Chinese petchem firms, refiners expand cracker capacity

: LPG, Oil products, Petrochemicals
20/07/28

Three new large steam crackers are on course to start up in China in August, boosting demand for petrochemical feedstocks such as naphtha and LPG.

Bora Chemical is due to be the first company to start its cracker, followed by state-controlled Sinopec's new Zhanjiang refining arm and state-owned Sinochem's Quanzhou operations.

Bora LyondellBasell, a 50:50 joint venture between global petrochemical firm LyondellBasell and local refinery Bora Chemical, started trial runs at its steam cracker on 27 July, according to market participants. This could not be confirmed with the company. The official start-up has been scheduled for 2 August.

The cracker, at Panjin in northeast China's Liaoning province, has 1.1mn t/yr of ethylene and 690,000 t/yr of propylene capacity. Its derivative units include 120,000 t/yr of butadiene (BD), 450,000 t/yr of linear low-density polyethylene (LLDPE), 350,000 t/yr of high-density polyethylene (HDPE), 350,000 t/yr of styrene monomer (SM) and 600,000 t/yr of polypropylene (PP).

The company plans to start up downstream PE and PP units together with the cracker, fed by purchased ethylene and propylene in the initial stage. The BD capacity is scheduled to start on 7 August. The SM capacity is in the process of starting up and Bora achieved on-specification production of ethylbenzene, a feedstock for SM, on 27 July.

Bora LyondellBasell's new cracker will run partly on merchant propane, which is estimated to make up around 44pc of its cracker feed slate. The remaining 56pc will mainly comprise naphtha and a small amount of light hydrocarbons from Bora's 140,000 b/d Panjin refinery.

The joint venture's sales agreement calls for Bora Chemical to market the LLDPE and SM, while LyondellBasell will market the HDPE and PP.

Two other crackers are poised to come on line next month. State-controlled Sinopec has set a 21 August date to start its naphtha cracker at Zhanjiang in Guangdong province. The cracker has 800,000 t/yr of ethylene and 430,000 t/yr of propylene capacity and is integrated with 250,000/400,000 t/yr ethylene oxide/ethylene glycol (EO/EG), 350,000 t/yr HDPE, 100,000 t/yr ethylene vinyl acetate (EVA) and 550,000 t/yr PP derivative units.

And fellow state-controlled firm Sinochem is now looking to start up its Quanzhou naphtha cracker at the end of August. The cracker has 1mn t/yr of ethylene and 500,000 t/yr of propylene capacity, and a full stream of petrochemical derivative units including 100,000 t/yr EVA, 400,000 t/yr HDPE, 200,000/450,000 propylene oxide/styrene (PO/SM), 580,000 t/yr PP and 120,000 t/yr BD capacity.

Sinopec Zhanjiang is buying LPG for its new cracker, while Sinochem has its own LPG supplies from the Quanzhou refinery. LPG is likely to make up about 10pc of the crackers' feedstock mixes.

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

24/12/23

Viewpoint: European large cargo propane to tighten

London, 23 December (Argus) — The large cargo cif Amsterdam-Rotterdam-Antwerp (ARA) propane market is set to tighten on supply constrains in 2025, as regional supplies and imports could slow, but demand is likely to remain erratic. Local availability from the North Sea is suppressed, with natural gas prices higher than those for propane. Production is largely dependent on gas processors that have the ability leave propane in the natural gas stream when the lighter grade becomes significantly cheaper, to maximise profits and yields. Current economics favour natural gas. The average spread between the fuels so far in December places large cargo propane at an average -$130/t discount, incentivising price-sensitive refineries to hold on to their propane. The forward curve for natural gas is in a contango structure, reflecting ample stocks and sluggish demand for the season, and a stronger outlook for next year. In contrast, prompt propane is priced higher than future values. The European propane swaps curve is heavily backwardated out to June 2025, with a January-February spread at $12/t and February-March at $19/t, widening the discount of the lighter grade against natural gas. This creates conditions for gas processors to leave more LPG in the gas stream over the first half of the year, possibly tipping local balances into tightness. Supply from European refiners that can switch from sellers to consumers of LPG, and use their own LPG production depending on the price balance between propane and natural gas, has so far been unaffected. The fca propane inland railcar price has hovered at a significant premium against natural gas in recent months, but if the lighter grade loses strength then production from refineries could be trimmed. With weaker regional output, European buyers will be more reliant on US imports. In the first half of 2024, the European region was flooded with US LPG, but this is unlikely to be repeated. The Panama Canal drought led to transit difficulties at the beginning of 2024, creating long queues and increasing delivery costs to send product east, freeing a surplus of US LPG to Europe at a time when demand was subdued. Transits through the Canal dropped by almost 30pc in 2024, according to the Panama Canal Authority. Yet, in recent months steady levels of precipitations pushed the water levels at the Gatun lake, the reservoir that supplies the isthmus, to a two-year high. Early forecasts indicate the passage will remain a reliable route for the first quarter of 2025. With no constraints to move US product east, European buyers would have to compete with the steep premiums typically offered in Asia-Pacific, creating tougher conditions to secure US LPG. Demanding conditions On the demand side, consumption from the petrochemical sector is likely to rise somewhat over the first quarter of 2025 as operating rates pick up, although margins are unlikely to improve by much. Ethylene crackers, which can oscillate between LPG and naphtha depending on economics, currently favour the latter, as the December propane-naphtha differential has hovered below the -$50/t discount threshold that incentivises a switch to naphtha and suppresses demand for propane. But forward curves show a steady widening of the negative differential in the first half of 2025, which should put propane back into the game. Demand from the heating sector has been lukewarm due to the mild weather conditions in Europe, and temperatures could remain slightly above seasonal averages in the UK, France and Germany in December and January, Speedwell Weather data show. Even without any strong demand, the prevailing sentiment looks a notch more bullish in the first half of 2025 than in the first six months of 2024, when the region was oversupplied and pressured by the excess selling competition. In contrast, in 2025 European buyers might be faced with an uphill fight to seize US product and to secure local production. By Efcharis Sgourou Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Europe’s refiners eye support from closures

24/12/23

Viewpoint: Europe’s refiners eye support from closures

London, 23 December (Argus) — Another tranche of European refining capacity will close for good next year, but the reprieve for margins in the region may only be temporary. Nearly 400,000 b/d of capacity, around 3pc of Europe's total, is scheduled for permanent closure in 2025, comprising Petroineos' 150,000 b/d Grangemouth refinery in Scotland, Shell's 147,000 b/d Wesseling refinery in Germany and a third of the capacity at BP's nearby 257,000 b/d Gelsenkirchen refinery . Around 30 refineries have closed in Europe since 2000. Among the most recent was Italian firm Eni's 84,000 b/d Livorno refinery in northern Italy earlier this year. And only this month, trading firm Gunvor announced it is mothballing its small upgrading refinery in Rotterdam . The Rotterdam facility had already stopped processing crude in 2020, leaving it peculiarly exposed to the margins between intermediate feedstocks and finished fuels. The refinery has been hit by a 25pc increase in operating costs in the last four years and a squeeze on margins, the latter the result of competition from new refineries outside the region, Gunvor said. Outside Europe, the world has added more than 2.5mn b/d of crude distillation capacity in the last three years. Three brand new refineries have come on stream in the Middle East in that time — Saudi Arabia's 400,000 b/d Jizan, Kuwait's 615,000 b/d Al-Zour with Oman's 230,000 b/d Duqm refineries. More recently, Nigeria's 650,000 b/d Dangote refinery, Mexico's 340,000 b/d Olmeca refinery and Yulong Petrochemical's 400,000 b/d refinery in China's Shandong province started up, all of which are likely to ramp up throughput in 2025. Refinery closures tend to support margins for those that remain. But European refiners' costs continue to rise while demand for their products falls, which means next year's closures are unlikely to be the last. Simpler and smaller refineries are prime candidates for closure as they usually achieve weaker margins. Europe also has plenty of refineries built before 1950 that are still running. These older plants can be more at risk of accidents and breakdowns. And repairs can sometimes cost so much that they tip a refinery into the red. An ongoing concern for European refiners is the trend towards lighter and sweeter crude slates , driven by supply-side dynamics, which is resulting in higher naphtha yields at a time when demand for naphtha from Europe's petrochemical sector is under pressure from a contraction in cracking capacity. But many in the market expect the greatest pressure in 2025 will fall on those coastal refineries in Europe that were built to maximise gasoline output. If, as expected, Dangote continues to shrink Nigeria's demand for gasoline imports , these refineries will be hit hardest. Any refinery that cannot desulphurise all of its gasoline output to the 10ppm required for UK or EU usage will be under intense pressure, as west Africa is presently among the only outlets for European high-sulphur gasoline. Strike support One of the strongest supports for European refining margins in 2025 could come in the form of industrial action if new capacity cuts or closures were to be announced. Refinery workers in the region have shown willing and able in the past to organise large-scale strikes, most emphatically in France. The highest diesel refining margins Argus has ever recorded came in October 2022, when the entire French refining system was shut down by strikes. Another trend to watch out for next year is the continuing shift in the ownership structure of Europe's refining sector. The large integrated oil companies that have dominated the industry for so long have been steadily selling European refining assets to independents and trading firms. The latter are nimbler and able to cut costs more ruthlessly. And with many of them not publicly listed, they are less susceptible to pressure regarding their environmental footprints. There could be more instalments in this story in 2025. Sweden's Preem started accepting bids for its Swedish refining assets in the summer of 2024 and Russia's Lukoil is considering bids for its Burgas refinery in Bulgaria. By Benedict George Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Shell and Prax call off deal on German refinery stake

24/12/20

Shell and Prax call off deal on German refinery stake

Hamburg, 20 December (Argus) — Shell's planned sale of its 37.5pc stake in Germany's 226,000 b/d Schwedt refinery to UK energy firm Prax has fallen through. "Both parties have taken the decision not to proceed with the transaction," Prax said, without elaborating. The refinery will continue to operate as normal, it said. Shell said the companies had reached the end of an agreed timeframe for closing the deal. It said it is still looking to sell the stake. The deal with Prax, which was announced a year ago , was initially due to be completed in the first half of 2024. Shell owns its stake in Schwedt through the PCK joint venture, which also includes Italy's Eni and Rosneft Deutschland, one of the Russian firm's two German subsidiaries. Shell previously attempted to sell its PCK share to Austria-based Alcmene in 2021 but that deal failed to complete after Rosneft Deutschland exercised its pre-emption rights later that year. Rosneft was unable to buy the stake after the German government placed its two German subsidiaries under trust administration in 2022 in the wake of Moscow's invasion of Ukraine, forcing Shell to seek an alternative buyer. In October, a court in Germany rejected a complaint by Rosneft Deutschland against Shell's plan to sell its PCK stake to Prax. By Svea Winter Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Trump backs new deal to avoid shutdown: Update

24/12/19

Trump backs new deal to avoid shutdown: Update

Adds updates throughout Washington, 19 December (Argus) — US president-elect Donald Trump is offering his support for a rewritten spending bill that would avoid a government shutdown but leave out a provision authorizing year-round 15pc ethanol gasoline (E15) sales. The bill — which Republicans rewrote today after Trump attacked an earlier bipartisan agreement — would avoid a government shutdown starting Saturday, deliver agricultural aid and provide disaster relief. Trump said the bill was a "very good deal" that would also include a two-year suspension of the "very unnecessary" ceiling on federal debt, until 30 January 2027. "All Republicans, and even the Democrats, should do what is best for our Country, and vote 'YES' for this Bill, TONIGHT!" Trump wrote in a social media post. Passing the bill would require support from Democrats, who are still reeling after Trump and his allies — including Tesla chief executive Elon Musk — upended a spending deal they had spent weeks negotiating with US House speaker Mike Johnson (R-Louisiana). Democrats have not yet said if they would vote against the new agreement. "We are prepared to move forward with the bipartisan agreement that we thought was negotiated in good faith with House Republicans," House minority leader Hakeem Jeffries (D-New York) said earlier today. That earlier deal would have kept the government funded through 14 March, in addition to providing a one-year extension to the farm bill, $100bn in disaster relief and $10bn in aid for farmers. The bill would also provide a waiver that would avoid a looming ban on summertime sales of E15 across much of the US. Ethanol industry officials said they would urge lawmakers to vote against any package without the E15 provision. "Pulling E15 out of the bill makes absolutely no sense and is an insult to America's farmers and renewable fuel producers," Renewable Fuels Association chief executive Geoff Cooper said. If no agreement is reached by Friday at 11:59pm ET, federal agencies would have to furlough millions of workers and curtail services, although some agencies are able to continue operations in the event of a short-term funding lapse. Air travel is unlikely to face immediate interruptions because key federal workers are considered "essential," but some work on permits, agricultural and import data, and regulations could be curtailed. The US Federal Energy Regulatory Commission has funding to get through a "short-term" shutdown but could be affected by a longer shutdown, chairman Willie Phillips said. The US Department of Energy expects "no disruptions" if funding lapses for 1-5 days, according to its shutdown plan. The US Environmental Protection Agency would furlough about 90pc of its nearly 17,000 staff in the event of a shutdown, according to a plan it updated earlier this year. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US Congress passes waterways bill

24/12/19

US Congress passes waterways bill

Houston, 19 December (Argus) — The US Senate has passed a bipartisan waterways infrastructure bill, providing a framework for further investment in the country's waterways system. The waterways bill, also known as the Water Resources and Development Act (WRDA), was approved by the Senate in a 97-1 vote on 18 December after clearing the US House of Representatives on 10 December. The WRDA's next stop is the desk of President Joe Biden, who is expected to sign the bill. The WRDA has been passed every two years, authorizing the US Army Corps of Engineers (Corps) to undertake waterways infrastructure and navigation projects. Funding for individual projects must still be approved by Congress. Several agriculture-based groups voiced their support for the bill, saying it will improve transit for agricultural products on US waterways. The bill also shifts the funding of waterways projects to 75pc from the federal government and 25pc from the Inland Waterways Trust Fund instead of the previous 65-35pc split. "Increasing the general fund portion of the cost-share structure will promote much needed investment for inland navigation projects, as well as provide confidence to the industry that much needed maintenance and modernization of our inland waterway system will happen," Fertilizer Institute president Corey Rosenbusch said. The bill includes a provision to assist with the damaged Wilson Lock along the Tennessee River in Alabama. By Meghan Yoyotte Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more