Asian petchem buyers query Saudi recovery timelines

The extent of the disruption from last weekend's attacks on Saudi oil infrastructure suggests the government's end-September timeline to restore production could be optimistic, petrochemical distributors and consumers in Asia said.

Saudi petrochemical companies were hit by sharp cuts to their feedstock supplies because of the attacks, which hit the major crude-processing plant at Abqaiq and infrastructure at the Khurais oil field.

The curbs are now starting to ease as state-owned Saudi Aramco brings more crude production on line, in line with the government's statement that crude production is likely to return to pre-attack levels by the end of September.

The end-September date was unexpected, as initial expectations were that the feedstock disruptions could last for as long as six months.

Some Asia-Pacific petrochemical traders and buyers told Argus they see the target date as optimistic. These market participants deal directly with Saudi Arabia, and are well informed about supply and production, but do not have first-hand information on the status of the affected units.

"The timeline is bullish," one major international distributor said.

The attacks knocked out around 2bn ft³/d of associated gas output, 1.3bn ft³/d of dry gas production, 500mn ft³/d of ethane and 500,000 b/d of natural gas liquids.

The scale of the supply disruptions suggests a longer lead-time could be needed for a full recovery, distributors and buyers of Saudi-origin material said.

"Two weeks is a short run-up. A return to full production normally takes longer," an Asia-based petrochemical distributor said.

Saudi petrochemical companies are trying to allay market fears of a prolonged supply disruption from the country. Polyethylene (PE) offers in Asia increased by $80/t on the first trading day after the attacks, but were met with a muted response from buyers.

The emergence of linear low-density PE (LLDPE) and high-density PE (HDPE) supply from the US means buyers in southeast Asia have other options. Malaysia, Oman and Russia will also add PE capacity in the coming months, with much of the output expected to head for China.

Saudi polypropylene (PP) supplies remain affected by a shortage of propane feed from Aramco. Advanced Petrochemical and Tasnee, which run propane dehydrogenation (PDH) units, yesterday said their feed allocation was increasing.

Aramco's LPG customers were told yesterday of 2-4 week delays to their nominated loading dates, while some loadings could be deferred to the following month, according to traders.

It is unclear if domestic petrochemical producers or Aramco's international contract customers will receive priority for propane supplies, should operations return to normal at the end of September.

Buyers of Middle East petrochemicals expect Saudi producers to be less active in the spot market in the coming weeks. Sabic this week cancelled September polymer orders for some of its Asia-Pacific and Middle East customers, citing unforeseen production issues.