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New Brazilian Buzios' crude grade trickles into China amid Venezuela sanctions -analysis




By Daisy Xu, Eric Yep, Oceana Zhou and Philip Vahn / Platts

Petroleumworld 04 01 2019

Brazil's new grade of medium heavy crude oil, known as Buzios, is making inroads into the Chinese refining sector despite quality issues, helped by US sanctions that have curbed the supply of competing grades from Venezuela.

China's independent refiners typically favor Brazil's Lula crude, but have been forced to look for similar grades from South America as buyers from the US and Europe have been competing for Lula cargoes as an alternative to heavier Venezuelan grades, trade sources said.

Buying interest for the new Buzios crude coincides with Brazilian state-controlled Petrobras starting production of the grade in April 2018, and commencing exports from the last quarter of 2018.

Chinese independent refiners Haike Petrochemical and Wudi Xinyue Petrochemical will receive a cargo of Brazilian Buzios crude in April, refinery sources and port sources told S&P Global Platts this week.

This will be Haike Petrochemical's first cargo of the medium heavy Brazilian grade, and the second one for Wudi Xinyue Petrochemical, highlighting efforts to secure heavier Latin American crude amid tightening availability.

Other buyers from Chinese independent refineries also said it was becoming increasingly difficult to fix the usual Brazilian barrels due to Venezuela sanctions.

Haike Petrochemical operates two refineries in Shandong province with a total capacity of 4.5 million mt/year, and Wudi Xinyue Petrochemical in eastern Shandong has a capacity of 2.4 million mt/year.

Wudi Xinyue received its first shipment of 1 million barrels of Buzios crude at Yantai port earlier this month. The Hong Kong-flagged VLCC DHT Sundarbans, which loaded at Angra dos Reis in Brazil over February 23-25, will make two deliveries in April, according to Platts vessel tracking software CFlow.

DHT Sundarbans will first arrive at Qingdao port to discharge 1 million barrels for Haike Petrochemical around April 10, followed by a second delivery for Wudi Xinyue Petrochemical at Tianjin port in late April, according to sources with knowledge of the matter.

The Buzios crude was offered at a discount of around 20-30 cents/b to Lula, according to refinery sources. The grade has an API gravity of around 28.4 and sulfur content of around 0.31.


It is relatively difficult for new grades of crude oil to penetrate the market as refiners will conduct tests to evaluate crude quality and assess refining economics by checking the refined product yield.

"The [Buzios] grade contains higher calcium, which needs pre-treatment to lower the calcium content," said a source from another independent Shandong refinery, which currently has no plans to lift Brazilian cargoes. "It is a new grade and takes time to be accepted by the market," he added.

Meanwhile, another refinery source said Buzios crude also has higher salt content, as well as chlorides, which will increase maintenance costs in anti-corrosion plant units.

"But it could be a choice if there is not enough Lula crude available," he said.

China's independent refiners are big buyers of Brazil's Lula crude due to its heavy gasoil yield, with total imports of the grade rising to around 3.2 million mt for the first two months of the year, up 71% from 1.877 million mt received in the same period of 2018.

Last year, nearly 66% of Petrobras' crude oil exports went to China, a company executive said in December.

China's crude imports from Brazil rose 37% year-on-year in 2018 to 635,000 b/d, while the volume surged 56% on the year to 966,000 b/d in January-February 2019, data from the General Administration of Customs showed.

"[We] see strong buying competition from other countries [versus China], mainly due to Venezuela's current situation," a trader of Brazilian crude oil said Thursday.

He added that it was difficult to gauge whether Brazilian crude flows to China would maintain their current growth rate but said output is certainly rising steadily.

Buzios crude is produced from the Buzios field, located in the pre-salt layer in the Santos Basin, at a water depth of 1,900 meters. Brazilian state-owned Petrobras holds 100% of the field. The production forecast is 65,000 b/d in the first year and 360,000 b/d by 2019.

-- Analysis by , newsdesk@spglobal.com

-- Edited by James Leech, newsdesk@spglobal.com



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Story analysis by Daisy Xu, Eric Yep, Oceana Zhou and Philip Vahn; Edited by James Leech from Platts / SPGlobal.

- newsdesk@spglobal.com

03 29


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