Page 7 - LatAmOil Week 28 2020

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Margins press China’s independent re ners
China’s independent re ners are reportedly set to wind down run rates in the third quarter, owing to depressed gross re ning margins (GRMs)
Margins have come under pressure from extensive fuel stockpiles and rising feedstock costs, Bloomberg quoted analysts and unnamed traders as saying last week.
Brent is currently trading in a $40-45 per barrel range, a signi cant improvement on the more than 20-year low recorded a er prices col- lapsed in early-March. Brent slipped below $16 in April, while West Texas Intermediate (WTI) even managed to trade – albeit brie y – at neg- ative prices.
Bloomberg noted that China’s independent re neries, or teapots, also had a backlog of crude imports waiting to be processed by the port of Qingdao in Shandong Province, which is home to the majority of the country’s teapots.
Shandong’s independent plants will cut runs from May highs of 2.3mn barrels per day to 1.9- 2mn bpd in July and August, industry consultant FGE said. Traders told the newswire that some plants in the cities of Dongying and Weifang were likely to lead the charge in ramping down operations.
Energy Aspects analyst Yuntao Liu warned that stronger oil prices had wiped out the ben- e ts re ners received from the central govern- ment’s oil price oor, which was set at $40 in January 2016. e policy was implemented to protect domestic production, following a simi- lar oil price collapse 2014 that sent Brent into a tailspin. Liu added: “[S]ince majors are looking to raise runs a er seasonal maintenance, teapots are facing big challenges.”
While Energy Aspects and FGE use di erent methods of calculating the teapots’ GRMs, both sets of numbers show the independent sector to be under enormous pressure.
Energy Aspects said margins had fallen from CNY1,243 yuan ($177) per tonne in late April to
negative CNY383 at the end of June, while FGE said margins had dropped from $20 in April to less than $5 per barrel.
If you’d like to read more about the key events shaping Asia’s oil and gas sector then please click here for NewsBase’s AsianOil Monitor.
Downstream: Storage in vogue
ere has been some deal-making in the Africa and Middle East downstream sector recently.
International contractor TechnipFMC has won a contract worth over $1bn to build a new hydrocracking complex near Egypt’s Assiut oil re nery. e award comes a er TechnipFMC carried out front-end engineering and design (FEED) for the project back last year.
e $2.8bn complex will convert low-value fuel oil into around 2.8mn tonnes per year (tpy) of Euro-5 diesel and other products. Egyptian authorities say the investment will help the coun- try add value to its resources and meet more fuel demand with its own supply. Egypt is developing a ra of other new re ning and petrochemicals projects, but how many of these ventures keep to their schedule is another matter, given the economic fallout from the pandemic. e new hydrocracking facility is due on stream in 2022.
In Oman, a Canadian public-private partner- ship called Canada Business Holdings (CBH) has announced plans to invest in a 300,000 bpd re nery to produce low-sulphur fuel oil (LSFO) for ships in the area. LSFO is in higher demand since IMO regulations were imposed, reducing the cap for sulphur content in marine fuel to 0.5% from 3.5% previously.
Meanwhile, Nigeria’s latest auction for mar- ginal elds, if successful, could provide oppor- tunities for the further deployment of modular re neries. Developers say these small-sized oil processing plants are the answer to Nigeria’s fuel dilemma, helping to reduce imports and replace illegal re neries in the Niger Delta.
China’s teapot refineries have a backlog of crude imports waiting to be processed by the port of Qingdao in Shandong province
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