European refiners winding down purchases of Iranian oil

MOSCOW (MRC) -- European refiners are winding down oil purchases from Iran, closing the door on a fifth of the OPEC member's crude exports after the United States imposed sanctions on Tehran, reported Reuers with reference to company and trading sources.

The drop in crude purchases from the Islamic republic could complicate efforts by European governments to salvage the Iranian nuclear deal disavowed by US President Donald Trump last month.

Although European governments have not followed Washington by creating new sanctions, banks, insurers and shippers are gradually severing ties with Iran under pressure from the US restrictions, making trade with Tehran complicated and risky.

Trump on May 4 announced his decision to quit the landmark 2015 nuclear deal between Iran and world powers and reimposed sanctions on Tehran. The restrictions on Iran's oil sector take effect after a 180-day "wind-down period" ending on Nov. 4.

Ministers from Germany, France and Britain have urged US officials to shield European companies from the sanctions, but refiners are not taking any chances.

"We cannot defy the United States," said a senior source at Italy's Saras, which operates the 300,000-barrels-per-day (bpd) Sarroch refinery in Sardinia.

Saras is determining how best to halt its purchasing of Iranian oil within the permitted 180 days, the source said, adding: "It is not clear yet what the U.S. administration can do but in practice we can get into trouble."

Refiners including France's Total, Italy's Eni and Saras, Spain's Repsol and Cepsa as well as Greece's Hellenic Petroleum are preparing to halt purchases of Iranian oil once sanctions bite, the sources said.

These refiners account for most of Europe's purchases of Iranian crude, which represent around a fifth of the country's oil exports.

Iran's crude sales to foreign buyers averaged around 2.5 million bpd in recent months, according to data collected by Reuters and EU statistics office Eurostat. The bulk of the exports go to Asia.

The companies, most of which have long-term contracts with Iran's national oil company, will continue to purchase cargoes until the sanctions take effect, the sources said.

Total, Europe's largest refiner, does not intend to request a waiver to continue crude oil trading with Iran after Nov. 4, according to people with direct knowledge of the matter. That effectively means it will be unable to keep purchasing crude.

Eni said it had an oil supply contract outstanding for the purchase of 2 million barrels per month, expiring at the end of the year.

Repsol and Hellenic Petroleum declined to comment.

"Our trading activity (remains) business as usual ... We continue to strictly conform with European Union and international laws and regulations," a Cepsa spokesman said.

Iranian crude can be substituted by Russian Ural grades, whose prices have risen following the US announcement, as well as crude from Saudi Arabia, trading sources said.

Some of the refiners, including Cepsa, are considering whether to request a waiver from US authorities to continue buying beyond the November deadline in order to complete their term agreements.

"With a longer-term contract in place, we're hoping to get a six-month waiver," an industry source close to Cepsa said. "From November, we don't know if any cuts will have to be partial or total."

Crude trade between Iran and Europe has risen sharply since the lifting of tough sanctions on Tehran in 2015.

But banks, shipping firms and insurance companies are now distancing themselves from the Islamic republic, leaving Europe's refiners few options but to stop oil purchases.

"It's a matter of finding a tanker and an insurer that will cover it. It's definitely not easy right now," a source at Repsol said.

Hellenic had to stop imports because the Swiss bank that it used was no longer processing payments to Iran, an industry source familiar with the situation said.

Asian buyers are also expected to reduce their purchases. India's Reliance Industries Ltd, owner of the world's biggest refining complex, plans to halt oil imports from Iran, two sources familiar with the matter said last week.
MRC

MOSCOW (MRC) -- Kazakhstan is set to rival Russian firms in the lucrative Central Asian fuel market once it finishes upgrading its oil refineries, reported Reuters with reference to officials in Astana and industry sources.

The government is considering halting light oil product imports from Russia and lifting a ban on such exports that was originally imposed to ensure reliable supplies on the domestic market, they said.

Astana has been looking at selling into other former Soviet republics and beyond - a market dominated by Russia - for some time. "Central Asia and Afghanistan are the key markets for Kazakhstan," Energy Minister Kanat Bozumbayev said last year.

But now Kazakhstan - the region's second biggest crude oil producer after Russia - is achieving a surplus over its own gasoline and diesel needs, meaning it can start acting on the idea.

Kazakhstan is rapidly expanding production at its three large refineries. It has completed upgrading the Pavlodar plant, with work at Atyrau and Shymkent expected to be finished soon, the energy ministry said in response to Reuters questions.

The plants' combined annual oil products output will increase by eight percent to 15.3 million tonnes this year, while gasoline and diesel production will exceed Kazakhstan's domestic demand by 1.5 - 2.0 million tonnes per year, the energy ministry said.

Despite producing 1.74 million barrels of crude per day, Kazakhstan has long imported oil products from its former Soviet-era master Russia due to the past lack of refining capacity. These amount to around 1.7 million tonnes a year.

Its ambitions mark another step away from Moscow for Kazakhstan, where around 85 percent of the population are fluent Russian speakers, but which is planning to a switch to a Latin-based alphabet from Cyrillic.

Kazakhstan has already faced overproduction of gasoline this year, which has led to lower prices.

Aiming to remove the surplus, the government plans to ban imports of the popular A-92 grade of gasoline and secure a deal to supply neighbouring Kyrgyzstan, the energy ministry told Reuters in an email.

"The government wants to start active discussions of these issues in parliament in June," a source close to the government said.

According to the energy ministry estimates, imports of Russian A-92 gasoline reached 386,000 tonnes in January-April, surpassing the plan of 280,000 tonnes.

For the whole of 2018, Russia is set to supply 800,000 tonnes of gasoline, 520,000 tonnes of diesel and 300,000 tonnes of jet fuel to Kazakhstan as Moscow raises exports due to its own extensive refineries modernisation.

Kazakhstan, in its turn, may export 200,000-300,000 tonnes of gasoline this year, increasing to 500,000 tonnes in 2019, according to industry sources and Reuters calculations.

Combined annual imports of light oil products by Kyrgyzstan, Tajikistan and Afghanistan stand at around 3.7 million tonnes. Kazakhstan's energy ministry declined to comment on the figures.

Russia's Rosneft, Gazprom Neft and privately-owned Forteinvest are the main players on the Central Asian fuel market. Spokespeople for all three companies declined to comment.

However, a source at Gazprom Neft, which has a network of gasoline stations in the region, said that the company may consider buying gasoline and diesel from Kazakhstan if it is more profitable than shipments from Russia.
MRC

MOSCOW (MRC) -- Bayer AG closed its USD63 billion acquisition of Monsanto Co., emerging from an arduous two-year antitrust review as the biggest seed and agricultural chemicals maker in the world, as per Bloomberg.

The deal’s closing is just the beginning of another tough task: knitting the two companies together. Integration should begin in about two months, once the sale of some of Bayer’s agriculture assets to BASF SE is complete. The combined unit will be based in Monheim, Germany, while the North American business and seeds division will be led from St. Louis.

The transaction, which will double the size of Bayer’s agriculture business, means “we will be even better placed to help the world’s farmers grow more healthy and affordable food in a sustainable manner,” Bayer Chairman Werner Baumann said in a statement on Thursday.

Bayer has sold off its plastics business and remade itself into a life-science company with half its sales from health and half from agriculture. The takeover also marks the third in a series of mega-deals in the industry, following Dow Chemical Co.’s merger with DuPont Co. and China National Chemical Corp.’s takeover of Syngenta AG.

To soothe regulators’ concerns about whether enough competitors would remain in the market, Bayer agreed to sell about 7.6 billion euros (USD9 billion) in assets to BASF. They include field seeds as well as Bayer’s vegetable-seeds business, some seed treatments and digital farming projects.
MRC

MOSCOW (MRC) -- SNC-Lavalin announced that it has signed an exclusive agreement with Project Development & Management International LLC (PDMI) in Oman, to design and deliver a greenfield chlor-akali PVC plant 150km southeast of the Omani capital Muscat, as per the company's press release.

SNC-Lavalin will support the project long term, from concept development to commissioning, carrying out the initial engineering, master planning, process technology evaluation and selection to support project financial investment decision approvals. The subsequent Engineering, Procurement and Construction Management (EPCM) contract is expected in Q1 2019, where SNC-Lavalin will execute the complete design and delivery, working alongside Omani contractors to maximise in-country value. SNC-Lavalin will also support the operations and maintenance of the plant.

The project capital cost is expected to be in the range of CAD1.9 billion (USD1.5 billion), and will produce around a quarter of a million tons per annum of PVC destined for Asia, and around 140,000 tons per annum of sodium hydroxide (caustic soda) that will support local industries. SNC-Lavalin has extensive experience in delivering downstream oil and gas infrastructure around the world, with expertise in greenfield and brownfield petrochemical and refining facilities, and has worked with some clients for over 50 years.

"This contract is a major strategic win for us, helping to grow our business in the region and demonstrate our world-leading credentials in providing end to end solutions for large EPC projects," said Christian Brown, President, Oil & Gas, SNC-Lavalin. "Oman is an important market for SNC-Lavalin where we have a long history of safely delivering complex major projects. We are pleased to be able to apply our international experience to such a significant project in the region while working hard to increase in-country value and help develop Oman’s resources."

In 2017, SNC-Lavalin was awarded a long term framework contract from Petroleum Development Oman for the commissioning and start-up support services management for its upstream assets in Oman. As part of this contract, SNC-Lavalin has set-up a dedicated training academy in Muscat to train and develop multidisciplinary graduate engineers in the specialist field of commissioning.
MRC

MOSCOW (MRC) -- Celanese Corporation, a global specialty materials company, has recently announced a consolidation of its global acetate manufacturing operations by initiating the closure of its acetate tow manufacturing unit in Ocotlan, Jalisco, Mexico, as per the company's press release.

The consolidation is designed to strengthen the company's competitive position, reduce fixed costs and align future production capacities with anticipated industry demand.

Marcel van Amerongen, Vice President of Celanese's Cellulose Derivatives business, said: "As Celanese has discussed over the last many months, the global business environment for acetate tow products is challenging. Global demand for acetate tow is declining, and for the foreseeable future we are not projecting improvements in this business environment. The acetate tow business is an important one for Celanese and we are taking the strategic steps needed to ensure success in the future."

The company will continue to serve its acetate tow customers by optimizing its global production network, which includes wholly owned facilities in Lanaken, Belgium, and Narrows, Virginia, USA, as well as the company's acetate tow joint venture facilities in China. Celanese expects to operate its acetate tow unit in Ocotlan through the fourth quarter of 2018 to ensure a smooth closure process.

Key products manufactured at the Ocotlan plant include cellulose acetate flake and filter tow. The plant's nameplate capacity is approximately 20,000 tons of acetate tow and 52,000 tons of acetate flake. The acetate flake operation, which employs more than 200 employees at the Ocotlan site, remains unaffected by these actions.

As MRC informed previously, Celanese Corporation has increased June list and off-list selling prices for Vinyl Acetate Monomer (VAM) sold in Europe, Middle East, Africa and the Americas, as follows:

- by EUR150/mt - for Europe, Middle East & Africa;
- by USD0.05/lb - for the USA and Canada:
- by USD150/mt - for Mexico & South America.

Celanese Corporation is a global technology leader in the production of differentiated chemistry solutions and specialty materials used in most major industries and consumer applications. Based in Dallas, Celanese employs approximately 7,600 employees worldwide and had 2017 net sales of USD6.1 billion.
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