Shell to tap major gas field off Trinidad

Spanish Market: Fertilizers, Natural gas, Petrochemicals
19/10/21

Shell plans to sign a production-sharing contract (PSC) for the 2.7 Tcf Manatee offshore natural gas field in Trinidad and Tobago, a project the government hopes will overcome a chronic gas supply shortage.

Manatee holds the potential to provide "the single largest new gas production in Trinidad and Tobago for decades," energy minister Stuart Young said.

"We are pleased to have reached agreement … on terms to enable the development of the Manatee area," Shell told Argus today. "We look forward to signing the PSC in the coming weeks."

The field is part of the 10 Tcf Loran-Manatee deposit that straddles Trinidad's maritime border with Venezuela.

Production from Manatee "could start as early as 2025, but this depends on the speed at which the parties can install infrastructure," the energy ministry told Argus today.

Output is projected to start at 300mn cf/d, rising to 700mn cf/d, the ministry said.

"The Manatee development presents a significant medium-term opportunity for the local energy sector to bolster gas supply to both domestic and LNG export markets," Shell said.

Going it alone

The Manatee deal highlights Trinidad's go-it-alone approach after years of flirting with gas-rich Venezuela next door.

The negotiations for the Manatee PSC started in February 2020 after efforts by Trinidad and Venezuela to jointly develop the cross-border deposit ran aground in 2018, in part because of disagreement over the gas price. The following year, the US imposed oil sanctions on Venezuela, sinking the joint initiative altogether.

US sanctions on Venezuela scuttled a separate project under which Trinidad was negotiating to buy gas from Venezuela's offshore Dragon field. Venezuela's state-owned PdV, Trinidadian state-owned gas company NGC and Shell struck a preliminary deal in 2017 to develop gas from Dragon. An initial 150mn cf/d of gas would have been transported through a planned flowline to Shell's Hibiscus platform off Trinidad and distributed by NGC.

The deal collapsed in 2018 and "there is little to suggest it will be taken forward," the ministry said.

For years, Trinidad's flagging gas production has caused supply curtailments to LNG, petrochemical and fertilizer plants.

The country's January-May gas output reached 2.73 Bcf/d, 20pc less than a year earlier, according to energy ministry data.

By Canute James

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24/12/24

Viewpoint: California dairy fight spills into 2025

Houston, 24 December (Argus) — California must begin crafting dairy methane limits next year as pressure grows for regulators to change course. The California Air Resources Board (CARB) has committed to begin crafting regulations that could mandate the reduction of dairy methane as it locked in incentives for harvesting gas to fuel vehicles in the state. The combination has frustrated environmental groups and other opponents of a methane capture strategy they accuse of collateral damage. Now, tough new targets pitched to help balance the program's incentives could become the fall-out in a new lawsuit. State regulators have repeatedly said that the Low Carbon Fuel Standard (LCFS) is ill-suited to consider mostly off-road emissions from a sector that could pack up and move to another state to escape regulation. California's LCFS requires yearly reductions of transportation fuel carbon intensity. Higher-carbon fuels that exceed the annual limits incur deficits that suppliers must offset with credits generated from the distribution to the state of approved, lower-carbon alternatives. Regulators extended participation in the program to dairy methane in 2017. Dairies may register to use manure digesters to capture methane that suppliers may process into pipeline-quality natural gas. This gas may then be attributed to compressed natural gas vehicles in California, so long as participants can show a path for approved supplies between the dairy and the customer. California only issues credits for methane cuts beyond other existing requirements. Regulators began mandating methane reductions from landfills more than a decade ago and in 2016 set similar requirements for wastewater treatment plants. But while lawmakers set a goal for in-state dairies to reduce methane emissions by 40pc from 2030 levels, regulators could not even consider rulemakings mandating such reductions until 2024. CARB made no move to directly regulate those emissions at their first opportunity, as staff grappled with amendments to the agency's LCFS and cap-and-trade programs. That has meant that dairies continue to receive credit for all of the methane they capture, generating deep, carbon-reducing scores under the LCFS and outsized credit production relative to the fuel they replace. Dairy methane harvesting generated 16pc of all new credits generated in 2023, compared with biodiesel's 6pc. Dairy methane replaced just 38pc of the diesel equivalent gallons that biodiesel did over the same period. The incentive has exasperated environmental and community groups, who see LCFS credits as encouraging larger operations with more consequences for local air and water quality. Dairies warn that costly methane capture systems could not be affordable otherwise. Adding to the expense of operating in California would cause more operations to leave the state. California dairies make up about two thirds of suppliers registered under the program. Dairy supporters successfully delayed proposed legislative requirements in 2023. CARB staff in May 2024 declined a petition seeking a faster approach to dairy regulation . Staff committed to take up a rulemaking considering the best way to address dairy methane reduction in 2025. Before that, final revisions to the LCFS approved in November included guarantees for dairy methane crediting. Projects that break ground by the end of this decade would remain eligible for up to 30 years of LCFS credit generation, compared with just 10 years for projects after 2029. Limits on the scope of book-and-claim participation for out-of-state projects would wait until well into the next decade. Staff said it was necessary to ensure continued investment in methane reduction. The inclusion immediately frustrated critics of the renewable natural gas policy, including board member Diane Tarkvarian, who sought to have the changes struck and was one of two votes ultimately against the LCFS revisions. Environmental groups have now sued , invoking violations that effectively froze the LCFS for years of court review. Regulators and lawmakers working to transition the state to cleaner air and lower-emissions vehicles will have to tread carefully in 2025. By Elliott Blackburn Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US BD demand awaits 1Q rebound as risks loom

24/12/24

Viewpoint: US BD demand awaits 1Q rebound as risks loom

Houston, 24 December (Argus) — US demand for butadiene (BD) is expected to increase in January, but buyer sentiment for the remainder of the first quarter remains uncertain. Inventory restocking in January is expected to draw down excess supply and provide near-term price support, according to market participants. Derivative manufacturers aim to rebuild inventories following earlier-than-normal destocking initiatives this year. Many buyers employ standard inventory control management strategies to avoid paying higher end-of-year inventory taxes, particularly in Texas. Others cut costs to improve year-end financial statements. Domestic demand in February and March is less clear, as market participants question whether the market will rebound from persistently low demand at the end of 2024. US BD prices on a contract basis fell by 12pc during the fourth quarter , owing to weak demand and oversupply. Demand was depressed by BD consumer turnarounds in October, seasonal slowdowns between November-December and trade pressures tied to derivative imports. US tire shipments this year are expected to rise by 2.1pc to 338.9mn units, surpassing the record set in 2021, according to the US Tire Manufacturers Association. However, market participants along with US trade data reference a jump in tire imports from Asia-Pacific. Both Bridgestone and Goodyear have said low-cost tire imports and structural changes in segment profitability across the Americas are eroding their market share, fueling capacity rationalization, asset sell-offs and plant closures in the region. Acrylonitrile butadiene styrene (ABS) is another segment at risk of stronger competition from low-cost, Asia-origin imports. Ineos Styrolution plans to permanently shut down its ABS plant in Addyston, Ohio, in 2025 because the facility cannot compete with imported material. "Over the past few years, we have seen the ABS market become increasingly competitive, particularly with growing competition from overseas imports," Ineos Styrolution chief executive Steve Harrington said in late October. Protectionist trade policies are likely to be a feature of president-elect Donald Trump's second administration, potentially altering business investment decisions and durable goods trade flows. Even if demand does not improve, planned maintenance in the first half of 2025 is expected to tighten BD supplies. A heavy turnaround cycle for steam crackers will concentrate in the first and second quarters, constraining availability of feedstock crude C4. One integrated US Gulf coast producer plans to enforce BD allocations while its assets are offline for planned maintenance. A separate, non-integrated producer has not announced BD sales controls, based on feedback from its customers. This same BD supplier was short on feedstock supplies for parts of this year, with the crude C4 merchant market illiquid in North America. A third producer has scheduled a cracker turnaround starting in January, but no indications emerged that would limit term volumes from its BD unit. Reduced BD supply during cracker maintenance is likely to pull volumes away from the export market until the second half of 2025. Export spot cargoes in the fourth quarter more than doubled from the third quarter, serving as a critical outlet to clear the domestic market of surplus BD supplies, even as lower export prices pressured US margins. By Joshua Himelfarb Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US LPG cargo premiums poised to fall

23/12/24

Viewpoint: US LPG cargo premiums poised to fall

Houston, 23 December (Argus) — The booming US LPG export market has fueled record spot fees this year for terminal operators that send those cargoes abroad, but those fees are poised to fall next year as additional export capacity comes online. US propane exports surged over the past two years, hitting an all-time high of 1.85mn b/d in the first quarter of this year, according to data from the US Energy Information Administration (EIA). Terminal fees for spot propane cargoes out of the US Gulf coast hit an all-time high of Mont Belvieu +32.5¢/USG (+$169.325/t) in mid-September. US propane production is expected to grow by another 80,000 b/d in 2025 to 2.22mn b/d while the outlook for domestic consumption is fairly steady, at 820,000 b/d next year — meaning even more propane will be pushed into the waterborne market. But that is dependent on US infrastructure keeping up with the pace of production. US export terminals in Houston, Nederland and Freeport, Texas, have run at or above capacity for the last two years given the thirst for cheaper US feedstock, largely from propane dehydrogenation (PDH) plant operators in China. This demand has created bottlenecks at US docks, and midstream operators like Enterprise, Energy Transfer, and Targa have rushed to ramp up spending on both pipelines and additional refrigeration to stay ahead of the wave of additional production. US gas output spurs LPG exports As upstream producers have ramped up natural gas production ahead of new LNG projects, most producers are counting on LPG demand from international outlets in Asia to offload the ethane and propane the US cannot consume. For the past four years, Asian buyers have been more than happy to oblige. US propane exports to China rose from zero in 2019, when China imposed tariffs on US imports, to an average of 1.36mn metric tonnes (t) per month in January-November 2024, according to data from analytics firm Kpler, making China the largest offtaker of US shipments. US exports to Japan averaged 480,000t per month throughout most of 2024, and exports to Korea averaged 460,000t per month in the first 11 months of 2024. China, Korea, and Japan received 52pc of US propane exports in 2024, up from 49pc in 2020, according to data from Vortexa. Strong demand in Asia has kept delivered prices in Japan high enough to sustain an open arbitrage between the US and the Argus Far East Index (AFEI). Forward-month in-well propane prices at Mont Belvieu, Texas, have remained well below delivered propane on the AFEI. In 2020, Mont Belvieu Enterprise (EPC) propane averaged a $143/t discount to delivered AFEI — a spread that has only widened as additional PDH units in Asia have come online. During the first 11 months of 2024, the Mont Belvieu to AFEI spread averaged a hefty $219/t, leaving plenty of room for wider netbacks in the form of higher terminal fees for US sellers, especially as a wave of new VLGCs entering the global market has left shipowners with less leverage to take advantage of the wider arbitrage. The resulting wider arbitrage to Asia has kept US export terminals running full for the last two years. So when a series of weather-related events and maintenance in May-September limited the number of spot cargoes operators could sell and delayed scheduled shipments, term buyers willing to resell any of their loadings could effectively name their price. This spurred the record-high premiums for spot propane cargoes in September. New projects may narrow premium An increase in US midstream firm investments in additional dock capacity and added refrigeration in the years ahead could narrow those terminal fees, however. Announced projects from Enterprise and Energy Transfer, in particular, will add a combined 550,000 b/d of LPG export capacity out of Houston and Nederland, Texas by the end of 2026. Enterprise's new Neches River terminal project near Beaumont, Texas, will add another 360,000 b/d of either ethane or propane export capacity in the same timeframe. These additions are poised to limit premiums for spot cargoes by the end of 2025. Already, it appears the spike in spot cargo premiums to Mont Belvieu has abated for the rest of 2024. Spot terminal fees for propane sank to Mont Belvieu +14¢/USG by the end of November. The lower premiums come not only as terminals resume a more normal loading schedule, but at the same time a surplus of tons into Asia ahead of winter heating demand has narrowed the arbitrage. The spread between in-well EPC propane at Mont Belvieu fell from $214.66/t to $194.45/t during November. A backwardated market for AFEI paper into the second quarter of 2025 means US prices are poised to fall more in order to keep the spread from narrowing further. By Amy Strahan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Protectionist policies muddy US PE outlook

23/12/24

Viewpoint: Protectionist policies muddy US PE outlook

Houston, 23 December (Argus) — Potential new tariffs combined with protectionist policies from other importing countries are clouding the outlook for growth in the US polyethylene (PE) market heading into 2025. US president-elect Donald Trump threatened a 25pc tariff on all imports from Canada and Mexico, and at times has threatened as much as a 60pc tariff on all goods imported from China. Any new tariffs open the US up to retaliatory tariffs from the three countries, which have historically been among the top destinations for US PE exports. Brazil, another major trading partner with the US, recently raised import tariffs on PE to 20pc. On top of that, Brazil is in the midst of an anti-dumping investigation into US PE, which if successful would raise the tariff on US PE by an additional 21.4pc, bringing the total tariff for US PE in Brazil to 41.4pc. US PE exports in the first 10 months of 2024 totalled roughly 11.6mn t, with 16.4pc sold to China, 13.3pc sold to Mexico, 10.8pc sold to Brazil and 7pc sold to Canada , according to data from Global Trade Tracker (GTT). US PE producers are increasingly relying on exports, particularly with new capacity still set to come online in the next two years. This includes a new 600,000 t/yr linear low density polyethylene (LLDPE)/high density polyethylene (HDPE) swing plant from Dow set to start in the second half of 2025, as well as 2mn t/yr of HDPE capacity from Chevron Phillips Chemical's joint venture with Qatar-based QE in 2026. Exports as a percentage of total US and Canadian PE sales has been growing since 2016, when it was less than 25pc to crossing the 50pc threshold for the first time in November of this year, according to data from the American Chemistry Council (ACC). ACC data combines the US and Canada and considers trade between them as domestic rather than exports. With the US and Canadian PE markets largely functioning as one, the potential tariffs on product from Canada could cause problems for US buyers as well as Canadian suppliers, whose competitiveness in the region could be limited by new tariffs. "It would be a huge problem," said one US PE buyer who purchases resin from suppliers in both countries. For one particular grade of PE, the buyer said there are only two suppliers, including one producer in Canada and one in the US. If tariffs were imposed on Canadian material, it would suddenly make that particular grade more expensive because it would mean the US producer would no longer need to match competitive offers from Canada. Retaliatory concerns While US buyers are concerned about having to pay new duties on imports from Canada, US producers are also worried about potential retaliatory tariffs from other countries, such as China, and new duties and potential tariffs in Brazil. US PE exports to China totaled roughly 1.9mn t in the first 10 months of 2024, an amount that could not be easily absorbed by many other countries if new tariffs limit sales into that country. And in Brazil, US PE exports totaled roughly 1.26mn t in 2024 through October, another huge chunk that is at risk if the new anti-dumping duties against US PE are implemented. "Brazil is a huge market for the US. It's a big deal," said one US trader. "Producers can ship to countries around Brazil, but that will not cover everything we are losing. Where will it all go?" New outlets are opening up for US product in places such as Europe, where some global capacity has shut down. ExxonMobil, for instance, announced in April it was permanently shutting down its Gravenchon cracker and associated derivative plants in France, including a 420,000 t/yr HDPE-LLDPE swing unit. With the closure of that plant, sources have said ExxonMobil is exporting more volume from its cost-advantaged US assets to the region. But there is a limit to how much US export volume can be absorbed because of shutdowns in other regions. While many market participants are hopeful that proposed tariffs will not materialize, the uncertainty is making it difficult to plan for 2025, sources said. "Speculating on it is a waste. You don't know what is going to happen first, you don't know what the reaction is going to be," said one buyer. "All you can do is try to get the lowest prices you can and work a little bit of flexibility into your contracts." By Michelle Klump Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Tight US phosphate supply may ease

23/12/24

Viewpoint: Tight US phosphate supply may ease

Houston, 23 December (Argus) — US phosphate buyers expect tight supply to ease next year after a lackluster fall application season left bins fuller, while unfavorable affordability will likely curtail spring demand. Tight P2O5 supply concerns driven by supply disruptions were of frequent concern among market participants earlier this year when DAP prices were roughly $80-100/st higher than price levels at the start of this December and MAP prices were at least $20/st higher. In May, a brush fire at major US phosphate producer Mosaic's Riverview facility in Florida caused a decrease in output. Market fundamentals tightened further throughout the summer and into early fall because of several hurricanes that made landfall in Louisiana and Florida, which reduced production from Mosaic and producer Nutrien's facilities. Higher phosphate values, lower crop prices and the resulting deterioration in affordability in the last six months of 2024 compared to 2023 deterred farmer buying interest. Some US buyers bought more triple superphosphate (TSP) throughout the summer as it became more economically appealing for the fall despite its lower nutrient content relative to MAP or DAP. The overall disinterest from farmers to use phosphate products this fall left higher-than-expected inventories across the Corn Belt that will carry over into next year and likely alleviate supply concerns along the Mississippi River for this spring. The US for the 2024/25 fertilizer year so far has imported less DAP and MAP compared with previous years, likely a result of poor affordability and farmer disinterest. Roughly 762,000 metric tonnes (t) of combined DAP and MAP were imported into the US from July through October, down from 34pc for the same period during the 2023/24 fertilizer year and 3pc lower than the five-year-average, according to US Census Bureau data. The absence of Moroccan producer OCP's phosphate products will continue to tighten US market fundamentals for the 2024/25 fertilizer year. The US Department of Commerce recently raised the phosphate import duty for OCP to 16.8pc from a preliminary rate of 14.2pc for calendar year 2022 and forward if it goes unchallenged. But most domestic buyers have been able to source product from elsewhere, like Jordan, Australia and Saudi Arabia. The US market also imported nearly 290,000t of TSP from July through October. That was 30pc higher than a year earlier and 70pc higher than the five-year-average, reflecting its recent appeal as a more affordable product. Affordability remains a headwind for demand in the spring as well. Based on the ratio between select phosphate barge prices and corn futures, farmer purchasing power for DAP and MAP has weakened throughout 2024 compared with 2023. This forces farmers to sell more of their crops to afford a ton of phosphate fertilizer. Market participants expect spring demand in 2025 to be lower than the robust demand seen last spring and for the market to be well supplied as a result. "Unless a big run on phosphate happens [this spring], we are looking at more supply than people know what to do with," one seller relayed. By Taylor Zavala Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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