Galp lifts earnings outlook on oil price, improved output

MOSCOW (MRC) -- Portugal's Galp Energia raised its 2018 pre-tax earnings estimate to 2.3 billion euros (USD2.6 billion) from a previous forecast of 1.8-1.9 billion on Monday, as a jump in oil prices and stronger output boosted its third-quarter results, as per Hydrocarbonprocessing.

Galp shares rose by more than 3 percent to 15.5 euros, outperforming the broader Lisbon, which was up by 1.3 percent, and the Stoxx 600 oil and gas index, which was 1.4 percent higher. Oil and gas output rose 10 percent in the third quarter from a year earlier to around 104,000 barrels of oil equivalent per day, but Galp's new projection for a full-year output increase of 15 percent came at the lower end of its previous forecast range of 15-20 percent.

International oil prices surged over 40 percent in the quarter from a year ago. Third-quarter net income and EBITDA (earnings before interest, tax, depreciation and amortisation) rose 35 percent and 38 percent respectively, in line with market expectations, even as refining margin fell 21 percent and refinery throughput declined 7 percent due to scheduled maintenance.

Galp's refining margin of USD5.8 per barrel was nevertheless well above the industry's benchmark of USD3.2 in the quarter. The rise in projected EBITDA came despite expectations of a "weaker refining environment in the fourth quarter".

The company, which is a relative newcomer in the world of big oil, plans to boost output to 150,000 barrels of oil equivalent per day by 2020.

Most of Galp's production growth will come from Brazil, where it has stakes in large offshore oil fields and is looking for further expansion opportunities.
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Chevron in talks to buy Brazilian oil companys Texas refinery

MOSCOW (MRC) -- Chevron Corp has held talks to acquire Pasadena Refining System Inc (PRSI), a Texas oil refining unit of Brazilian state-run oil firm Petroleo Brasileiro SA, three people familiar with the matter said this week, as per Reuters.

U.S. oil companies are looking to expand refining operations to handle rising volumes of crude flowing from the country’s shale fields. A deal for PRSI would give Chevron an oil refinery that can process about 110,000 barrels-per-day of light crude.

Chevron is also discussing a gas liquids processing joint venture with Kinder Morgan Inc (KMI.N), largest energy infrastructure provider in North America, two of the sources said. Kinder Morgan operates a nearby plant that separates gas liquids into ethane, propane and other fuels.

The sources requested anonymity to discuss the confidential talks. They did not disclose the deal price. Petrobras did not respond to requests for comment. Chevron and Kinder Morgan declined to comment.

Petrobras, which is deeply in debt, has been seeking to divest USD21 billion in assets by year-end but has faced union resistance and legal obstacles. A presidential election on Sunday could raise obstacles for a sale with front-runner Jair Bolsonaro promising to install new managers at the company.

The PRSI refinery has been limited in the type of crude it can run since a 2011 fire, which left one of its processing units idle. A buyer would have to invest to upgrade the refinery, one of the people familiar with the matter said. But PRSI includes open land that could enable a future owner to easily expand the plant.

Petrobras put the plant, which is on the Houston Ship Channel leading to the U.S. Gulf of Mexico and has its own export docks, on the market earlier this year after sinking more than USD1.18 billion into the operation since 2006.

Garfield Miller, chief executive of energy investment bank Aegis Energy Advisors, said the U.S. shale-oil boom has given a second chance to U.S. plants designed to process lighter crudes. Several years ago Petrobras would not have been able to sell PRSI because of its age and inability to process heavy crudes, he said.

That has changed with the growth of the Permian Basin, the nation’s largest oilfield, which now produces 3.5 million barrels per day of oil, according to U.S. government figures. “Anyone with crude in the Permian might logically want to own it,” said Miller. “This refinery today has value, whereas eight or nine years ago it had none.”

Pierre Breber, Chevron’s head of refining and chemicals, this month said the company wanted to build or buy a refinery along the U.S. Gulf Coast to process oil from its West Texas operations.

Chevron’s shale output from the region jumped 51 percent in the second quarter to 270,000 barrels of oil equivalent per day. By expanding its refining capacity to Houston, it would be able to process the crude closer to where it is produced.
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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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