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HOUSTON (ICIS)–LyondellBasell still can make a strong case for converting its refinery in Houston into a sustainability hub, even though it is delaying its exit from the refining business to the end of the first quarter of 2025. The refinery has the right mix of processing units, logistics, access to feedstocks and government incentives to become a hub for sustainable chemicals and fuels The refinery is connected by pipeline to a nearby cracking complex in Channelview, which could convert sustainable feedstock produced by the sustainability hub into olefins When LyondellBasell announced the delay, the company said it expects the refining site to become part of a regional hub for its Circular and Low Carbon Solutions business and support the growth of its Circulen line of sustainable products THE REFINERYThe company originally planned to end operations at the 268,000 bbl/day Houston refinery by end 2023. It is delaying the exit because of favourable inspections and consistent performance. The delay will also allow LyondellBasell to have a smoother transition between shutting down the refinery and implementing the retrofitting and circular projects needed to convert the complex into a sustainability hub. Comments and announcements made over the past several months are providing clues about how that conversion project could take shape. RENEWABLE NAPHTHAThe latest clue came from Neste, the company that Peter Vanacker headed before becoming the CEO of LyondellBasell. Neste and Kinder Morgan have started up a storage and logistics hub in Harvey, Louisiana that will collect used cooking oil and other renewable feedstocks that Neste uses to produce renewable diesel, sustainable aviation fuel (SAF) and renewable naphtha at its plants in Martinez, California; Singapore; Rotterdam in the Netherlands; and Porvoo in Finland. The companies said the hub in Louisiana can be expanded at Neste’s option. Neste pioneered the production of naphtha from renewable feedstock, and the Houston refinery is a short distance by sea from the Harvey storage and logistics hub in Louisiana. LyondellBasell could modify its refinery’s hydrocracker to handle renewable feedstock. If needs be, LyonellBasell could upgrade the feedstock at its refinery’s hydrotreaters. In fact, the Houston refinery has a lot of hydroprocessing capacity, which would give it the ability to treat a lot of material, said Mike Connolly, ICIS principal analyst for refining. The renewable naphtha produced in Houston can be shipped via existing pipelines to LyondellBasell’s nearby cracking operations in Channelview. Channelview is a natural destination for the refinery’s naphtha because the complex lacks a catalytic reformer. The olefins produced from the renewable naphtha can be polymerised and marketed under LyondellBasell’s existing CirculenRenew brand. LyondellBasell already processes renewable naphtha at its cracker in Wesselling, Germany. The feedstock comes from Neste under a long-term commercial agreement. Meanwhile, the renewable diesel or sustainable aviation fuel (SAF) produced by the hydrocracker could be sold in the growing markets for these fuels. CHEMICALLY RECYCLINGFor more than a year, LyondellBasell discussed building a chemical recycling plant at the refinery using its MoReTec process technology. The existing hydrotreaters could upgrade the resulting pyoil produced by the MoReTec plant into a naphtha that LyondellBasell’s Channelview crackers could convert into olefins. LyondellBasell could market the polymers made from these olefins under its existing CirculenRevive brand. If LyondellBasell pursues this project, it would be the company’s second commercial-scale MoReTec plant. It is considering building the first one in Wesseling. LyondellBasell should make a final investment decision on the Wesseling project by the end of 2023. BLUE AND GREEN HYDROGENAll of this hydrotreating and hydrocracking would require hydrogen. Houston’s position as the nation’s refining and petrochemical hub already gives it access to plenty of hydrogen made by steam methane reforming. However, LyondellBasell could choose to provide its Houston operations with blue or green hydrogen. It, Air Liquide, Chevron and Uniper are part of a consortium that is evaluating sites for a hydrogen and ammonia project on the Gulf Coast. The Houston refinery is the top choice for the site. More hydrogen could come from the proposed Houston HyVelocity Hub. It is among the hubs participating in the Department of Energy’s Regional Clean Hydrogen Hubs programme. Blue and green hydrogen would further reduce the carbon footprint of the naphtha and fuels produced in Houston. GOVERNMENT INCENTIVESState and federal programmes could lower LyondellBasell’s development and production costs while offering it tax credits that could further enhance the profitability of the sustainability hub. The US Inflation Reduction Act (IRA) introduced several tax credits and production credits for low-carbon hydrogen, low-carbon fuels and carbon-capture projects. The IRA is recent regulation, so it remains to be seen whether its incentives and tax credits could be applied to renewable plastics and chemicals. The possibility does exist, since these renewable products sequester carbon dioxide. The IRA is explicit about renewable fuels, so any renewable diesel, SAF or renewable gasoline produced at the sustainability hub would qualify for tax credits. Moreover, the US states of California, Oregon and Washington have adopted Low Carbon Fuel Standards (LCFS), which would offer more incentives for any renewable fuels produced in Houston. Texas is moving closer to reviving a tax-break programme that it offered to industrial projects. Hydrogen and renewable fuel projects could qualify under the proposed bill. If Texas revives the programme, LyondellBasell could apply for tax breaks, lowering the cost for the conversion project. Insight article by Al Greenwood Thumbnail shows bales of waste plastic, which could be recycled. Image by RICHARD VOGEL/AP/Shutterstock

LONDON (ICIS)–Although Norway is expected to be a major supplier in the developing European hydrogen market, concerns about the level of future European hydrogen demand could limit Norwegian hydrogen investments, a report commissioned by the Norwegian Government showed. According to ICIS Analytics, Germany’s yearly hydrogen demand by 2030 is set to total between 70-100TWh while domestic hydrogen production is estimated between 18-23TWh, meaning Germany will need to primarily rely on imports to meet its internal hydrogen demand. Norway, currently Germany’s main gas supplier, is expected to take on the role of a key hydrogen supplier to Germany. In January, state-owned energy company Equinor and German utility RWE signed an MoU to work towards exporting blue hydrogen from Norway to Germany via a dedicated hydrogen pipeline. The agreement is not binding but is an important signal for Norway that hydrogen is in demand in Germany, and more broadly in Europe, as an alternative to natural gas. However, Norway’s role in Europe’s developing hydrogen market is still uncertain. According to a report commissioned by the Norwegian government and published on 30 May “it is unclear whether the EU in a ten-year perspective can afford to phase out Norwegian gas in favour of hydrogen”. The report also highlights the risk that energy-intensive industry could move out of Europe and shrink the European market for hydrogen. In particular, the Inflation Reduction Act (IRA) in the USA, which came into effect in 2022 and subsidises green industry, could see European industry moving to the USA. The report additionally questions whether Norway should produce and export hydrogen, or keep exporting natural gas to Europe, which can be converted to blue hydrogen locally, and facilitate for the transport and storage of CO2 back to the Norwegian Continental Shelf. Already, Equinor and Wintershall Dea is looking into building a CO2 pipeline between Norway and Germany to transport 30-40 million tonnes CO2 each year. However, pressured EU power and gas supply due to the lack of Russian pipeline gas, combined with the fact that there is a 20% energy loss in converting natural gas to hydrogen, could delay plans to produce blue hydrogen as the gas is needed elsewhere. In this situation, replacing gas with coal for power generation will likely have a larger decarbonisation effect than producing hydrogen, and energy losses during conversion is avoided. Despite these wide-ranging uncertainties, hydrogen remains a key decarbonisation tool for Europe and the Norwegian TSO Gassco is examining the feasibility of a hydrogen pipeline from Norway to Germany with a yearly capacity of 130-150TWh, roughly equal to the entire yearly Norwegian power production. Whether Norway will invest in hydrogen infrastructure on this scale will depend on European demand signals.

LONDON (ICIS)– Corporate governance rules at Ukraine’s energy state owned enterprises (SOEs) have been critical to market reforms and to helping the country secure a long-term gas transit contract with Russia. As Ukraine is preparing to receive billions of euros for the reconstruction of its war-torn energy sector, consolidating corporate governance rules are even more important as a guarantee against possible corrupt practices. However, in this interview with ICIS’ senior journalist Aura Sabadus, Dr Andriy Boytsun, a corporate governance expert, explains that safeguards have been eroded even as pressures to tighten up the independence of companies such as Naftogaz, GTSOU or Ukrenergo are growing.

LONDON (ICIS)–Eurozone inflation fell in May to the lowest monthly rate this year as price rises eased across all sectors and energy costs decreased. Annual inflation in May was 6.1%, down from 7% in April, according to official statistics agency Eurostat on Thursday. The biggest inflation driver was food, alcohol & tobacco at 12.5%, though this was down from 13.5% in the previous month. Inflation in non-energy industrial goods and services also eased off, while energy inflation fell by 1.7% compared to a rise of 2.4% in April, the agency said in its initial flash estimate which is subject to revision. The European Central Bank has been raising interest rates in a bid to tackle high inflation across the eurozone.

LONDON (ICIS)–“Some in the industry expected this project would never get built,” says an Anglo American UK executive, adding: “But you only have to look at the scale of the site to see we’re serious about the project.” Nestled behind tall, grass-covered berms amid the rolling hills of the UK’s North York Moors National Park, the developmental Woodsmith polyhalite mine has changed completely from the last time ICIS visited in January 2018 – not least thanks to the deeper pockets of global mining major Anglo American. Formerly owned by junior miner Sirius Minerals, Anglo purchased the project outright in a widely publicised £405m ($535m) buy-out in March 2020 – right before Covid brought the world screeching to a stop. “It was a rough time,” a second Anglo UK executive says. “Lots of meetings held [for the acquisition] as everyone was racing to get ready to work from home. “It took around three months to finish the acquisition. It became clear Anglo’s approach to the project would be quite different, both in terms of engineering and product marketing – the resources and expertise we can draw on now are an order of magnitude larger. It has been a total cultural shift.” The buy-out was a desperate move by Sirius, which was facing collapse at the time. The company saw its share price crash nearly 50% in mid-September 2019 on news that it was scrapping plans for a $500m bond issue, which would have unlocked a vital revolving credit facility needed to complete the project’s initial construction. Snapping up the project in the acquisition – for which 80% of Sirius’ shareholders voted for – Anglo launched a bottom-up reworking of the entire mine construction plan. BACH TO THE DRAWING BOARDAmongst the measures taken by Anglo American’s sweeping rework of the Woodsmith project was the selection of new contractors and the withdrawal of Sirius’ 2024 start-up date, which was deemed unworkable under Anglo’s far more stringent, cautious, and measured approach to mine construction. The rework also saw the scrubbing of Sirius’ triple tunnel boring machine (TBM) structure, which would have seen three metal monsters unleashed under the Moors to drill the project’s 23-mile mineral transport system (MTS) transfer tunnel. The first TBM launched – the 250m Stella Rose – has made good time, allowing Anglo to save on two additional launches: “By the time it’s finished, the MTS will be the longest single tunnel drive ever – and the longest tunnel in Britain,” says area manager for the tunnel drive Mark Pooleman, with pride. As for the shafts at Woodsmith itself, the production and service shafts have hit more than 150m and 400m beneath the surface, respectively. The polyhalite ore seam sits at 1,600m, with an estimated deposit size of around 2bn tonnes. Ore will be lifted to meet the MTS, which transports the volumes to Teesside for processing via conveyor. At Teesside the ore will be crushed, granulated and shipped to Redcar Bulk Terminal (RBT) for export to the global market – although Anglo plans to invest in its own purpose-built terminal on the River Tees once the product is flowing well. The initial aim for the project is an annual production capacity of 5m tonnes/year by 2030, with ramp-up to 13m tonnes subsequently. Mine life is an expected 50-plus years. On the surface (and beneath it) Anglo American’s investment looks set to be complete and operational by 2027 – but there is no doubt established players and buyers across the global fertilizer market still question the need for Anglo American’s flagship Poly4 product. A LEAGUE OF  ITS OWNPoly4 includes 14% potassium, 19.5% sulphur, 6% magnesium and 17% calcium, but has never been positioned as a direct substitute for potassium-rich muriate of potash (MOP) fertilizer – even in the Sirius days. Indeed, Anglo appears to be supercharging Sirius’ efforts to position Poly4 in a league of its own, and is thinking long-term to ensure Woodsmith’s return surpasses Anglo’s initial and subsequent investment. The company has carried out 3,500 agronomic studies, some 1,500 of which have been processed thus far – and the results show an uplift in crop yields in many high-cash crops. Of particular interest are crops in key target markets including Brazil, the US and Europe – and in persuading farmers in those nations of the benefits of Poly4. The underlying message is Anglo knows soil is a farmers’ biggest asset, and the metals major is working to present Poly4 as a positive step to improving yields, sustainability and cash returns on farmers’ crops. This is a message already put forward by Israel Chemicals’ Boulby polyhalite mine – situated near to Woodsmith – which is mining polyhalite and selling it as Polysulphate around the globe. ICL’s capacity at its Yorkshire project – which was originally an MOP mine – will be far outstripped by Woodsmith once Anglo’s play is operational. A TOUGH SELLAlways a tough sell in an industry that has seen little change for decades, Anglo’s work to showcase Poly4 as a unique product may nevertheless be assisted by news spilling across the MOP market since 2021 – when the sedate nature of the global potash trade was abruptly overturned. Indeed, just over two years since Belarusian President Aleksandr Lukashenko grounded Ryanair flight 4978 in May 2021 – kicking off a series of sanctions imposed by Western powers first on Belarus and then on Russia, following the latter’s invasion of Ukraine – supply concerns remain at the forefront of potash players’ minds. Russian exports are expected to decline 15-20% in 2023 year on year, and though Belarus is exporting increased volumes via borrowed berth space at Russian ports, the nation’s total export volume is expected to be down 40-60% this year on its average 12m-13m tonnes. Although prompt MOP prices have declined on a combination of weak demand and buyer reluctance, MOP pricing has yet to return to the far lower levels seen pre-flight 4978 – and is not likely to until the Ukraine crisis is resolved and outcast Russia rejoins the global community. This upheaval could position Anglo’s Poly4 as a suitable alternative choice in a rocky market – although this is far from certain. As for the watching global fertilizer market, Anglo’s gamble is seen by many players as a long-shot in a well-established trade, and by others as a serious potential rival to established products. Many, however, question if Poly4 will be successful in carving its own niche: “I wonder how you can place such a large volume [13m tonnes/year]. How will it all find a home?” pondered one European sulphate of potash (SOP) producer’s lead salesperson. “If someone asked me to put together a marketing plan for Anglo’s stuff I’d be struggling. They’re leaning on the organic credentials, but that’s not much to go on. It’s going to be an uphill battle [for [Anglo American.” Nevertheless, following ICIS’ visit in May 2023, Anglo’s willingness to complete the project and bring Poly4 to market is clear. The mood at Woodsmith is upbeat, thanks largely to the global mining major’s deep pockets offering job security and a future Sirius Minerals never really had. Poly4 is coming to the global market. Anglo is confident the market will be ready – and willing – to harness it. Insight article by Andy Hemphill

LONDON (ICIS)–Eurozone manufacturing output fell by the strongest rate in six months in May, according to latest data from the Hamburg Commercial Bank (HVOB) and S&P Global on Thursday. The slow down for both production and new orders caused prices at the factory gate to fall for the first time since September 2020 with both Purchasing Managers’ Index (PMI) readings for manufacturing falling further into contraction. PMI (below 50 = contraction) May April Trend Manufacturing PMI (1) 44.8 45.8 36-month low Manufacturing Output (2) 46.4 48.5 6-month low This is the second monthly contraction in a row for manufacturing, after modest growth in the first quarter. This is contrary to expectations of a slow start to the year followed by a steady recovery. Poor demand has been the key driver in driving down sentiment, enabling producers to work through backlogs, which also fell at a quicker pace in May and for the twelfth consecutive month. External demand was particularly poor. Th drop in export orders registered the biggest plunge on record, since the survey began in June 1997. Factory employment levels rose for the 28th month in a row, but at the slowest rate over this period. Delivery times also got faster as more spare capacity became available. As suppliers pricing falls coupled with diminished energy costs, manufacturing output costs fell at the fastest rate since February 2016.  Output prices decreased for the first time since September 2020. The fall in input prices allowed producers flexibility with their pricing strategy, enabling prices at the factory gate to fall for the first time since September 2020. For many countries in the bloc, manufacturing readings fell by the greatest extent since the beginning of the initial COVID-19 outbreak in May 2020. In light of the poor sentiment, manufacturers have opted to work through inventories for the fourth month running, and to the greatest extent since October 2019 as purchasing activity sharply fell again in May. Stocks of finished goods remained stable on the previous month. Despite the fall in output data, manufacturers held resilient optimism that things would improve in the 12 month outlook,. Although current conditions weighed on expectations to a five month low, and below historic standards. NOTES: 1. Manufacturing PMI is a composite index based on a weighted combination of new orders (0.30); output (0.25); employment (0.20); suppliers’ delivery times (0.15); stocks of materials purchased (0.10). The Manufacturing Output Index is based on the survey question “Is the level of production/output at your company higher, the same or lower than one month ago?” Front page picture shows warehouses at Kehrwiederfleet, Hamburg (image credit: Schoening/imageBROKER/Shutterstock)

SINGAPORE (ICIS)–Asian propylene (C3) prices have fallen for four consecutive weeks on the back of poor polypropylene (PP) performance. Markets editor Julia Tan speaks with senior editor Jackie Wong on market fundamentals in the Asian C3 and PP markets. Turnarounds provide limited support for C3 on the back of ample Chinese supply Q3 PP market fundamentals likely to remain similar to Q2 Market participants await Chinese demand recovery

SINGAPORE (ICIS)–The US’ House of Representatives has approved a deal to suspend the $31.4tr debt ceiling late on Wednesday, allowing the country to borrow more money and avoid a default. The agreement suspends the debt ceiling until 1 January 2025. Oil prices rose mid-morning following the, reversing earlier losses. Product ($/bbl) Latest  (at 02:46 GMT) Previous Change Brent August 73.13 72.60 0.53 WTI July 68.57 68.09 0.48 The US House voted 314-117 to send the legislation to the  US Senate, which must vote on the bill later this week before President Joe Biden can sign it into law. It is not yet clear when the Senate will vote. The US government is forecast to hit its borrowing limit on 5 June. A default could cause financial markets to freeze up and ignite an international crisis. US lawmakers have never failed to pass a suspension or increase in the debt ceiling before the Treasury ran out of cash to pay its obligations. On Thursday morning in Asia, oil prices were trading lower, weighed down by data from the American Petroleum Institute (API) which showed a rise in  US crude inventories last week, raising oversupply concerns. Both crude benchmarks closed lower overnight on demand concerns following poor economic data from China and a firm US dollar. China’s official Purchasing Managers Index (PMI) showed that manufacturing activity in the world’s second-biggest economy contracted further in May amid dwindling demand. The manufacturing PMI in May fell by more than expected to 48.8 in May, down from 49.2 in April.

SINGAPORE (ICIS)–Caixin’s China manufacturing purchasing managers’ index (PMI) picked up from 49.5 in April to 50.9 in May, marking the first expansion in three months, the Chinese media firm said on Thursday. A PMI reading below 50 indicates contraction in the manufacturing economy, while a higher number denotes expansion. The Caixin PMI figure stood in contrast with China’s official manufacturing PMI for May which fell deeper into contraction mode at 48.8, marking a five-month low. The Caixin PMI surveys small and medium-sized enterprises (SMEs) and export-oriented enterprises located in eastern coastal regions while the official PMI is tilted toward larger state-owned enterprises. Production expanded at the quickest rate in nearly a year, supported by a fresh rise in overall new business amid reports of firmer client demand, Caixin said in a statement. The rate of output growth picked up from April’s three-month low and was the best seen since June 2022. “The subindex for total new orders recorded its second-highest reading since May 2021 as surveyed businesses reported more clients and demand, even though demand remained a bit weaker than supply,” said Wang Zhe, a senior economist at Caixin Insight Group. External demand remained stable, with the gauge for new export orders rising marginally within expansionary territory, Wang said. Overseas shipments of intermediate goods significantly outperformed shipments of consumer and investment products, according to Wang. Average delivery times for inputs at Chinese factories shortened again in May due to increased capacity at suppliers and improved material availability. However, business confidence around the 12-month outlook for output slipped to a seven-month low in May amid concerns over lingering global economic uncertainty, Caixin said. Manufacturing employment continued to deteriorate in May, Wang noted. “In a stark contrast to the improvements in supply and demand, the job market contracted at a faster pace in May, with the employment subindex plumbing the lowest level since February 2020,” Wang said. “Manufacturers remained optimistic, but the reading for expectations for future output worsened in May from the previous six months, though it stayed above 50. In fact, the reading was 2.6 points below the long-term average, as manufacturers showed concern about economic uncertainty,” Wang added. Focus article by Nurluqman Suratman

HOUSTON (ICIS)–LyondellBasell plans to delay the exit from its Houston-based refining business to no later than the end of Q1 2025, the international petrochemicals major said in an update on Wednesday. The company originally planned to end operations at the 268,000 bbl/day Houston refinery by end 2023. “Favourable inspections and consistent performance” have given the company the confidence to continue safe and reliable operations at the Houston site, it said. A moderate maintenance spend would support the extension in 2023 and 2024, it added. The extension will minimise any impact on the workforce as LyondellBasell continues to develop future options for the site. It will also enable a smoother transition between the shutdown and the implementation of the retrofitting and circular projects, it said. Meanwhile, the company is evaluating multiple options for the Houston site, including recycled and renewable-based feedstocks and green and blue hydrogen. These growth projects will connect to existing assets in the Houston area and use existing infrastructure on the refining site, including hydrotreaters, pipelines, tanks, utilities, buildings and laboratories, LyondellBasell noted. “In the future, LyondellBasell expects the 700-acre refining site will be part of a Houston regional hub for its Circular and Low Carbon Solutions business and support the growth of the LyondellBasell Circulen product portfolio,” it said. Additional reporting by Al Greenwood Thumbnail shows a pump that dispenses gasoline, one of the products made at a refinery. Image by Shutterstock.