BASF scoops second China chemicals deal in four months

MOSCOW (MRC) -- Chemical giant BASF said on Monday it had signed a memorandum of understanding (MoU) with China's Sinopec Corp to build a steam cracker in east China, the second major investment pledged by the German firm in four months, as per Reuters.

China, the world's top chemicals consumer, is allowing greater access by global majors and local independents to its massive chemicals market to feed plastics, coatings and adhesives to the fast-growing consumer electronics and automotive sectors, as well as polyesters for clothing.

According to the MoU, BASF-YPC, the German group's joint venture with Sinopec in Nanjing, will invest in a 50 percent stake in the new cracker. SINOPEC Yangtzi Petrochemical (YPC) will take the other 50 percent.

"This additional investment into a new steam cracker and the expansion of our BASF-YPC joint venture in Nanjing underline the strong partnership between Sinopec and BASF and the commitment to our customers in China," BASF Chief Executive Martin Brudermueller said.

BASF said the new steam cracker will have an annual capacity of one million tonnes of ethylene, a building block for plastics, rubber and synthetic fibre. The group declined to disclose financial details.

A joint venture consisting of French oil group Total , Borealis and NOVA Chemicals last year said it would spend USD1.7 billion on an ethane steam cracker at Port Arthur, Texas, with a similar capacity.

In July, BASF landed a preliminary deal to build China's first wholly foreign-owned chemicals complex in Guangdong, worth some USD10 billion in investment to 2030, aided in part by trade tensions between Beijing and Washington.

The German group made 22 percent of sales in the Asia-Pacific region last year, its annual report shows. It does not break out Chinese numbers.
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After years of global success, India's Reliance Industries faces oil shock at home

MOSCOW (MRC) -- Reliance Industries , currently India's second most valuable listed company, got rich by trading fuel across Asia, Africa and Europe while effectively ignoring its home market, as per Hydrocarbonprocessing.

Reliance's refineries processed crude from the nearby Middle East and sold fuel to fast-growing markets in North Asia including China, Japan, South Korea and Taiwan. That began to change when India's oil demand surged, overtaking Japan as the world's third-biggest consumer. Reliance took more interest in the country's retail fuel sector and has opened more than 1,300 service stations.

This push into the domestic fuel market may stumble after India's government imposed cost controls on Oct. 4 on gasoline and diesel prices to rein in recent record highs. Reliance's shares plunged 6.9 percent on the day of the announcement and are down about 20 percent since their record close on Aug. 28.

The decline has pushed Reliance's market capitalization down to 6.64 trillion rupees (USD90.47 billion) and it is no longer India's most valuable company, sitting behind Tata Consultancy Services Ltd at 6.77 trillion rupees.

The price shock, driven by soaring crude import costs, angered consumers and triggered riots by farmers, forcing the government to react at the cost of its refiners' health. For now, Reliance is staying with its retail plans despite the recent trouble.

"When prices are cut, you have to effectively match it," said Venkatachari Srikanth, Reliance's joint chief financial officer, during their earnings presentation on Oct. 17. "We are not going to let this alter broadly our strategy on retail petroleum."

In line with that, Reliance is planning as many as 2,000 retail stations with oil major BP Plc over the next three years, local media reported on Tuesday. Reliance's domestic push made sense in an Asian fuel market that is increasingly crowded with new refinery capacity from the Middle East, Southeast Asia and China.

The new capacity, combined with soaring crude prices, has eroded profit margins for producing refined fuels. With the domestic market now also under pressure from price controls, some analysts have been spooked.
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South Korea's Hyundai E&C cancels USD521 MM petrochemicals deal

MOSCOW (MRC) -- South Korea's Hyundai Engineering& Construction said on Monday that it scrapped a 595 billion won (USD521 million) deal to build a petrochemicals complex in Iran, saying the Iranian customer's ability to fund it had been hit by the prospect of U.S. economic sanctions against Tehran, as per Reuters.

In a regulatory filing, Hyundai E&C said the consortium it led for the project's construction cancelled the contract on Sunday.

"The contract was cancelled because financing is not complete, which was a prerequisite for the validity of the contract, as external factors worsened such as economic sanctions against Iran," Hyundai E&C said in its filing.

From Nov. 4, the United States will re-impose sanctions against Iranian crude oil exports as part of President Donald Trump's efforts to force Tehran to accede to a more restrictive deal on limiting its nuclear and missile programmes.
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Total delays start up of La Mede biodiesel refinery to Q1 2019

MOSCOW (MRC) -- French oil and gas major Total has delayed the startup of its planned 500,000 tonnes capacity La Mede biofuel refinery to the first quarter of 2019, as per Hydrocarbonprocessing.

The company has invested around 200 million euros (USD227 million) to convert the loss-making crude refining unit in southeastern France to produce biodiesel. It was expected to start production in the summer.

De la Chevardiere told analysts that production will now start in the first quarter of next year. He did not provide reasons for the delay.
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Singapore fuel oil margins near record as crude tumbles, supplies shrink

MOSCOW (MRC) -- Asian fuel oil refining margins climbed to a near record high on Friday, boosted by falling crude oil prices and tightening supplies of the fuel amid refinery upgrades and looming U.S. sanctions on Iranian oil exports next month, as per Hydrocarbonprocessing.

"Cracks have strengthened recently mostly due to weaker crude prices which are down by almost USD10 per barrel since the start of the month," said Nevyn Nah, an analyst at consulting firm Energy Aspects. Weaker crude oil prices tend to improve margins because of the lower cost for raw materials.

Supplies of fuel oil, the residue oil left after initial crude processing in a refinery, have constricted this year. The oil product is mainly used to power large ships and for electricity generation. Refineries have cut their fuel oil output after upgrades ahead of stricter emissions regulations for ship fuel in 2020 and as exports of Iranian fuel oil, a major producer and exporter of the residual fuel, have dropped before the U.S. sanctions start on Nov. 4.

"Secondary units upgrades in Europe and South Korea, loss of low-viscosity Iranian supplies which is vital for blending West of Suez material," have all contributed to the stronger fuel oil margins, said Nah. Refinery disruptions from key producers such as Venezuela and Mexico have also tightened the availability of fuel oil.

The Singapore 180-centistoke (cst) fuel oil refining margin, or crack, for November was at USD1.43 a barrel above Dubai crude oil during afternoon trade on Friday, data on Refinitiv Eikon showed. The last time the front-month fuel oil crack was at a wider premium was in March 2003.

The more actively traded crack for barges of 380-cst fuel in Europe versus Brent crude has also soared. "The barge crack yesterday shot up pretty sharply to about minus $5.75 a barrel," said a Singapore-based fuel oil broker. The front-month 380-cst barge crack is now at its highest since September 2017, Refinitiv data showed.

Fuel oil typically trades at a discount to crude oil because it is a residual by-product. Oil prices on Friday were heading for a third weekly loss amid growing concerns of oversupply amid a slump in global equities and trade.

From 2020, International Maritime Organization (IMO) rules will ban ships from using fuel oil with a sulphur content above 0.5 percent, compared with 3.5 percent now, unless they are equipped with so-called scrubbers to clean up sulphur emissions.

The new regulations have forced the oil refining and shipping industries to prepare for the shift by making large investments to comply with the new standards.
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