Petronas-Saudi JV to restart crude unit at Malaysia refinery in July
Pengerang Refining and Petrochemical (PrefChem), a joint venture between Petronas and Saudi Aramco, is expected to restart a crude distillation unit at its oil refinery in Malaysia in July, three sources familiar with the matter said. The Pengerang Refining development, part of Petronas’ $27 billion Pengerang Integrated Complex, consists of a 300,000 barrels-per-day (bpd) oil refinery and a petrochemical complex with a production capacity of 7.7 million tonnes per year in the southern Malaysian state of Johor. The refinery stopped trial runs in April for safety checks after a fire occurred at the atmospheric residue desulphurisation (ARDS) unit. Contractors are still assessing the extent of damage at the fire-hit ARDS unit and repairs could take between three months and two years, one of the sources said, citing initial estimates. The CDU will be processing low-sulphur crude in the absence of the desulphurisation unit, the sources said. The ARDS unit was set up to remove sulphur from fuel oil which is then passed through a residue fluid catalytic cracker (RFCC) – a secondary refining unit that upgrades residual fuels into higher quality products such as gasoline. The ARDS unit is located close to the refinery’s CDUs. The refinery is expected to produce fuel in August-September although output may not meet commercial specifications yet. A 1.2-million-tonnes-per-year naphtha cracker at the site started trial runs this month. By restarting the CDU in July, the refinery is working towards producing fuel that meets commercial specification by the end of the year, the sources said. The project, originally known as RAPID, or Refinery and Petrochemical Integrated Development, was to resume operations by the end of this year, Petronas said in a statement last month. Petronas and PrefChem have not responded to emailed requests for comment.
OPINION: Unlike crude oil, LNG takes Gulf tensions in its stride
The subdued reaction of global liquefied natural gas (LNG) prices to the latest tensions around the Persian Gulf not only stands in contrast to the excitable crude oil market, but perhaps offers a more reasonable assessment of the risks. While spot prices for LNG did move somewhat higher in the wake of the attacks on two tankers in the nearby Gulf of Oman on June 13, the reaction wasn’t as pronounced as the spike in global oil benchmark Brent. In some ways this could be viewed as surprising as LNG is actually more exposed to the threat of closure of the Strait of Hormuz, the narrow sea lane that links the Persian and Oman gulfs. About 26% of all LNG transited the Strait of Hormuz in 2018, the vast majority from Qatar, which is now the world’s second-largest producer of the super-chilled fuel behind Australia. For crude oil, the figure is less than 20% of global demand, with about 17.4 million barrels per day (bpd) going through the Strait out of world consumption of around 100 million bpd. The attacks on two oil product tankers were blamed on Iran by the United States and some of its Gulf allies, the subsequent rise in tensions has already resulted in Iran shooting down a U.S. drone and U.S. President Donald Trump cancelling a retaliatory strike minutes before it was due to be carried out. The June 13 attacks sent crude prices up, with Brent rising 3.6% on the day, and extending the gains since to end at $66.49 a barrel on Wednesday, up 11% from the day before the incidents. In contrast LNG has been far more subdued, with Singapore Exchange contracts rising from $4.10 per million British thermal units (mmBtu) the day before the attacks to $4.37 the day after, a gain of 6.6%. But since that spike, the price has slipped back to $4.34 per mmBtu. The weekly assessment for LNG delivered to China lifted from $4.25 per mmBtu the week prior to the attacks to $4.60 in the week to June 21, a rise of 8.2%. Of course, the tensions in the Middle East aren’t the only factors influencing crude and LNG prices, with trade tensions between the United States and China, and a slowing global growth outlook also playing a role. However, it’s worth noting that spot LNG prices usually start to rise around this time as utilities in North Asia restock ahead of peak summer power demand. LITTLE THREAT? Another possible explanation for LNG’s more relaxed reaction is that Qatar sells very little of its output on the spot market, meaning that traders saw little threat to immediate supplies. However, if the LNG market was genuinely worried about the Strait being blocked, the spot price would surely be considerably higher to reflect the risk premium associated with the potential loss of a quarter of global supplies. The paper-traded market for LNG is also considerably smaller than that for crude oil, and is used predominantly by professionals already deeply engaged in LNG. This means that it is less subject to the influence of speculators and “hot money” investors who chase news headlines for short-term gains. While LNG traders are aware of the risks surrounding an escalation of conflict around the Strait, they are also aware that as the situation stands right now, the chances of the vital passage being blocked are small. Even the so-called tanker war of the late 1980s didn’t result in the Strait being closed, even though it was mined by Iran and there was military conflict between the U.S. and Iranian navies. An Iranian civilian airliner was also downed by a U.S. missile, killing 290 people. It would probably take a serious escalation from the current tensions before the LNG market would start to price in a realistic chance of the Strait being blocked. However, the more volatile crude market is likely to react far more quickly to developments, even if these don’t actually do much to the overall chances of the loss of shipments through the Strait.
ONGC invites partners for enhancing production from 64 marginal fields
Oil and Natural Gas Corporation (ONGC), the country’s largest producer of oil and gas has invited partners to help the company enhance production from 64 marginal fields, the company said in an official statement today. “ONGC announces Notice Inviting Offer (NIO) seeking partners for enhancement of oil and gas production from its 64 marginal nomination fields with the intention to maximize recovery from these fields by infusion of new technology,” the statement read. According to the release, the offer shall allow interested companies to participate in the International Competitive Bidding (ICB) process being announced for 17 onshore contract areas comprising of 64 oil and gas producing fields with total in-place Oil and Oil Equivalent of Gas (O+OEG) volume of about 300 Million Tonne Of Oil Equivalent (MMTOE). The contractor will be selected on revenue sharing basis, with the revenue being shared on incremental production over and above the baseline production under Business-As-Usual (BAU) scenario. Moreover, selected contractors will not be required to reimburse any expenditure already incurred by ONGC. Companies can either alone or in consortium or through a joint venture bid for one or more contract areas. Contract period for these contracts will be for a period of 15 years with an option to extend by five years. Royalty rate will be reduced by 10 per cent in case of additional production of natural gas over and above BAU scenario, according to the statement. The contract will allow complete marketing and pricing freedom to sell oil and gas on an arm’s length basis.