Shell to sell to Pemex 50% of Deer Park refinery; Olin shuts more of its chlor-alkali capacity; Cheniere’s 2021 outlook improves on strong LNG demand; Canada’s chemistry association disappointed after plastics included on environment act

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Chlor-alkali is a reaction used to produce chlorine. Chlorine is a water treatment product for pools as well as an intermediate for products including PET bottles and textiles. Image courtesy of Gadini/Pixabay

Shell to sell to Pemex its 50% stake in jointly owned Deer Park refinery

Shell said on May 24 that after an “unsolicited offer” from its Mexican venture partner Pemex in the 340,000 b/d Deer Park refinery in Houston it reached an agreement to sell its half ownership stake for $596 million in cash and debt.

“Pemex has been our strong and active partner at the Deer Park Refinery for nearly 30 years, and we will continue to work with them in an integrated way, including through our on-site chemicals facility, which Shell will retain,” said Huibert Vigeveno, Shell’s downstream director, in a press release.

“This transaction allows Shell to further focus its refining footprint while also maintaining integration optionality and retaining value through its Chemicals and Trading activities,” he added.

Mexican President Andres Manuel Lopez Obrador separately announced the transaction and said the country will also continue planned and ongoing domestic refining capacity construction. Mexico has a deficit in gasoline production that it covers mainly with imports from north of its border.

Shell's Vigeveno said during a Reuters Events Downstream conference in November that the company looked forward to a future with fewer, more integrated refineries.

Olin shuts more of its chlor-alkali capacity

Olin Corp. announced on May 18 it will permanently shut down about 20% of its diaphragm-grade chlor-alkali capacity, following similar announcements in recent months.

That capacity, at Plaquemine, Louisiana and equivalent to 225,000-tons, will be closed by June 1, the Clayton, Missouri-based company said in a statement.

Scott Sutton, Olin’s chairman and CEO, said the decision aimed to shut down high-capital, low return businesses to refocus elsewhere.

"Earlier this year we shut down 200,000 diaphragm ECU tons at our McIntosh, Alabama facility, and the previously announced shut down of 230,000 diaphragm ECU tons at our Freeport, Texas facility will occur in the second quarter of 2021, as well," he added.

Olin, which also produces ammunition, has a chemical portfolio that includes chlorine and caustic soda, vinyls, epoxies, and chlorinated organics. 

Chlor-alkali is a reaction used to produce chlorine, sodium derived products and caustic soda. Chlorine is a disinfectant to treat water and an intermediate material, most prominently for the manufacture of polyvinyl chlorine (PVC) and textiles.

Cheniere’s 2021 outlook improves on strong LNG demand

The global LNG market has recovered in 2021 and the demand outlook may outweigh supply and result in higher prices, said on May 4 Jack Fusco, Cheniere’s CEO.

“We've often described 2021 as Cheniere's cash flow inflection point, and you can see progress on that early in the year in our first quarter financial results,” Fusco said during the earnings call discussion, according to a transcript of the call by Motley Fool.

“During the first quarter, we exported a quarterly record of 133 cargoes of LNG from our two facilities, with production incentivized by strong global LNG margins during the quarter,” he added.

During the 2017-2020 four-year period, the global LNG market added almost 120 million tons of capacity, an average of almost 30 million tons per year.

“In the subsequent four-year period that average is expected to drop to approximately 11 million tons a year, a significant slowdown in supply growth, which will be amplified by output declines from older legacy projects,” Fusco added.

LNG demand has expanded with the number of countries importing it doubling within the last decade. In addition, “hundreds of billions of dollars of natural gas oriented infrastructure (is) being built around the world today” to support future LNG demand increases, he said.

“We forecast that global LNG trade will approximately double, expanding by approximately 350 million tonnes per annum to over 700 million tonnes per annum by 2040, which would support additional, approximately 225 million tons per annum of incremental global supply,” Fusco added.

During a large part of 2020 many LNG customers chose to pay penalties and reject LNG cargoes. This occurred as energy demand dried out amid lockouts and Covid-19 restrictions.

Canada’s chemistry association disappointed after plastics included on environment act

The Chemistry Industry Association of Canada (CIAC) said on May 12 its members were disappointed with the Canadian federal government’s decision to list all plastic manufactured items on the “Schedule 1” of the Canadian Environmental Protection Act (CEPA).

“We remain concerned that today’s decision sends the wrong message to global chemistry investors, namely that Canada is ambivalent about the enormous investment prospects for the circular economy for plastics,” it said.

Canada’s plastics industry is “committed to solving the plastic waste problem and has set a goal to make 100% of plastic packaging recyclable or recoverable by 2030 and embracing advanced recycling technologies to make plastics packaging 100% recovered and recycled by 2040,” said Elena Mantagaris, vice president of the CIAC’s plastics divisions.

“CIAC is disappointed that safe inert plastic materials that play such important roles in Canadians lives are being labeled as toxic substances,” she said.

The association has long opposed any initiative to use the Canadian Environmental Protection Act (CEPA) to regulate the plastics industry because it does not consider it “an appropriate legislative instrument for managing post-consumer plastics.” 

The CEPA act, which first became law in 1988, has the purpose of preventing pollution and addressing potentially dangerous chemical substances.

U.S. trade officials warned the Canadian federal government in September in relation to the potential impact on U.S. petrochemical exports.

U.S. trade officials have said Canadian legislation changes that could lead to a ban of any U.S.-made product may undermine existing free-trade agreements.

By Reuters Events Downstream