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REFINERY NEWS ROUNDUP: India to boost refining capacity on rising oil

India’s peak oil demand will come much later than what the rest of the world might anticipate, creating enough room to pursue refinery expansions and secure crude supplies through diversification drives, speakers at the S&P Global Platts South Asia Commodities Virtual Forum said early February.

“India’s peak oil demand will be much later than what many analysts predict. So we will be seeing handsome demand numbers going into 2030s and 2040s, if not 2050s,” Debanjan Saha, who works in the commodities risk management team at Bharat Petroleum Corp. Ltd., or BPCL, told the forum. Indian oil and steel minister Dharmendra Pradhan told the forum that with the country’s oil demand expected to double by 2040, India would look to boost refining capacity from the current 250 million mt/year to 450 million mt/year.

“I think at least over the next four-five years there will be a lot of refinery augmentation programs coming up,” Saha said. Saha added that BPCL was aiming at growing its capacity at the Numaligarh refinery to 9 million mt/year by 2025 from about 3 million mt/year. Capacity at the Kochi refinery would be expanded to 20 million mt/year by 2025 from 15.5 million mt/year.

Meanwhile refineries in India have ramped up runs but elsewhere in the region some refineries are closing.

** Indian Oil Corp (IOC) recorded an average of 101% combined run in December for all its nine standalone refineries compared with 91.5% in December 2019 and 108% in November.

** India’s Bharat Petroleum Corp Ltd. (BPCL) registered a 108% run in December compared with 118% in December 2019 and 114% in November.

** India’s Hindustan Petroleum Corp Ltd. recorded a run rate of 96% in December compared with 93% in December 2019 and 109% in November.

** Reliance’s domestic unit operated at 107% in December compared with 102% in December 2019 and 106% in November. Its export focused refinery ran at 90% in December compared with 94% in December 2019 and 90% in November. Reliance’s combined run was 98% in December compared with 97.5% a year earlier and 98% in November.

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

** 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.

** Petron Philippines has shifted the planned temporary shutdown of its Baatan refinery to February, from the original scheduled date of mid-January, industry sources told S&P Global Platts. Although the reason for the shift could not be ascertained with the company immediately, market sources noted that the delay was likely due to operational reasons. In addition to postponing the refinery’s shutdown, industry sources also added that the plan is for the refinery to be shut for a period of four-months, with the status to be updated again before a possible restart by July. The refinery’s closure comes in light of the announcement late in the week ended Jan. 16 that the facility would be included in the Freeport Area of Bataan, which allow the 180,000 b/d refinery enjoy some tax incentives that could improve its financial situation. 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.

** ExxonMobil Australia plans to shut its 80,000 b/d Altona refinery in Melbourne and convert it into a fuel import terminal, the company said in a statement released Feb. 10. “The decision was made following an extensive review of operations at Australia’s smallest refinery … the review considered the competitive supply of products into Australia, declining domestic crude oil production, future capital investments and the impacts of these factors on operating earnings,” the statement said. The refinery will remain in operation while transition work is undertaken, the statement added.

** 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.

** South Korea’s top refiner SK Energy will keep its run rate at 60% in January, down from 65%-70% in December.

** South Korean refiner Hyundai Oilbank has raised its crude throughput by 12% at Daesan in the first quarter on expectations that refining margins will recover in 2021 due to the global rollout of COVID-19 vaccines, a company official said. “The company plans to use an average of 460,000 b/d of crude as feedstock in the first quarter, up 12.2% from the average of 410,000 b/d in 2020,” the official said. This equates to a run rate of 88.5% in Q1, up from 78.8% in 2020. Hyundai Oilbank, South Korea’s smallest refiner, operates two crude distillation units with a combined capacity of 520,000 b/d, the No. 1 with 160,000 b/d and No. 2 with 360,000 b/d, at its Daesan complex on the country’s west coast. It has no plans to shut the CDUs for maintenance this year, the official said.

** South Korea’s third-biggest refiner S-Oil Corp. has no plans of CDU maintenance at Onsan this year, a company official said, indicating the company will keep its crude run rate higher to meet potential rebound in demand of oil products. “We have no plan for maintenance of CDUs and upgraders this year at the moment,” the company said. S-Oil increased its crude run rate to 100.8% in the fourth quarter last year, up from 97.8% a year earlier and 90.7% in the third quarter, according to the official. Its crude run rate averaged at 96.1% for the full 2020 year, up from 95.4% in 2019, despite the COVID-19 pandemic.

In other news, Pakistan’s oil product sales during the last seven months of the fiscal year 2020-21 (February-January) recorded double-digit growth on the back of higher volumes registered in sales of furnace oil as electricity producers shifted from regasified LNG and gas, according to the latest data from the country’s Oil Companies Advisory Council. Total volumes of petroleum products including furnace oil, diesel and petrol grew by 12% to 11.269 million mt over the July 2020 to January 2021 period as compared with 10.063 million mt over the same period the previous year. Fuel oil sales, meanwhile, shot up by 37% to 1.91 million mt in the seven months ended Jan. 31, 2021 compared with 1.39 million mt over the same period a year ago. “Demand from the power sector shot up as a shortage of gas has resulted in power production shifting towards other fuels such as fuel and diesel”, said Shahrukh Saleem, senior research analyst at Karachi-based brokerage house, AKD Securities.

Vietnam’s imports of gasoline notched a fresh seven-month high in January, with buying activity due to better domestic appetite for gasoline staying firm amid continued success in the country’s pandemic control efforts. “Vietnam is one of the few countries where we started to see a strong recovery in [gasoline] demand, especially after the country removed lockdown measures early,” one Singapore-based source said.

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India

** India’s HPCL-Mittal Energy Ltd.-owned Bathinda oil refinery in the northern state of Punjab has undertaken a planned shutdown since the last week of January for 35 days, company officials said. The shutdown is for regular maintenance due every four years. “The refinery is expected to start functioning by March 31,” M.K. Surana, chairman of HCPL, said on a conference call.

Asia-Pacific

** Hengyi Industries is planning to shut the reformer unit at its refinery complex in Brunei for two to seven days, industry sources with close knowledge of the matter told S&P Global Platts. The shutdown is due to the “discovery of a technical issue in the unit’s cooling system”, according to a market source, who added that the “the unit [shut] is likely to be a minor one.” A second source also noted that the shutdown will likely occur sometime in February, although the company could not be immediately reached for confirmation.

** Taiwanese state-owned CPC has brought one of its two residual fluid catalytic cracker units at its 400,000 b/d Dalin refinery back online on Feb. 8, instead of the original Feb. 7 it had planned, one company source told S&P Global Platts. “The feedstock poured in our RFCC has hit 55%, everything is doing quite smoothly,” said the company source. The restart was delayed following a fire that broke out at the unit on Feb. 5. The fire occurred due to a “leak in one of the pipelines”, a source said. Another source also said that the “incident occurred just as the refinery was restarting the RFCC.” This is the second incident to have occurred at the 80,000 b/d RFCC this year, with a technical issue having forced the RFCC to shut on Jan. 19, Platts reported earlier. “We have a technical issue with our RFCC, so we shut down Jan. 19, and plan to restart Feb. 7,” said a company source in late-January. The unit outage comes following the completion of a 60-day scheduled maintenance works at the facility’s 100,000 b/d crude distillation unit, with the CDU having been brought back online in mid-December 2020, Platts reported previously. CPC has produced on-spec propylene at one of its two residual fluid catalytic cracker units at Dalin refinery on Feb. 9, after it restarted the RFCC, one company source told S&P Global Platts.

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