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Oriental Energy hives out LPG, shipping to focus on petrochemicals, hydrogen

Highlights

Oriental Energy focusing on growing PDH operations

LPG trade shifted to Matheson Energy, VLGCs to Keegan Shipping

Sees potential in pushing hydrogen business

New York — China's Oriental Energy is embarking on a major restructuring of its businesses to focus on expanding propane dehydrogenation operations and make an aggressive push into the hydrogen sector, a senior executive told S&P Global.

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The major LPG importer is transferring its LPG shipping business to Keegan Shipping, an affiliate of parent Oriental Petroleum, while shifting LPG trading to another sister firm, Matheson Energy.

"We would like to focus more on the development of our PDH industry chain, which include propylene, polypropylene and hydrogen products in the future," the executive of the Shenzhen-listed company said March 3.

Oriental Energy has signed an entrusted operation agreement with Singapore-based Keegan Shipping Holding for commercial operations of its LPG shipping business.

This involves transferring charters of 15 very large gas carriers, of which five charters with one-year term are due to expire by May 31, 2022. Another five charters with 10-year term will expire by Dec. 31, 2026, while two charters with 10-year term will expire by Dec. 31, 2030, according to a company announcement in the week ended Feb 27.

Two new VLGCs ordered by Oriental Petroleum are under construction. They will also be transferred to Keegan Shipping upon delivery.

While Oriental Energy has transferred its LPG trading to Matheson Energy, it will still make procurement of LPG feedstocks for its PDH plants, the executive said, adding Matheson Energy can also supply no more than 30% of LPG feedstock.

"We will secure around 60-70% of our LPG feedstocks through term contracts, while the remaining volumes will be purchased in the spot market," the executive said.

Since January, Matheson Energy has been participating in the Singapore physical LPG market.

It has made offers of propane: for H1 April and H2 April deliveries at FEI April plus $34/mt and FEI April plus $32/mt, which equated to $595/mt and $593/mt, respectively on March 4; H1 and H2 February-delivery propane -- with Glencore booking its offer of a H2 February cargo at FEI February plus $38/mt, equating to $675/mt Jan. 7.

Matheson Energy booked a bid from Trafigura of a H2 February propane lot, at FEI February plus $31/mt, equating to $653/mt on Jan. 13. Trade sources said the firm had also sold to Total about 46,000 mt of propane for H1 March delivery.

Push into petrochemicals

Oriental Energy launched on Feb. 21 the Ningbo phase-two 600,000 mt/year PDH unit, increasing its total propylene production capacity to 1.86 million mt/year.

It can use up to 2.23 million mt/year of propane as feedstock at full capacity.

Previously, Oriental Energy operated two PDH plants -- a 600,000 mt/year unit in Zhangjiagang and the phase one 660,000 mt/year PDH unit in Ningbo -- making it China's largest PDH plant operator.

"We still need some time to test the new unit... we expect our propylene production to reach around 1.8 million mt in 2022, after the new PDH unit operates normally," the executive said, adding that PDH processing margins were currently estimated around Yuan 1,000/mt .

Besides, the company plans to start up its Ningbo phase two 800,000 mt/year polypropylene units in March, which will increase total PP production capacity to 1.6 million mt/year, the executive said.

The company currently operates two polypropylene units in Zhangjiagang and Ningbo, with PP production capacity of 400,000 mt/year each.

"China's PP demand is expected to maintain annual growth of 10% in coming years," the executive added.

Oriental Energy has also started constructing its Maoming PDH base since March 2020. The first phase will comprise building two PDH units with propylene production capacity of 600,000 mt/year each, three polypropylene units with PP production capacity of 400,000 mt/year each, and a synthetic ammonia unit, the executive said.

The first PDH unit and the first PP unit in Maoming are expected to start operations end-2022, while the second PDH unit and remaining two PP units are slated to go on stream around half a year later, after the first units are launched, said the executive.

Once the Maoming phase one project starts operations, Oriental Energy will have five PDH units, with total propylene production capacity of 3.06 million mt/year and use up to 3.67 million mt/year of propane as feedstock at full capacity.

Further development of hydrogen

"We have begun selling hydrogen to nearby refineries and factories since 2019 ... and we have built a few hydrogen-refueling stations in Zhangjiagang and Ningbo," the executive said.

In addition, the company plans to build a synthetic ammonia unit in Maoming, to make full use of its hydrogen, a by-product of its PDH plants, said the executive.

Oriental Energy is now capable of producing some 70,000 mt/year of hydrogen with the startup of Ningbo phase two PDH unit, up from around 50,000 mt/year.

The company's hydrogen production is expected to reach 120,000 mt/year after the launch of its Maoming phase one project, the executive said.