Singapore fuel oil inventories hit four-month high despite sinking net imports
Residual fuel oil inventories in the Singapore fuel oil trading and storage hub inched to a near four-month high in the week ended Oct. 16 despite sharply lower net import volumes, according to official data. – Onshore fuel oil stocks climbed by 208,000 barrels (about 31,000 tonnes), or 1 per cent, from the previous week to 22.11 million barrels, or 3.3 million tonnes, data from Enterprise Singapore showed on Thursday. – This came despite weekly net fuel oil import volumes which were 53 per cent lower from the prior week at 405,000 tonnes, well below the 2019 weekly average of 684,000 tonnes. However, such weekly figures are volatile. – The lower net imports were pressured by weak import volumes totalling 773,000 tonnes, a six-week low. – Compared with year-ago levels, onshore fuel oil inventories came in 25 per cent higher. – Singapore’s net exports of fuel oil to South Korea topped the week at 42,000 tonnes, followed by Hong Kong and China at 38,000 tonnes each, and Bangladesh at 20,000 tonnes. – The largest net imports into Singapore originated from the United Arab Emirates at 213,000 tonnes, followed by Malaysia at 94,000 tonnes, Iraq at 83,000 tonnes and Russia at 76,000 tonnes. – Fuel oil inventories in Singapore have averaged 21.1 million barrels a week, or 3.15 million tonnes, so far in 2019, compared with 18.93 million barrels, or 2.83 million tonnes, in the previous year.
US LPG entrenches itself as regular supply source to India: traders
LPG is being shipped to India from the US in November, making it a regular supplier to Asia’s second-largest importer since flows began in April, as traders widen sources to meet spot or term commitments after the attacks on Saudi Arabia’s oil facilities in September disrupted supply, market sources said. In contrast, as trade tensions persisted, China continues to diversify away from US LPG, taking more from the North Sea, traders said. Up to five VLGCs are on their way to India and China, from the US and North Sea, sources said. The buyers are state-run Bharat Petroleum Corp. Ltd. and Indian Oil Corp. “Anything is possible. Indian buyers have done spot tenders on a CFR basis and it’s up to the sellers to source the cargoes from the Arabian Gulf, the US or anywhere else,” a source familiar with the matter said. Among the traders moving Western cargoes to India are Equinor and Trafigura, who have term contracts with Indian buyers, market sources said. The VLGCs include Crystal Sunrise, which sailed from Houston on October 13, and due to reach Dahej on India’s west coast on November 21, according to cFlow, Platts trade flow software. Others include Sakura Gas and Pampero, both carrying US cargoes and heading to India in November, a Western trader said. Pampero is an Avance vessel fixed on spot basis to Equinor, a ship broker said. It is currently in the Caribbeans and due to arrive in Dahej November 22, cFlow showed. The trader said Equinor is working on bringing one more Western cargo to India in November. The Breeze is China-bound with a North Sea cargo, the trader added. It is currently in the Mediterranean, cFlow showed. “Breeze is an Avance vessel fixed to Equinor on spot business duty. That one goes to China as she is loaded with full propane in Norway,” the ship broker said. VLGCS Loading More Butane Than Normal BW Gemini also loaded in North West Europe and could head for India, the ship broker said. It is en route to Egypt’s Port Said after departing Denmark, cFlow showed. “Until vessels load and sail, as you know, there is no certainty where they will end up. I believe up to September from early this year, India probably has imported from the US about 500,000 mt,” another ship broker said. He said there are delays at Indian ports and until Saudi Arabia sort things out after the production disruptions, some of the proposed Western shipments would not be finalized. Some of the VLGCs were loading more butane than normal, a US-based source said. “Sometimes instead of loading all propane, they will load one tank of butane, but we have seen some in the past month or so, loading up to two tanks of butane,” he said. “In September and October we see 25%-30% of all LPG exported from the US being butane. At the very start of the year it was 15%-17%, then around 20% during summer,” he said, adding that the butane arbitrage to Asia has widened despite rising freight costs, on worries about Saudi production constraints which lifted Asian prices. VLGC moves to North America and Europe for long journeys to Asia have boosted global freight, with Persian Gulf-Japan rates at more than four-year highs of around $81/mt. Houston-Japan rates are at the highest in close to four years at $125/mt. Platts assessed CFR Japan propane at $435/mt Wednesday, after hitting a five-month high of $456/mt on October 11, while CFR Japan butane was assessed at $453/mt after hitting a six-month high of $473/mt on October 11. Since flipping to a premium against propane in early August, butane has been $8/mt and $20/mt above propane, Platts data show. BPCL and IOC turned to buying evenly split cargoes via spot tenders for October and November deliveries after their October-loading Saudi term cargoes were delayed or deferred after the attacks. Indian lifters are waiting for the acceptances of November-lifting nominations — expected by end-week — before deciding on alternative supply for the end-year, a source said. Industry sources said the incident at Saudi Aramco’s 305,000 b/d SASREF refinery during a turnaround, added to uncertainties, though there were no reports of supply disruption as maintenance continues. Sources said even if LPG from the refinery is affected, the volume is small and meant for the domestic retail market. India’s first lifting of US cargoes early this year was prompted by pre-election stockpiling in April and May. China’s rising imports of Middle Eastern LPG as the country halted US shipments, led to higher costs for Indian buyers, forcing them to seek cheaper alternatives. India traditionally sources about 98% of LPG from the Middle East, comprising 45% propane and 55% butane, market sources said.
Shell aims to operate Egypt concessions in H2, 2020
Royal Dutch Shell is aiming to start operating in its concession areas in Egypt in the second half of 2020, a senior executive said. Shell won three oil and two gas concessions in Egypt in February. Eni, BP and Exxon Mobil also won some of a total of 12 tenders as Egypt looks to sustain an investment upswing spurred by major discoveries. Shell has also applied to take part in a bidding round in Egypt for oil and gas drilling in the Red Sea, Gerald Schotman, executive vice president upstream JVs at Shell, told Reuters. The company would be also interested in any bidding for oil and gas drilling in the Mediterranean Sea should it open as Shell wanted to expand in Egypt, Schotman said in an interview in Alexandria. He said the Egypt did not owe Shell any arrears. Arrears to foreign oil companies accumulated after the 2011 uprising that toppled President Hosni Mubarak and reached $6.3 billion in the 2011/2012 fiscal year. Petroleum Minister Tarek el-Molla said in July that Egypt’s arrears to foreign oil companies had declined to $900 million. Eni’s discovery of the giant Zohr field in 2015, the largest in the Mediterranean and estimated to hold about 30 trillion cubic feet of gas, has raised interest in exploration in Egypt. The country has reached maritime demarcation agreements with several countries in its push in recent years to increase oil and gas exploration.
Adani partners UAE’s Adnoc, Germany’s BASF for $4 billion chemical venture
Billionaire Gautam Adani-run Adani Group has forged a partnership with UAE’s oil firm Adnoc, German chemical giant BASF and Austria’s Borealis to study the feasibility of setting up a USD 4 billion chemical complex at Mundra in Gujarat by 2024. The four firms have signed a memorandum of understanding (MoU) to “engage in a joint feasibility study to further evaluate a collaboration for establishment of a chemical complex in Mundra, Gujarat,” the companies said in a statement. In January this year, Adani Group had announced plans to set up a Rs 16,000 crore chemical factory at Mundra in partnership with BASF. The present MoU, the statement said, was the next step of the January announcement. “With the inclusion of Abu Dhabi National Oil Company (Adnoc) and (Europe’s second-largest producer of polyethylene and polypropylene) Borealis as potential partners, the parties are examining various structuring options for the chemical complex that will leverage the technical, financial and operational strengths of each company,” it said. The total investment is estimated to be up to USD 4 billion (about Rs 28,400 crore), it added, but did not state which company will hold how much stake. The partners aim to finalise the joint feasibility study by the end of Q1 2020. Production is intended to commence in 2024. “The collaboration includes evaluating a joint world-scale propane dehydrogenation (PDH) plant to produce propylene-based on propane feedstock to be supplied by ADNOC. Propylene will be partially used as feedstock for a polypropylene (PP) complex, owned by ADNOC and Borealis,” it said. The PP complex will be the first overseas production joint investment by ADNOC and Borealis as part of a strategic framework with their current joint venture Borouge. Furthermore, propylene will be the key raw material for the previously announced acrylics value chain complex comprising glacial acrylic acid (GAA), Oxo-C4 (butanols and 2-ethyl hexanol), butyl acrylate (BA) and potentially other downstream products as part of a joint venture of BASF and Adani in which BASF holds a majority. “The designated site is planned at Mundra port in Gujarat, India, and the products are predominantly for the Indian market, serving a wide range of local industries, including construction, automotive and coatings,” the statement said. Besides investing in the chemical factory, the partners will also invest in wind and solar power plant at the site to meet electricity requirement of the unit. “The partners are evaluating co-investment in a wind and solar park with the plans at an advanced stage of development,” it said. “If realized, this would be the world’s first CO2-neutral petrochemical site to be fully powered by renewable energy, fully in line with the partners’ commitment to sustainability and energy efficiency.” The products produced would be predominantly for the Indian market to serve a wide range of local industries, including construction, automotive and coatings, whose growing demand is currently supplied via imports. Commenting on the MoU signing, Sultan Al Jaber, UAE Minister of State and ADNOC Group CEO, said: “This exciting collaboration is in line with ADNOC’s strategy to foster mutually beneficial partnerships. As a value-adding partner, ADNOC will play a crucial role as the propane feedstock supplier to this project.” “As the fastest growing global energy market, India is crucial to our international growth ambitions in the downstream sector. As such, this project allows ADNOC and its partners to capture the promising growth in the Indian polyolefins market,” he said. Adnoc has also signed an initial pact to take a stake in a mega refinery-cum-petrochemical complex planned by state-owned oil firms led by IOC in Maharashtra. Adani Group Chairman Gautam Adani stated: “We are very pleased to collaborate with our international partners to establish a chemical manufacturing complex at Mundra Port. We stand committed to the ‘Make in India’ initiative and serve the larger purpose of aligning growth opportunities with the creation of goodness for the nation.” “BASF remains committed to investing in India’s growth. We will play a key role in driving this joint collaboration which is also pioneering in terms of sustainability. We look forward to working together with our partners in establishing a chemical cluster in Mundra and supplying the Indian market with high-quality downstream products,” said Martin Brudermueller, Chairman of the Board of Executive Directors of BASF SE. Alfred Stern, CEO of Borealis, added: “This partnership is a unique opportunity to strengthen our PP presence in India with proprietary Borealis Borstar PP technology and to create value and tangible benefits through innovation for customers across multiple industries.” As per the January announcement, BASF was to hold a majority controlling stake in the new chemical venture. It will, however, hold a minority interest in the power venture. Headquartered in Ahmedabad, Adani Group is one of India’s largest integrated infrastructure conglomerates with interests in resources (coal mining and trading), logistics (ports, logistics, shipping and rail), energy (renewable and thermal power generation, transmission and distribution), agro (commodities, edible oil, food products, cold storage and grain silos), real estate, public transport infrastructure, consumer finance and defence sectors.
Slowdown now hits oil sector; petrol, diesel consumption falls
The oil sector seems to be latest addition to the list of sectors facing stress due to the ongoing economic slowdown. For the first time in many months, both oil demand and imports have witnessed a sharp fall indicating that poor health of the economy has now begun impacting a sector where the country relies a lot on imports. As per latest the Oil Ministry data, petroleum products demand in India has slipped to its two-year low level in September at 105.7 million tones. The fall is largely on account of a consistent fall witnessed in the consumption of auto fuels – petrol and diesel. Both fuels have reached their lowest consumption level in September with consumption of petrol and diesel falling to 2.3 and 5.8 million tonnes level respectively in September. The consumption of the two products have fallen in each of the months in current financial year indicating the slowdown is taking its toll in the oil sector as well. What is worse is that consumption fall has also resulted in slowing down of oil imports that have fallen by 0.5 per cent during April-August 2019 from a level of 94.9 million tonnes (MT) in FY19 to 94.4 MT in the five-month period of the current fiscal. While a slowdown in oil imports should be welcomed in a country that spends its foreign exchange to but crude oil, it is reflective of poor demand scenario that has slowed oil imports by refineries. The refineries are using their inventories for meeting domestic supplies of petroleum products rather than buying additional quantities of crude oil from overseas even though buying at this juncture would be beneficial with international crude prices at a low of $58.9 a barrel. “It is surprising that oil imports have fallen when global prices are stable and low. This means that consumption has declined and demand is not picking up. The sector has begun to feel the pain of an economy that several of the consuming industries such as automobiles are already facing,” said an executive of the Indian Oil Corporation asking not to be named. Though it is difficult to derive conclusive relationship between oil imports/sales and economic activity, analysts are unanimous that current contraction is the result of a slowdown. Otherwise, sales of petroleum products should not have fallen when per capita consumption has been growing. As per the Petroleum Planning and Analysis Cell (PPAC) of the Oil Ministry, except for bitumen and lubricants, consumption of all other petroleum products such as petrol, diesel, ATF, kerosene, LPG, naptha, and petroleum coke have fallen in September on a month-on-month basis. Some of the products have maintained a fall throughout the first half of current fiscal. Total LPG consumption fell to 2.2 MT in September from a level of 2.4 in August, even though government Ujjwala scheme is fast expanding the reach of cooking gas to remotest corner of the country. Even kerosene consumption registered de-growth, falling to 1.76 lakh tonnes in September from over 2.3 lakh tonnes in August. All is not good on oil export front as well with exports of petroleum products decreasing by 5.2 per cent during August 2019 as compared to the same period of the previous year. Decrease in petroleum products exports during August 2019 was due to decrease in all exports. Indigenous crude oil and condensate production during August 2019 was lower by 5.4 per cent than that of August 2018. OIL, ONGC and PSC registered lower production of 4.2 per cent, 3.7 per cent and 9.5 per cent, respectively, during August 2019 as compared to August 2018. On cumulative basis, indigenous crude oil and condensate production of the country was lower by 6.1 per cent during April-August 2019 as compared to the corresponding period of the previous year. The slowdown is coming at a time when international environment is very favourable, in terms of pricing of crude oil. The price of Brent crude averaged $59 per barrel during October 2019 and around $60 a barrel in September 2019 against much higher levels last year. The Indian basket crude price averaged $59.35/barrel during August 2019 as against $63.63/barrel during July 2019.