Asian refining margins are set to weaken further — despite record low crude prices — undermined by demand destruction for transportation fuels as global efforts to stem the coronavirus pandemic slash air and land travel, market sources said.
Transport fuels such as gasoline and jet fuel have posted the sharpest falls in Asia in recent days. With multiple governments telling citizens to stay indoors, reduced traveling is expected to cut gasoline demand further in the near term.
Malaysia announced a nationwide lockdown over March 18-31 in a bid to reduce the spread of the coronavirus. Such prolonged nationwide lockdowns are likely to further exacerbate the demand destruction for motor fuels.
India has entered a 21-day lockdown period from Wednesday in its battle against the coronavirus. According to Facts Global Energy, India's gasoil demand in March is estimated to contract by 18% year on year and by 17% in April. The country's jet fuel demand is expected to fall by some 22% year on year in March, 20% in April and 16% in May.
This follows high capacity utilization for all categories of refineries in India at 106.59% in February compared with 102.36% the previous month, according to the latest oil ministry survey.
In February, state-run refineries recorded a 108% run rate, joint venture refineries 111% and private refineries 104%. State-run Indian Oil Corp's (IOC) refinery at Haldia recorded a 87% rate in February due to a delay in start-up operations after a major shutdown.
In February, IOC's refinery at Panipat recorded a 97% rate due to the shutdown of the atmospheric and vacuum distillation unit shutdown for maintenance.
IOC's Bongaigaon refinery registered a 48% run rate in February due to an extension of a maintenance shutdown program.
Bharat Petroleum Corp Ltd's Numaligarh Refinery Ltd in the northeast recorded a 94% run rate in February, after its operations recovered from a local demonstration in December-January that delayed the startup of a gasoline unit, which was shut down for an upgrade to produce Euro 6 fuels.
Analysts said the month-on-month rise in the run rate was due to some major refineries turning units on-stream after completion of the last leg of shutdown programs ahead of a deadline to introduce Euro 6 fuel grades. India is set to roll out Bharat Stage 6, a local version of Euro 6 fuel grade, from April 1.
Meanwhile, following the enforced lockdown, IOC has decided to cut crude throughput at its nine refineries to combat falling demand for petroleum products due to COVID-19, company officials said. "We have regulated crude throughput at most of our refineries by 25%-30%," a company official said. A day earlier IOC had been expecting normal operations at its refineries.
India's No. 2 refiner Bharat Petroleum Corp. Ltd received a 1 million-barrel US crude cargo at Mumbai port for its refinery on the west coast. The cargo of US Midland crude grade was contracted in November.
New Zealand's Refining NZ also reduced operations at its refinery at Marsden Point in line with "significant fuel demand reduction" due to transport restrictions implemented to curb the spread of the coronavirus, the company said in a statement. "The refinery's processing facilities will be operated on a rotating basis to enable the refinery to produce at substantially lower rates," the company said.
The reduced operations will remain in place for three months initially, with the company to review and make a decision in April on whether to extend this arrangement beyond June, Refining NZ said.
New and ongoing maintenance
New and revised entries
India
—India's BPCL has postponed maintenance of Mumbai units to end-April. BPCL had initially planned for maintenance at its Mumbai refinery to start on April 6 before postponing the start to April 16. It postponed the start of the turnaround again to April 28 on manpower considerations following the spread of the coronavirus in India. It should last 25-30 days. The turnaround includes 10,000 mt/day Diesel hydrotreater (DHT) unit, 1,500 mt/day Isomerization unit and 5,000 mt/day Aromatics Extraction unit (ARU).
—Manpower concerns have been the reason for the delay of the start of routine maintenance at the 5,500 mt/day vacuum gasoil hydrotreater at India's BPCL Kochi refinery. The 15-day turnaround, which also includes a 210,000 b/d crude distillation unit, has been postponed to the second week of May. It was initially scheduled to start in April.
Asia-Pacific
—South Korea's Hyundai Oilbank will idle its residue desulfurization unit with a capacity of 100,000 b/d at its Daesan refinery in the country's west as the refiner will revamp the unit to increase low sulfur fuel oil production, a company source said in March. The capacity will be raised to 130,000 b/d after the shutdown. The company will be able to produce up to 200,000 mt/month of LSFO after the completion, a trader said.
Existing entries
India
—Indian refiner Mangalore Refinery and Petrochemicals Ltd will undergo works at its 300,000 b/d refinery in March, taking one of the plant's three crude distillation units offline for maintenance for around a month, sources with knowledge of the matter told S&P Global Platts. The 150,000 b/d unit is part of the plant's Phase II complex, the source said, adding that it comes ahead of the country's April 1 deadline to introduce the Euro 6 equivalent, Bharat Stage 6, fuel grades. Over the period of works, the Phase I and Phase II process units continued to function, Platts reported earlier.
Asia-Pacific
—Shell's Pulau Bukom refinery plans to shut its Bukom refinery for a scheduled maintenance over April 18-May 27, market sources with knowledge of the matter said. Shell officials declined to comment to S&P Global Platts, when contacted. According to several trade sources, the initial turnaround plan was scheduled to start in May, but the plan was brought forward by a month due to declining product margins.
—South Korea's largest refiner SK Energy plans to shut its biggest crude distillation unit, the 260,000 b/d No. 5 unit, at Ulsan, for scheduled maintenance over late May-late June, a company official said. Earlier in March, the refiner reduced the combined operating rate of its five CDUs at Ulsan to 85% until the end of March amid weakening demand for refined oil products due to the coronavirus. This means 15% of total capacity, or 126,000 b/d, will remain idle through end March. The 85% run rate is SK Energy's lowest since the second quarter of 2017, when it was 79%. The operating rate of the refiner's five CDUs at Ulsan averaged 95% in Q1 last year, 90% in Q2 and 94% in Q3, then dropped to 89% in Q4 as refining margins narrowed.
—Taiwan's Formosa Petrochemical is halting a 84,000 b/d No. 2 RFCC, 180,000 b/d CDU and 80,500 b/d No. 1 RDS (residue desulfurization unit) at Mailiao over March and April for maintenance, a company spokesman said. The No. 2 RFCC shut from March 1 for 50 days, with the restart scheduled for April 20, the official said. Formosa has two RFCCs, each with a nameplate capacity of 84,000 b/d. The CDU and No. 1 RDS units will be shut around March 10, and restart around April 20-25.
—PARCO's Mid-Country refinery has shut for a two-month long scheduled maintenance period from early-February to end-April, industry sources with close knowledge of the matter told S&P Global Platts. The turnaround saw the 100,000 b/d plant completely idled, to "undergo repairs and maintenance works", the source added. PARCO was not immediately available for official comment. PARCO is a joint venture between the Pakistan government and the Emirate of Abu Dhabi, with the former holding a 60% shareholding, while the latter a 40% interest through state-owned Mubadala Investment Company.
—South Korea's third-biggest refiner S-Oil Corp will shut its 90,000 b/d No. 1 crude distillation unit and 76,000 b/d No. 2 residue fluid catalytic cracker at Onsan for several weeks' maintenance some time in 2020, but has yet to confirm the dates, a company official said. "The two units will be shut for maintenance this year, but the exact time is not decided," the official said. S-Oil operates three CDUs — No. 1 with a capacity of 90,000 b/d, No. 2 with 240,000 b/d and No. 3 with 250,000 b/d, and a condensate fractionation unit with a capacity of 89,000 b/d, giving it a total refining capacity 669,000 b/d. It also operates two RFCCs — No. 1 with a capacity of 73,000 b/d and No. 2 with 76,000 b/d, at its Onsan complex on the country's southeast coast. S-Oil last year shut its No. 3 CDU for maintenance over March-April, No. 2 RFCC over April-May and No. 1 RFCC over September-October.
—South Korea's Hyundai Oilbank plans to idle one of two crude distillation units and a fluid catalytic cracker at Daesan for maintenance in mid-April, a source with knowledge of the matter said. The turnaround will be for one month lasting until mid-May.
—GS Caltex, South Korea's second-biggest refiner, has scheduled maintenance at its Yeosu refinery for March, a source close to the company said. The duration was expected to be around one month.
—Indonesia's state-owned Pertamina is eyeing a turnaround for its Balongan refinery at the end of the first quarter, sources close to the matter said.
—Indonesia's state-owned Pertamina will postpone a turnaround at one of its two crude distillation units at Balikpapan in East Kalimantan to the end of July from mid-January, sources said. The 200,000 b/d CDU will now undergo maintenance from end-July to end-August, the source said. During the CDU turnaround, the refinery will also shut several secondary units, such as its 81,000 b/d high vacuum unit and 20,000 b/d platformer. The facility's 60,000 b/d CDU will also be taken offline later in the year, though the exact dates have yet to be settled.
—Binh Son Refining and Petrochemical Co. plans to undertake maintenance at its 148,000 b/d Dung Quat refinery over June to July 2020. Binh Son Refining and Petrochemical expects production at Dunq Quat to fall to 5.57 million mt in 2020 due to the planned maintenance of around two months. In 2021 BSR plans to shut the refinery for two months to connect the facility with an expansion project.
Upgrades
New and revised entries
—South Korea's Hyundai Oilbank will idle its residue desulfurization unit with a capacity of 100,000 b/d at its Daesan refinery in the country's west as the refiner will revamp the unit to increase low sulfur fuel oil production, a company source said in March. The capacity will be raised to 130,000 b/d after the shutdown. The company will be able to produce up to 200,000 mt/month of LSFO after the completion, a trader said.
Existing entries
—South Korea's top refiner SK Energy said it has started test runs at a new 40,000 b/d vacuum residue desulfurization unit or VRDS after completing mechanical construction on January 31, three months ahead of schedule. "We aim to start commercial production by the end of March after a two-month test run," a company official said, adding the VRDS will supply low sulfur marine fuels that comply with the IMO 2020 sulfur cap. SK Energy has spent Won 1 trillion ($847 million) since November 2017 to build the VRDS at its Ulsan complex on the country's southeast coast. The VRDS will transform high sulfur heavy fuel oil into value-added low sulfur light products, producing 34,000 b/d of 0.5% sulfur fuel oil and 6,000 b/d of marine gasoil, as well as 2,000 b/d of LPG and naphtha. It will use 30,000 b/d of vacuum residue produced by its heavy oil upgrader and 10,000 b/d of atmospheric residue from crude distillation units as feedstock. The startup of the VRDS in late March will increase SK Innovation's supply of low sulfur fuels to 70,000 b/d from 30,000 b/d currently, the company official said.
—Indonesia's Pertamina is looking to upgrade the Balongan refinery in West Java. Two consortiums, REE and JSW, are competing to provide a front end engineering design (FEED). The first phase of the upgrade is expected to be completed in 2-1/2 years. Once upgraded, capacity will be increased to 150,000 b/d. Previously Pertamina was looking to launch Phase 1 in 2022, according to reports. Meanwhile, Pertamina had also signed a memorandum of understanding with ADNOC for potential development in the integrated Balongan petrochemical refinery.
—Hyundai Engineering has won a $2.17 billion deal to upgrade the Balikpapan refinery in Indonesia. Hyundai Engineering will "be responsible for the engineering, procurement and construction for the facility upgrade", which would take 53 months for completion and increase the refinery's capacity from 260,000 b/d to 360,000 b/d. Completion was expected in 2023. Separately, Indonesia's Pertamina and Mubadala signed a Refinery Investment Principle Agreement to evaluate any possibility to cooperate in processing sector, including to accelerate Pertamina's Balikpapan project that is expected to require about $5.5 billion of investment. Pertamina is seeking equity investor to join on the development of Balikpapan refinery.
—IOC's refinery in the western state Gujarat will have the largest capacity among its portfolio of refineries by 2022-23, company officials said. IOC plans to raise the capacity of the Gujarat refinery to 360,000 b/d by March 2023 from the current 275,000 b/d. "The expansion project will take off after a detailed feasibility report gets approval from the company's board," an official said.
—IOC plans to expand the atmospheric and vacuum unit at its Barauni refinery to boost its overall capacity to 9 million mt/year by 2021.
—At Thailand's Bangchak Petroleum an expansion plan is under way to ramp up the 120,000 b/d refinery's production capacity to 140,000 b/d in 2020, through installation of a continuous catalyst regeneration unit. Under the expansion plan, the company will also debottleneck the hydrocracker, which could expand the refinery's production capacity by 10%.
—Saudi Aramco and S-Oil signed a memorandum of understanding to collaborate on a $6 billion steam cracker and olefin downstream project at Onsan due for completion in 2024, which will produce ethylene and other basic chemicals from naphtha and off-gas.
—ExxonMobil announced a final investment decision at its Singapore complex. The project includes an expansion aimed at converting "fuel oil and other bottom-of-the-barrel crude products into higher-value lube base stocks and distillates." Start-up is set for 2023. The expansion will add capacity to increase cleaner fuels output with lower sulfur content by 48,000 b/d.
—HPCL's $3.2 billion project to expand Vizag's 8.3 million mt/year capacity to 15 million mt/year is on schedule for completion by March. The project will install primary processing units such as a CDU, replacing one of the three existing CDUs, a hydrocracker and a naphtha isomerization unit.
—Reliance Industries Ltd. has received clearance to raise the capacity of its export-oriented Jamnagar refinery on the west coast of India by 17% to 41 million mt (820,000 b/d). By 2030, RIL aims to raise its total refining capacity — including its domestic-focused refinery — at Jamnagar to 98.2 million mt/year.Reliance currently is 1.37 million b/d, of it 707,000 b/d for the export and 660,000 b/d domestic. The export one will increase capacity to 820,000 b/d. By 2030, it aims to raise its overall capacity to 1.96 million b/d.
—India's IOC plans to raise the capacity of its Panipat refinery to 25 million mt/year by 2021 to meet growing demand for oil products. The refinery's capacity is 15 million mt/year.
—India's cabinet has approved a project to expand the capacity of the Numaligarh refinery to 9 million mt/year from 3 million mt/year.
—South Korea's Hyundai Oilbank plans to expand its residue desulfurization unit's capacity to 130,000 b/d in May 2020 from the current 100,000 b/d. Hyundai Oilbank also is set to complete works to expand its CDUs, increasing its refining capacity to 650,000 b/d from 560,000 b/d. Once the works are complete, the 120,000 b/d No. 1 CDU will be expanded to 160,000 b/d, while the No. 2 CDU will be expanded to 360,000 b/d from 310,000 b/d.
—Nayara Energy is seeking the renewal of environmental approval to double capacity at its Vadinar refinery as the previous approval had been given to Essar Oil. It had planned to double the refining capacity at Vadinar to 40 million mt/year.
—Petron plans to expand and upgrade its Bataan refinery in Limay, increasing its capacity by 55% to produce 75,000 b/d of refined products and 1 million mt/year of aromatics. There was no timeline for when the expansion will take place. The refinery's capacity will be increased by 100,000 b/d of condensates and light crude oils, from current capacity of 180,000 b/d.
—IOC has signed up energy technology and infrastructure solutions provider CB&I for a residue upgrading unit at its Mathura refinery in north India.
—India's IOC is exploring an option to build a petroleum coke gasification plant at its Paradip refinery on India's east coast. IOC's $2.3 billion expansion project for the refinery to raise its overall capacity to 18 million mt/year from 13.7 million mt/year by 2020 is on schedule.
—The Philippines' Petron Corp. has been considering a plan to more than double capacity at its 88,000 b/d Port Dickson refinery in Malaysia by 2020 to 178,000 b/d.
Launches
Existing entries
—Malaysia's PRefChem refinery, also known as RAPID, said that there was a fire and explosion in mid March at its diesel hydrotreating unit in the Pengerang Integrated Complex in Johor province. The fire caused five fatalities and one injury with 40% second degree burns, it added. PRefChem did not provide further details. Sources close to the company told S&P Global Platts Monday that the steam cracker at the complex had been closed. Any repairs could be delayed as parts needs to be procured from China, which is not so easy in the current environment, a Singapore-based trader said. The complex includes a 300,000 b/d refinery and an integrated steam cracker with a capacity of 1.3 million mt/year of ethylene, with associated propylene, butadiene, benzene, polyolefins and ethylene glycol facilities. It was launched in late 2019 and targets full commercial operations for the second half of 2020.
—A Rosneft and Pertamina joint venture has signed a contract with Spanish Tecnicas Reunidas to design the construction of an oil refinery and petrochemical complex in Tuban, Indonesia, Rosneft said. Commissioning of the plant in East Java is expected within the next five years. Primary processing design capacity is planned at up to 15 million mt/year, planned capacity at the petrochemical complex includes more than 1 million mt/year for ethylene and 1.3 million mt/year for aromatic hydrocarbons.
—Sri Lanka has approved a $20 billion refinery project at the port town of Hambantota. The announcement follows the inauguration of a smaller refinery complex at the port, which has backing from the Oman Oil Company.
—Mongolia's first refinery is expected to reach full capacity by 2026, the facility's top official said, implying a lagged increase in the plant's run rate after completion of construction works in 2022. "We expect to achieve 70% of the installed capacity by 2024," Mongol Refinery Executive Director Altantsetseg Dashdavaa told S&P Global Platts.
—Iran remains open to investing in a planned expansion project by Chennai Petroleum Corp Ltd to set up a 180,000 b/d refinery at Cauvery Basin at Nagapattinam, in the southern Indian state of Tamil Nadhu, Indian oil ministry officials said. IOC holds a 51.9% share in CPCL, while NIOC holds 15.4% through Swiss subsidiary Naftiran Intertrade.
—India's proposed new 1.2 million b/d refinery on the west coast will be commissioned in 2025, oil ministry officials said. The refinery will now be built in the Raigad district, around 100 km from Mumbai. An official at Ratnagiri Refinery & Petrochemicals Ltd. (RRPCL) said construction of the refinery complex would start in 2020.
—Global trader Vitol is looking to build a 30,000 b/d refinery in southern Malaysia's Johor state. The project involves a simple refinery to be built at Tanjung Bin at VTTI's ATB tank farm. ATB, or ATT Tanjung Bin Sdn Bhd, is a terminal 100% owned by VTTI. Vitol co-owns VTTI.
—Haldia Petrochemicals Ltd's proposal to invest $4.05 billion in an integrated refinery and petrochemicals facility in Balasore, India, has been granted approval by the Odisha government.
—Pakistan and Saudi Arabia are in talks to develop a 200,000-300,000 b/d refinery in Balochistan's Gwadar district for $10 billion.
—A new HPCL project in Barmer, India, is due for completion by March 2023.
—India's big refinery project in Maharashtra, being developed by state-owned IOC, HPCL and BPCL, will start up around 2022-23.
