June 19, 2020:

Moscow’s Tverskoy District Court on Friday issued an arrest warrant for ex-CEO of troubled Russia’s Antipinsky oil refinery Gennady Lisovichenko in absentia as part of a large scale fraud case, the court’s press service told RAPSI.  He is to be placed in detention for two months from the date of his extradition or arrest in Russia.  In August 2019, the Tymen Region investigators also brought abuse of office charges against Lisovichenko and put him on the international wanted list.  According to media reports, in late 2017, the businessman sold a railroad sidetrack transporting oil products to a third party company for 20 million rubles while the market price of the railroad was estimated at around 38 million rubles ($550,000). When the contract was signed the Antipinsky refinery held the railroad on lease. Investigators claim that these actions caused serious damage to the enterprise.  In late 2019, the Tyumen Regional Commercial Court declared the Antipinsky oil refinery bankrupt.  Antipinsky is a private, not a state-run refinery which capacity exceeds 9 million tonnes per year. The refinery occupies its rightful place among the largest players of the Russian oil refining industry, forming the Urals and West-Siberian oil refinery market, and is known abroad, the company’s official website says.

By rapsinews.com

June 19, 2020:

U.S. refiners and other buyers of crude oil are reworking some of their supply contracts to guarantee volumes after many were cut off unexpectedly when a price collapse this spring led drillers to curtail production, sources said, Reuters reported.  The effort reflects concern in the refining industry about the possibility of another drop in oil prices as world markets continue to reel from the economic fallout of the coronavirus outbreak.  Sellers will likely be forced to agree to the terms as buyers remain scarce in the oil market, traders and analysts said.

U.S. oil prices crashed into negative territory for the first time in history in April as the pandemic crushed energy demand, prompting oil producers to shut in about 2 million barrels per day (bpd) of production, or nearly a fifth of the country’s output.  Normally a drop in prices is good for refiners, but only when they can get their hands on the cheap supply.  Typically, physical crude sales agreements between buyers and suppliers at the wellhead specify a price differential to a floating benchmark that can rise or fall with the markets, but do not specify volumes that must be sold, allowing suppliers to hold back sales when the price is too low.  “Now they are trying to install volume thresholds into the lease contracts,” one of the sources, who works at an oil producer company, told Reuters.  The seller typically has little clout in a lease agreement, said Sandy Fielden, analyst at Morningstar.

“Adding a volume clause helps guarantee supplies for buyers, but to make such a change now is acting after the horse has bolted and the only producers who can meet the volume requirements are those with enough tankage at the wellhead to give them that flexibility.”  Some producers are now also selling at discounted rates after failing to deliver in previous months when they shut wells, in order to avoid legal disputes with buyers, some of the sources said.  “You’re losing the price benefit now, but refiners are mad,” another source at a shale producer said. “There are a bunch of lease contracts that are going to read differently.”  Some U.S. oil producers declared force majeure, an emergency clause typically set aside for acts of god or wars that provides some legal cover to breach contracts. But such declarations have drawn criticism from refining groups.

By BIC Magazine

June 18, 2020:

A tentative deal has been reached in the dispute between the Co-op Refinery Complex and Unifor 594. A ratification vote is required. | Mike Raine photo A tentative deal has been reached in the dispute between the Co-op Refinery Complex and Unifor 594.  The deal, according to a news release issued by Federated Co-op, includes “the monetary aspects of our best and final offer along with a well defined return-to-work agreement.”  The releases said the offer “balances an appreciation for our unionized employees with the fiscal realities of the refining sector.”   The workers at the Regina refinery were locked out after voting in favour of a strike about six months ago.  Union members have been disrupting traffic, picketing the Saskatchewan legislature and protesting at various fuel locations on the Prairies since then.  A ratification vote is required.  

By producer.com

June 17, 2020:

The U.S. Environmental Protection Agency has not yet taken action on petitions by refiners seeking retroactive biofuel blending waivers, Senator Chuck Grassley from Iowa said on Tuesday, Reuters reported.    The Iowa senator called on the EPA to reject such petitions in a weekly call with reporters. Grassley said the petitions were an attempt to skirt a 10th Circuit Court of Appeals decision earlier this year that said waivers from the nation’s biofuel blending laws granted to small refineries after 2010 had to take the form of an “extension.” 

The decision, if applied broadly, would likely put an end to the Trump Administration’s practice of granting large numbers of exemptions to blending mandates.  However, a Department of Energy official said last month the department would review retroactive blending waivers. If granted, such waivers could be considered compliant with the court’s ruling.  His comments sparked outrage from biofuel advocates, who claim waivers undermine demand for ethanol and other biofuels. The oil industry refutes that claim.  Grassley said the petitions should be immediately dismissed, and the fact that they haven’t was a big concern of corn farmers and the industry in general. Iowa is the largest ethanol-producing state in the country. 

“If the EPA ends up accepting these petitions, not only will they lose again in court, they will risk President Trump’s support in Iowa and other Midwestern states,” he said.  Under the U.S. Renewable Fuel Standard, refineries must blend billions of gallons of biofuels into their fuel pool or buy credits from those who do. Small refineries have been able to get waivers from the EPA, after their applications are reviewed by the Department of Energy.  The 10th circuit court’s decision made it unclear whether the large number of waivers issued in recent years could go ahead.  “Small refinery petitions received are sent to DOE for further analysis and we will await their recommendations,” an EPA spokesperson said.

By BIC Magazine

June 6, 2020:

 India’s oil market is lagging behind its fellow Asian refiners in terms of recovery from the devastation that Covid-19 has inflicted, with both crude imports and refinery runs for May at below-average levels, as the country of 1.3 billion people remains under lockdown, with recovery expected after Q2. The country imported 4.1-4.2 million barrels-per-day (bpd) of crude for May, assessments by Refinitiv Oil Research showed, well below the February-April average 4.76 million bpd and under the 2019 average of 4.37 million bpd, while refinery runs were at under 80% of its 5.1 million bpd capacity for a second straight month, at around 76% for the month.

In comparison, crude arrivals into Asia’s top four refining centres – China, India, South Korea and Japan – were at all-time high levels of 21.8 million bpd, boosted by record-high inflows to China and South Korea, respectively at 11.4 million bpd and 3.5 million bpd. The record-high arrivals into China and South Korea, in part, are due to opportune timing, in that their recovery from Covid-19 came at around the same time when oil prices collapsed, when OPEC and Russia flooded the market with their oil, in a fight for market share.

For India, the timing was not quite so opportune. When the price war erupted in early March, India had yet to suffer from the worst of Covid-19. Its refiners, both the state-owned enterprises and private firms, were among the first to volunteer for the extra barrels that the Middle Eastern members of OPEC, mainly Saudi Arabia and the United Arab Emirates, were offering. This led to near record-high imports for each month of February to April, at 4.7-4.8 million bpd for each of the three months. Less than three weeks later, Covid-19 exploded in the country and it was placed under lockdown, with land and air transportation, as well as economic and industrial activities severely curtailed. Demand for refined products, mainly diesel, gasoline and jet fuel, nosedived; as refining margins all over the world were crushed, with that for gasoline and jet falling into the red, while that for diesel fell to multi-year lows of under $6/bbl.

Refinery runs, which had been high at above 90% from January thru March, plunged to a record-low of 71.4% for April, as the same Indian refiners, who had earlier asked for the incremental crude barrels now have a dilemma, slashed runs.

Indian Oil (IOC), Mangalore Refineries & Petrochemicals (MRPL) and Hindustan Petroleum (HPCL), slashed output by cutting refinery runs by about 1.4 million barrels-per-day of capacity, or about a third of the country’s 5 million bpd capacity. IOC, which accounts for about a third of the country’s total capacity, has cut 25-30% of its 5-million bpd capacity; MRPL has shut its Panipat plant, while HPCL has declared force majeure on two Iraqi cargoes of 1 million barrels each and cut runs at its Mumbai facility by 10%. Even Reliance, the world’s largest refiner, was not spared, and was seen offering crude barrels in the Asia spot market. Both Mangalore Refineries & Petrochemicals (MRPL) and Hindustan Petroleum (HPCL) also declared force majeure on some of their crude liftings, mostly from the Middle East.

To cope with the sudden surplus in crude supply, the Indian government decided to move the extra barrels into its strategic petroleum reserves (SPR), with its entire 36.87-million-barrel capacity, at its three sites in the country’s south, fully filled.  In addition, India has also parked 8.5-9 million mt of crude on board vessels in different parts of the world, mainly the Arab Gulf. Oil Minister Dharmendra Pradhan said India is now looking at storing some low-priced U.S. oil in facilities there as the domestic storages are full. Refinitiv Oil Research expects crude demand and refinery runs to pick up in June, versus May levels, as parts of the country emerges from lockdown, but a full recovery looks some way off as the number of Covid-19 infections remain high, with daily increases of over 1,000 cases, and the total number of infections at nearly 200,000 and deaths at 5,600.  (Yaw Yan Chong is Director, Oil Research (Asia) at Refinitiv. The views expressed are the author’s own ideas)

By Financialexpress.com