US skips plan to raise tariffs on Chinese goods, SNF awards Wood $20 m maintenance contract, Northeast gas prices fall as pipelines fill

Our pick of the downstream industry news you need to know.

US and China make inroads on Trade War negotiations.

US skips raising tariffs on Chinese goods in October

The U.S. and China have reached a partial trade pause, but there are still plenty of details to work out. Officials believe it will take up to five weeks to finalize the deal.

As a result of the deal, the U.S. did not raise tariffs on the Chinese on October 15 to the 30% level as originally announced.

The tariffs would have risen to 30% from 25% on October 15 on more than $250 billion worth of Chinese goods. The tariffs would have covered several petrochemical imports from China.

The preliminary deal includes intellectual property, financial services and $40-50 billion related to agriculture products.

China agreed to buy up to $50 billion worth of agricultural products from the U.S.

The agreement did not remove any existing tariffs that the two countries had imposed on each other. It did not mention cancelling the plans to impose more tariffs in December.

The U.S. originally talked about raising tariffs on October 15 and December 15.

The ACC has warned that the ongoing US-China trade war could impact petrochemical investment in the Americas.

Many owners expanded capacity or announced they would expand with the intention of exporting to China. Because of the tariffs, companies have diverted this material to other countries.

SNF awards Wood $20 million maintenance contract

Wood has been awarded a $20 million contract from SNF Floquip (SNF) to provide maintenance and supplemental project services at its chemicals manufacturing facilities located in Plaquemine, Louisiana and Pearlington, Mississippi.

The initial two-year contract comes with a one-year option to extend and was awarded following a competitive tender process.

Under the contract, Wood will mobilize around 100 employees to support the multi-discipline maintenance and project work scopes at the two facilities.

“This strategic win signals the expansion of our downstream and chemicals capabilities and growing presence in a key regional market,” Andrew Stewart, CEO of Wood’s Asset Solutions Americas business, said in a statement.

SNF Floquip is a subsidiary of SNF Holding, the world’s leading manufacturer of water-soluble polymers, serving prominently public and industrial water and wastewater treatment markets.

California Refinery Disruptions after 4.5 Earthquake

Two California refineries said they had production disruptions following a magnitude 4.5 earthquake on October 15.

Marathon's 170,000 bbl/day Martinez refinery shut down multiple units late Monday, California regulatory filings showed.

Shell's 158,000 bbl/day Martinez and Marathon's Martinez refinery are both located less than 20 miles from the epicenter of the earthquake which hit near San Francisco.

No known spills or releases occurred nor were there any injuries. Operations are normal, but some equipment may have been affected.

Three other refineries, including Phillips 66's 128,000-bbl/day San Francisco, Chevron's 260,000-bbl/day Richmond and Valero's 149,000-bbl/day Benicia, are all located in Northern California but farther away from the epicenter.

There were no known issues at these refineries.

Kinder Morgan said the company's Concord station lost power and was shut down after the quake, and other facilities in the area were also shut down as a precaution. Facilities have restarted and resumed normal operations. 

Northeast natural gas spot prices fall as pipelines fill

Natural gas flows out of the Northeast region into the rest of the U.S. averaged more than 16 billion cubic feet per day (Bcf/d) during September—between 1 Bcf/d and 2 Bcf/d more than in previous months, according to data from Genscape, the U.S. Energy Information Administration (EIA) said.

Image: EIA

The movement of natural gas has increased as natural gas spot prices have declined in the Northeast and as production in Appalachia has continued to grow.

During the past three weeks, natural gas prices at Appalachian supply hubs, Dominion South and Tennessee Zone 4 Marcellus, fell from about $2 per million British thermal units (MMBtu) in mid-September to lows of 76¢/MMBtu and 65¢/MMBtu, respectively, on October 4.

The resulting average price difference of $1.59/MMBtu lower than the Henry Hub national benchmark was the widest price gap since October 5, 2018. In both instances, Northeastern pipelines had declared force majeure.

Lower prices in recent weeks have resulted in more favorable economics for transporting natural gas volumes from the Northeast to other regional demand markets, notably those in the South Central and Midwest regions. Natural gas spot prices in southwestern Pennsylvania, at Dominion South, and in northeastern Pennsylvania, at Tennessee Zone 4 Marcellus, typically averaged 20¢/MMBtu to 50¢/MMBtu lower than Henry Hub prices this spring and summer, and this discount began to widen in August.

In September, the average natural gas spot prices at these hubs was 83¢/MMBtu lower than the Henry Hub average, and the difference to Henry Hub widened to an average of $1.59/MMBtu lower on October 4.

Similarly, the price gap between Appalachian Basin natural gas spot prices and those at the Chicago Citygate widened from 20¢/MMBtu earlier in 2019 to 94¢/MMBtu on October 4.

Flows from the Northeast into Midwest demand markets have grown primarily because of increased use of the Rover and Rockies Express pipelines. Increased flows on these pipelines coincided with an explosion on the Texas Eastern Transmission (TETCO) pipeline (1.7 Bcf/d capacity) on August 1, which forced rerouting of southbound TETCO flows of natural gas out of the Northeast onto other pipelines. However, volumes delivered to the Midwest have continued to rise despite TETCO returning to partial service in late August.

The explosion on the TETCO system limited southbound capacity out of the Northeast but flows from the Northeast through the Midwest region to South Central demand markets have increased.

Southbound flows on the Tennessee Gas Pipeline (TGP) and Columbia Gulf Pipeline (TCO) were flowing at or near full capacity for most of September, according to Genscape.