Petrochemical trends H1 2022: Continued challenges amid latest wave of COVID-19

Enterprise Products Partners will expand its 1 million mt/year ethylene export terminal 50% by the second half of 2023 and double it to more than 2 million mt/year by 2025, the company said May 2. The second expansion will coincide with an expansion of ethane export capability as well in 2025, according to Enterprise's presentation that accompanied the company's first-quarter 2022 earnings call. According to Chris D'Anna, the company's senior vice president of petrochemicals, the terminal, a joint venture with Navigator Gas, has been operating at 125% of its nameplate capacity, or 1.25 million mt/year. A 50% expansion of that level of output would push capacity to 1.875 million mt/year, and doubling the current beyond-nameplate output by 2025 would push capacity to 2.5 million mt/year. Co-CEO Jim Teague said during the May 2 call that Enterprise has seen some economic run cuts at crackers amid logistics logjams that have hindered downstream resin exports. "You're definitely seeing the supply chain somewhat concentrated," Teague said. 'We're realizing some economic run cuts in ethylene plants as they're stacking up polyethylene." Market sources have seen similar backups for other resins, including construction staple polyvinyl chloride. Market sources have said resin packaging warehouses were full or nearly full, leaving rail cars with new cargoes waiting to unload for packaging. Sources had expected those holdups to prompt resin and ethylene producers to reduce rates until the clogs can clear. "But that ultimately gets resolved," Teague said of logistics holdups. "And this is still the most price-advantaged market in the world." Teague referred to the US ethane feedstock advantage over crackers in naphtha-dependent regions, namely Asia and Europe. Naphtha prices have risen sharply alongside crude prices after Russia's Feb. 24 invasion of Ukraine, raising ethylene production costs in Asia and Europe, and widening the cost advantages of using ethane feedstock for US crackers. During the company's April 12 analyst meeting, D'Anna said operating the ethylene export terminal at 125% of its nameplate capacity was not enough. "The terminal is full as the rest of the world is struggling with high energy and feedstock prices. They want more across the dock. Both our US ethylene producers and our international customers want more." Enterprise secures sufficient long-term support for ethane export capacity expansion Teague also said during the analyst meeting that Enterprise has secured a long-term agreement with INEOS that supports a second ethane terminal along the US Gulf Coast "somewhere along our ethane header system" between Corpus Christi, Texas, and New Orleans. "When INEOS approaches us with this opportunity, they were adamant that a second terminal was needed to be able to step up their commitments," Teague said. "They're developing markets around the world and supporting our value chain via their waterborne logistics." He said the company was still working on the final site location. Justin Kleiderer, vice president of natural gas liquids marketing and supply, said during the May 2 earnings call that Enterprise has seen spot ethane volume availability rise in the last 12-18 months. The company's current ethane terminal can load 10,000 barrels/hour at the same site along the Houston Ship Channel, which is home to the ethylene export facility.

With roots in Germany's industrial heartland dating back to 1865, chemicals giant BASF is readying itself for carbon neutrality. As it builds a foothold in the renewable energy space, the company is morphing from buyer to producer of green electricity. Boasting a market capitalization of nearly Eur47 billion, BASF makes products including fertilizers, industrial gases, electronic-grade chemicals and glues, which it manufactures at production hubs in Texas, Belgium, Malaysia, China and other global locations. The company has committed to buy electricity from multiple European wind and solar farms, has taken an equity stake in a Dutch offshore wind farm, is bidding for another one and in January established a dedicated renewables division. In setting up BASF Renewable Energy, the company is making renewables part of its core business. "This is the extension of our existing approach of integrating ourselves in the value chain for key inputs," Horatio Evers, CEO of the new division, told S&P Global Market Intelligence. BASF, which already generates most of its own electricity through steam and gas turbines, has a goal is to "provide a secure, ideal portfolio of renewables," Evers said. Its "make and buy" strategy includes building up its own capacity while buying electricity through long-term power purchase agreements. Such activities have accelerated in recent months. In November 2021, the company signed a 25-year PPA for green electricity with French utility Engie, encompassing up to 20.7 TWh of power. This came after buying a 49.5% stake in the Hollandse Kust Zuid offshore wind farm in the Netherlands from Vattenfall, of which BASF agreed to sell half to German insurer Allianz at the end of the year. More recently, BASF bought a stake in a company called Vattenfall Hollandse Kust West VI, with Vattenfall and BASF confirming April 22 that they will bid for the 700 MW Site VI concession in the Netherlands' Hollandse Kust West offshore wind tender. The tender opened April 14 and closes May 12, with the winners set to be announced after the summer. Having a more involved BASF in the construction and planning of offshore wind farms would be a welcome development, according to Martin Neubert, chief commercial officer at Danish wind developer Ørsted. "There is a huge amount of [interest] from industry to directly secure, procure and be part of development," Neubert said at industry group WindEurope's annual conference in Bilbao, Spain, on April 6. "I think it's good, in terms of how we best allocate resources, capabilities, but also risk. An open-door approach empowers the industry to ramp up." Ørsted will sell 186 MW of output from its 900 MW Borkum Riffgrund 3 wind farm in Germany's North Sea coast to BASF under a 25-year PPA. The project is expected online in 2025. Buying green power under long-term PPAs allows BASF to secure the required volumes at predictable prices, Evers said. The deals also help reduce BASF's direct Scope 1 and 2 greenhouse gas emissions -- those associated with its own production and purchased energy -- which stood at 21.8 million mt of CO2 equivalent in 2020, according to S&P Global Trucost, having barely changed since 2016. German utility RWE more than halved its direct emissions during that time. BASF wants to reduce its Scope 1 and Scope 2 emissions by 25% by 2030, compared with 2018 levels. For those scopes, the company is targeting net-zero by 2050. Home country Germany, by comparison, has a net-zero target of 2045. To support its goals, BASF wants to spend around Eur4 billion on low-carbon technologies by 2030. The company does not have a target for Scope 3 emissions, which arise from customers using its products, but said it aims to be "among the first companies to provide large volumes of as many products as possible with reduced carbon footprints." 'Precious hydrogen' Renewable electricity will help to decarbonize the company's activities, but many processes rely on natural gas or gas-derived hydrogen and cannot be directly electrified. Fertilizer ingredient ammonia, for instance, is made using gray hydrogen, produced with natural gas, including by BASF. The company uses around 1 million mt of hydrogen per year across its global operations, and flagship location Ludwigshafen in western Germany makes around a quarter of this hydrogen. To clean up these polluting operations, EU policymakers want chemicals companies to switch to green hydrogen, which is made with renewables and electrolysis. BASF's renewables unit welcomes this plan, Evers said, while calling for a targeted approach and focus on specific use cases. "Hydrogen alone will not solve all of our problems," the executive said. "For the production we will also need vast amounts of renewables that we currently do not have." As a result, deployment of hydrogen needs to happen in areas that are directly reliant on hydrogen, such as chemicals and steel, Evers said. Policymakers ought to prioritize these sectors over power generation or heating, where sufficient alternatives exist. "Precious hydrogen should not be wasted," Evers said. As the market and production capacity for green hydrogen ramps up, BASF also wants production to take place near existing hubs like Ludwigshafen, while a gas network for long-distance transport is built up for the medium to long term. To that end, the company will build an electrolyzer in Ludwigshafen starting this year, subject to subsidy approvals. "We know how power-intensive electrolysis is," Evers said. BASF is testing a supplementary method of hydrogen production at the site, called methane pyrolysis, which the company says uses less electricity. The process splits gas into hydrogen and solid carbon and produces no greenhouse gas emissions if run on renewables, according to BASF. The approach is not without critics. "Methane pyrolysis is almost as bad as the current major process of producing hydrogen," Mark Jacobson, professor of civil and environmental engineering at Stanford University, said in an email. This is chiefly because of gas leakage in the value chain, while the green energy required to power pyrolysis is prevented from replacing coal and gas in power generation, Jacobson said. Europe's industries will also tap hydrogen in a pivot from Russian gas usage, with the EU committed to stopping all imports by 2027 in light of Russia's invasion of Ukraine. This shift will be felt strongly in German industry, as the country is heavily reliant on Russian gas, importing more than half of its supplies from there via pipelines. BASF's stock declined sharply as Russia invaded Ukraine and is down 18% in the year to date as of April 13. The company also owns a majority stake in Wintershall Dea, one of the financiers of the now-shelved Nord Stream 2 gas pipeline; Wintershall took a Eur1 billion impairment on that project.

Russian rubber will face an additional import tariff of 35% when imported into the UK, the British government said April 21, as part of a second round of import sanctions against Moscow following its invasion of Ukraine. The UK government on March 15 said that Russian tires would face an additional 35% import tariff. The sanctions this time, part of a GBP150 million sanctions package, extends the same measure to a wider group of "rubber and articles thereof" products under the HS code 4001, 4002, 4005, 4008, 4009, 4010, 4015, 4016. Commodities including butadiene rubber, styrene-butadiene rubber, nitrile-butadiene rubber and isoprene rubber are included under HS code 4002. The announcement did not provide a clear timeline and overall scope on implementing these measures, stating "legislation will be laid in due course to implement these measures. The overall scope of products affected by existing and planned tariff increases will remain under review." The full list of affected Russian imports under the second round of sanction measures include commodities such as sugar, wood products, silk, cotton, as well as other products like diamond, toys and furniture. Tires are the primary consumer of styrene-butadiene rubbers and other synthetic rubbers while also using materials such as carbon black and steel.

Taiwan's CPC has declared force majeure on isomer mixed xylenes and toluene cargoes for April loading, a company spokesperson told S&P Global Commodity Insights April 18. Industry sources said the force majeure was in response to the closure of aromatics units No. 3 and No. 7, earlier announced due to a coronavirus positive case, with letters issued to customers from April 13-14. "Mixed xylenes buyers have arranged vessels to load cargo but [CPC] can't deliver cargo in April ... toluene and MX will be deferred to May or June," a source close to the company said. "Actual quantity is not confirmed. Toluene about 13,000 mt," the source added. Trading sources said the isomer-MX quantity was around 9,000 mt. Supplies of isomer-MX and toluene have been tight following several operating run in from Southeast Asia and Northeast Asia since March, trading sources said. The force majeure will further add to lack of availability, they said. The No. 3 aromatics unit can produce 25,000 mt/year of benzene, 136,000 mt/year of toluene and 150,000 mt/year of mixed xylenes, industry sources said, while the No. 7 unit can produce 208,000 mt/year of benzene and 104,000 mt/year of toluene. CPC is able to produce 274,000 mt/year of benzene, 321,000 mt/year of toluene and 507,000 mt/year of xylenes annually. The toluene FOB Korea marker was assessed at $1,065/mt April 18, $20/mt higher day on the day, gaining more than the adjacent aromatics prices and upstream naphtha prices, S&P Global data showed. This was largely attributed to the tight supplies and further curtailments in availability from Taiwan CPC's force majeure declaration on toluene cargoes. Some traders had also heard the possibility of term commitments being postponed as well. Benchmark naphtha C+F Japan was assessed higher by $14.50/mt day on day at $957.50/mt, while the adjacent downstream CFR Taiwan/China paraxylene price was assessed up $12.83/mt day on day at $1,213.33/mt. China has supplies but no ships to transport the cargoes, industry sources said. Several traders have been caught off guard due to the shortage, amid commitments in India and Vietnam, sources said. A trader said that he was unable to find ships to load cargoes from China and send to West Coast India. Vessels were stuck in India due to a lack of cargoes to send to Asia, he added.

Chinese refineries will slash throughput in April and lift oil product exports from initial plans to compensate for falling domestic demand due to COVID-19 lockdowns. As a result, 10 refiners from the 11 polled Sinopec and PetroChina refining sources said they have cut their April throughput by 30,000-100,000 mt from their initial planned volumes or plan to reduce. These include Sinopec's 14 million mt/year Shanghai Petrochemical, which has been locked down since late March. It will lower throughput by 40,000 mt to 1.19 million mt in April. The neighboring 8 million mt/year Anqing Petrochemical plant has trimmed throughput several times since April 1 to get the current target of about 550,000 mt from an initial 650,000 mt. Another neighbor, the 16 million mt/year private greenfield Shenghong Petrochemical has further delayed its startup, with no fixed commission schedule, given high oil prices coupled with weak product demand, according to a company source. Down south in Guangzhou, oil product sales are also slow. The 13.2 million mt/year Sinopec plant has cut throughput by 40,000 mt from planned to 990,000 mt in April. In eastern China's Shandong province, independent refineries have even cut their average utilization rates to 49.4% as of April 6, against 57.1% a month earlier, according to local information provider JLC. In northeast China, three of PetroChina's refineries in Liaoning province have reduced their April throughput by 30,000-50,000 mt from original plans, according to sources with the plants. Meanwhile, Russian crude imports by China's independent refiners slumped 44.4% year on year to a 10-month low of 1.5 million mt in March as a regular buyer ChemChina shut for maintenance its Huaxing Petrochemical. The volume is expected to fall further as a few independent refineries step away from Russian cargoes amid uncertainties in payment and shipping amid the ongoing Russia-Ukraine war and negative refining margins. Japan's largest refiner ENEOS does not plan to sign any Russian crude oil import contracts following Russia's invasion of Ukraine, ENEOS Holdings Chairman Tsutomu Sugimori said March 22. "Following the Ukraine invasion, we have not signed any contracts [for Russian crude]," Sugimori told an online press conference as the president of the Petroleum Association of Japan. "We do not expect to import [Russian crude] for the moment." ENEOS, however, will receive a few ships carrying Russian crude cargoes until April from its purchase contracts signed prior to the invasion in February, Sugimori said. Japan's second largest refiner Idemitsu Kosan has decided to suspend new Russian crude oil trades for imports amid uncertainty over payment and logistics disruptions, a company spokesperson told S&P Global Commodity Insights March 23. Cosmo Oil, Japan's third largest refiner, does not currently procure Russian crude oil, and it does not have any plans to procure the barrels, a Cosmo Energy Holdings spokesperson said March 23. Japanese refiner Taiyo Oil is currently seeking clarity about whether it can continue to lift term crude oil supply from Russia, which it relies on for 20%-30% of its crude procurement, amid uncertainty over payment settlements and shipping, a company spokesperson said April 4. Meanwhile, Japan's Ministry of Economy, Trade and Industry revoked March 31 Taiyo Oil's safety inspection permission at its sole 138,000-b/d Kikuma refinery at Shikoku in western Japan following its violations of safety regulations. Following the revocation, Taiyo Oil will now have to conduct a refinery maintenance program every year and get it approved by the local authorities until the company restores the permission, a METI official said. Prior to the suspension of its safety inspection permission, Taiyo Oil planned to shut two crude distillation units at the Kikuma refinery over May 30-Aug. 17 for a large scheduled maintenance program that takes place every four years. Separately, Japan's largest refiner ENEOS said March 28 it restarted the 170,000 b/d No. 2 crude distillation unit at the Kawasaki refinery in Tokyo Bay on March 25 after it was shut March 16 due to earthquake-led power outages. ENEOS said April 4 that it plans to restart the distillation unit at the Sendai refinery in the northeast and the Chiba refinery in Tokyo Bay in mid-April. At the Sendai refinery, all refining units were shut while all refining units at ENEOS's Chiba Refinery and the No. 2 crude distillation unit at the 247,000 b/d Kawasaki refinery, both in Tokyo Bay, were suspended. In other news, China aims to develop renewables-based hydrogen and curb fossil fuel-based hydrogen production which currently dominates the nation's hydrogen supply, according to its hydrogen industry development plan. The development plan jointly released by China's top economic planner National Development and Reform Commission, or NDRC, and energy regulator National Energy Administration lays out high-level guidelines for its hydrogen supply chain from 2021 to 2035. China has already become the world's largest hydrogen producer with 33 million mt/year of supply, but 63.5% of this is produced from coal, 21.2% as industrial byproduct, 13.8% from natural gas and only 1.5% from water electrolysis that is not fully powered by renewables-based electricity, according to the China Hydrogen Alliance. Quantitative targets are only set up until 2025, including building up 100,000-200,000 mt/year of renewables-based hydrogen production, realizing 1 million-2 million mt/year of CO2 emissions reduction and 50,000 hydrogen fuel cell vehicles or FCEVs by 2025, the report said. By 2030, the plan aims to build up a more comprehensive supply system for clean hydrogen and enable broad applications of hydrogen in different sectors to support China's carbon peaking 2030 target. By 2035, the plan expects to have a more sophisticated ecosystem for hydrogen, covering diverse applications in transportation, energy storage, industrial and other sectors. Renewables-based hydrogen will occupy a significantly increasing share in China's energy consumption mix and become an important backbone for the nation's energy transition, the plan said. NEW AND ONGOING MAINTENANCE Refinery Capacity b/d Country Owner Unit Duration Negishi 270,000 Japan ENEOS Part Closure'22 Wakayama 127,500 Japan ENEOS Full Closure'23 Kikuma 138,000 Japan Taiyo Oil Full May Hainan 184,000 China Sinopec Full Mar Jinzhou 150,000 China Petrochina Full Apr Yangtz 290,000 China Sinopec Full Mar Tahe 100,000 China Sinopec Full Mar Huaxing 140,000 China ChemChina Full Apr UPGRADES Zhenhai 230,000 China Sinopec Expansion NA Jinling 420,000 China Sinopec Upgrade NA Haiyou 70,000 China Haiyou Upgrade On hold Huizhou 440,000 China CNOOC Upgrade NA Chiba 190,000 Japan Idemitsu Upgrade 2020 Changling 230,000 China Sinopec Upgrade NA Qinzhou 240,000 China Guanxi Upgrade 2023 Fujian 280,000 China Sinopec Upgrade NA LAUNCHES Tangshang 300,000 China Xuyang Group Launch 2021 Jieyang 400,000 China Guandong Launch 2021 Huajin Aramco 300,000 China Joint Launch 2024 Lianyungang 320,000 China Shenghong Launch Launched Yulong 400,000 China Yulong Launch 2022 Near-term maintenance New and revised entries Japan ** Japan's Cosmo Oil shut one of two crude distillation units at its 177,000 b/d Chiba refinery in Tokyo Bay after a fire at a furnace April 2, a company spokesperson said April 5. The fire broke out at around 6:15 pm local time (0915 GMT.) April 2, and the local fire department confirmed that it was put out at 11:45 pm, the spokesperson said. No one was injured, and it was not clear when Cosmo would be able to resume the CDU, the spokesperson said. China ** PetroChina's Yunnan Petrochemical refinery in southwestern Yunnan province, which shut its 4 million mt/year residual hydrogenation unit and some of its relative downstream facilities due to a blast in December, is fully back online. ** ChemChina has shut for maintenance its Huaxing Petrochemical. Works started on March 15. Existing entries China ** Sinopec Hainan plans to completely shut for nearly two months of scheduled maintenance March 15-May 10, and there will no oil products exports in April. The Hainan refinery plans to process 370,000 mt of crude oil in March, which would be equivalent to about 47% of its nameplate processing capacity, down from 102% in February. ** PetroChina's Liaohe Petrochemical will shut for maintenance over April-June. ** Sinopec's Yangtz Petrochemical is scheduled to shut the entire refinery for maintenance over March-April. ** Sinopec's Tahe Petrochemical is scheduled to shut for maintenance from mid-March to late April. Japan ** Japanese refiner Taiyo Oil plans to shut two crude distillation units at its sole Kikuma refinery over May 30-Aug. 17 for scheduled maintenance, a company spokesperson said March 8. It will halt a 106,000 b/d No. 1 CDU and a 32,000 b/d No. 2 CDU. "This will be a large-scale planned maintenance [which is done] every four years, and we plan to shut the No.1, the No. 2 CDUs and the [32,000 b/d] RFCC at about the same time," the spokesperson said. ** Japan's largest refiner ENEOS will decommission the sole 127,500 b/d crude distillation unit at its Wakayama refinery in western Japan in October 2023. ** Japan's ENEOS will decommission the 120,000 b/d No. 1 CDU at its 270,000 b/d Negishi refinery in Tokyo Bay in October 2022. It will also decommission secondary units attached to the No. 1 CDU, including a vacuum distillation unit and fluid catalytic cracker. ENEOS will also decommission a 270,000 mt/year lubricant output unit at the Negishi refinery. Upgrades Existing entries ** Sinopec plans to add a petrochemical plant to its Fujian refining complex as part of its phase two expansion plans, according to a company source. "An ethylene plant will likely be added," said the source, without giving more details as the plans are still in early stage. The adding of the new chemical plant, will likely help lift the overall run rates at the refinery, sources said. On March. 8, Saudi Aramco and Sinopec said they would study possible capacity expansion at the Fujian refinery. The two companies will undertake a feasibility study looking into "optimization and expansion of capacity", Saudi Aramco said in a statement. ** Chinese Sinopec's refinery Zhenhai Refining and Chemical has a 27 million mt/year refining capacity and a 2.2 million mt/year ethylene plant, after its phase 1 expansion project of 4 million mt/year crude distillation unit and a 1.2 million mt/year ethylene unit was delivered end-June. The company aims to grow its refining capacity to 60 million mt/year and 7 million mt/year of ethylene by 2030. ** PetroChina's Guangxi Petrochemical in southern Guangxi province planned to start construction at its upgrading projects at the end of 2021, with the works set to take 36 months. The projects include upgrading the existing refining units as well as setting up new petrochemical facilities, which will turn the refinery into a refining and petrochemical complex. The project will focus on upgrading two existing units: the 2.2 million mt/year wax oil hydrocracker and the 2.4 million mt/year gasoil hydrogenation refining unit. For the petrochemicals part, around 11 main units will be constructed, which include a 1.2 million mt/year ethylene cracker. ** Sinopec's Changling Petrochemical in central Hunan province plans to start construction for its newly approved 1 million mt/year reformer. ** Japan's Idemitsu Kosan plans to start work on raising the residue cracking capacity at its 45,000 b/d FCC at Chiba. ** Axens said its Paramax technology has been selected by state-owned China National Offshore Oil Corp. for the petrochemical expansion at the plant. The project aims at increasing the high-purity aromatics production capacity to 3 million mt/year. The new aromatics complex will produce 1.5 million mt/year of paraxylene in a single train. ** Construction of a new 1 million mt/year coker at Chinese independent refinery Haiyou Petrochemical, in eastern Shandong, has been put on hold. ** Sinopec's Jinling Petrochemical refinery in eastern China will build a new 600,000 mt/year VDU. Launches New and revised entries ** Private greenfield Shenghong Petrochemical has further delayed its startup, with no fixed commission schedule, given high oil prices coupled with weak product demand. The refinery initially planned to start up in end August, but this was postponed to end-December and then to January. ** PetroChina has started constructing a low sulfur bunker fuel oil project with 2.6 million mt/year production capacity at its upcoming Guangdong Petrochemical. PetroChina targets to commission Guangdong Petrochemical by end-2022. The Guangdong plant is PetroChina's latest greenfield integrated refinery in southern China Jieyang city, featured with a 2.6 million mt/year aromatics unit and a 1.2 million mt/year steam cracker. Existing entries ** Saudi Aramco said it has "taken the final investment decision" to participate in the development of a major refinery and petrochemical complex in China which is expected to be operational in 2024. The complex will be developed by Huajin Aramco Petrochemical Company (HAPCO), a joint venture between Aramco, North Huajin Chemical Industries Group Corporation and Panjin Xincheng Industrial Group. The decision is subject to finalization of transaction documentation, regulatory approvals and closing conditions. The project represents an opportunity for Aramco to supply up to 210,000 b/d of crude feedstock for the complex. The complex involves a 300,000 b/d refinery, 1.5 million mt/year ethylene-based steam cracker and a 1.3 million mt/year PX unit, S&P Global Commodity Insights has reported previously. ** Honeywell said China's Shandong Yulong Petrochemical will use "advanced platforming and aromatics technologies" from Honeywell UOP at its integrated petrochemical complex. The complex will include a UOP naphtha Unionfining unit, CCR Platforming technology to convert naphtha into high-octane gasoline and aromatics, Isomar isomerization technology. When completed Yulong plans to produce 3 million mt/year of mixed aromatics. Shandong's independent greenfield refining complex, Yulong Petrochemical announced the start of construction work at Yulong Island in Yantai city at the end of October 2020. Construction was expected to be completed in 24 months. The complex has been set up with the aim of consolidating the outdated capacities in Shandong province. A total of 10 independent refineries, with a total capacity of 27.5 million mt/year, will be mothballed over the next three years. Jinshi Petrochemical, Yuhuang Petrochemical and Zhonghai Fine Chemical, Yuhuang Petrochemical and Zhonghai Fine Chemical will be dismantled, while Jinshi Asphalt has already finished dismantling. ** China's coal chemical producer Xuyang Group has announced plans to build a greenfield 15 million mt/year refining and petrochemical complex in Tangshang in central Hebei province.

Refineries in Russia and Belarus are reducing throughput, with some halting production, as they have been unable to place their output due to the reluctance of international buyers to take Russian-origin cargoes following Moscow's invasion of Ukraine. According to estimates by market participants, around 4 million mt of capacity has been shut since Feb. 24, the day Russia invaded Ukraine. Russian refiners typically process around 25 million mt/month (around 5.9 million b/d). Russian Deputy Prime Minister Alexander Novak said April 7 that Russia's oil output in April could fall 4%-5% month on month due to financial and logistical difficulties. Novak, who was speaking to Russia 24 TV channel, also said there would also be "adjustments to refining, there will also be a decrease in refining volumes," adding that he did not expect this to affect domestic supplies, and exports would continue. Some of the lower throughput is due to planned spring turnarounds, though in addition to those, a host of plants appear to have brought forward their works and extended them through June. The maintenance schedule is encompassing a growing number of plants, including those in the key Samara and Ufa refinery hubs in central Russia and the Far East, and will involve both primary and secondary units. Small and medium-sized refineries, which produce feedstock predominantly for export, are expected to run at around 50% of capacity in April. Others have fully halted their output. At the beginning of March the Tuapse and Novoshakhtinsky plants in southern Russia reduced or fully stopped crude intake, as they were unable to ship production. Tuapse previously exported more than 100,000 mt/month of VGO, but its exports have dropped to zero in April. Despite their previous dependence on Russian vacuum gasoil, many European refineries have taken the decision to self-sanction Russian-origin products in response to the invasion of Ukraine. "There is just no demand for Russian VGO in Northwest Europe," a trader said. Russian fuel oil has faced a similar response from international buyers, with mounting stocks putting pressure on domestic prices and refinery runs. Earlier this week, local media reported that Russian oil major Lukoil was expecting potential refinery closures due to a lack of outlets for fuel oil and spare storage. Later, the company denied the information and said all its refineries were operating normally and finding homes for fuel oil. However, problems placing Russian feedstock products have worsened. Another widely exported Russian feedstock, naphtha, is facing avoidance not only internationally, but from domestic petrochemical buyers, themselves subject to sanctions pressure. The Taif refinery is expected to halt processing this week, as an adjacent petrochemical company has decided to stop taking its naphtha. Petrochemical maker Nizhnekamskneftekhim told local media that its exports to European markets, its main outlet, have dropped since the end of February and individual contracts have been suspended. Belarus plants almost halve throughput The two refineries in Belarus have nearly halved their runs due to sanctions, local media uoted Prime Minister Roman Golovchenko as saying. Naftan currently processes 11,700 mt/day crude oil and Mozyr about 13,700 mt/day. They each have capacity of around 12 million mt/year, although have been processing less than that. While the US and its partners have not imposed additional sanctions on Belarus' oil sector since the invasion, Belarus had already become reliant on Russian ports for its exports, and the ports are now being shunned by much of European industry. Naftan also brought forward its planned maintenance to March after losing some export markets, with Ukraine the main one. Belarus was the biggest source of Ukraine's oil product imports before the war, accounting for 41.9%, but Ukraine halted these after Russia invaded. In 2021, Belarus supplied 3.87 million mt of petroleum products to Ukraine. Currently refineries in Belarus produce enough to supply the domestic market. In the past they had exported oil products, in particular gasoline, to Russia, but Russian refiners themselves are struggling to place their products. Alternative destinations, domestic demand With buyers in the West avoiding Russian products, Moscow is turning to buyers in the East. In addition, exports have been ramped up to neighboring Central Asian countries. Data emerged during the week that Russia increased significantly its oil product exports to China and Kazakhstan in March. Fuel oil represented the bulk of its exports to China, with 394,200 mt supplied, 43.6% higher month on month, while gasoline exports to Kazakhstan increased 32-fold to 7,600 mt. However, gasoline exports to Kazakhstan will not come close to offsetting the potential loss of more than 300,000 mt that Russia previously exported monthly. While Russia traditionally has been short gasoline, the situation appears to be reversing amid an abundance of output countered by diminishing demand. Russian domestic gasoline supply has been rising, as more naphtha is heading into the gasoline pool due to reduced exports and use by petrochemical plants. Meanwhile, market participants are concerned that domestic demand is weak on poor prospects for domestic tourism to southern regions, due to the war in nearby Ukraine. Diesel for the moment appears to be somewhat bucking the pressure of sanctions so far, with fairly typical exports in March, while the April export program from its Baltic port of Primorsk appears to be fairly normal, and domestic demand is drawing support from buying from the agricultural sector and the military. However, there is growing doubt that these diesel flows will find homes in Europe. In March Russia exported around 2.513 million mt of diesel to Europe, but this is currently set to fall to around 452,000 mt in April so far, according to Kpler data.

China's refineries are to slash throughput in April and lift oil product exports from initial plans to compensate for falling domestic demand due to COVID-19 lockdowns, refiners told S&P Global Commodity Insight on April 8. The country's financial center, Shanghai, a city of 25 million people, has gone into lockdown due to omicron variant outbreaks and there have been reports the lockdown could be extended into May. Other cities in northeast, east and south China also stay in alert mode. The latest lockdown has compounded China's supply chain and logistical challenges; transportation has been disrupted, workers are in isolation, and construction work has been wound down or stopped altogether. This situation is likely to continue while the Chinese government adheres to a zero-COVID policy. As a result, 10 refiners from the 11 polled Sinopec and PetroChina refining sources said they have cut their April throughput by 30,000-100,000 mt from their initial planned volume or are going to reduce. These include Sinopec's 14 million mt/year Shanghai Petrochemical, which has been locked down since late March. It is to lower throughput by 40,000 mt to 1.19 million mt in April. "Shanghai's demand for oil products is drying out, product inventory is rising," a source with the plant said. The neighboring 8 million mt/year Anqing Petrochemical plant has trimmed throughput several times since April 1 to get the current target of about 550,000 mt from an initial 650,000 mt. Another neighbor, the 16 million mt/year private greenfield Shenghong Petrochemical has further delayed its startup, with no fixed commission schedule, given high oil prices coupled with weak product demand, according to a company source. Down south in Guangzhou, oil product sales are also slow, despite the capital city of Guangdong being less affected by the latest wave of the pandemic. The 13.2 million mt/year Sinopec plant has cut throughput by 40,000 mt from planned to 990,000 mt in April, a refining source said. In eastern China's Shandong province, independent refineries have even chopped their average utilization rate to 49.4% as of April 6, against 57.1% a month earlier as of March 9, according to local information provider JLC. In northeast China, three of PetroChina's refineries in Liaoning province have reduced their April throughput by 30,000-50,000 mt from original plans, according to sources with the plants. The neighboring Jilin province is another epicenter of the current wave of COVID-19 spreading. Analysts in Beijing warned that refineries may further lower throughput when demand is worsen. Product export hikes In addition to throughput, PetroChina's refineries have also lifted product exports from initial estimations. But the increase is likely to be capped due to limited export quotas and logistical restriction due to COVID-19 controls, analysts said. One Dalian-based PetroChina refinery is to increase its gasoline exports in April from the initial plan of 32,000 mt to 130,000 mt, while the other PetroChina refineries in the same city will export 150,000 mt of gasoline this month -- compared with zero in its original plan, according to company sources. Moreover, PetroChina's Guangxi Petrochemical is also likely to ship out some gasoline barrels. PetroChina was initially estimated to export only 32,000 mt of gasoline in April. "But lockdowns and movement controls ban driving activities, even during the Tomb-Sweeping Day holiday (April 3-5)," a company source said. "Oil products stock is rising, forcing refiners to upward adjust their export plans, especially gasoline," said a product trader in East China. However, Beijing slumped oil product quota awards by 55.9% year on year in the first-round allocation for 2022, at only 13 million mt, which caps exports in the month. Market sources had initially estimated China to export 416,000 mt of gasoline and 140,000 mt of gasoil in April, S&P Global reported.

China's oil giant PetroChina has started constructing a low sulfur bunker fuel oil project with 2.6 million mt/year production capacity at its upcoming Guangdong Petrochemical, a company source told S&P Global Commodity Insights April 5. The project will further push up China's LSFO production, which jumped 58.4% year on year to 2.27 million mt in January-February, according to data from local information provider JLC. The source said the 20 million mt/year Guangdong Petrochemical is designed to process heavy crude with higher residual yield than the recent new refineries which crack medium crudes. The plant will expand its storage capacity by adding four of 20,000 cm tanks for the LSFO project, the source added. China is set to boost its bonded bunker fuel oil supplies as raising the quotas for bunkering at Chinese bonded ports by 30% to 6.5 million mt in the first round allocation for 2022. PetroChina won 2.03 million mt in the round, up 36.2% year on year. The oil giant targets to commission the 20 million mt/year Guangdong Petrochemical by end-2022, helping to buoy the country's crude appetites along with the private 16 million mt/year Shenghong Petrochemical and Zhejiang Petroleum & Chemical's 20 million mt/year expansion. PetroChina targeted to lift its throughput by 3.6% year on year to 3.48 million b/d in 2022, S&P Global reported. The Guangdong plant is PetroChina's latest greenfield integrated refinery in southern China Jieyang city, featured with a 2.6 million mt/year aromatics unit and a 1.2 million mt/year steam cracker. Guangdong Petrochemical was initially proposed in 2011 and scheduled to be built by a 60:40 joint venture between PetroChina and Venezuela's state-run PDVSA. It was designed to process only Venezuelan Merey 16 crude or diluted crude oil. But the project was stalled partly due to debt-ridden PDVSA having lost the ability to raise funds. PetroChina subsequently adjust its crude slate design in March 2018 to process Basrah Heavy crude from Iraq and heavy crude oil from Iran, as well as Merey 16.

Japan’s naphtha-fed steam crackers are to face increased pressure to lower run rates in April with more crackers returning from maintenance, a change from March when many were able to maintain close to full operations to make up for the shortfall in domestic ethylene production during maintenance season, which is in contrast with the widespread run cuts at other Asian steam crackers due to poor downstream margins. Around 37% of Japan’s steam cracking capacity was shut due to maintenance in March, however, this will drop to around 25% in April as Keiyo Ethylene’s cracker was in the process of restarting. The return of Keiyo Ethylene’s cracker production would pressure Japanese cracker margins and spark lower operation rates. Comparatively, naphtha-fed steam crackers in South Korea and China had cut run rates to an estimated 85%-90% in March, with many expected to reduce rates further to 80% in April, amid weak ethylene demand and high naphtha costs. The average operation rate of Japan’s naphtha-fed steam crackers was 97.4% in December 2021, 94.2% in January 2022, and 92.4% in February 2022, latest data from Japan Petrochemical Industry Association showed. Ethylene tight on lower cracker runs The expected restart of Japanese crackers in April could alleviate the tightness for spot ethylene, some market sources said. “We have some enquiries from buyers in Southeast Asia, as there is very limited availability there. However, with crackers in Northeast Asia planning to cut operating rates further in April, it has been difficult to secure cargo,” a trader based in Southeast Asia said. “Japanese crackers typically operate at high operating rates of 95%-100%, so the supply situation could ease a little if these crackers restart as planned and run at their normal rates.” As crackers in Japan typically supply contractual ethylene volumes to the domestic markets, some Japanese buyers had to import ethylene from other Asian regions. However, volumes were limited by lowered operating rates at downstream facilities, according to some traders. “There is no definite answer for what the outlook will be like because the upstream markets are too volatile and downstream demand is weak,” a trader based in Northeast Asia said. “But definitely the restarts will help to improve the supply situation in Asia overall.” Thin downstream margins Non-integrated producers of key downstream products such as polyethylene, monoethylene glycol, and styrene monomer have suffered negative production margins since late February, slashing operating rates in order to reduce ethylene consumption. Margins for HDPE film were last calculated at negative $300/mt March 28, S&P Global Commodity Insights data showed. Margins for MEG were calculated at negative $265/mt, while margins for SM were at minus $157.425/mt. Ethylene buyers reduced purchase quantities in March amid the operating rate cuts, with several saying they would only purchase sufficient feedstock to supply contractual volumes as derivative production was unprofitable. High feedstock cost Many Asian steam cracker operators shied away from purchasing H2 April delivery naphtha feedstock, as they were faced with a spike in costs, which crunched downstream earnings. Purchasing activity resumed in H1 May but remained muted as many were not keen on the high costs of naphtha and had lowered run rates. Benchmark C+F Japan naphtha rose above the psychological $1,000/mt level in early March, and averaged $1,012.40/mt over March 1-28. Comparatively, the average in February was $858.16/mt, while the January average was $769.86/mt, S&P Global data showed. This also attracted steam crackers to use LPG as an alternative feedstock to lower overall costs at various times from January through March. The resultant drop in demand weakened Asian naphtha even as supply shortened drastically from fewer Western inflows and crude-driven flat prices. LPG is typically an alternative steam cracker feed stock that is economically viable when it is 90% or lesser than the price of naphtha. However, most steam crackers can only switch a small portion of their feedstock to LPG. Reflecting the weaker naphtha sentiment, key CFR Japan naphtha physical crack against front month ICE Brent crude futures shrank to a nine-month low of $93.45/mt at the March 25 Asian close, down $44.125/mt on the week, S&P Global data showed. The physical crack has since edged back up to $104.75/mt at the Asian close March 28 due to the strength of the European naphtha segment. “Naphtha market will be bearish in April and May as some crackers will return from turnaround in Japan,” a Japan-based naphtha end-user said. “Maybe the cracker margins will be fine in June, because some crackers [had lowered] operation rates for April and May. So supply and demand balance for derivative products will be fine in June [and] the value of naphtha will recover in June and July.” Steam cracker operations in Japan:

Japan’s naphtha-fed steam crackers are to face increased pressure to lower run rates in April with more crackers returning from maintenance, a change from March when many were able to maintain close to full operations to make up for the shortfall in domestic ethylene production during maintenance season, which is in contrast with the widespread run cuts at other Asian steam crackers due to poor downstream margins. Around 37% of Japan’s steam cracking capacity was shut due to maintenance in March, however, this will drop to around 25% in April as Keiyo Ethylene’s cracker was in the process of restarting. The return of Keiyo Ethylene’s cracker production would pressure Japanese cracker margins and spark lower operation rates. Comparatively, naphtha-fed steam crackers in South Korea and China had cut run rates to an estimated 85%-90% in March, with many expected to reduce rates further to 80% in April, amid weak ethylene demand and high naphtha costs. The average operation rate of Japan’s naphtha-fed steam crackers was 97.4% in December 2021, 94.2% in January 2022, and 92.4% in February 2022, latest data from Japan Petrochemical Industry Association showed. Ethylene tight on lower cracker runs The expected restart of Japanese crackers in April could alleviate the tightness for spot ethylene, some market sources said. “We have some enquiries from buyers in Southeast Asia, as there is very limited availability there. However, with crackers in Northeast Asia planning to cut operating rates further in April, it has been difficult to secure cargo,” a trader based in Southeast Asia said. “Japanese crackers typically operate at high operating rates of 95%-100%, so the supply situation could ease a little if these crackers restart as planned and run at their normal rates.” As crackers in Japan typically supply contractual ethylene volumes to the domestic markets, some Japanese buyers had to import ethylene from other Asian regions. However, volumes were limited by lowered operating rates at downstream facilities, according to some traders. “There is no definite answer for what the outlook will be like because the upstream markets are too volatile and downstream demand is weak,” a trader based in Northeast Asia said. “But definitely the restarts will help to improve the supply situation in Asia overall.” Thin downstream margins Non-integrated producers of key downstream products such as polyethylene, monoethylene glycol, and styrene monomer have suffered negative production margins since late February, slashing operating rates in order to reduce ethylene consumption. Margins for HDPE film were last calculated at negative $300/mt March 28, S&P Global Commodity Insights data showed. Margins for MEG were calculated at negative $265/mt, while margins for SM were at minus $157.425/mt. Ethylene buyers reduced purchase quantities in March amid the operating rate cuts, with several saying they would only purchase sufficient feedstock to supply contractual volumes as derivative production was unprofitable. High feedstock cost Many Asian steam cracker operators shied away from purchasing H2 April delivery naphtha feedstock, as they were faced with a spike in costs, which crunched downstream earnings. Purchasing activity resumed in H1 May but remained muted as many were not keen on the high costs of naphtha and had lowered run rates. Benchmark C+F Japan naphtha rose above the psychological $1,000/mt level in early March, and averaged $1,012.40/mt over March 1-28. Comparatively, the average in February was $858.16/mt, while the January average was $769.86/mt, S&P Global data showed. This also attracted steam crackers to use LPG as an alternative feedstock to lower overall costs at various times from January through March. The resultant drop in demand weakened Asian naphtha even as supply shortened drastically from fewer Western inflows and crude-driven flat prices. LPG is typically an alternative steam cracker feed stock that is economically viable when it is 90% or lesser than the price of naphtha. However, most steam crackers can only switch a small portion of their feedstock to LPG. Reflecting the weaker naphtha sentiment, key CFR Japan naphtha physical crack against front month ICE Brent crude futures shrank to a nine-month low of $93.45/mt at the March 25 Asian close, down $44.125/mt on the week, S&P Global data showed. The physical crack has since edged back up to $104.75/mt at the Asian close March 28 due to the strength of the European naphtha segment. “Naphtha market will be bearish in April and May as some crackers will return from turnaround in Japan,” a Japan-based naphtha end-user said. “Maybe the cracker margins will be fine in June, because some crackers [had lowered] operation rates for April and May. So supply and demand balance for derivative products will be fine in June [and] the value of naphtha will recover in June and July.” Steam cracker operations in Japan:

The Intercontinental Exchange, or ICE, has launched a CFR Taiwan/China paraxylene futures contract based on the Platts CFR Taiwan/China benchmark assessment, on March 28.The contract is "a monthly cash-settled future based on the Platts daily assessment price for Paraxylene CFR Taiwan/China", the notice on the ICE website said.The contract is based off the assessment specifications for the Platts CFR Taiwan/China assessment for physical cargo. The contract size is 100 mt and it will trade in multiples of 100 mt.The last trading day on the contract is specified as the last trading day of the contract month.The final settlement is based on the floating price in US dollar/mt of the high and low quotations that appear in the weekly Platts Asian Petrochemicalscan, ICE said.

The Intercontinental Exchange, or ICE, has launched a CFR Taiwan/China paraxylene futures contract based on the Platts CFR Taiwan/China benchmark assessment, on March 28. The contract is “a monthly cash-settled future based on the Platts daily assessment price for Paraxylene CFR Taiwan/China”, the notice on the ICE website said. The contract is based off the assessment specifications for the Platts CFR Taiwan/China assessment for physical cargo. The contract size is 100 mt and it will trade in multiples of 100 mt. The last trading day on the contract is specified as the last trading day of the contract month. The final settlement is based on the floating price in US dollar/mt of the high and low quotations that appear in the weekly Platts Asian Petrochemicalscan, ICE said.

At least one Chinese propane dehydrogenation, or PDH, plant is suspending operations as the sector struggles with processing losses amid escalating LPG feedstock costs, while others continue with propane imports to keep production going, trade sources said. Tianjin Bohai Chemical shut its 600,000 mt/year PDH plant in North China March 23 due to poor PP margins and high LPG feedstock prices, a company source told S&P Global Commodity Insights. This came weeks after the company restarted its PDH unit Jan. 29 and operated at 90% of capacity in February following regular maintenance that started Jan. 3, according to domestic information provider JLC. “Now margins are not good,” one trader said. A JLC analyst said Tianjin Bohai shut for maintenance March 23 for around 15 days due mainly to negative processing margins caused by higher propane costs and lower domestic PP prices. Tianjin Bohai plans to restart its PDH unit April 7, a company source said March 28. “We shut down on March 23, weak PP margins downstream and firm feedstocks are some of the main factors,” the company source added. Tianjin Bohai Chemical produces about 1,700 mt/day of propylene and supplies mainly to buyers in North China and the Shandong region. The company supplies 1,300 mt/day to its own downstream oxo alcohols operations, Tianjin Bohua Yongli, besides providing about 400 mt/day to term customers. Tianjin Bohua Yongli has two 250,000-mt/year swing plants that produce normal butyl alcohol, or 2-ethyl hexanol, and are currently operational. Fujian Meide, a wholly owned subsidiary of China Flexible Packing Group, is due to restart its 660,000 mt/year propane dehydrogenation plant late March after a scheduled shutdown at the start of the month, though the precise restart date is not yet known. Others still importing Others such as Jinneng Science & Technology Co. have bought by tender two 46,000-mt propane cargoes for May 1-15, or May 1-25, delivery CFR Qingdao, at May FEI plus mid $30s/mt, trade sources said. This is ahead of its scheduled resumption of operations in mid May after maintenance activities began at its 1.08 million-mt/year PDH plant in eastern Shandong province from late March. Another PDH operator Zhejiang Satellite, which operates a 900,000-mt/year PDH plant, is seeking by tender closing March 30 about 23,000 mt of propane for delivery over April 26-May 10 ex-ship at Jiaxing, trade sources said. CFR North Asia propane hit $1,029.5/mt March. 7, the highest since reaching $1.040/mt Feb. 20, 2013, data from S&P Global showed. CFR North Asia propane averaged $940.24/mt over March 1-25, up from $824.53/mt in February, the data also showed. Overall, China’s PDH plants operated at an average rate of 80% in February, up from about 69% in January, due to the return of four plants from maintenance, according to S&P Global’s calculations based on data from domestic information provider JLC. The price spread between polypropylene and propylene was calculated at $10/mt March 25, up from $5/mt the month before, much lower than the typical breakeven spread of $150/mt, data from S&P Global showed. Asia’s petrochemical sector is also reeling from rising costs of other feedstocks, forcing steam crackers to cut operating rates and switch to alternative feedstock to cope with more than a decade-high naphtha costs exacerbated by volatile crude prices amid the Russia-Ukraine conflict. Regional naphtha-fed steam crackers had started lowering runs since late 2021 to manage poor margins, with some operators cutting rates to 70% in March as the turmoil took its toll, and the extended strain led to production line cuts further downstream, market sources said.

Recycled plastics have been around for years as a premium option for those aiming to reduce their environmental footprint while continuing to use these materials which, due to their remarkable versatility, have become ever more entrenched in daily modern life. But despite steady growth, this segment has always been a relatively niche part of the ever-expanding petrochemicals market. Now, however, the growing urgency of the global drive toward net-zero and the energy transition is encouraging companies to innovate even more in the quest to provide premium sustainable petrochemicals. This in turn is driving rapid growth in demand for the feedstocks to produce them, and resulting in an ever-tighter market. Chief among these innovations are chemical plastic recycling and bio-plastics – which refers both to plastics that are made using bio-feedstocks or plastics that are biodegradable at the end of their lifecycle. Over recent years, traditional petrochemical companies have been announcing sizeable investments into research and production of these types of plastics left, right and center. Carbon reduction efforts are also taking off, although low-carbon petrochemical markets are nascent and yet to see liquidity of any significance. Over 7.8 million mt/year of capacity was certified for bio-polymer production across the globe at the end of 2021, according to ISCC data, and over 1.4 million mt/year of chemical recycling capacity is expected to start up by 2025, according to S&P Global Commodity Insights research. While this pales in significance compared to the overall size of the plastics market – production is estimated at over 300 million mt/year – what is eye-catching is the rapid pace of growth, and the number of established petrochemical companies that are getting behind it. Legislation, growing public awareness and companies’ voluntary adoption of ESG principles will likely continue driving growth in demand for green petrochemical solutions. According to the Ellen MacArthur Foundation, a UK-based circular economy proponent, companies representing 20% of all plastic packaging produced globally have a commitment to recycled and recyclable plastic, and to decrease their reliance on virgin (fossil fuel-derived) plastics. However, there are major challenges to overcome. Addressing feedstock supply issues will be key to driving scalability, greater competition and further technological innovation across the supply chain Hurdles to overcome Inadequate feedstock availability is an important one, whether that be sourcing post-consumer plastic waste, for either mechanical or chemical recycling, or sourcing of first-, second- or third- generation feedstock for bio-polymer production. For recycled plastic, this means navigating complex waste collection systems that are inconsistent not just across different regions, but even within the same country. For bio-plastics, petrochemical companies will need to compete for bio-naphtha – the primary feedstock – with the gasoline blending and agriculture markets. Addressing feedstock supply issues will be key to driving scalability, greater competition and further technological innovation across the supply chain. Recycled plastics The supply and demand imbalance in the recycled plastic markets has become an all too familiar issue over the pandemic years. Supply of post-consumer waste has fallen because the drop in tourism and large-scale events has reduced demand for on-the-go products. Meanwhile, government and industry commitments to recycle plastics have continued to pile on demand, particularly in markets such as consumer goods, automotive and construction. End-2021 data from CalRecycle revealed that only seven out of the 69 beverage manufacturers in California met the first recycled content threshold in 2020 , ahead of the implementation of a state bill requiring a minimum of 15% post-consumer recycled polyethylene terephthalate, or PET, to be used in beverage bottles from January 2022. Part of the issue is that there is just not enough material. Reclamation capacity in the US would need to increase by at least 50% from current capacity to meet announced recycled PET commitments by companies operating in the US, according to a 2021 study by the American Institute for Packaging and the Environment. This problem is not specific to the US. Global recycled plastic prices followed a strong upward trend throughout 2021, as a result of growing demand, acute supply shortages and shipping disruptions that have cut off vital sources of supply like Southeast Asia from the demand centers of Europe and the US. Bio-plastics The key petrochemical feedstock for bio-plastic production is bio-naphtha, which can be used as a direct substitute for fossil-based naphtha. Current European bio-naphtha supply is estimated at 150,000-250,000 mt annually, with expectations for supply to double or even surpass 1 million mt/year in the coming years, according to the NOVA Institute. Even in the most bullish scenario, bio-naphtha supply would not meet demand growth expectations. Bio-polymers were seen as a green solution to inadequate supply in recycled markets. But now, a solution is needed to address the shortage in bio-polymers As a result, bio-naphtha is commonly priced at steep premiums against its fossil alternatives, which can range between double to three times the price of the Platts naphtha CIF NWE benchmark. Moving forward, the petrochemicals markets are going to have to attract this key sustainable feedstock in the face of much competition – from the food industry and fuels – if it is to scale up and supply sufficient quantities of bio-polymers. Low-carbon solutions For some, bio-polymers were seen as a green solution to inadequate supply in recycled markets. But now, a solution is needed to address the shortage in bio-polymers. Several petrochemical producers are stepping up carbon-reduction efforts in sectors such as methanol, olefins and polymers, including PET. Solutions include using renewable energy in cogeneration power plants, scaling up bioproduction, carbon capture, utilization and storage technology, and shifting away from fossil fuel-based feedstocks to lower-carbon alternatives like hydrogen. But the results so far are well short of the mark. More coherent policy frameworks, particularly in emerging petrochemical hubs, will be needed to lower investment barriers for these new technologies. Industry efforts will be needed to standardize how the carbon intensity of specific petrochemical products is measured and reduced – or offset in carbon credits markets. Further standardization and liquidity would boost competition and technological innovation, and facilitate the formation of prices and benchmarks that ultimately would determine the direction and pace of change through the energy transition. There are multiple routes to a greener future for petrochemicals and they will need to be explored simultaneously for the industry to truly go green. To reach the stage where a plastic bottle, for instance, is made from part recycled content, part bio content and part low-carbon certified material, all of these markets will require efforts to drive commoditization on a global scale. This piece was first published in February 2022 under the special report Breaking Barriers to Accelerate Energy Transition

Saudi Aramco is looking at a number of opportunities with China's state-backed Sinopec and is still in discussions with India's Reliance on a possible joint venture as the world's largest oil company is looking to further diversify downstream, CEO Amin Nasser said on March 20."We have announced one JV in China. We're currently working with a number of opportunities with Sinopec. We are also exploring a good number of opportunities with other players in Asia - all for mainly highly integrated complexes with more than 50% liquid to chemical that would represent a huge growth opportunities," Nasser told reporters in an earnings call.The investment will give Aramco a source for its crude and will help the company lower emissions as the crude is converted to chemicals rather than liquids to be used in the carbon-intensive transport sector, he said.Nasser also said there are discussions to buy a stake in the oil-to-chemicals business of India's Reliance Industries."We never stopped that discussion with Reliance. We are currently in discussion with Reliance with regard to a potential JV," Nasser said."This is ongoing as you know these things take time to to reach a final agreement but we are currently still in discussion with Reliance," he said.Reliance said last year that both companies decided to re-evaluate their agreement to sell a stake in the Indian company to Aramco. Reliance dropped its plan to create a separate oil-to-chemicals unit as it looked to diversify its holdings away from hydrocarbons. China ambitions Aramco has an interest in China's downstream sector as it looks to lock in demand for its crude in Asia's largest economy.Saudi Aramco decided to move forward with a 300,000 b/d oil refinery and petrochemical project in northeast China on March 10.Aramco said it had taken the final investment decision to develop a liquids-to-chemicals complex under a joint venture with North Huajin Chemical Industries Group Corp. and Panjin Xincheng Industrial Group.The Saudi state-run company had withdrawn from the project in 2020, but S&P Global Commodity Insights reported in September 2021 that the partners had revived negotiations.The facility, to be built in the city of Panjin, will combine a 300,000 b/d refinery and an ethylene-based steam cracker, with Aramco supplying up to 210,000 b/d of crude oil feedstock. It is expected to be operational in 2024 and will cost some $10 billion.Saudi Arabia was China 's top crude supplier in 2021, delivering 1.76 million b/d, followed by Russia at 1.6 million b/d, according to data from China 's General Administration of Customs.Chinese state-owned Sinopec also plans to add a petrochemical plant to its 280,000 b/d Fujian refining complex as part of its phase two expansion plans, S&P Global Commodity Insights reported on March 9.On March 8, Saudi Aramco and Sinopec said they would study possible capacity expansion at the Fujian refinery.