ABB revamps EPC business to cap year of transition

MOSCOW (MRC) — ABB will reshape its engineering, procurement and construction (EPC) business—including its biggest but least profitable power grids division—by spinning off and winding down some operations, triggering fourth-quarter charges totaling USD225 MM, as per Hydrocarbonprocessing.

Chief Executive Ulrich Spiesshofer called the move ABB's final step in a year of transition that would lead into a 2018 when it would benefit from a strengthening economy. "We will always run the business in a way that we are responsibly managing capacity in line with market development," he told reporters on a call, but noted economic conditions were likely to be brighter next year than in 2017.

Last month, ABB said it would revamp its global power grids operations as it responds to the division's sluggish profitability and falling orders. The move came as ABB sought to justify its decision last year to reject calls from Cevian Capital, its second-largest shareholder, to spin off power grids, which has suffered a 9% drop in orders in 2017.

In the Power Grids division, which also makes electrical substations, ABB will form a joint venture with SNC-Lavalin for electrical substation EPC projects, the Swiss technology group said on Wednesday. Canadian-based SNC-Lavalin will have the controlling interest in the venture, it said.

In the Industrial Automation division, ABB's oil & gas EPC business will be transferred into a previously announced joint venture controlled by Saudi-based Arkad Engineering and Construction Ltd in a deal now expected to close this month. In the Robotics and Motion division, ABB is winding down its turnkey full train retrofit business.

"The fourth quarter 2017 results of Power Grids and Robotics and Motion are each expected to be impacted by approximately $75 MM on operational EBITA. The transfer of the turnkey oil & gas EPC business into the JV with Arkad is expected to result in a non-operational pre-tax charge to net income of approximately USD75 MM," the company said.

Spiesshofer said he did not expect negative impact on jobs. ABB is trying to shift its focus to higher-margin services.

Its four divisions cover electrification products, robotics, industrial automation and power grids. Power grids accounted for around 30% of 2016 sales, electrification products 28%, robotics 23% and industrial automation 19%.

ABB shares fell 0.4% in early trading, while the Stoxx European industry sector index was little changed. "We believe that the indicated completion of the (EPC) business model change will be supportive for sales growth rates as well as profitability," Baader Helvea analyst Guenter Hollfelder, who rates the stock "hold," said in a note.

ABB will report these businesses as a non-core operating unit which will manage its backlog of existing business. The new unit will report to finance chief Timo Ihamuotila from the start of next year.

MRC

MOSCOW (MRC) -- Oil edged lower towards USD65/bbl on Tuesday, but remained within sight of its highest level since mid-2015, as the looming restart of a North Sea oil pipeline offset support from OPEC-led supply cuts, said Hydrocarbonprocessing.

The North Sea Forties pipeline, which plays an important role in the global oil market, is being tested following repairs and full flows should resume in early January, its operator Ineos said on Monday. Brent crude, the international benchmark for oil prices, slipped 15 cents to USD65.10 a barrel at 1153 GMT. Prices hit USD65.83 on Dec. 12, the highest since June 2015. US crude was down 7 cents at USD58.40.

"The confirmation that Forties is coming back is the main development of the long weekend," said Olivier Jakob, analyst at Petromatrix. "For sure it has the potential for capping Brent." Trading activity was thin due to the ongoing Christmas holiday in many countries.

Brent has risen 17% in 2017. The Organization of the Petroleum Exporting Countries, plus Russia and other non-members, have been withholding output since Jan. 1 to get rid of a glut. The producers have extended the supply cut agreement to cover all of 2018.

Iraq's oil minister said on Monday there would be a balance between supply and demand by the first quarter, leading to a boost in prices. Global oil inventories have decreased to an acceptable level, he added. That's earlier than seen by OPEC's latest official forecast, which calls for a balanced market by late 2018.

While the OPEC action has lent support to prices all year, the unplanned shutdown of the Forties pipeline on Dec. 11 pushed Brent to its mid-2015 high. Forties plays an important role in the global market as it is the biggest of the five North Sea crude streams underpinning Brent, the benchmark for oil trading in Europe, the Middle East, Africa and Asia.

Rising production in the United States is offsetting some of the OPEC-led cuts. The US rig count, an early indicator of future output, held at 747 in the week to Dec. 22, according to the latest weekly report by Baker Hughes.
MRC

MOSCOW (MRC) -- LG Chem Ltd, South Korea’s largest chemical company, said on Tuesday it will spend USD278.32 MM on expanding its acrylic acid and superabsorbent polymer production capacity by the first half of 2019, as per the company's press release.

The company said in a statement that the investment aims to focus on boosting its higher-value petrochemical business.

The expansion will increase the production capacity of its plants in the southwestern city of Yeosu by 180,000 tpy of crude acrylic acid to 700,000 tpy, and by 100,000 tpy of super absorbent polymer to 500,000 tpy, LG Chem said.

Crude acrylic acid is a feedstock for super absorbent polymer that is typically used to make diapers.

As MRC reported earlier, in January 2016, South Korea's LG Chem said it had decided to drop a plan to jointly build a USD4.2-billion petrochemical complex in Kazakhstan, citing a prolonged slump in oil prices and a sharp increase in facility investments. In 2011, the chemical company said it would construct the complex near the western Kazakh city of Atyrau as part of a 50-50 joint venture with two Kazakh companies. The plan involved building ethylene and polyethylene plants with annual capacities of 840,000 tonnes and 800,000 tonnes, respectively.

LG Chem Ltd., often referred to as LG Chemical, is the largest Korean chemical company and is headquartered in Seoul, South Korea. According to ICIS report, it is 15th biggest chemical company in the world in 2011. It has eight domestic factories and global network of 29 business locations in 15 countries. LG Chem is a manufacturer, supplier, and exporter of petrochemical goods, IT&E Materials and Energy Solutions.
MRC

MOSCOW (MRC) — Britain's Forties oil and gas pipeline, one of the biggest in the North Sea, is being tested following repairs and full flows should resume in early January, as per Hydrocarbonprocessing.

The closure of the pipeline since Dec. 11 has pushed oil prices above USD65/bbl in recent weeks, their highest level since mid-2015. Forties plays an important role in the global market as it is the biggest of the five North Sea crude streams underpinning Brent, a benchmark for oil trading in Europe, the Middle East, Africa and Asia.

"The repair of the pipeline ... is now mechanically complete and pressure testing is well under way," Ineos said in a statement. "A small number of customers are now sending oil and gas through the pipeline at low rates as part of a coordinated plan that allows Ineos to carefully control the flow and pressure in the system."

The system, which carries about 450,000 bpd of crude to Britain, along with a third of the country's total offshore natural gas output, was shut down after a crack was found. Ineos said the oil and gas processing facility Kinneil should restart in the next 24 hr.

"Based on current estimates the company expects to bring the pipeline and Kinneil progressively back to normal rates early in the new year," Ineos said. Ineos was forced to declare force majeure on deliveries of Forties crude oil, natural gas and condensate, suspending its contractual obligations to customers by citing circumstances beyond its control.

This is believed to be the first force majeure on a major North Sea production stream in decades. Ineos didn't say when it expected to lift the force majeure. Ineos, a privately-owned chemicals company based in Switzerland, bought the pipeline system from BP in late October.
MRC

MOSCOW (MRC) -- Russia's output of products from polymers dropped in November by 4% month on month. However, this figure grew in January-November 2017 by 4% year on year, reported MRC analysts.

According to the Russian Federal State Statistics Service, November output of unreinforced and non-combined films was 92,600 tonnes, compared to 101,100 tonnes a month earlier. Production of film products grew in January-November 2017 by 6.4% year on year to 991,800 tonnes.

Last month's output of porous boards, sheets and polymer films fell to 25,960 tonnes, whereas this figure was 27,420 tonnes in October. Overall production of these polymer products increased by 13.7% year on year in the first eleven months of 2017 to 254,600 tonnes.

November output of non-porous boards, sheets and films was 28,300 tonnes, compared to 29,700 tonnes a month earlier. Thus, output of these products rose by 13.5% over the stated period to 310,100 tonnes.

Last month's production of plastic bottles and flasks grew to 1,473,000 units versus 1,409,000 units in October. Output of these plastic products increased by 18% in the first eleven months of 2017, totalling 17,795,000 units.

November production of plastic windows and door blocks was 2,062,000 sq metres and 75,620 sq metres, respectively, versus 2,346,000 sq metres and 106,450 sq metres a month earlier. Output of these products was 20,540,000 sq meters in January-November 2017 and 882,100 sq meters, respectively, up by 10% and 6% year on year, respectively.

November production of polymer pipes, hoses and fittings decreased to 50,500 tonnes from 55,740 tonnes a month earlier. Overall output of these products totalled 526,100 tonnes in the first eleven months of 2017, down by 0.7% year on year.
MRC