Page 7 - LatAmOil Week 06 2020

LatAmOil COMMENTARY LatAmOil

Previous demand shocks include the September 11 terror attacks and the SARS infection of 2003. Demand for oil has been relatively resilient in the years since the Great Recession, boosted by the rapid economic growth in China and India. An alliance between Saudi Arabia and Russia has helped prop up oil prices for the last three years. But the two big oil producers were far
from being in perfect harmony this week.
Cloud on the horizon
A further cloud on the horizon is the potential of an agreement being reached by the warring sides in Libya.
This is by no means certain, but if it happens, the restored oil output from Libya would dwarf the tentative production cuts proposed at the OPEC-plus talks last week. That would turn the current stern test for the cartel into a potentially
insurmountable challenge.
The coronavirus has struck at the heart of
global demand, with US prices dipping below $50 a barrel for the first time in more than a year. If prices do not recover, soon the budgets of nations from Saudi Arabia to Kazakhstan will suffer.
At a strategic level, the inability to reach a quick consensus has inevitably raised con- cerns about whether Saudi Arabia, the de facto leader of OPEC, and Russia are still able to work together to co-ordinate oil policy.
On the ground, serious action has been taken in China, where teeming cities have become ghost towns, flights have been cancelled and fac- tories and schools have been closed. In day-to- day life, in the economy – and in the commodity and energy markets – there is a lot at stake, and uncertainty is adding to the sense of crisis.™
Brazilian-Mexican JV begins importing US-produced ethane
“ tailspins, this
Unlike recent oil
one has been triggered by lack of demand, not excess supply
MEXICO
BRASKEM Idesa SAPI, a joint venture formed by two Latin American firms, has reportedly begun taking delivery of US-produced ethane at its Nanchital petrochemical complex in the Mexican state of Veracruz.
In a statement dated February 10, Braskem Idesa SAPI said it had received its first shipment of ethane from US suppliers. It also explained that the Nanchital facility would be using the ethane as feedstock for polyethylene production but did not identify the source of the shipment. Nor did it reveal the size or price of the ethylene cargo.
Last November, the joint venture was reported to be in talks with an unnamed seller on a long-term supply agreement for ethane from the US. At the time, it said it would turn to the spot market to ensure its access to adequate quantities of ethylene if these negotiations failed.
Braskem Idesa SAPI is set to invest around $4mn in efforts to keep US-produced ethane flowing to the Nanchital plant on an ongoing basis. This initiative puts the joint venture in a position to import as much as 12,800 barrels per day (bpd) of ethane, equivalent to 19% of full capacity.
So far, Braskem Idesa SAPI has spent $2.4mn on the first phase of an infrastructure pro- gramme designed to facilitate US ethane deliv- eries to Nanchital. It used some of these funds to contract SmartPass, a logistics operator, and Énestas SA de CV, which provides cryogenic gas transportation services.
SmartPass unloads liquefied ethane from tankers in the port of Coatzacoalcos and then
transfers it from these vessels into cryogenic tanks. Énestas has been loading the ethane into trucks so that it can be moved to other stor- age facilities at the Braskem Idesa SAPI plant, either for storage or for regasification prior to processing.
Delivery volumes are set to rise. According to Braskem, ethane delivery volumes could go as high as 25,800 bpd by the end of the first phase of this project, he said.
The Nanchital plant lies within the Coatza- coalcos-Nanchital region of the Mexican state of Veracruz. Braskem Idesa SAPI’s shareholders are Braskem (Brazil) and Groupo Idesa SA de CV (Mexico). ™
The plant is now receiving US-produced ethane (Photo: Braskem Idesa SAPI)
Week 06 13•February•2020 w w w. N E W S B A S E . c o m P7