, agricultural, and consumer products for hygiene and personal care.

“Demand for performance polymers will continue to increase in China, and we’re well positioned to meet the needs of that growing market,” “We look forward to progressing this exciting project as we work to build a competitive growth platform in Dayawan,” said Karen McKee, president of ExxonMobil Chemical Company, at the unveiling of the project in 2021.

Meanwhile, last year, Saudi Aramco acquired a 10% stake in Shenzhen-listed Rongsheng Petrochemical for $3.6bn, and has entered talks to buy a stake in Hengli Petrochemical, a top Chinese producer of chemicals for plastics. Last year, Aramco-owned S-Oilbroke ground on a $7bn petrochemical factory in South Korea.

By: Oilprice..com, Alex Kimani / July 31, 2024 

Crude oil prices have been tightly range-bound for about a year now, with bearish and bullish factors largely balancing each other out. But one Wall Street major believes the market is nearing a breakout point. The only question is whether the breakout will be a bearish or a bullish one.

In a recent note, Bank of America analysts referred to the current situation in crude oil as a Bermuda Triangle because of the region’s notoriety as a sort of black hole where vessels and aircraft disappear without a trace. In the case of oil, the disappearance could be that of demand worries about China or expectations of extended production cuts by OPEC+, Investing.com wrote.

The BofA analysis is based on technical indicators that suggest oil has been experiencing growing pressure, likening the past year or so in oil trade to a tightly wound spring. Sooner or later, the spring would be released, and per BofA, that moment is near.

Speaking practically rather than technically, the chances of OPEC+ rolling back their production cuts are not exactly great. The group has repeatedly made it clear that it would only do that if prices move much higher than they are now. Right now, prices are sinking because the war premium from the Middle East conflict is shrinking while the bearish demand attitude about China is getting reinforced by economic data. Earlier today, Brent crude sank below $80 per barrel.

Bank of America’s analysts seem to be leaning towards a bearish breakout, by the way. In fact, they expect oil prices to dive all the way to the $60s by the end of the year, meaning that negative expectations would trump any positive developments. This suggests that the focus on China will likely remain strong, with other fundamental factors taking the backseat, such as the state of world oil reserves.

Rystad Energy recently reported that the world’s recoverable reserves were lower than official reports showed, which should have sounded a bullish note for oil but did not because of the more abstract nature of total reserves as opposed to everyday output and demand trends. The energy research outlet calculated the total at 1.5 trillion barrels, which was down by some 52 billion barrels from last year’s calculations. Rystad attributed the decline to a year’s worth of production since 2023 and downward adjustments of resources.

Based on that total, Rystad forecast that oil production could peak at around $120 million barrels daily in 2035 and then decline to 85 million barrels daily by 2050. Yet that was in a “high case” scenario seeking oil demand as strong as it is now—which is not the scenario Rystad itself likes best. The company would much prefer a scenario where the electrification of transport reduces oil demand—because the available reserves are insufficient to support much higher demand.

Yet all these are long-term predictions, and these are notoriously inaccurate. In the short term, oil prices will most likely remain stuck between the rock of Chinese demand—meaning Chinese economic indicators—and the hard place of the Middle Eastern conflict. The sideshow is OPEC and its production cuts, which are probably safe to say are going nowhere until Brent crude moves closer to $90 or even tops it.

Indeed, Bank of America analysts have also allowed for such a development, saying that if Brent can top $89 per barrel, it could go to $105 per barrel by the end of the year. That would probably take a major escalation in the Middle East or a slump in U.S. shale output.

By Oilprice.com , Irina Slav / Jul 30, 2024

Energy Transfer LP announced the successful completion of its acquisition of WTG Midstream Holdings LLC. The total consideration for the transaction was $2.275 billion in cash, along with approximately 50.8 million newly issued ET common units.

This acquisition significantly expands Energy Transfer’s footprint in the Midland Basin by adding approximately 6,000 miles of gas gathering pipelines to its network. Additionally, the transaction includes eight gas processing plants with a total capacity of around 1.3 Bcf/d, as well as two more processing plants currently under construction.

The newly acquired assets are expected to enhance Energy Transfer’s system by increasing the supply of NGL and natural gas volumes. This will generate additional revenue from gathering and processing activities, as well as from downstream transportation and fractionation fees. Energy Transfer anticipates that the WTG assets will contribute approximately $0.04 of Distributable Cash Flow per common unit in 2025, with an increase to around $0.07 per common unit by 2027.

The completion of this transaction underscores Energy Transfer’s commitment to expanding its infrastructure and capabilities within the energy sector, reinforcing its position as a leading player in the industry.

By: Storage Terminals Magazine / July 16, 2024

The recent series of mergers and acquisitions of independent oil companies by major companies has reshaped the energy industry for the better in the Permian Basin.

Odessa oilman Kirk Edwards, State Rep. Brooks Landgraf and Waco economist Ray Perryman say one of the big benefits will be more stability in the oil and natural gas markets as the major companies prove much less reactive to price fluctuations than the independents always were.

Starting last fall and continuing through the spring, ExxonMobil bought Pioneer Natural Resources for $60 billion, Chevron merged with the Hess Corp. for $53 billion, Diamondback Energy obtained Endeavor Energy Resources for $26 billion and Occidental Petroleum acquired CrownRock Operating for $12 billion. ConocoPhillips bought Concho Resources for $13.3 billion in 2020.

“To me the consolidation that has taken place in the Permian over the last few years from the major independents going into the major oil companies can only spell good news for the Permian Basin economy ahead,” Edwards said. “The reason is that these majors make their budgets not just for 12 months ahead but for decades to come.

“They deal with price fluctuations much better than the independents do as usually the majors are also involved in downstream energy such as refining and then distribution. When one side of that equation is lower the other pieces are usually doing well and vice versa.”

What that means, Edwards said, is that the majors specify how many rigs and frac crews will run for a year or two and stick with that schedule no matter what pricing is doing.

“That creates stability in the market and it will certainly be celebrated by the service companies and communities that are so affected by their scope of work,” he said.

Landgraf, an Odessa Republican who chairs the House Environmental Regulation Committee in Austin, said it is reasonable to expect oil and gas prices to experience more stability following the wave of mergers and acquisitions.

“Due to a myriad of factors including tighter financial constraints, small oil companies are extremely responsive to price fluctuations,” said Landgraf, who represents Ector, Ward, Winkler and Loving counties in the 81st Representative District. “When oil prices rise production dramatically increases, which in turn pushes prices down.

“Conversely when oil prices fall, small oil companies drop production, causing prices to shoot back up again. While price and production volatility are part and parcel of this industry regardless of the size of oil companies, the existence of many small companies can exacerbate these fluctuations.”

In contrast, the representative said, larger companies are much less responsive to short-term price changes.

“This allows them to maintain more stable and consistent production levels,” he said. “With these mergers and acquisitions there are now fewer small producers and the large companies have expanded. Accordingly I expect oil and gas production and prices to fluctuate less.

“With greater price and production stability we will likely see more employment stability as well. Oilfield labor tends to balloon when production surges and pop when production is curtailed.

“If oil and gas flow at a more constant rate, these employment swings will be less frequent and less severe.”

While the mergers and acquisitions will provide a more predictable environment for producers, workers and consumers, Landgraf said, “I still want independent operators with a wildcatter spirit to have the opportunity to start up and grow in the industry.

“Fortunately I believe the consolidation of larger companies has not done anything to diminish that opportunity.”

Perryman said the increased concentration of resources in the Permian Basin is first and foremost a testament to industry leaders’ recognition that there will be strong demand for the area’s oil and gas in the coming decades.

“Drilling programs always have been and will continue to be based on the economic aspects of the potential wells and overall market conditions,” Perryman said. “Anticipated costs and potential revenues and therefore projected profit streams are essential to drilling decisions.

“To the extent that mergers could affect these economics such as through enabling lower costs, they could change drilling patterns. In addition the newly merged firms might have different priorities than were in place prior to the merger.

“The larger firms have a tendency to develop long-term drilling and capital allocation programs and communicate them to the financial market through their standard disclosure process. Having said that they also make changes rapidly to adapt to changing conditions.”

Perryman said he therefore expects somewhat greater predictability with the greater presence of major players in the region but that some degree of volatility will certainly remain.

“In many cases a drilling program that made sense before the mergers and acquisitions is likely to make sense afterwards,” he said. “It is worthy of note that while the Permian Basin is obviously a major production area, firms operating there remain ‘price takers,’ meaning that they do not have the ability to single-handedly shift prices in the large and complex international energy market.

“Global markets, production and supply and demand conditions are going to remain the primary determinants of oil prices and production decisions. The increased concentration should produce somewhat greater stability in regional activity, but oil and gas markets are volatile by their very nature and subject to policy issues, geopolitics and production priorities through the world.”

By oaoa, Bob Campbell / July 31, 2024