CNPC buys stake in Novatek Yamal LNG project in Russian Arctic

MOSCOW (MRC) -- China National Petroleum Corp. bought a 20 percent stake in OAO Novatek’s USD20 billion Yamal liquefied natural gas project, aiding the Russian gas supplier’s bid to raise financing, said Bloomberg.

Novatek and CNPC closed the deal for an undisclosed sum today on the sidelines of the G-20 Summit in St. Petersburg, Russia, the same city where they signed a preliminary according on the acquisition earlier this year. CNPC had pledged to purchase at least 3 million metric tons a year of liquefied natural gas from the Arctic project.

"CNPC’s entrance in Yamal LNG is an important milestone for the project," Chief Executive Officer Leonid Mikhelson said in an e-mailed statement. "We are pleased to welcome a new, strong partner who will contribute its capabilities and resources to the successful implementation."

Novatek, Russia’s second-largest gas producer, plans to make a final investment decision on Yamal in the third or fourth quarter of this year. CNPC joins France’s Total SA (FP), which has a 20 percent stake in the Yamal venture. Novatek has said it’s ready to cut its holding to as low as 51%.

Novatek, controlled by billionaires Leonid Mikhelson and Gennady Timchenko, is challenging OAO Gazprom (OGZD)’s export monopoly. The Russian government plans to meet this month on amending laws to allow exceptions to the monopoly for LNG, Deputy Prime Minister Arkady Dvorkovich said on Aug. 9.

Today’s sale is subject to regulatory approvals and expected to be completed by Dec. 1, according to the Novatek statement.

MRC

MOSCOW (MRC) -- The future of PEMEX (Petroleos Mexicanos ), the country's petroleum monopoly is being debated in Mexico. The issue is very important economically, but it's more than an economic question, said Americanthinker.

The question of how to handle PEMEX is closely tied to national sovereignty and Mexican identity. Any politician who wants to reform it had better take that into consideration.

PEMEX is Mexico's state oil monopoly. PEMEX is protected from competition in Mexico, where it enjoys a legal monopoly on the exploration, processing and sale of petroleum. Its privileged status in national mythology affords it certain immunity from criticism.

Nevertheless, PEMEX is in deep trouble. It's heavily indebted, in fact it's one of the world's most indebted oil companies. It's not really managed as an oil company, but as a cash cow of the Mexican government, which makes it difficult to function as a normal oil company.

PEMEX is the source of a third of the Mexican government's revenue. Any reform that substantially reduces that share is going to be difficult to bring about.

Petroleum is Mexico's biggest revenue earner, but production is dropping. If present trends continue, Mexico will be an oil importer by 2020.

The Mexican Constitution (Article 27) guarantees PEMEX's privileged position, a monopoly over the oil industry, from exploration to the sale of gasoline at the pump.

PEMEX lacks sufficient refineries. The United States has 139 operable oil refineries. Mexico, with less than half of U.S. production, has only seven!

PEMEX is prohibited from partnering with foreign companies within Mexico, but not abroad. So Mexican crude is shipped to Houston, Texas, where it is refined (in partnership with Shell) and then re-imported to Mexico.

As MRC wrote before, PEMEX signed a noncommercial agreement with Exxon Mobil to share technical and scientific information of mutual interest. PEMEX said in a press release that the five-year agreement renews the two oil companies' relations in matters of cooperation.

Pemex, Mexican Petroleum, is a Mexican state-owned petroleum company. Pemex has a total asset worth of USD415.75 billion, and is the world"s second largest non-publicly listed company by total market value, and Latin America's second largest enterprise by annual revenue as of 2009. Company produces such polymers, as polyethylene (PE), polypropylene (PP), polystyrene (PS).
MRC

MOSCOW (MRC) -- INEOS ChlorVinyls has announced it has completed the sale of its UK packed chlorine business to 2M Group Limited, reported the company on its site.

The value of the deal is not disclosed.

The sale consists of the packed chlorine assets at ChlorVinyls’ Runcorn Site, Cheshire, together with the associated commercial goodwill of this business.

Employees associated with the packed chlorine business will remain with INEOS and will provide dedicated packing services to 2M Group under a service contract.

The sale is part of INEOS ChlorVinyls’ ongoing review of its product portfolio and the desire to focus on its core businesses.

Comments Keith Metcalfe, INEOS ChlorVinyls Business Director: "Packed chlorine is an excellent strategic fit with the existing businesses operated by 2M Group and they have the necessary expertise to maximise the full potential of this business."

More recently, the Group agreed exclusive manufacturing and marketing rights for the TRIKLONE and PERKLONE branded business of INEOS ChlorVinyls.

As MRC informed previously, in May 2013, two Europe’s biggest chemical companies agreed a joint venture that will create one of the world’s largest producers of PVC plastics by revenues. Solvay, the Franco-Belgian chemicals company, will pool its European business that creates chlorvinyls - the base materials for PVC plastics - with that of privately owned rival INEOS Group , in a move that will eventually result in the Anglo-Swiss company taking full control of the joint venture.

INEOS ChlorVinyls is one of the major chlor-alkali producers in Europe, a global leader in chlorine derivatives and Europe's largest PVC manufacturer.
MRC

MOSCOW (MRC) -- Petroleos de Venezuela, or PdVSA, will take the catalytic cracker unit at its 140,000 bpd El Palito oil refinery offline for 25 days for maintenance starting this week, reported Hydrocarbonprocessing with reference to the state news agency AVN.

Oil Minister Rafael Ramirez said that El Palito was processing 129,000 bpd of crude and that Venezuela's refinery network had overall output of 1.2 MMbpd.

PdVSA has enough inventory to maintain fuel supplies to the central regions of the country served by El Palito, AVN said, citing comments from refinery manager Jesus Sanchez.

As MRC wrote earlier, in June 2013, Technip was awarded by the Hyundai-Wison consortium a significant contract to supply its proprietary technology as well as engineering and procurement services for two hydrogen reformers in Venezuela. These 135-million standard cubic feet per day (151-thousand normal cubic meters per hour) reformers are part of the Deep Conversion project being executed by the consortium for Venezuela’s state oil company, Petroleos de Venezuela SA (PDVSA), to upgrade the Puerto La Cruz refinery.

Besides, in 2012 state-run China National Petroleum Corp (CNPC) and Petroleos de Venezuela SA (PDVSA) began construction work to build a new USD9.08bn refinery in Jieyang, China. The 400,000 barrels-per-day (bpd) refinery will process Venezuelan heavy oil, thereby tripling oil sales from the South American nation to the world's second-largest oil user.
MRC

MOSCOW (MRC) - Fitch Ratings has revised the outlook on Belgium-based Solvay SA's Long-term Issuer Default Rating (IDR) to stable from negative, said Reuters.

The agency has also affirmed Solvay's IDR and senior unsecured ratings at 'A-', Short-term rating at 'F2' and subordinated hybrid bond rating at 'BBB'. Rhodia SA's bond rating has also been affirmed at 'BBB+' .

The rating actions reflects our opinion that Solvay's debt metrics will be restored to levels commensurate with a 'A-' rating over the next two years, despite challenging market conditions. The ratings reflect Solvay's above-average portfolio, end-market and geographic diversification. These have been enhanced by Rhodia's complementary offering and provide some protection against the inherent demand cyclicality and raw material price volatility of some of the group's more commoditised products.

Solvay's 2012 credit metrics were slightly better than anticipated under our previous forecasts. Free cash flow (FCF) was EUR374m (Fitch's calculation) aided by working capital inflows, and net funds from operations (FFO) adjusted leverage was 1.5x. We had projected negative FCF and net FFO adjusted leverage of 1.7x at end-2012. Under our rating base case, which conservatively assumes limited recovery in market conditions in 2014, FCF is expected to be marginally negative in 2013 on the back of high capex and neutral to positive afterwards. Net FFO adjusted leverage peaks at 1.6x and reduces gradually thereafter. This compares with our negative rating guideline of FFO net leverage sustained materially above 1.5x through the cycle.

The announced 50/50 Solvay-Ineos JV provides upside for the rating case. The JV, which will combine Ineos's and Solvay's European PVC assets, will limit Solvay's exposure to the ailing European PVC sector and rebase its margins above 15% through the cycle. The assets it will contribute had sales of EUR1.9bn in aggregate in 2012 and we estimate that EBITDA was roughly EUR150m (8% margin). The new company is expected to be the second-largest global PVC producer by capacity with combined sales (proforma 2012) of EUR4.3bn with EBITDA of EUR257m. Solvay intends to exit the JV four to six years after its creation. Solvay will receive an upfront cash payment of EUR250m upon closing, on an exit value based on a mid-cycle EBITDA multiple of 5.5x. Closing is expected by year-end.

Solvay's ratings reflect its position as the world's leading producer of specialty polymers, soda ash, polyamides, specialty surfactants, silica, rare earth systems and generated 38% of its 2012 sales from emerging markets. In Fitch's view, margins and operating cash flows should exhibit limited volatility through the cycle with EBITDA and EBITDA margin sustained around EUR1.9bn and 15%, respectively, under the base rating case.

EBITDA is forecast at around EUR1.8bn in 2013, slightly below 2012 EBITDA (Fitch's calculation). This assumes continuously weak market conditions in the PVC, polyamide, rare earths and soda ash segments. It also reflects reduced prices for guar gum from the record levels of 2012. These trends should be partly offset by good performances in silica, acetow and specialty polymers. The EBITDA margin is projected marginally below 2012 level at 14.4%. FCF generation is mildly negative in 2013-2014 and mildly positive in the following years, based on annual capex assumed above historical levels at around EUR0.8bn (EUR0.9bn in 2013).
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