S Korea 2020 ferrous scrap import volumes lowest in more than 25 years

Refinery closures in Asia-Pacific are likely to offset a wave of new supply streams into the region.

The pandemic accelerated a wave of refinery closures, with several regional refiners forced to close or review operations due to poor refining margins.

BP’s plans to shut Australia’s largest refinery in Kwinana and Pilipinas Shell Petroleum Corp’s plans to shutter its Tabangao-based refinery in the Philippines, with several other potential closures on the horizon.

According to market sources, this will help offset a wave of new supply streams, especially of gasoil, entering the market, sources said.

One example is China’s private greenfield 20 million mt/year Zhejiang Petroleum & Chemical, designed to produce 1.7 million mt/year of gasoil. In addition, gasoil output from two refinery start-ups in the Persian Gulf — Saudi Arabia’s Jazan and Kuwait’s Al-Zour — are set to spill fresh barrels into the spot market.

Meanwhile, some refineries in the region have raised their runs though others continue to operate at lower rates due to weak margins.

** India’s No.1 state-owned refiner Indian Oil Corp. has been running its plants at full capacity since early November.

** India’s Mangalore Refinery and Petrochemicals Ltd. is running at 90%.

** India’s state-owned refiner Bharat Petroleum Corp. Ltd. has returned operation levels at its Kochi and Mumbai refineries to near full capacity.

** India’s Chennai Petroleum Corp. Ltd-owned Manali refinery is operating at a run rate of 95%.

** Shell will halve the crude processing capacity at its Pulau Bukom refinery in Singapore as part of the energy major’s initiative to reduce its CO2 emissions to net zero by 2050. “Bukom will pivot from a crude oil, fuels-based product slate towards new, low-carbon value chains,” the company said. “We will reduce our crude processing capacity by about half and aim to deliver a significant reduction in CO2 emissions.”

** South Korea’s top refiner SK Energy has shut two CDUs at Ulsan but plans to restart the 60,000 b/d No. 1 crude distillation unit and 170,000 b/d No. 3 CDU at Ulsan in January.

** Indonesia’s state-owned Pertamina was reported to be keeping the run rate at its Balikpapan refinery in East Kalimantan steady at around 80% with industry sources noting that the refinery has no plans to raise its run rate back to 100%, as refining margins across the barrel remain poor.

** Pilipinas Shell Petroleum Corp plans to shut down its Tabangao refinery and transform the facility into an import terminal, the company said in a statement. The refinery has been shut since May 24, having been idled due to weak demand for domestic products.

** Philippines’ Petron plans to halt temporarily its Bataan refinery in the middle of January. The refinery would resume processing depending on the improvement of the Philippines economy. The company has previously said that the Bataan plant may close should discussions regarding customs tax with the government fall through.

** New Zealand’s Refining NZ is moving ahead with its plans to convert its refinery into an import terminal, putting into motion the next phase of long-term strategic plans that will turn New Zealand into a full importer of refined oil products. Marsden Point has been operating at a “cash neutral” position, since simplifying its operations after restart in October.

** Australia’s second-largest refiner, Viva Energy, has decided to avoid closure of its Geelong refinery, as the company takes up a payment lifeline extended by the Australian federal government. The grant, also known as the “interim Refinery Production Payment,” will last for six months from January-July 2021. Refineries that take part in the grant will have to agree to maintain operations at least during the tenure of the program, committing to “an open book process and long-term self-help measures to further inform the development of the long-term Refinery Production Payment.” Should refining margins stay on an upward trajectory, “the company expects to be able to maintain refining operations once the interim Refinery Production Payment concludes at the end of June 2021,” it said in a separate statement.

** Ampol, formally Caltex Australia, has announced the start of a “comprehensive review” of its Lytton refinery in Brisbane as a prolonged period of poor refining margins and an uncertain outlook threaten the closure of the facility. “The review will consider all options for the facility’s operations and for the connected supply chains and markets it serves,” Ampol said.”These options include closure and permanent transition to an import model, the continuation of existing refining operations and other alternate models of operation, including the necessary investments required to execute each of the options,” the company added.

** The Maritime Union of Australia has urged the federal government to nationalize BP’s Kwinana oil refinery, rather than allow it to be closed. BP Australia on Oct. 30 said it was planning to shut its Kwinana refinery and convert it into a fuel import terminal, in a strategy aimed to better meet the needs of a changing oil market.

** Vietnam’s Nghi Son refinery will keep its operating run rate above 100% of capacity in the near term, even as a buildup of inventories put domestic buyers under pressure, industry sources with close knowledge of the matter said.

** Taiwan’s Formosa Petrochemical plans to operate its Mailiao refinery at reduced rates of around 60% of capacity in January and February as demand for refined products remains tepid and several secondary units are shut over this period, a company spokesman said. Formosa plans to operate its refinery at 320,000 b/d in January and 330,000 b/d in February, putting operations at 59% and 61% of nameplate capacity, respectively. Formosa had idled one of its crude distillation units of 180,000 b/d in November due to weak margins and low secondary unit operations. The idled CDU is expected to restart in the second half of the year, when the company’s No. 2 RDS unit restarts following the completion of repairs, the source said, adding that margins are also expected to improve by then. The company’s No. 2 RDS was shut July 15 after a fire. The unit’s restart was originally planned for April at the earliest. The company has three CDUs at the Mailiao refinery, each with a capacity of 180,000 b/d.

** SK Energy plans to keep its run rate at crude distillation units in the Ulsan refinery at 60% in January, down from 65%-70% in December, a company source said. A second company source said the run rate cut is due to thin margins for oil products, even though light and middle distillates markets saw a rise in cracking margins in recent months.

India’s fuel demand fell 11% year on year to 193.4 million mt, or 4.1 million b/d, in 2020 due to the coronavirus impact, according to the latest provisional data from the Petroleum Planning and Analysis Cell. The decline in demand for oil products in 2020 was the first annual contraction since 1999, analysts said. Diesel demand fell 14.5% on the year to 71.91 million mt while demand for gasoline dropped 9.3% on the year to 27.27 million mt in the period. LPG demand rose 4.3% to 27.41 million mt in 2020 due to demand from the domestic cooking segment. Jet fuel demand fell 47.8% year on year at 4.27 million mt as air travel was badly hit due to the lockdowns.

Meanwhile, domestic consumption of gasoline in India rose for the fifth straight month in December, with public confidence in resuming daily activities gradually increasing in the near term amid a steady fall in COVID-19 cases across the country, industry sources told S&P Global Platts. Continuing the recovery in demand, the latest consumption data from India’s Petroleum Planning and Analysis Cell showed that December recorded the highest consumption of fuel oil last year at 559,000 mt, an 8.54% increase on the month, although this was still 11% down on the year.

In other news, Indonesia’s Pertamina is expected to raise its Cilacap refinery’s production of higher quality gasoline moving forward, with the proportion of gasoline of octane rating above 90 RON set to increase, industry sources with knowledge of the matter told S&P Global Platts. The move is to increase production of 90 RON gasoline, the next step in the refinery’s plans following the completion of the Cilacap Blue Sky Project in 2019, which had allowed the refinery to produce Euro 4 gasoline.

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