Viewpoint: E15 changes may lift midcon CBOB prices

: Oil products
23/12/26

US midcontinent gasoline prices may tick higher than normal next summer as eight midcontinent states seek to retain year-round sales of 15pc ethanol gasoline (E15) in a proposed reformulation that could pinch regional supplies and constrain pipeline movements.

The potential shift to year-round E15 could lead to portions of the midcontinent adopting a boutique grade of gasoline particular to the region that would be used for blending to produce the E15. The boutique grade would be 7.8 Reid Vapor Pressure (RVP), a more expensive specification, as opposed to the 9.0 RVP gasoline that is typically used during the summer months.

This lack of uniformity in gasoline specifications may cause logistical problems, with pipelines unable to make the necessary changes to accommodate two separate RVPs of CBOB before the 2024 summer. The change may also result in an inability to draw product from other regions, leading to higher prices.

Gasoline prices at the pump could potentially increase by between 8¢-12¢/USG if the proposed rule were to go through, said US refiner HF Sinclair in its 15 November petition to the US Environmental Protection agency opposing the move, citing a study conducted by energy consultant Baker and O'Brien earlier this year.

Southern US midcontinent suboctane gasoline prices averaged $2.62/USG from April through December this year, while Chicago's Buckeye Complex CBOB averaged $2.49/USG in the same timeframe.

Ethanol industry groups released a study conducted by energy consultant MathPro in December 2021 that estimated the cost of a nationwide shift to E15 gasoline at approximately 2¢/USG. Petroleum industry organizations say the MathPro study is flawed.

The change to E15 may benefit the environment as well with the Renewable Fuels Association claiming that E15 gasoline produces 40-50pc less greenhouse emissions than crude-based gasoline. The association also argues that the use of more US-made ethanol can increase energy independence and reduce the effects of market shocks.

E15 has been available for sale across the US since 2019, but a federal court in 2021 found that the Clean Air Act exclusively offers a fuel volatility waiver to refiners to produce 10pc ethanol gasoline. The EPA has worked around this ruling for the last two summers by issuing temporary emergency orders allowing the sale of E15 because of the Ukraine conflict's squeeze on fuel supply. The EPA currently intends to issue a final ruling by late March next year.

The change could also result in additional costs and losses in production for refiners. Segregating 7.8 RVP gasoline from 9.0 RVP gasoline could result in a 12pc decrease in production, HF Sinclair said in its petition to delay the change, citing a 2005 report from the US Government Accountability Office. The US midcontinent produced an average of 2.53mn b/d of finished gasoline between April and September this year, according to data from the US Energy Information Administration (EIA). Ethanol blending in the midcontinent averaged 248,000 b/d during that period.

Other US and Canadian refiners also filed petitions urging the EPA to delay the change beyond summer 2024. US refiners Phillips 66 and Country Mark and Canadian refiner Cenovus each filed petitions in October of this year. Country Mark, which operates a 30,000 b/d refinery in Indiana, said it planned to supply Illinois if the proposed change were implemented but would most likely be unable to continue to supply Ohio. Cenovus said that the change would require significant capital investment and would potentially not be done in time for the 2024 driving season.

Pipeline problems

Because any change in RVP specifications would not be uniform across the midcontinent, pipelines would face logistical issues over how to deliver different specifications of gasoline to different destinations.

Magellan, operator of a major fuel distribution system in the southern midcontinent, said in its 18 August petition to the EPA that it currently did not have the resources to "bifurcate" or divide shipments between multiple RVPs. The bifurcation of two different grades of gasoline may also lead to less efficient shipping along the pipeline and may have splash-over effects on diesel transportation due to a drop in available CBOB inventories, according to Magellan.

The US midcontinent receives a significant volume of CBOB from the US Gulf coast during the summer, averaging 2.19mn bl/month from April to September this year, according to data from the EIA.

The midcontinent would become more reliant on shipments from the US Gulf coast to meet demand due to the production pinches caused by the 7.8 RVP specification, according to the Baker and O'Brien study. US midcontinent refineries were running at an average of 91pc utilization from April to September of this year, according to EIA data. High utilization levels leave little room for increases in efficiency to compensate for the loss of production that would be caused by the transition to E15.

Still, the US Gulf coast would be the only region able to meet the new demand because its refiners already operate at high run rates.

By Zach Appel

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24/11/12

Algerian bitumen importers eye resumed Spain flows

London, 12 November (Argus) — Algerian bitumen importers are getting ready to resume cargo imports from Spain after the Algerian government signalled last week that trade can restart for the first time in more than two years. The government's decision in June 2022 to suspend a friendship and co-operation treaty with Spain, linked to Madrid's public recognition of Morocco's autonomy plan for Western Sahara, led to the immediate cancellation of previously agreed bitumen cargo movements from Spain to Algeria. In a notice issued by the Bank of Algeria on 6 November, Algerian firms were told they could resume trade with their Spanish counterparts under the usual transaction rules, and both state-owned and private Algerian bitumen importers say they are now free to discuss deals to buy and bring Spanish cargoes to their facilities for supply into the domestic market. No such deals are understood to have been concluded yet, but private importers into western Algerian import terminals like Ghazaouet, Oran and Arzew are well placed because of their relative proximity to Spanish export terminals at Tarragona, Huelva and Cadiz compared with existing supply sources in Italy and even more so when compared with cargoes shipped from Greece or Turkey. Ship brokers said freight rates for standard 5,000t bitumen tanker cargo movements from Tarragona — site of a 1.2mn t/yr Asesa bitumen refinery held in a 50-50 joint venture by Repsol and Moeve, formerly Cepsa, — to Ghazaouet are around $35/t, compared with around $50/t for the Augusta, Italy, to Ghazaouet route. Spanish and international bitumen trading and supply firms are still examining the Algerian developments and seeking clearance "on all sides", as one said today, before resuming bitumen cargo discussions with their Algerian counterparts. That could mean the actual restart of Spain-Algeria flows takes until early 2025. Demand for now may be hindered by a pre-winter slowdown in Algerian road construction and bitumen-consuming activity as weather conditions gradually worsen. Algerian state-owned Sonatrach, which imports cargoes into a raft of bitumen terminals along the country's Mediterranean coast, is largely dependent on substantial term flows from Sonatrach Raffineria Italiana's (SRI) 170,000 b/d refinery and export terminal at Augusta, Sicily, and occasionally takes Greek cargoes from Motor Oil Hellas' Agioi Theodoroi refinery and export terminal at Corinth. Sonatrach is less likely than private Algerian buyers to seek Spanish cargoes, on which it had been highly reliant until 2020 before it switched in a big way to Augusta after it bought the refinery there from ExxonMobil in 2018. Algerian market participants said the recent slippage in bitumen cargo prices linked to Mediterranean high-sulphur fuel oil (HSFO) declines and seasonally weakening bitumen cargo differentials to the regional HSFO cargo prices — coupled with a late season slippage in cross-Mediterranean freight rates over the past few weeks — are all factors conducive to resumed imports from Spain. Spanish fob cargo premiums to Mediterranean HSFO cargoes have dropped from around $10/t in mid-October to $2-3/t last week, while outright prices for Spanish bitumen exports have slipped from $498-499/t fob to $458/t over the same period. By Keyvan Hedvat Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cop: Negotiators positive on remaining Article 6 talks

24/11/12

Cop: Negotiators positive on remaining Article 6 talks

Baku, 12 November (Argus) — Negotiators have a "positive attitude" towards outstanding talks on Article 6 of the Paris Agreement taking place at the UN Cop 29 climate conference in Baku, Azerbaijan, bolstered by the finalisation of crediting mechanism standards yesterday. The adoption of two key Article 6.4 standards on Monday night kicks off remaining talks on a very positive note, Switzerland's lead negotiator on international carbon markets under Article 6, Simon Fellermeyer, said. The approval has set the mood for remaining negotiations, lead Article 6 negotiator for New Zealand Jacqui Ruesga added. Article 6 of the Paris accord aims to help set rules on global carbon trade. Negotiators have already seen a more constructive attitude to discussions since the failed talks at Cop 28 in Dubai last December, Ruesga said. This was spurred on by disappointment at the lack of outcome last year, and supported by a number of informal meetings organised in the lead-up to June's Bonn climate conference, as well as increasing direction from heads of delegation on the subject. Divergence persists on some issues, but negotiators still have this positive attitude, Ruesga said. Different sides have also begun communicating the reasons behind their positions more clearly, Article 6 negotiator for Colombia Adriana Gutierrez added, which she hopes will help bring a result this year. Outstanding questions include how to deal with reporting inconsistencies and credit authorisations. Countries also still disagree on the question of whether Article 6.2's international registry should be capable of holding internationally transferable mitigation outcome (Itmo) units, or simply provide an accounting function. But talks on this point are progressing along the lines of deciding which potential functions of the registry could be integrated or dropped in the view of opposing sides, Ruesga said. The first ever Itmo transfer, which took place between Switzerland and Thailand earlier this year , would have been much easier through such a registry, Fellermeyer said. Gutierrez expects most remaining topics to be concluded ahead of Cop 30 in Belem, Brazil, next year. But some smaller, more technical elements are "bound to stick through" to the next summit, Ruesga said. There is not much appetite to reopen most elements for discussion next year, Fellermeyer said, meaning it could be that they are either concluded in Baku or left in a state of "constructive ambiguity". Agreement in Baku on the remaining Article 6 elements is important to give confidence to potential participants, Fellermeyer said, having encountered parties who declined to cooperate through the mechanism owing to a lack of visibility on the rules. By Victoria Hatherick Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cop: Carbon credit standards key step, work continues

24/11/12

Cop: Carbon credit standards key step, work continues

Baku, 12 November (Argus) — The adoption of new standards for creating carbon credits under the Paris Agreement on the first day of the UN Cop 29 climate summit yesterday is a key step, but work continues on Article 6. Cop parties agreed yesterday on standards that will cover credits for greenhouse gas (GHG) emissions removals under Article 6.4 of the Paris accord. The new standards set requirements for developing and assessing projects and establish rules covering carbon removal projects. Article 6 of the Paris accord aims to help set rules on global carbon trade. Cop 29 lead negotiator Yalchin Rafiyev said the decision is a critical step towards concluding Article 6 negotiations. "This will be a game-changing tool to direct resources to the developing world and help us save up to $250bn/yr when implementing our climate plans," Rafiyev reiterated. "[The] centralised UN mechanism for markets looks at the projects that are not financially feasible currently and how it can help in providing some stream of revenue," chair for the supervisory body Maria al-Jishi said. UN climate body UNFCCC chief Simon Stiell said that yesterday's breakthrough was a good start but pointed out that this was "the product of over 10 years of work within the process" and that more work remains to be done. Cop parties must reach a deal on other aspects of implementing 6.4 and 6.2, which together govern how countries can use carbon credits to meet their GHG emissions-reduction pledges, known as nationally determined contributions (NDCs). Remaining issues include the nature of credit registries, the guidance for inclusion of removals and a solution for dealing with reporting inconsistencies and credit authorisations. Overlapping articles 6.4 and 6.2 elements are still under discussion and will require a decision at Cop 29, including on how governments and host parties choose to interact with 6.4 on credit authorisation and how national credit registries can interact with the 6.4 registry, al-Jishi said. By Bachar Halabi Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cop: Azerbaijan president criticises ‘petrostate’ label

24/11/12

Cop: Azerbaijan president criticises ‘petrostate’ label

Edinburgh, 12 November (Argus) — Azeri president Ilham Aliyev remonstrated a room packed with world leaders at the UN Cop 29 summit in Baku about calling his country a "petrostate", given its small share of global oil and gas production. He said that it was "not fair" to label Azerbaijan a "petrostate", adding that it might have been "acceptable" when the country produced more than half of global oil output in the 19th century. He said the country accounts for 0.7pc of global oil production and 0.9pc of global gas production today. He also said that Azerbaijan's share of global greenhouse gas emissions is only 0.1pc. Azerbaijan's oil output reached 480,000 b/d in October. "Right after Azerbaijan was elected as a host country of Cop 29 we became a target of co-ordinated, well-orchestrated campaign of slander and blackmail," he said. The Azeri president reiterated that oil and gas is a "gift of god" and that countries rich in natural resources should not be blamed for bringing them to the markets as they are needed. He pointed out again that eight of the 10 countries that are supplied with Azeri gas are in Europe and that the EU asked Azerbaijan to double its gas supply to the bloc by 2027. Natural gas output in Azerbaijan reached a new high of 132mn m³/d in 2023, and the country aims to increase it further. Upping exports to the EU to 20bn m³/yr by 2027, from the current 12bn m³/yr, has been a key government commitment since 2022, when Europe was desperate for alternative gas suppliers. The UAE, Azerbaijan and Brazil — the Cop presidencies Troika — face scrutiny for pushing for increased global climate ambitions, but at the same time seemingly avoiding the question of fossil fuels in relation to their own new climate targets. The Troika countries look at fossil fuels through the lens of their own national circumstances — with their economies being heavily reliant on them. Azerbaijan's increasing gas exports spurred an economic boom, with GDP increasing tenfold over 2003-13. "As a president of Cop 29, I will be a strong advocate for the green transition, but at the same time we must be realistic," he said. He listed green projects in Azerbaijan, either in the pipeline or already operating, including an agreement to be signed at Cop 29 with BP to build a 240MW solar power station. By Caroline Varin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Lower Mississippi draft restrictions lifted

24/11/11

Lower Mississippi draft restrictions lifted

Houston, 11 November (Argus) — The US Coast Guard (USGC) removed draught restrictions from the lower Mississippi River on 8 November, after several rain washed across much of the Midwestern US. Draft restrictions were completely lifted for north and southbound barges on the lower Mississippi River between Tiptonville, Tennessee, to Tunica, Louisiana. Approximately 2-8 inches of rain were reported in Illinois and Missouri in the last seven days, adding around 14 inches to the lower Mississippi River, according to the National Weather Service (NWS). St Louis, Missiouri was at a high of 11.5 inches above baseline on 11 November, up from a low of -1.5ft on 1 November. The USGC has had draft restrictions in place since August, with the river system receiving a short reprieve in early October after rain from Hurricane Helene poured into the US river system. But low water levels and restrictions returned about two weeks later. Prior to recent precipitation, drafts were restricted to 10-10.5ft for southbound barges and tows could not not be greater than 6-7 barges wide. Northbound barges could not draft greater than 9.5ft, tows could not be more than six barges wide, and only four barges could be loaded. High water levels are expected to remain through November, according to NWS but barge carriers have said that water levels will slip quickly if no additional rain falls along the upper Mississippi River. By Meghan Yoyotte Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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