The return of Saudi petrochemical feedstock after curbs and its implications

Автор Muhamad Fadhil, Petrochemicals Editor

Podcast: Most Saudi petrochemical producers announced feedstock curbs of between 15 and 50pc following the mid-September attacks on the country's oil installations.

 

Petrochemical feedstock curbs are easing with a majority of producers announcing a full resumption of ethane to pre-attack levels. Argus Editor Muhamad Fadhil is in Saudi this week and provides an update on the feedstock situation.

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Transcript

Welcome to the latest podcast from Argus Media, a leading price reporting agency. My name is Muhamad Fadhil, an editor for Argus Petrochemicals. 

Attacks at Saudi Arabia's Abqaiq plant, the world's largest crude processing facility, and infrastructure at the Khurais oil field on 14 September forced Saudi Aramco to shut in 5.7mn b/d of crude output. 

In today's podcast, I will speak about the post-attack impact on Saudi downstream production and petrochemical exports. 

I have been in Saudi Arabia this week and met with a number of chemicals producers. I saw first-hand how Saudi petrochemical producers are getting their feedstock access back to pre-attack levels.

Advanced Petrochemical and Sadara said on 29 September they had resumed full feedstock supplies at their complexes in Jubail. Advanced operates a polypropylene plant and a propane dehydrogenation unit in Jubail. 

Sadara, a joint venture between Aramco and US producer Dow, produces polymers, polyols, isocyanates and glycols utilising a mixed-feed cracker.

The return of Advanced and Sadara's full feedstock supplies follows similar announcements last week from Sabic, PetroRabigh, Tasnee and Sipchem.

Producers had earlier targeted a return to full production by end-September.

But the resumption of full feedstock access still does not mean Saudi producers can sell polymer cargoes at pre-attack volumes. In the immediate aftermath of the attacks, most Saudi producers announced feedstock curbs of between 15 and 50pc. 

The Saudi producers are expected to offer fewer cargoes to Asia in October to meet the backlog of orders.

Offers were firm in China days after the attacks, as traders attempted to quickly leverage the fears of shortages. 

But spot prices dipped last week on expectations of a sooner-than-expected return by Saudi polymer producers. 

China's LLDPE prices slipped by $5/t to $860-880/t last week, while PP raffia prices in China fell by $25/t to $980-1,010/t.

The emergence of LLDPE and HDPE supply from the US means buyers in southeast Asia have other options. US producers are aggressively targeting the region, particularly markets like Vietnam and Indonesia. 

Malaysia, Oman and Russia will also add PE and PP capacity in the coming months, with much of the output expected to head for China.

Risk premiums on Middle East petrochemical supplies remain high because of regional tensions following the attacks.

Shipowners are expressing concerns over the security of their container vessels and have highlighted the need to raise premiums. 

The last time shipowners made a similar request was in June, when two tankers were attacked in the Gulf of Oman, near the strategic strait of Hormuz.

Significant pushback from Middle East petrochemical producers has so far discouraged shipowners from indicating or proposing the size of the premium they plan to implement.

Argus is closely monitoring the feedstock situation in Saudi Arabia and its potential implications.

Contact us at petrochemicals@argusmedia.com for any questions or comments about this analysis.

Stay tuned for more updates as news unfolds.

If you want further information about the Saudi crude disruptions visit www.ArgusMedia.com for more key stories and follow us on Twitter @ArgusMedia.

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