Asset swap between BASF and Gazprom will not be completed

MOSCOW (MRC) -- BASF and Gazprom has agreed that they will not complete the asset swap, which was planned for the end of the year, reported BASF on its site.

"We regret that the asset swap will not be concluded. We will continue our cooperation of over 20 years with Gazprom in our existing joint ventures," said Dr. Kurt Bock, Chairman of the Board of Executive Directors of BASF SE. "Our strategy in the oil and gas business remains unchanged: we will continue focusing on profitable growth at the source in our targeted oil and gas-rich regions in Europe, North Africa, Russia, South America, and the Middle East."

The natural gas trading business will continue to operate as a 50-50 joint venture between Gazprom and BASF Group company Wintershall. Wintershall Noordzee B.V. will remain a 100% BASF Group company.

In the asset swap, it was originally planned that two additional blocks of the Achimov formation of the Urengoi natural gas and condensate field in western Siberia would be jointly developed by Gazprom and Wintershall, a 100% subsidiary of BASF. In return, Wintershall would have transferred the jointly operated natural gas trading and storage business to Gazprom. Gazprom would have also received a 50% share in the activities of Wintershall Noordzee B.V., which is active in the exploration and production of oil and gas in the southern North Sea (Netherlands, UK and Denmark). Together the activities that would have been divested contributed around EUR12 billion to sales and about EUR500 million to EBITDA of the BASF Group in 2013.

BASF is the world’s leading chemical company. Its portfolio ranges from chemicals, plastics, performance products and crop protection products to oil and gas. BASF had sales of about EUR74 billion in 2013 and over 112,000 employees as of the end of the year.

Gazprom is the largest extractor of natural gas and one of the largest companies in the world.
MRC

MOSCOW (MRC) -- Across the Gulf, petrochemical companies' earnings are set to suffer following the deep decline in oil prices. However, heavy state spending means most firms in other sectors in the region are likely to do just fine, said Tradearabia.

Petrochemical product prices are closely linked to oil prices, while regional producers buy subsidised feedstock, so higher crude prices provide them with better margins; cheaper oil removes that advantage.

The damage to petrochemical firms will be most keenly felt in Saudi Arabia, because such firms account for about a third of the Saudi stock market's capitalisation. In the past three months, analysts have slashed their average earnings growth forecast for the Saudi petrochemical sector this year to 13 per cent from 25 per cent.

They do not see much of a slowdown for other Saudi sectors, however. Their forecast for earnings growth across the entire stock market has dropped only slightly, to 12 per cent from 17 per cent; most of that fall is due to petrochemicals.

The two largest GCC economies, Saudi Arabia and the UAE, will probably run budget deficits. But the huge fiscal reserves that they have built up over the last several years mean they will easily be able to keep spending high.

According to Thomson Reuters data, analysts have only marginally changed their average forecasts for 2015 corporate earnings in the UAE and Qatar over the last three months. Saudi Arabia has seen a significant downgrade, but that is almost entirely due to the petrochemical sector.

Corporate earnings in the GCC's two smallest states may be hit hard by oil at USD70. Bahrain was already running a budget deficit when oil was above USD100; Oman is now almost certain to slip into the red, and its fiscal reserves are relatively small.

Spending cutbacks therefore look likely in both countries. Last week, an advisory body to Oman's government suggested sweeping spending cuts and tax rises to cope with cheaper oil.

The outlook for the total value of 2015 Saudi cororate earnings has been cut by four per cent, mostly because of petrochemicals but also because of a shock restatement of earnings at telecommunications operator Etihad Etisalat (Mobily) in early November.

The corporate earnings in other big GCC markets, where petrochemicals have smaller weightings, are likely to suffer less. Over the last three months, analysts polled by Reuters have actually increased their average forecast for the combined 2015 earnings of Dubai's 13 leading listed companies by three per cent.

As MRC wrote before, Saudi Aramco announced that its downstream investments would exceed USD100 billion over the next decade, as global demand for oil rises by a quarter in the next 25 years.

MRC

MOSCOW (MRC) -- Bharat Petroleum (BPCL) on Wednesday said it will invest Rs 4,588 crore (USD741.44 million) to diversify into the petrochemicals business, a move that will help the state-run refiner boost margins by expanding beyond refining and retailing, said Businesstoday.

BPCL will produce niche petrochemical products, that are predominantly imported into the country, at its Kochi refinery using propylene that will be available once the ongoing refinery expansion is completed, the company said in a statement.

The state-run company plans to boost capacity at its Kochi refinery to 310,000 barrels per day (bpd) from the current 190,000 bpd by May 2016.

The project proposal will now be submitted for obtaining environmental clearance and the petrochemical unit is expected to come on stream during financial year 2018-2019, BPCL said.

As MRC wrote before, Technip has been awarded a contract by Air Products for a new industrial gas complex in Kochi, India. The contract covers project management, as well as engineering, procurement and construction management (EPCM) services for the new industrial gas complex for Bharat Petroleum Corporation Limited – Kochi Refinery (BPCL-KR) located in the state of Kerala.

Bharat Petroleum Corporation Limited (BPCL) is an Indian state-controlled oil and gas company headquartered in Mumbai, India. Bharat Petroleum owns refineries at Mumbai, Maharashtra and Kochi, Kerala (Kochi Refineries) with a capacity of 12 and 9.5 million metric tonnes per year.

MRC

MOSCOW (MRC) -- Ashland Inc. announced it has completed the sale of its elastomers business, based in Port Neches, Texas, to Lion Copolymer Holdings, LLC., said the company in its press release.

Financial terms were not disclosed.

The elastomers business, which primarily serves the North American replacement tire market, accounted for approximately 18 percent of Ashland Performance Materials' USD1.6 billion in sales in fiscal 2014. Ashland operates a 250-person manufacturing facility in Port Neches that serves elastomers customers.

"We are pleased with the value we received for the business and believe this transaction represents a good strategic fit for Lion," said James J. O'Brien, Ashland chairman and chief executive officer.

As MRC informed before, in August 2014 Ashland Inc.completed the previously announced sale of Ashland Water Technologies to a fund managed by Clayton, Dubilier & Rice (CD&R) in a transaction valued at approximately USD1.8 billion. Net proceeds from the sale totaled approximately USD1.4 billion, which primarily will be used to return capital to shareholders in the form of share repurchases.

Ashland Inc. is a global leader in providing specialty chemical solutions to customers in a wide range of consumer and industrial markets, including architectural coatings, automotive, construction, energy, food and beverage, personal care and pharmaceutical. Through our three commercial units - Ashland Specialty.
MRC

MOSCOW (MRC) -- Oil’s plunge into a bear market and a petroleum-product glut is dragging South Korea’s largest refiner toward junk status and raising industry borrowing costs, said Bloomberg.

There’s a 0.98 percent chance SK Innovation Co. will fail to pay its debts in the coming year, up from 0.13 percent on June 30, according to Bloomberg’s default-risk model that takes into account a company’s finances and stock moves. That suggests it merits a non-investment debt rating. The premium on GS Caltex Corp.’s 2019 dollar bonds jumped 36 basis points to a record this quarter, compared with a 7 basis point average rise for Korean dollar debt, JPMorgan Chase & Co. indexes show.

Moody’s Investors Service cut SK Innovation’s rating to Baa3, the lowest investment-grade on Dec. 3, while Standard & Poor’s changed the outlook on GS Caltex and S-Oil Corp. (010950) to negative from stable Dec. 1. That may raise borrowing costs for the refiners, which face 2 trillion won (USD1.8 billion) in repayments next year, data compiled by Bloomberg show.

Korean oil refiners are in a more difficult position than their Chinese peers because they lack a major domestic market, S&P said. Exports accounted for 60 percent of their production, according to Korea Investors Service. South Korea’s November exports of petroleum products fell 21.6 percent from a year earlier, the most among commodity groups, according to the trade ministry. That compares with a 1.9 percent drop for total exports.

Korean oil refiners will probably maintain their investment-grade rating status at least for 2015 if oil prices don’t weaken further because earnings are expected to be weak, but stable, in 2015, said Wee Lee Cheng, a Singapore-based credit analyst at ING Investment Management Asia Pacific Ltd.

Overcapacity in the petrochemical industry will stretch into next year, however refining margins are likely to be stable in 2015, barring any further material declines in oil, he said.

Petrochemical margins, used to offset losses on oil refining, are under pressure as well, said Park Jin Young, a credit analyst at Woori Investment & Securities Co. in Seoul.

As MRC wrote before, SK Innovation Co. will end a battery-pack joint venture with German partner Continental AG due to slow growth in demand for electric cars. SK Innovation and Continental, Europe's second-largest car parts maker, established a joint venture in January 2013 to develop and produce lithium-ion battery systems for vehicles. Although the companies agreed to invest 270 million euros (US$336 million) over five years, they are ending the partnership early due to weak market demand for battery-powered vehicles amid limited infrastructure and falling oil prices.
MRC