Asian crackers step up operations but pace may not last, say consultants
By RONNIE LIM 9 February 2009
It looks like a rough ride in the next year or so for Singapore’s oil refining and petrochemical sector, given the global economic slowdown. But there could be a couple of bright spots.
The Chinese are expected to resume buying oil products later this year, and petrochemical plant operators may even see an industry turnaround late next year, energy specialists say.
Asian petrochemical crackers are already back up to 90 per cent operating levels - from 70 per cent late last year - thanks to Chinese buying ahead of the Chinese New Year, they said at a recent energy conference here.
‘We are seeing some signs of life in the Asian industry,’ Colin Shelley, consulting manager at UK’s Poten & Partners, told the Condensate and Naphtha Forum. But this may not be sustained, he warned. ‘Current conditions suggest a minimum two-year slump, which suggests the earliest petrochemical turnaround would be in the fourth quarter of 2010.’
This implies that while the existing crackers here of Petrochemical Corporation of Singapore and Exxon Mobil will just have to ride out the storm, the two new crackers of Shell and ExxonMobil, now under construction, could be right on target given their start-up dates of mid-2010 and early-2011.
Mr. Shelley said that the petrochemical industry usually leads the market down, then back up again, which suggests global recovery could also start happening then.
On oil refining prospects, Fereidun Fesharaki, chairman and chief executive of Facts Global Energy, said that Chinese demand for oil products started disappearing in Q3 last year, but he expects demand from the world’s third-largest economy to resume around Q3 or Q4 this year, spurred by Beijing’s economic stimulus packages.
He also warned, however, that Asian refiners may soon start to feel the impact of Reliance Industries’ big new Jamnagar refinery in India - intended to export to the US and Europe - as Indian oil products meant for the US will start heading east instead in the second half of this year.
Dr Fesharaki’s take on oil - at the forum organised by The Conference Connection Inc - is that the price, now around US$40 a barrel, is likely to rise to US$55-60 by end-2009, based on global economic growth projections. ‘Prices of heavy crudes are starting to go up. Opec has been quite observant of its output cuts,’ he said.
Still, given the slow pace of economic recovery, the oil price is not expected to rise very fast, perhaps going up US$5-7 a barrel annually at best, he said. ‘And this is provided the global demand situation doesn’t worsen.’
What has helped, according to Dr Fesharaki, is the absence of big hedge funds and the estimated US$50-60 billion they ploughed into the oil market between February and June last year, which boosted the oil price to a record US$147-plus in July. Many of these funds have since run into financial problems and ‘while they are still in the market, the sums are much less and more focused’, he said.
Some of the so-called Wall Street refiners - investment banks that traded oil, such as Lehman Brothers - have folded. And others such as Goldman Sachs and Morgan Stanley have transformed themselves into bank holding companies, which means they cannot trade as freely as before.
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Oil, petrochem players bank on Chinese buyers
Asian crackers step up operations but pace may not last, say consultants
By RONNIE LIM
9 February 2009
It looks like a rough ride in the next year or so for Singapore’s oil refining and petrochemical sector, given the global economic slowdown. But there could be a couple of bright spots.
The Chinese are expected to resume buying oil products later this year, and petrochemical plant operators may even see an industry turnaround late next year, energy specialists say.
Asian petrochemical crackers are already back up to 90 per cent operating levels - from 70 per cent late last year - thanks to Chinese buying ahead of the Chinese New Year, they said at a recent energy conference here.
‘We are seeing some signs of life in the Asian industry,’ Colin Shelley, consulting manager at UK’s Poten & Partners, told the Condensate and Naphtha Forum. But this may not be sustained, he warned. ‘Current conditions suggest a minimum two-year slump, which suggests the earliest petrochemical turnaround would be in the fourth quarter of 2010.’
This implies that while the existing crackers here of Petrochemical Corporation of Singapore and Exxon Mobil will just have to ride out the storm, the two new crackers of Shell and ExxonMobil, now under construction, could be right on target given their start-up dates of mid-2010 and early-2011.
Mr. Shelley said that the petrochemical industry usually leads the market down, then back up again, which suggests global recovery could also start happening then.
On oil refining prospects, Fereidun Fesharaki, chairman and chief executive of Facts Global Energy, said that Chinese demand for oil products started disappearing in Q3 last year, but he expects demand from the world’s third-largest economy to resume around Q3 or Q4 this year, spurred by Beijing’s economic stimulus packages.
He also warned, however, that Asian refiners may soon start to feel the impact of Reliance Industries’ big new Jamnagar refinery in India - intended to export to the US and Europe - as Indian oil products meant for the US will start heading east instead in the second half of this year.
Dr Fesharaki’s take on oil - at the forum organised by The Conference Connection Inc - is that the price, now around US$40 a barrel, is likely to rise to US$55-60 by end-2009, based on global economic growth projections. ‘Prices of heavy crudes are starting to go up. Opec has been quite observant of its output cuts,’ he said.
Still, given the slow pace of economic recovery, the oil price is not expected to rise very fast, perhaps going up US$5-7 a barrel annually at best, he said. ‘And this is provided the global demand situation doesn’t worsen.’
What has helped, according to Dr Fesharaki, is the absence of big hedge funds and the estimated US$50-60 billion they ploughed into the oil market between February and June last year, which boosted the oil price to a record US$147-plus in July. Many of these funds have since run into financial problems and ‘while they are still in the market, the sums are much less and more focused’, he said.
Some of the so-called Wall Street refiners - investment banks that traded oil, such as Lehman Brothers - have folded. And others such as Goldman Sachs and Morgan Stanley have transformed themselves into bank holding companies, which means they cannot trade as freely as before.
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