Energy

HOUSTON (ICIS)–Liquid chemical tanker rates from the US Gulf to Asia are plunging this week as plant shutdowns and delays in the aftermath of Hurricane Beryl have led to “gaping large holes of space”, shipping brokers said on Wednesday. Hurricane Beryl made landfall in Texas on 8 July between Corpus Christi and Houston, which is a key region for US petrochemical production. Some plants took precautionary measures and shut down ahead of the storm, while others sustained damage or lost power or other utilities to their sites, leading to shutdowns and force majeures. A shipping broker said the outages and delays left shipowners without contract cargoes that are typically the base volumes for vessels. “As a result, there are gaping large holes of space available for prompt loading,” a broker said. The broker expects the trend to continue for the next week or two. A different broker said it is seeing part cargo space for the rest of this month and into August across MOL and Odfjell vessels. Rates have also softened this week along the USG-Brazil trade lane as some partial space has opened. Beryl has led to a “wait and see” sentiment for players on this trade lane, a broker said. PANAMA CANAL A broker said that Stolt has joined MOL and Odfjell in resuming transits through the Panama Canal. Restrictions have gradually eased at the canal after the Panama Canal Authority (PCA) began limiting transits in July of last year because of low water levels at the freshwater lake that feeds the locks because of an ongoing drought. Water levels have improved because of the onset of the rainy season and conservation efforts enacted by the PCA to better use the freshwater available to them. The PCA will limit transits on 3-4 August for planned maintenance at the Miraflores locks. Visit the ICIS Logistics – impact on chemicals and energy topic page. Visit the ICIS Hurricane Beryl topic page. Thumbnail image shows a container ship moving through the Panama Canal. Photo courtesy of the PCA.

17-Jul-2024

UK government does not rule out increasing budget for offshore wind in next auction Capacity would need to average 16.60GW in the next two auctions to procure the capacity needed to reach revised 2030 target But only 10.6GW of offshore projects have the required development consent to enter the auction LONDON (ICIS)–The UK government has left the door open to a possible budget increase for offshore wind at an upcoming renewable capacity auction under the Contracts for Difference (CfD) scheme, after it said it intends to quadruple installed capacity for the technology by 2030. But ICIS calculations show that, depending on the strike price, the budget would have to increase between 2.3-5.4 times in order to allow for a capacity award consistent with meeting the revised target. And even if it did, planning hurdles are set to prevent this, with the pressure shifting on subsequent auction rounds. The budget for offshore wind in the upcoming round is currently £800m and the maximum strike price has been set at £73/MWh. A spokesperson for the department for energy security and net zero told ICIS that applications for the sixth allocation round are currently being assessed. “The Secretary of State will then carefully consider whether to increase the budget,” they said. The government did not confirm an exact figure for the revised offshore wind target. To present an idea of how much quadrupling offshore wind capacity by 2030 would translate into, ICIS quadrupled its forecast for installed capacity by the end of 2024, resulting in 61.08GW by 2030. Actual intended capacity may vary. A trader said: “I suspect they will increase the budget; we have had people backing out of projects and these will be the people saying they need better returns so the budget will need to be higher for the amount of capacity the government wants.” CFD BUDGET ICIS Analytics calculated that, in the next two CfD rounds, capacity will need to average 16.60GW per auction to obtain the amount needed to reach the 2030 target. This is to allow construction time which is usually between six to eight years. ICIS calculated that, if the auction cleared at a strike price of £60/MWh, a budget of £800m will be able to finance 4.2GW of capacity. If the auction cleared at the maximum strike price of £73/MWh, the budget would only be able to fund 3GW. If the budget was increased to £1bn, 5.3GW of capacity could be obtained with a clearing price of £60/MWh. Similarly, if the auction cleared at the maximum strike price of £73/MWh, 3.9GW could be obtained. SHORTFALL While an increase in budget to £1bn would procure more offshore wind capacity, a larger budget is required to obtain the capacity needed to meet the 2030 target. ICIS Analytics calculated a budget of nearly £1.8bn is needed to obtain 16.60GW of capacity in the sixth auction if it cleared at the lowest price of £44.1/MWh. This was modelled as the lowest figure as it is just above the maximum clearing price of the fifth auction round, which was £44/MWh and was too low to attract bids , If the auction cleared at £60/MWh, which is a base case scenario, the budget would need to be nearly £3.2bn. Furthermore, if the auction cleared at the maximum strike price, a £4.3bn budget is required. However, according to ICIS analyst Robbie Jackson-Stroud, there are too few entrants to obtain 16.60GW for the auction, as only 10.6GW of offshore projects have the required development consent to proceed to auction. This therefore puts increasing pressure on the seventh auction round, due to be held in 2025, to obtain offshore wind capacity needed to meet the 2030 target. As things currently stand, ICIS analytics forecasts only 39GW of offshore wind capacity by 2030 under a base case scenario, therefore falling short of the ambitious target. .

17-Jul-2024

SINGAPORE (ICIS)–Aramco has signed definitive agreements to acquire 50% of Saudi Arabia-based Blue Hydrogen Industrial Gases (BHIG), a wholly owned subsidiary of Air Products Qudra (APQ), for an undisclosed fee, the energy giant said late on Tuesday. The transaction will also include options for Aramco to offtake hydrogen and nitrogen, it said in a statement. APQ is a joint venture between Saudi-based Qudra Energy and US industrial gases firm Air Products. Upon completion of the transaction, Aramco and APQ are expected to each own a 50% stake in BHIG, which focuses on producing lower-carbon hydrogen through a process known as steam methane reforming (SMR). Saudi Aramco expects its investment to contribute to creation of a lower-carbon hydrogen network in the Eastern Province, catering to both domestic and regional markets. “This investment highlights Aramco’s ambition to expand its new energies portfolio and grow its lower-carbon hydrogen business," Aramco executive vice president for strategy & corporate development Ashraf Al Ghazzawi said. "We intend to leverage our growing capabilities in carbon capture and storage (CCS), as well as our technical expertise in hydrogen, with the ambition to support the establishment of a vibrant marketplace for lower-carbon hydrogen – helping lay the foundations of a future energy system.”

17-Jul-2024

HOUSTON (ICIS)–Logistics firm Stolthaven Terminals announced that in cooperation with Global Energy Storage (GES), it has been selected as the only potential operator to design, build and operate a green ammonia terminal in Brazil to be located within the industrial export zone at Pecem in the state of Ceara. The Port of Pecem Authority, referred to as CIPP, awarded the rights to the partnership after a 15-month tender process involving global storage providers. Stolthaven said this development will see the production of green hydrogen and ammonia and allow offshore markets access to one of the most competitive sources of this renewable energy. During the next phase, with the involvement of all parties including ammonia producers, the basic engineering of the terminals will be undertaken before confirmation of the official contract. In 2023, Stolthaven Terminals and GES agreed upon a partnership to develop and operate an export terminal for hydrogen and its derivatives with Stolthaven already having a local presence in Brazil with 42 years of experience as a storage provider in the Port of Santos. “We are proud to be chosen by CIPP as the right partner for its Hydrogen Hub. This is one more step towards executing our strategy for growth and supporting our customers in transitioning to green energy,” said Marcelo Schmitt, Stolthaven Santos general manager. “Brazil is fast becoming a new export powerhouse for biofuels and renewable energies and our extensive local and global experience, together with the expertise of our partner GES, will make it a successful and exciting development for the storage industry.”

15-Jul-2024

LONDON (ICIS)–Here are some of the top stories from ICIS Europe for the week ended 12 July. Europe ethylene spot prices turn firmer on demand, feedstock, looming cracker turnarounds European ethylene spot prices have firmed week on week on the back of better-than-expected demand amid higher feedstock values and an increasing focus on upcoming planned cracker maintenance outages. Global crude demand slows in Q2, China consumption contracts – IEA Global crude oil demand slumped to 710,000 bbl/day in Q2 2024 as China’s post-pandemic economic rebound ran its course, the International Energy Agency (IEA) said on Thursday. Storm Beryl damage, economic loss to US estimated at $28-32 billion Total damage and economic loss in the US from Storm Beryl amounted to $28-32 billion, according to meteorology firm AccuWeather. Europe chemicals players expect construction demand to remain sluggish until H1 2025 Chemicals players in Europe do not expect any substantial recovery from the building and construction industry until the first half of 2025 at least. Flooding to continue across central US as Beryl moves inland Flash flooding is expected as Storm Beryl continues to progress across the central US, with blackouts and logistic shutdowns seen in parts of Texas. ‘Life-threatening’ storm surge in Texas as Hurricane Beryl makes US landfall Hurricane Beryl has made landfall in eastern Texas and looks set to batter parts of the state’s key petrochemicals production hubs, with the US National Hurricane Center (NHC) warning of a life-threatening storm surge on Monday.

15-Jul-2024

SINGAPORE (ICIS)–China kicked off a major meeting in Beijing on Monday to map out the economic future of the world’s second-biggest economy, whose recovery is being hindered by a property slump now on its third year, and a manufacturing overcapacity. Q2 GDP growth slows to 4.7% Fiscal reforms, US/EU protectionism, private sector promotion to be discussed Government may push for more affordable housing measures The Communist Party of China (CPC) is holding a third plenary session or plenum since the members were elected in October 2022, in the Chinese capital from 15-18 July. The pivotal meeting began just as China reported a slowdown in annualized GDP growth in the second quarter at 4.7% from a 5.3% pace in the January-March 2024. The world awaits policy announcements from the closed-door meeting, in which Chinese leaders are expected to discuss fiscal and tax reforms, strategies to counter protectionism from the US and EU, promotion of domestic private sector, and address the country’s ailing real estate market. The third plenum typically sets China’s economic agenda over the medium term, with Xi Jinping serving his third term as Chinese president. The CPC’s Central Committee typically holds seven plenary sessions during its five-year term, with the third plenum typically garnering significant international interest. China is currently on its 14th Five-Year Plan, which covers 2021 to 2025. “The third plenum is in the middle of the five-year plan of the Chinese Communist Party and therefore is unlikely to witness major policies,” Alex Ng, founder and head of research at Hong Kong-based Fortress Hill Advisors, said in a note for investment research and analysis firm Smartkarma. “Rather, there will be fine-tuning of existing policy direction and some sector-specific measures.” The third plenum was delayed from late-2023 as Chinese leaders have had to grapple with a multitude of domestic and external headwinds. First-quarter annualized economic growth was robust at 5.3%, driven by strong manufacturing and industrial output, despite patchy consumer spending. However, second-quarter GDP growth has slowed to 4.7% as consumption weakened, official data showed on Monday. China's government has already taken measures to stabilize growth further this year. In March, the country’s State Council issued an action plan to promote large-scale equipment renewals and trade-ins of consumer goods. This was followed by the latest property rescue package in mid-May, comprising of both supply and demand side measures. KEY AREAS TO WATCH A resolution will be presented at third plenum focused on "comprehensively deepening reform and advancing Chinese modernization", aiming to establish a "high-level socialist market economy" by 2035, according to an official CPC document. “This indicates that the focus of the reforms will be on promoting long-term high quality economic development that centers on innovation, technology, green transition and the people,” said Ho Woei Chen, economist at Singapore-based UOB Global Economics & Markets Research. “The youth unemployment, ageing population, hukou system and promotion of domestic consumption may also come into the picture.” FISCAL AND TAX REFORMWith local government’s revenue from land sales drying up and a high debt overhang, the central government will need to transfer more resources to the local governments and broaden their income sources, Ho said. This would help to sustain the economic recovery as the local governments oversee stimulating their own regional growth, leading to more equitable development, she said. “Reforms to the consumption tax and a broad-based property tax to provide steady income streams for local governments could be considered,” Ho said. China's central government collects the majority of the country's revenue but allocates most of it to provincial and local governments, which are responsible for the majority of government expenditures. This leaves local governments strapped for cash, especially with the struggling property market. As a result, many local governments are now facing a serious debt crisis. EYES ON PROPERTY MEASURESWhile the continuing property market downturn requires further attention from the government, new stimulus measures are unlikely to be unveiled at the third plenum. China announced its latest rescue package for the property market in May. The measures to-date have relaxed buying restrictions and downpayment requirements, reduced the borrowing costs and established a yuan (CNY) 300 billion ($41 billion) re-lending program for social housing. Nonetheless, the government could reiterate the direction towards affordable housing market, including the conversion of unsold homes into affordable housing. As of end-2023, the housing ministry has achieved two thirds of its target to provide 8.7 million units of government-subsidized rental housing in the 14th five-year plan for 2021-2025. NEW FORCES FOR PRODUCTIVITYDuring a visit to Heilongjiang province in September 2023, China President Xi urged the nation to mobilize "new quality productive forces" to stimulate economic growth. This refers to the promotion of new growth drivers for the economy, specifically innovation in advanced sectors and industrial system modernization, alongside the upgrading of traditional sectors such as property and lower value-added manufacturing and assembly to enhance efficiency and sustainability. Xi emphasized that China wants quality growth and not just high growth for its economy. This was clearly the CPC's top priorities at this year’s National People's Congress (NPC) in March, critical for its economic sustainability, stability, and security. CPC officials have also emphasized education, the development of science and technology in its efforts to build a modern industrial system. Insight article by Nurluqman Suratman ($1 = CNY7.26) Thumbnail image: Large machinery loading containers onto the China-Europe freight train in Lianyungang, China, on 14 July 2024. (Costfoto/NurPhoto/Shutterstock)

15-Jul-2024

SINGAPORE (ICIS)–Here are the top stories from ICIS News Asia and the Middle East for the week ended 12 July 2024. OUTLOOK: Asia naphtha market braces for supply uncertainties By Li Peng Seng 12-Jul-24 12:00 SINGAPORE (ICIS)–Asia’s naphtha market sentiment is expected to be choppy in the short term due to a lack of clarity on arbitrage supplies against volatile demand. OUTLOOK: Asia EVA market loses shine as demand from PV sector lags By Helen Lee 11-Jul-24 11:25 SINGAPORE (ICIS)–Demand for ethylene vinyl acetate (EVA) from China’s photovoltaic (PV) industry is likely to remain lackluster amid an oversupply in the entire industry chain. PODCAST: China to accelerate hydrogen development via energy law By Patricia Tao 10-Jul-24 11:25 SINGAPORE (ICIS)–China's recent decision to include hydrogen in its draft national energy law signals a transformative shift in the country's energy landscape. China EV giant BYD to invest $1 billion in Turkey production plant By Nurluqman Suratman 09-Jul-24 15:24 SINGAPORE (ICIS)–Chinese electric vehicle (EV) giant BYD has agreed to invest $1 billion to set up a manufacturing plant in Turkey which will produce up to 150,000 vehicles per year. PODCAST: Asia recycling market sees increased interest in pyrolysis By Damini Dabholkar 09-Jul-24 11:17 SINGAPORE (ICIS)–Market players in Asia are increasingly becoming more interested in the use of pyrolysis oil as fuel. OUTLOOK: SE Asia PE to see some demand recovery in H2, challenges persist By Izham Ahmad 09-Jul-24 15:07 SINGAPORE (ICIS)–The southeast Asian polyethylene (PE) market is expected to face modest demand recovery in the second half (H2) of the year, but this is likely to be negated by increased supply and the threat of high freight costs affecting import shipments.

15-Jul-2024

HOUSTON (ICIS)–Average global rates for shipping containers moderated this week, and market players in Latin America have even seen decreases in costs from Asia, but rates to the US East Coast are likely to remain elevated as deployed capacity remains tight. Rates on the World Container Index (WCI) from supply chain advisors Drewry edged higher by 1% over the week, as shown in the following chart. Rates from Shanghai to the US East Coast rose by 2.5% over the week while rates from China to the US West Coast rose by less than 1%, as shown in the following chart. Drewry expects freight rates to remain high until the end of the peak season. Rates from online freight shipping marketplace and platform provider Freightos are slightly higher to the West Coast and slightly lower to the East Coast when compared with Drewry's assessments. Judah Levine, head of research at Freightos, said the convergence of peak season demand, strained capacity on continued diversions away from the Red Sea and Suez Canal, and congestion at Asia ports are keeping upward pressure on rates. Kyle Beaulieu, senior director and head of ocean Americas at Flexport, said in a webinar this week that congestion has eased a bit over the last month at key Asian ports, especially Singapore. But still, Beaulieu said deployed capacity was 91% in June and 94% so far in July. He said general rate increases (GRIs) were largely successful for 15 June and 1 July, but that GRIs set to take effect on 15 July have been cancelled. He said there are no real signs of relief for the Asia-USEC trade lane as capacity is expected to remain tight. For the near term, he expects the Red Sea diversions to support higher rates, and those higher rates to continue being spread across all trade lanes. A trader told ICIS this week that it is seeing softer rates from Asia to South America. Rates from Asia to South America were flat to lower this week according to ocean freight rates analytics firm Xeneta and as shown in the following charts. Additional reporting by Bruno Menini

12-Jul-2024

SAO PAULO (ICIS)–Earlier this week, the head of Brazil’s chemical producers’ trade group Abiquim accompanied President Luiz Inacio Lula da Silva during his official visit to Bolivia and returned with deals which could potentially increase and liberalize natural gas supplies to Brazil. The chemicals industry in Brazil consumes around a third of all-natural gas available, according to Abiquim. Prices in the largest Latin American economy, however, are considerably higher than in the US, the other large economy in the Americas. Therefore, natural gas supplies – how to increase them and how to make them more affordable – has been on Abiquim lobbying agenda for some time now. Nearly a year ago, Brazil’s minister for energy and mines, Alexandre Silveira, was the star guest at an Abiquim event presenting a study on how to increase supplies. At the time, Silveira thanked them for the kind invitation but he came to basically say the government had little to do and it should be the private sector leading the effort. Truth be told, Brazil’s cabinet has much to say and much it could do about energy. The rather overwhelming and dominant position of Petrobras – a ministry in all effects, with its CEO always handpicked by whoever is the president – gives the energy major a key role in what Brazil's energy landscape looks like. Its interest in natural gas has always been very limited, injecting the supplies it gets from crude oil production back into the system. However, Abiquim and Petrobras earlier this year signed an agreement to explore joint projects on natural gas supplies. In June, Abiquim said in an interview with ICIS there would be news on that front within weeks, but nothing has been announced yet. One year on since Silveira attend that event in Sao Paulo, it seems industrial trade groups come and go in Brasilia’s corridors of power as they please. The current left-leaning administration and manufacturing companies have a common goal, expressed in different wishes: the former, more and better paid manufacturing jobs to please Lula's Workers Party (PT) core constituency; the latter, higher sales and profits, and improving their competitiveness can be an important part of that. Thus, this week Lula invited to go to Bolivia with him trade groups or associations representing sectors directly affected by Brazil’s high natural gas prices. Among them, Abiquim’s head, Andre Passos, with whom ICIS will publish an interview next week. Never shy in using strong words, Abiquim said the week’s agreements in Bolivia represented a “historic step” for Brazilian chemicals which could come to partly fix its competitiveness problem. “The visit to Bolivia is in line with the objectives of the Gas Para Empregar [Gas for Jobs] program and could represent an immense short-, medium- and long-term opportunity for the natural gas market, with the possibility of even using gas from Argentina through Gasbol [pipeline connecting Bolivia’s fields with Brazil’s south and most industrialized states],” said Abiquim. “Based on the conversations held, it will now be possible to start rounds of negotiations for the contracting of Bolivian and Argentine gas without the participation of Petrobras, which will be essential to increase competition in the gas market, enabling greater liquidity, and even helping to make natural gas from the pre-salt viable.” Abiquim added that Brazil’s Ministry of Mines and Energy was “essential in making this moment a reality” and in helping private players to make progress on being able to directly contract gas in Bolivia. In Brazil, the Ministry for Energy and Petrobras are the two decisive voices in energy policy. Abiquim’s diplomatic words thanking the ministry is just another way of saying they are pleased to see Petrobras losing the nearly full control it has had in issues related to the natural gas supply from Bolivia. This, of course, occurs as Abiquim's largest member and commanding voice is Brazilian polymers major Braskem, of which Petrobras owns 36.1%. A GIANT SEEKING GASBrazil has for several years been importing natural gas from Bolivia, via the pipeline Gasbol, which links the producer’s fields with Brazil’s southern and more industrialized states. Gasbol is the longest natural gas pipeline in South America with 3,150 kilometers (1,960 miles). According to Brazil’s Ministry of Energy and Mines, Bolivia is Brazil's main supplier of natural gas supplying two thirds of its imports. Meanwhile, natural gas represents 86% of Bolivia's exports to Brazil. Regarding natural gas, the trip this week aimed at easing access to that gas for Brazilian private sector players, until now quite constrained in what they could purchase given that natural gas bilateral trade has practically been a state-controlled affair via Petrobras. That was one of Brazil’s delegation legs, led by trade groups such Abiquim, Abrace Energia representing energy consumers, trade group for industrialists in Sao Paulo state FIESP, Abvidro representing the glass sector, and Aspacer and Anfacer, both representing the ceramics industry. Brazil’s minister for energy and mines, Alexandre Silveira, and Petrobras’ new CEO, Magda Chambriad, were also part of the delegation. While the company she now presides over may lose the upper hand in natural gas trade with Bolivia, Chambriad said – according to the Ministry of Energy and Mines’ press office – that the new natural gas production areas in Bolivia are going through the environmental licensing phase and could start up as soon as 2025. “The increase in gas supply to Brazil translates into lower prices in the country,” concluded the ministry. As it normally happens, many of the deals signed this week will be worth only the paper they are written in in some years’ time. However, they could be meaningful if just a few of them were to be implemented: the Bolivian Ministry for Hydrocarbons and Energy, in charge of all areas mentioned so far, published this week as many as 12 press releases on as many agreements. For example, and again related to Brazil’s thirst for natural gas, private companies had conversations about potential imports from Argentina but via the Bolivian Gasbol. MERCOSUR – AND MILEILula went to Bolivia after having visited Paraguay for a summit of Mercosur, the trade bloc formed by Argentina, Brazil, Paraguay, and Uruguay and which this year welcomed Bolivia as a member. However, Argentina’s Javier Milei refused to participate in the summit, perhaps for the best. He has insulted Lula so many times and in so colorful manners that it may be hard to try and establish any personal relationship – the two have never met face to face. To make his preferences clear, instead of attending the Mercosur summit, Milei went to Brazil’s state of Santa Catarina for an international event of right-wing and far-right figures. “No political rift will prevent dialogue with our Argentine brothers and sisters,” said Silveira before travelling to the summit, quoted by the public news agency Agencia Brasil. But increasingly more people are wondering what Mercosur’s future will look like. Despite Lula and his Spanish counterpart Pedro Sanchez good intentions when Spain was the holder of the EU’s rotatory presidency in 2023, both leaders were unable to push their sides to conclude the free trade deal between the two blocs, which has been in the making more than 20 years. The financial weekly The Economist also wondered this week about the bloc’s importance, highlighting Milei’s absence. In an opinion-ed article – those without byline which would represent the publication’s view – it said that the host’s rebuffs to Mile for not attending may well fall in deaf ears. “It was an especially pointed snub. Skipping the twice-yearly get-together of the presidents of Mercosur, Milei chose instead to speak to the hard right at a Conservative Political Action Conference in Brazil … The reality is that Mercosur is no longer so important. Even the host, Santiago Peña of Paraguay, admitted that ‘Mercosur is clearly not going through its best moment’,” said the article. “Milei has never formally met Luiz Inácio Lula da Silva, Brazil’s president, whom he slags off as ‘corrupt’ and a ‘communist’ (Brazil’s supreme court quashed Lula’s conviction – and he is a socialist). But political incompatibilities go back further: Jair Bolsonaro, Brazil’s former leader, and Alberto Fernández, Milei’s Peronist predecessor, similarly shunned each other.” THE FIGURES In 2023, trade flows between Brazil and Bolivia totaled $3.31 billion, with a surplus of $278 million for Brazil, according to official figures. Bolivia was the 35th main destination for exports and the 30th country of origin for Brazilian imports. Brazil was the main destination for Bolivian exports and the second country of origin for its imports. The main products exported by Brazil to Bolivia were those from the steel sector (iron and steel, bars, angles, and profiles, 6.1% of the total), and passenger cars (3.8%). The main products imported by Brazil from Bolivia were natural gas (86%) and chemical fertilizers (4.8%). Insight by Jonathan Lopez

11-Jul-2024

HOUSTON (ICIS)–The conditions that helped make Beryl become a hurricane before hitting Texas chemical plants will persist through the rest of the season, with meteorologists forecasting 11 more forming in the Atlantic basin. Conditions are already conducive for hurricanes even though the peak of the season does not happen until the late summer. Beryl still disrupted chemical operations even though it was a relatively weak hurricane when it made landfall in Texas. The next hurricane could disrupt global chemical markets if it damages terminals and ports on the Gulf Coast. BERYL'S KNOCKS OUT POWEREven though Beryl was a Category 1 hurricane – the weakest class – it still caused more than 2 million outages in Texas. Many of the disruptions that Beryl caused to the chemical industry were because of power outages. A roughly equal number of disruptions was caused by companies shutting down operations as a precaution. Other disruptions were attributed to bad weather. PORT DISRUPTIONSBeryl's other major effect was on ports. The ports of Corpus Christi, Freeport, Texas City and Houston had shut down. Beryl caused Freeport LNG Development to shut down its operations. CONDITIONS THAT MADE BERYL SO POWERFUL WILL PERSISTBeryl illustrates the destructive potential of a weak Category 1 hurricane that travels through parts of Texas that host critical powerlines and ports. The meteorology firm AccuWeather estimates that total damage and economic loss caused by Beryl was $28-32 billion. Beryl was remarkable because, prior to making landfall in Texas, it had become a Category 5 hurricane, the most powerful class under the Saffir-Simpson scale. It was the first time that such a powerful hurricane had formed so early in the year, something that US meteorologist attributed to exceptionally warm ocean temperatures. The surface temperatures at sea are already close to what is typical during the mid-September, the peak hurricane season, according to the National Oceanic and Atmospheric Administration (NOAA). After Beryl made landfall in Mexico's Yucatan peninsula, it weakened into a tropical storm before passing over more warm water in the Gulf of Mexico. There it strengthened rapidly and became a hurricane once more before hitting Texas. The warm waters that contributed to Beryl's strength will persist and should soon be joined by La Nina, a weather phenomenon that also makes hurricanes more likely. METEOROLOGISTS RAISE HURRICANE FORECASTEarlier this week, the hurricane forecast for this year was raised by meteorologists at Colorado State University's Tropical Weather & Climate Research. The following compares the center's latest hurricane forecast to its update in June and to the average for the years 1991-2020. July June Average Named Storms 25 23 14.4 Named Storm Days 120 115 69.4 Hurricanes 12 11 7.2 Hurricane Days 50 45 27.0 Major Hurricanes 6 5 3.2 Major Hurricane Days 16 13 7.4 Source: Colorado State University Like NOAA, Colorado State University (CSU) noted that extremely warm sea surface temperatures and a possible La Nina are making it more likely for hurricanes to form and strengthen. THE NEXT HURRICANE COULD CAUSE MORE DAMAGEThe next hurricane can prove to be a bigger logistical headache for railroad companies. Beryl had caused only brief disruptions at BNSF and Union Pacific (UP). Beryl's path did not threaten US oil and gas production in the Gulf of Mexico. The next storm could threaten those wells, causing several energy producers to shut in production. Damage to Gulf Coast oil, ethane, LPG and LNG terminals could disrupt energy markets if the outages last long enough. Texas and the neighboring state of Louisiana are home to most of the nation's LNG export capacity. Prolonged outages at LNG terminals could lead to an oversupply of natural gas in the US because producers could lose an outlet to ship out excess capacity. Prices for natural gas could consequently fall. Prices for ethane tend to follow those for natural gas, so they would also fall in the event of a supply glut. Texas ships ethane and liquefied petroleum gas (LPG) to crackers all over the world. If the next hurricane damages those terminals and leads to a prolonged shutdown, it could have global repercussions by interrupting shipments of feedstock to crackers. In the US, it could cause prices for those products to plummet, especially for propane. US midstream companies are already trying to ship out as much LPG as possible because production has been so prolific. Over the years, US producers have exported increasing amounts of polyethylene (PE) and polyvinyl chloride (PVC). If the next hurricane damages those plants, then it would have a direct effect on global petrochemical markets. Insight by Al Greenwood Thumbnail shows a distribution transformer of a power line knocked down by Beryl. Image by Reginald Mathalone/NurPhoto/Shutterstock

11-Jul-2024