Oil price to stay low in 2016; Kuwait plans more petchems spending

Petrochemicals news you need to know.

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Oil prices to average $40/barrel in 2016

Brent crude oil prices will average $40 per barrel (b) in 2016 and $50/b in 2017, according to the Short-Term Energy Outlook published by the US Energy Information Administration (EIA) on January 12.

West Texas Intermediate (WTI) crude oil prices are expected to be $2/b lower than Brent in 2016 and $3/b lower than Brent in 2017.

Crude oil prices are projected to remain low as supply continues to outpace demand in 2016 and more crude oil is placed into storage (see chart below).

Source: US Energy Information Administration, Short-Term Energy Outlook, January 2016.

Meanwhile, the EIA expects Henry Hub natural gas prices to average $2.65/MMBtu in 2016 and $3.22/MMBtu in 2017. The price is projected to rise on the back of planned consumption growth, mainly from the industrial sector, which will outpace near-term production growth (see chart below).

Source: US Energy Information Administration, Short-Term Energy Outlook, January 2016.

WTI CME NYMEX crude futures settled at $33.22/b on January 28 and NYMEX Henry Hub natural gas futures settled at $2.182/MMBtu, giving a crude-to-gas ratio of around 15 at the end of January.

Formosa progresses with Louisiana cracker; M&G Chemicals to expand PET/PTA plant

Formosa Plastics Group (FPG) is moving ahead with plans to build an ethane cracker in Louisiana. The company has said it will invest about $9.4 billion to build a new ethane cracker in the state, Nikkei reported on January 25, citing Formosa Petrochemical Corp’s Executive Vice President Lin Keh-yen.

According to the report, Formosa submitted an environmental assessment application to the Louisiana state government in September 2015 and expects to receive a decision as early as the end of 2017.

If approved, the facility is expected to start producing in 2022 and will be FPG’s fourth major project in the US – after its two existing facilities in Texas and a 1.2 mtpa construction project in the state, set to launch in 2017-2018.

Meanwhile, M&G Chemicals announced on January 20 that it would expand the capacity of the PET and PTA facility it is building in Corpus Christi, Texas. The company will add 100,000 tpa of integrated PET capacity to the original 1 mtpa planned and increase PTA capacity by the corresponding amount at the plant, which is scheduled to start up in the second half of 2016.

M&G Chemicals CEO Marco Ghisolfi said in a statement the company is making the expansions to boost the plant's efficiency and displace current imports from Mexico.

In the refining sector, Phillips 66 is performing scheduled maintenance on an electrostatic precipitator at its Borger, Texas, refinery, Dow Jones Business News reported on January 24.

The Fluid Catalytic Cracking Unit (FCCU) associated with the electrostatic precipitator would not be shut down, but excess emissions could occur between Sunday and February 24, according to a Phillips 66 filing with the Texas Commission on Environmental Quality.

Kuwait plans more capital spending; Emerson wins contract for Tahrir refinery

Despite the more than 70% drop in oil prices since mid-2014, Kuwait is moving ahead with capital spending on energy projects. The country awarded $32.2 billion worth of project contracts in 2017 – a 20% increase from 2014 – with more than half of the contracts going to the oil and gas sector, including investments in refinery and petrochemical projects, Arab Times reported on January 27.

In April 2016, the Kuwait National Petroleum Company (KNPC) plans to award the contract for a $3.3 billion LNG import and regasification terminal at Al-Zour, which is also slated to host a 615,000 bpd refinery.

Kuwait is also reviewing a project to integrate a $7 billion Olefins III plant into the Al-Zour refinery complex. The project is not expected to be tendered before December 2016, according to Arab Times.

Meanwhile, the Egyptian Refining Company will start production at its $3.7 billion oil refinery in Egypt in Q1 2017, Reuters reported on January 21, citing the company’s managing director.

The refinery, which has a capacity to produce 4.2 million tons of refined products annually, will start trial production by the end of 2016.

Also in Egypt, Emerson Process Management has won a contract to provide automation and reliability technologies and services for Carbon Holdings’ $6.9 billion Tahrir Petrochemicals Project, the two companies announced on January 13.

Emerson’s initial scope of work is estimated at $150 million. When completed, the Tahrir project will be the largest petrochemical plant in Egypt and the largest naphtha cracker facility in the world.