Energy

HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 6 September. Brazil’s manufacturing sharply slows in August on higher costs, lower demand Brazil’s manufacturing PMI index for August sharply slowed down from July on the back of output falling for the first time in several months due to subdued sales, and elevated cost pressures, analysts at S&P Global said on Monday. INSIGHT: Brazil’s natgas overhaul to benefit chems but crude players push indispensable The Brazilian government’s decree changing natural gas regulations could potentially overhaul the market and, along the way, benefit the chemicals industry by providing it with cheaper energy and eventually with ethane-based feedstocks. INSIGHT: LatAm chemicals needs to be as plural as society to reach full sales potential For years, Latin American petrochemicals companies have been trying to increase diversity within to better represent the consumers they want to sell their products to – without much success. Canada government wobbles amid fallout from rail labor dispute Canada’s Liberal-led minority government under Prime Minister Justin Trudeau is paying a heavy price for its decision last month to end the labor dispute at freight railroads Canadian National (CN) and Canadian Pacific Kansas City (CPKC) through binding arbitration. SHIPPING: Union, USWC ports at impasse as strike deadline looms; container rates keep falling A strike by union dock workers at East Coast and US Gulf ports seems more likely after International Longshoremen’s Association (ILA) Wage Scale Delegates voted unanimously at the end of their two-day meeting to support leadership’s intentions to walk off the job if a new labor deal is not agreed to when the contract expires on 30 September.

09-Sep-2024

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 6 September. EU chemicals production gradually firming, short of recovery levels – Cefic Chemicals production in the EU has continued to firm through 2024, but weak demand is keeping output growth below recovery levels, with energy prices still substantially above US levels in the region, trade body Cefic said. Europe jet fuel prices hit new lows on supply overhang, crude softness Average European jet kerosene spot prices for cargoes fell 6% week-on-week while barge prices dropped 5% from the week prior as supply overhang and lack of demand continues to haunt the market. Europe markets slump on US, China demand worries, commodity shocks Europe chemicals shares and public markets slumped on Wednesday in the wake of sell-offs in Asia and the US on the back of growth fears and a crude oil sell-off. Europe August acetic acid contracts roll over Acetic acid contract pricing for August was assessed at a rollover in Europe amid balanced supply and seasonally low demand. Global spot index up on gains in NE Asia, NW Europe The global spot ICIS Petrochemical Index (IPEX) was up for the first time in four weeks in the week ending 30 August, on the back of increases in northeast Asia and northwest Europe.

09-Sep-2024

HOUSTON (ICIS)–A strike by union dock workers at East Coast and US Gulf ports seems more likely after International Longshoremen’s Association (ILA) Wage Scale Delegates voted unanimously at the end of their two-day meeting to support leadership’s intentions to walk off the job if a new labor deal is not agreed to when the contract expires on 30 September. The ports, represented by the United States Maritime Alliance (USMX), contend that the offer on the table “demonstrates a willingness by our members to reach a new deal before the end of this month,” and that it remains committed to reaching a new deal before the current agreement expires. Last week, both parties submitted documents with the US Federal Mediation and Conciliation Service (FMCS) informing the agency of a dispute between the parties, as required by law. The looming work stoppage would have major impacts on the US economy, and the National Retail Federation (NRF) has urged both sides to resume negotiations. Union delegates from the 13 port areas included in the current agreement received a strike mobilization plan from ILA Executive Vice President Dennis A Daggett during the two-day meeting that will be implemented if a new agreement is not reached in time. USMX said in a statement posted to its website that “the ILA continues to strongly signal it has already made the decision to call a strike and we hope the ILA will reopen dialog and share its current contract demands so we can work together on a new deal, as we have done successfully for nearly 50 years”. USMX said its offer includes industry-leading wage increases, retention of the existing technology language in the current agreement, which already formalizes that there will be no fully automated terminals and no implementation of semi-automated equipment or technology/automation without agreement by both parties to workforce protections and staffing levels, increases to retirement account contributions, higher starting wages and continuation of premier health care coverage. The ILA is seeking better pay, including container royalty. Market participants have said a strike by dockworkers would not have much of an impact on liquid chemical tankers. One reason is that most terminals that handle liquid chemical tankers are privately owned and do not necessarily use union labor. Also, tankers do not require as much labor as container or dry cargo vessels, which must be loaded and unloaded with cranes and require labor for forklifts and trucks. But more liquid chemicals are being moved on container ships in isotanks. CONTAINER RATES Rates for shipping containers from east Asia and China to the US fell again this week and global average rates continued to fall at a faster rate, according to multiple analysts. Supply chain advisors Drewry in its World Container Index showed average rates down by 8%, as shown in the following chart. The decrease in rates from China to both US coasts is shown in the following chart from Drewry. Despite the looming threat of a port strike in the US, transpacific Eastbound freight rates have seen a slight dip this week, Drewry said. Judah Levine, head of research at online freight shipping marketplace and platform provider Freightos, said the looming strike may be pushing more volumes to the West Coast, supporting some rebound in rates since mid-August, but prices are nonetheless 15% below their high for the year reached in mid-July. “Some of this rate decline is likely also due to capacity increases, including from opportunistic carriers who launched transpacific services when rates were spiking earlier in the summer,” Levine said. Container ships and costs for shipping containers are relevant to the chemical industry because while most chemicals are liquids and are shipped in tankers, container ships transport polymers, such as polyethylene (PE) and polypropylene (PP), are shipped in pellets. They also transport liquid chemicals in isotanks. LIQUID CHEM TANKER RATES STABLE Rates for chemical tankers ex-US Gulf were unchanged this week on trade lanes assessed by ICIS. Rates firmed on the USG to Mediterranean, and to Mexico’s East Coast. The firming is due to a lack of available tonnage amid more inquiries and fixtures along these trade lanes. However, rates to both Asia and India are facing downward pressure, especially for stainless steel vessels. The downward pressure is likely to hold into next week. Overall, throughout September the spot market should remain soft as there is open partial space in the US Gulf and as most owners continue to depend on contract tonnage. Bunker fuels in the USG were slightly lower following the weaker energy complex. PANAMA CANAL MAINTENANCE The Panama Canal will be conducting maintenance from 10-25 September on the center wall culvert of the Gatun Locks but is not expected to limit transits, according to the Panama Canal Authority (PCA). Although the culvert maintenance will increase the time required to fill and empty the chamber in both lanes at Gatun Locks, this should not affect significantly the capacity of the Panamax Locks to warrant a booking condition change. Since the culvert outage is at Gatun Locks, Neopanamax vessels should not be affected as result of this maintenance. The PCA added an additional booking slot effective 1 September, bringing the total number of passages allowed per day to 36, almost at par with the 36-38 transits/day seen before a drought forced the PCA to limit transit for the first time in its history. There are 10 slots for Neopanamax vessels, 20 for supers and six for regular vessels. The better conditions at the canal are likely to improve transit times for vessels traveling between the US Gulf and Asia, as well as between Europe and countries on the west coast of Latin America. This should benefit chemical markets that move product between regions. Wait times for non-booked southbound vessels ready for transit are 2.6 days for northbound vessels and 0.4 days for southbound vessels on 6 September, according to the PCA vessel tracker. Additional reporting by Kevin Callahan Visit the ICIS Logistics – impact on chemicals and energy topic page Thumbnail image shows a container ship carrying cargo on its way to Antwerp Harbour. (Olivier Hoslet/EPA-EFE/Shutterstock).

06-Sep-2024

LONDON (ICIS)–Chemicals production in the EU has continued to firm through 2024, but weak demand is keeping output growth below recovery levels, with energy prices still substantially above US levels in the region, trade body Cefic said. Sector output increased for the fourth consecutive quarter in the April-June period, increasing 1.2% compared to the first three months of the year and 4.3% from the same period in 2023. The second quarter last year may stand as the low point for chemicals production going back to before the pandemic, Cefic added, but the 4.3% annual improvement for the same period this year does not yet represent a pronounced recovery. Second-quarter 2023 productivity had plummeted over 12% compared to the same period in 2022. “Given the lack [of] demand growth, the European chemical industry production volumes are still far from the pre-COVID levels,” the group said. Despite gradually firming output, demand remains depressed, and capacity utilisation declined slightly during the quarter, to 75.2%, with that trend continuing into July. Despite capacity rates substantially below the long-term average of 81%, the longstanding destocking trend in the sector may have come to an end in March, with July standing as the fourth consecutive month of increasing stocks. The sector outperformed general industrial productivity in the first six months of 2024, Cefic said, which saw a 3.6% decline year on year. This is having a knock-on effect on chemical company order books, while energy prices continued to be 4.7 times higher than in the US in July. Gas prices in the first half of the year were 70% above the 2014-2019 average in Europe, Cefic added. Thumbnail photo: Part of BASF's Ludwigshafen, Germany, site on the banks of the River Rhine (Source: Lilly/imageBROKER/Shutterstock)

06-Sep-2024

European traders asked to pay difference for capacity booked prior to a sharp tariff increase The increase could wipe out transit on Trans-Balkan route Ukrainian TSO GTSOU says the latest increase could lead to a revenue reduction for Moldova LONDON (ICIS)–Traders have lashed out at the Moldovan gas grid operator Vestmoldtransgaz (VMTG) for being asked to pay higher transmission tariffs for capacity booked prior to the price hike on 1 September. At least ten companies active regionally and local traders who booked monthly or quarterly capacity for gas sourced in southern Europe and transiting Moldova to Ukrainian storage have been asked to pay the difference between the old and the new tariffs. Traders say the increase is wiping out the competitiveness of one of the most attractive regional transit routes and will block Moldova and Ukraine’s access to non-Russian gas supplies in southern Europe. An international trader told ICIS that beyond hurting the economic viability of the route the decision would also put a major burden on Moldovan consumers, who will have to face ever soaring bills. Another trader said the increase would hit the entire region. He questioned why VMTG increased tariffs by 50% since it hadn’t made any recent investments and the transmission assets it now operates have long been amortised. MOLDOVAN LOSSES In a letter sent to the Moldovan regulator, the ministry of energy, VMTG and the Energy Community and seen by ICIS, the Ukrainian gas grid operator GTSOU said reverse flows along the Trans-Balkan route linking southern Europe to Ukraine had ‘significantly facilitated cross-border trading opportunities in the region.’ VMTG, a company majority-owned by the Romanian grid operator, Transgaz, took over Moldova’s transmission operations in September 2023 following a government and regulator push to divest transmission from incumbent Moldovagaz. The transfer of operations via the lease agreement was pushed through after Gazprom, Moldovagaz’ majority owner, repeatedly requested the delay of transmission unbundling. Immediately after the switchover, VMTG requested a tariff increase, which was approved by the Moldovan regulator. This year VMTG has requested a further rise, with entry tariffs increasing from Moldovan Lei 20.9/MWh/h (€1.08/MWh/h) to Moldovan Lei 30.7/MWh/h (€1.59/MWh/h) on 1 September. Exit tariffs have also risen from Moldovan Lei 22.3/MWh/h to Moldovan Lei 35.5/MWh/h (€1.85/MWh/h). GTSOU said in the letter that the sharp tariff increase requested by VMTG combined with an increase in transmission tariffs in neighbouring transit country Romania has led to utilisation rates for the route dropping from 83% in 2023, prior to VMTG’s takeover, to 10% in 2024. The Ukrainian operator calculated that prior to the first VMTG tariff transit costs to ship gas from Greece to the Grebenyky on the border with Ukraine were around €3.00/MWh. Following the first rise, the overall cost rose by 67% to €5.00/MWh, while now it has increased to €6.7/MWh, with Moldova being the most expensive transit country in the region and possibly across Europe, traders say. The Ukrainian grid operator said the latest increase would ‘worsen’ the situation and lead to a revenue reduction for Moldova. A source close to GTSOU said VMTG could alleviate the situation by introducing comparatively cheaper short-haul tariffs bridging cross-border points. ANRE, Transgaz and VMTG did not reply to questions by publication.

05-Sep-2024

MUMBAI (ICIS)–Indian petrochemical major Reliance Industries Ltd (RIL) has won in the bid to get government incentives to produce advanced chemistry cell (ACC) batteries, which can be used in electric vehicles (EVs). Government incentives worth $431 million RIL chosen out of seven in tender process Construction of RIL ACC battery project in Gujarat ongoing The company will get Indian rupees (Rs) 36.2 billion ($431 million) worth of incentives under the government’s production-linked incentive (PLI) scheme, India’s Ministry of Heavy Industries said on 4 September. RIL bested six other bidders in the global tender process for the incentives in building an ACC plant with a 10 Gigawatt-hours (GWh) capacity, it said. The other bidders were ACME Cleantech Solutions; Amara Raja Advanced Cell Technologies; Anvi Power Industries; JSW Neo Energy; Lucas TVS; and Waree Energies. RIL is currently constructing an ACC-based battery manufacturing plant in Jamnagar in the western Gujarat state. “We have already begun construction of an integrated advanced chemistry-based battery manufacturing facility with a 30 GWh annual capacity at Jamnagar,” RIL chairman Mukesh Ambani had said during the Indian conglomerate’s annual general meeting (AGM) on 29 August. “Production will commence by the second half of next year,” Ambani added. The plant will initially assemble battery systems and packs, later expanding to cell manufacturing and chemical production, he added. ACC batteries can store and convert electric energy and are used in a variety of applications, including electric vehicles (EVs), renewable energy storage, consumer electronics, and as power backup. EVs and associated battery markets provide growth opportunity for the chemical industry, with chemical producers separately developing battery materials, as well as specialty polymers and adhesives for the environment-friendly vehicles. In May 2021, the Indian government set aside Rs181 billion for a National Programme on ACC battery storage to encourage development of the battery storage ecosystem and electric mobility in India. In the first round of the ACC PLI bidding in March 2022, three beneficiary firms were allocated a total capacity of 30 GWh. Ola Cell Technologies, Rajesh Exports Ltd and RIL subsidiary Reliance New Energy Solar Ltd won the bid in the first round. The fourth company that was initially awarded incentives was eventually disqualified, paving the way for rebidding of the unawarded 20GWh capacity, according to local media reports. Focus article by Priya Jestin ($1 = Rs83.98)

05-Sep-2024

HOUSTON (ICIS)–The collectively bargained contract between US East Coast and US Gulf ports and dock workers expires at the end of the month and the parties are not currently negotiating, leading one of the nation’s largest retail trade groups to urge the government to get involved. Last week, both parties submitted documents with the US Federal Mediation and Conciliation Service (FMCS) informing the agency of a dispute between the parties, as required by law. About 14,500 dock workers are represented by the International Longshoremen’s Association (ILA), while the 36 ports – including three of the busiest ports in the US in Houston, New York and New Jersey, and Savannah, Georgia – are represented by the United States Maritime Alliance (USMX). The looming work stoppage would have major impacts on the US economy, and the National Retail Federation (NRF) has urged both sides to resume negotiations. “At a time when inflation is on the downward trend, a strike or other disruption would significantly impact retailers, consumers and the economy,” NRF President and CEO Matthew Shay said. “The administration needs to offer any and all support to get the parties back to the table to negotiate a new contract.” In June, NRF led a coalition of 158 state and federal trade associations in a letter to President Joe Biden urging the administration to work with the negotiating parties to reach a new agreement. The NRF said that the threat of a strike during the peak shipping season has many retailers already implementing costly mitigation strategies, such as shifting deliveries to West Coast ports. This adds additional costs because of the longer routes, which could be even more drastic as capacity for ocean carriers is already tight because of diversions away from the Suez Canal and Red Sea. USMX said in a statement on its website that it is seeking a return to the bargaining table. “USMX has still been unable to secure a meeting with the ILA to resume negotiations on a new master contract,” according to the statement. “USMX continues to meet with its members in preparation for the resumption of negotiations, and it remains committed to working with the ILA leadership on a new agreement.” The ILA is holding Wage Scale Committee meetings today and tomorrow in Teaneck, New Jersey, and union president Harold Daggett insists the union will strike at 00:01 Eastern Time on 1 October if a deal is not reached. “There is a real chance we will not have an agreement in place,” Harold Daggett said in a video shared on the ILA website. “The ILA will definitely hit the streets on 1 October if we do not get the kind of contract we deserve,” Daggett said. Dennis Daggett, ILA executive vice president, said in the video that the two sides are at an impasse and cannot even get past the economics of a new contract. Other issues that the ILA cites as deal-breakers are container royalty (special payments to compensate longshoremen for decreased employment opportunities resulting from the use of containerized shipping), better healthcare benefits, and a ban on all automated and semi-automated services at the ports. Dennis Daggett said the ILA has been working through local agreements between locals and individual ports before focusing on the overall agreement and still has some items to work out at the local level, including Mobile, Alabama, and Jacksonville and Tampa, Florida. Market participants have said a strike by dockworkers would not have much of an impact on liquid chemical tankers. One reason is that most terminals that handle liquid chemical tankers are privately owned and do not necessarily use union labor. Also, tankers do not require as much labor as container or dry cargo vessels, which must be loaded and unloaded with cranes and require labor for forklifts and trucks. But more liquid chemicals are being moved on container ships in isotanks. Focus story by Adam Yanelli Visit the ICIS Logistics – impact on chemicals and energy topic page

04-Sep-2024

BUENOS AIRES (ICIS)–For years, Latin American petrochemicals companies have been trying to increase diversity within to better represent the consumers they want to sell their products to – without much success. Company boards and middle management levels continue to be mostly populated by men, and most of them tend to be white, in a region where ethnic minorities are sometimes the majorities. The environmental, social, and governance (ESG) mantra has been used so many times that it has become a bit futile. A few statistics to show off positive trends are one thing – real change is another. Companies need to go the extra mile to be as plural as society. And in some Latin American countries like Brazil, that mostly means one thing: blackness, in the country outside Africa with the largest black population. They will need to hire and promote people who will not conform to the norm; visionary people who will be wise enough to know a company will not reach its sales potential until they try, at least, to resemble the society they operate in. Brazil’s polymers major Braskem – the largest petrochemicals producer in Latin America – seems to have found one of those people: meet Debora Ferraz, global senior HR manager at the company and specialist in diversity, equity, and inclusion (DE&I) issues. “My job is not only about gender inequality, although that is still a big part of it, of course. My job goes much further than that and it involves making Braskem more like the country: in Brazil, 50% of the population are black or have black roots,” said Ferraz. “We have now established a system in which the HR person looking to hire will not see in what university the candidate coursed his or her studies. Before, we always ended up hiring people who were anything but plural: they all spoke English, they all came from the same universities. Behavior is now the key element in our hiring processes.” Ferraz went on to say that in Braskem’s Mexican operations, a country with painful statistics showing sexism is women’s everyday life, a hiring process will not go ahead if there is not at least one woman shortlisted. In Europe, where nationality is probably the biggest factor determining discrimination, Braskem pays more attention to that; in the US, it is veterans of war, many of whom find themselves lost in a competitive labor market after 20 or 30 years of service, she said. Ferraz was speaking to delegates at an event about sustainability organized by the Latin American Petrochemical and Chemical Association (APLA). Her talk captivated the audience, and it was recurrently referred to thereafter. RACISM: LONG SHADOWBrazil is Latin America’s largest economy, with 220 million consumers, and it is a case increasingly studied when it comes to racism and discrimination. The shadow of four centuries of Portuguese Empire rule, where enslaved black Africans composed the bread and butter of the workforce, have left a mark present still today, in all aspects of life. “The black and brown [Brazilians with black roots] populations represent 9.1% and 47% of the Brazilian population, respectively. Yet, the share of these population is lower in the indicators that reflect higher levels of life conditions,” said a report by Brazil's statistics office IBGE in 2022. “This indicator already shows a disadvantage of those populations when inserting in the labor market. The proportions of the black and brown populations among those unemployed and underutilized are higher than what they represent in the labor force,” it added. Racism is so ingrained in Brazil that when the country officially abolished slavery in 1888, the last nation in the western hemisphere to do so, it gave no rights worth the name to its black population and even decided to go as far as Italy or Japan to look for the workers it needed to feed its nascent industrial sectors. Hence the large Japanese or Italian minorities present in the country, who were allowed to integrate fairly well and some of whom went on to build business empires, quickly becoming part of the economic fabric. Meanwhile, blacks remained at the favelas, Brazil’s famous shanty towns, only mixing with the non-black population when they went to do the badly paid jobs, many times in the informal economy. Fernando Henrique Cardoso, the Brazilian center-right president who stabilized the economy in the 1990s and gave way to the successes of President Luiz Inacio Lula da Silva in his first and second terms (2001-2011), has become a reference in racism studies. A quote by Cardoso lies in one of the walls of Sao Paulo’s Museu Afro-Brasil, which only opened its doors in 2004 and is a painful journey through Brazil’s most shameful past, a quote which sums up why the integration of all Brazilians will be a long-term and laborious enterprise. “An economic system which was based in slavery and violence for four centuries creates a deformed society,” said Cardoso. And a deformed society will invariably take many decades – hopefully not centuries – to be fixed. Companies like Braskem should make more efforts to bring people like Ferraz in but, most importantly, listen to what they have to say and follow their advice – Ferraz is black herself, and without doubt she will have suffered racism. “We need to aim to have a good representation of society within the company. To get serious with this, we must have quantitative targets: we can do continuous training with employees, but if we don’t set clear targets, nothing will be achieved,” said Ferraz, who has been in her current post since 2022. “Up to that year, 30% of our workforce was black but that figure had not changed in the preceding 15 years, no matter how many trainings we did. Since 2022, that figure has increased to 37%. What has changed? That we set clear targets, and we are fighting hard to achieve them. I speak monthly with the CEO and with other board members, because they are the first ones who must believe in this.” Speaking at the same panel, Paola Argento, head of diversity at Argentina’s energy and petrochemicals major YPF, corroborated that until a company does not employ a plurality of workers – each of them feeling free enough to bring its own singularity to the workplace – a company will not reach its potential. “If we all come from the same universities, the final product we offer will not be innovative. Plurality allows us to produce better products and services. These days, most consumers do care about these issues, so the lack of plurality and innovation will end up negatively affecting sales,” said Argento. “But to achieve this true plurality of thinking, the highest executives at a company have to understand it and be fully behind it.” The APLA sustainability event runs in Buenos Aires on 4 September. Front page picture source: Brazil's statistics office IBGE Insight by Jonathan Lopez

04-Sep-2024

SAO PAULO (ICIS)–The Brazilian government’s decree changing natural gas regulations could potentially overhaul the market and, along the way, benefit the chemicals industry by providing it with cheaper energy and eventually with ethane-based feedstocks. The job of a lobbyist may be well paid, but it must be a hard one most of the time. For years, Brazil’s chemicals trade group Abiquim had been lobbying for the government to pass regulations which would allow the natural gas which comes as a byproduct from crude oil production to stay within the economy, and not be just reinjected into the ground again. To make common cause on that lobbying, Brazil’s polymers major Braskem has also been saying for years that it stands ready to expand its Duque de Caxias facilities, in the state of Rio de Janeiro, as soon as the necessary gas and derivatives were available. For years, those demands had fallen in deaf ears. Until 26 August, when the cabinet presided by Luiz Inacio Lula da Silva passed a decree contemplating, among other measures, higher powers for the oil and gas regulator ANP to set up the amount of gas which is reinjected into the system, for instance. If fully implemented, the decree could completely change the natural gas market in Brazil, and ultimately benefit the chemicals industry via lower energy costs and, potentially, having more ethane, rather than crude-based naphtha, as a raw material. In a written response to ICIS, Abiquim’s director general Andre Passos celebrated the decree and did not share the fears of some analysts, who see in giving regulators more power than traditional willingness to basically intervene the market. REINJECT OR NOT TO REINJECT – AND WHO PAYS THE BILLActing on natural gas in Brazil had almost become an imperative since the US shale gas revolution changed that country’s energy landscape, making it again a net exporter and reviving the petrochemicals industry to an extent no-one could imagine just two decades ago. In the US and Brazil, the two largest chemicals producers in the Americas, the contrast is stark: natural gas prices in the southern neighbor are around four times higher than in the US. However, some analysts have said they are concerned about the type of action taken, arguing that giving regulators such as the ANP more power could lead to more government interventionism in the oil and gas sector, potentially denting Brazil’s crude sector attractiveness to invest. However, lest not forget that Brazil’s crude sector is mostly dominated by one player, Petrobras, and this player is majority owned by the state: its CEO is appointed or dismissed as the President sees fit, and the crude major is effectively one more arm of the cabinet – a ministry of energy bis, so to speak. Still, Brazil’s crude sector was meant to go towards more liberalization, not less. And this is where the decree on natural gas passed in August overreaches, according to critics, the scope of what a government should do or should not do to encourage certain economic activity. According to the decree, the ANP will be able to mandate to crude oil players the levels of natural gas they can reinject back into the system during their crude oil extraction operations, and how much they should make available for companies and households. In simpler words: crude producers will have to go from reinjecting most of the gas – at a very low cost – to create an infrastructure to transport that gas onshore. For now, crude oil majors operating in Brazil have, for the most part, kept quiet about the decree. In a written response to ICIS on 29 August, Shell said it was “analyzing” the decree, without any further comment, a response it has not updated as of 3 September. Petrobras and Equinor had not responded to a request for comment at the time of writing. Equally, Braskem did not respond either to questions about potential petrochemicals expansions or how the decree could affect investments in crude oil and, ultimately, affect the industrial sectors if that was to happen. Petrobras’ CEO, Magda Chambriard, said, however, the company would do “everything possible” to reinject as much gas as it is able to, but also reminded how this reinjection will only be possible in the production platforms to be started up in the future. “On the platforms that are already there [in operation] and on those that are already being delivered, this [reinjecting more gas] will not be possible," said Chambriard, quoted by specialized publication Offshore Energy. Abiquim’s Passos is not concerned at all and said that the powers given to ANP is a natural step for “an aspect of oil and gas production” that was not previously covered by the regulators. “The power to regulate will be used considering the interests of producers, consumers, and the state and, obviously, without implying a disincentive or a halt to new investments. In any case, given the magnitude of investments in oil, new investments specifically for gas would not significantly alter the competitiveness of oil exploration and production (E&P) in Brazil,” said Passos. “Abiquim is confident that the costs associated with E&P in Brazil's oil sector are sufficiently low to cover any additional costs that may arise.” And to the fears about higher intervention from the government, Passos said it was a “global characteristic” of the crude oil and gas sectors to be highly regulated. CHEMICALS CHEERS, FINALLYAbiquim’s Passos is well aware of Petrobras’ CEO warning about the slowness in the natural gas market, and how it may take years for the changes benefiting chemicals to take place. But, after years of unsuccessful lobbying, Passos is a happy man who says the authorities have finally a vision of what chemicals should be and what its problems are. With that, he is ready to wait. “Nothing will be immediate. However, there is a compatibility between the time needed for greater availability of natural gas, improving the competitiveness of this raw material in Brazil, and the time required for petrochemical projects to mature – we should consider that this is a structural action with medium- and long-term impacts,” said Passos. However, after years of lobbying for a decree like the one just passed, the trade group was understandably exultant, not least because this comes just two months after another success. In June, Abiquim and Passos as its representative were part of Lula’s entourage when he went on a state visit to gas-rich Bolivia in June. During the visit, Brazil and Bolivia signed agreements to expand natural gas supplies, in a long-running business relationship which has made Bolivia the key supplier to the Brazil’s most populous, industrious and wealthiest states in the south via the pipeline Gasbol, the longest natural gas pipeline in South America at 3,150 kilometers (1,960 miles). At the time, Abiquim described the agreements inked in Bolivia as a “historic” step for Brazil’s chemicals and which, together with the latest natural gas moves, could pave the way for a truly competitive sector in the global stage, said the trade group. Agreements on fertilizers were also signed as Brazil, already one of the world’s bread baskets, continues to post a large trade deficit in that field. According to Brazil’s government, the deals in Bolivia and the decree on the regulatory environment for natural gas could unleash investments of Brazilian reais (R) 96 billion ($17 billion) in natural gas, biomethane, and fertilizer plants, as cited by Abiquim in its statement following the decree’s passing. SEVERAL DEALS, LITTLE RESULTSAbiquim’s lobbying has been directed where it could make the most difference: the government and Petrobras, admittedly achieving more success with the former than the later. In its quest for expanding natural gas supplies and lower prices, Abiquim knocked on Petrobras’ door in 2023 and formed a working group to explore solutions to the “critical situation” the chemicals industry was in. Nothing was heard about that working group, so this year the two parties gave it another shot and singed a memorandum of understanding (MoU) aiming for the same: to find ways of making the petrochemicals industry more competitive. So far, nothing concrete has been communicated, while chemicals remains with its operating rates at record lows as imports continue flooding Brazil and the wider Latin America, with an increase in import tariffs later this year one of the elements which, according to Abiquim, could start fixing the beleaguered Brazilian domestic chemicals production. “Over the last few months, both teams (Petrobras and Abiquim) have been concerned about handling anonymized data from the sector. Creating a safe environment for members to access competitive natural gas is Abiquim's focus,” said Passos. “The high volume of natural gas consumption for the sector justifies the continuation of the negotiations. We are very pleased with the technical capacity and fairness of the process and how it has been handled by both parties.” Front page picture: Abiquim's director general Andre Passos (second from the right) in Brasilia on 26 August, when the new national energy and natural gas policies were signed  Picture source: Brazil's Ministry of Mines and Energy  ($1 = R5.64) Insight by Jonathan Lopez

03-Sep-2024

BARCELONA (ICIS)–New analysis suggests the chemical industry may face a more rapidly aging and shrinking population in key markets such as China, while the subsequent drag on demand means new business models will be required. China-driven petrochemicals supercycle is over China’s population may be aging and shrinking more quickly than previously thought China may switch to become net exporter of many synthetic resins Demographic shifts will shrink demand for chemicals throughout developed world Developing world faces challenges which may slow growth New business models will be required to create opportunities from these trends In this Think Tank podcast, Will Beacham interviews Nigel Davis and John Richardson from the ICIS market development team and Paul Hodges, chairman of New Normal Consulting. Editor’s note: This podcast is an opinion piece. The views expressed are those of the presenter and interviewees, and do not necessarily represent those of ICIS. ICIS is organising regular updates to help the industry understand current market trends. Register here . Read the latest issue of ICIS Chemical Business. Read Paul Hodges and John Richardson's ICIS blogs.

03-Sep-2024