Petrobras refineries sale lures trading companies, PetroChina, Saudi Aramco

MOSCOW (MRC) -- Brazil’s planned privatization of eight Petroleo Brasileiro SA refineries has lured several of the world’s largest trading and oil companies as prospective bidders, reported Reuters with reference to two sources with knowledge of the matter.

Around 20 companies have signed non-disclosure agreements granting them access to the refineries’ data and signaling that they are considering a bid, the sources added, speaking on condition of anonymity to disclose private details of the sale.

The first round of non-binding offers for four of the eight refineries Petrobras put on the block is due on Oct. 11, the sources said. The eight refineries have total capacity of 1.1 million barrels per day.

Among the potential bidders are trading firms Vitol SA, Glencore PLC and Trafigura AG. Local companies Ultrapar Participacoes SA and Raizen, a joint venture of Brazil’s Cosan SA and Royal Dutch Shell (RDSa.L), also signed non-disclosure agreements.

Other companies interested, according to the sources, include PetroChina Co and Sinopec, which already has a Brazilian joint venture with Spain’s Repsol (REP.MC). Oil behemoth Saudi Aramco, which is planning one of the world’s largest initial public offerings, is also looking at the refining units’ numbers.

The request to access the data room is just the first step of companies interested in the deal, and does not mean they will deliver bids on Oct. 11.

Petrobras, PetroChina, Ultrapar, Sinopec and Vitol did not immediately comment on the matter. Raizen, Trafigura, Saudi Aramco and Glencore declined to comment.

The deal, to be one of Petrobras’ largest divestitures ever, would transform Brazil’s oil industry and may raise around USD18 billion, bankers working on the deal say. Refining has traditionally been state-owned in Brazil, triggering occasional calls for government price controls.

At least partial privatization is widely seen as one of the best possible ways to bring real competition to the Brazilian oil industry.

Antitrust watchdog CADE has already forced Petrobras to change its refinery sale process to boost competition, demanding the separate sale of each of the eight refineries. A single buyer will be barred from buying two of the largest refineries in the same area, whether it be the northeast, the south or the southeast.

Petrobras is also carving out logistics assets, such as oil pipelines and terminals, to sell along with the refineries, one of the sources said.

Most of the bidding groups are expected to include private pipeline operators, possibly including France’s Engie and Canada’s Brookfield, one of the sources said, explaining that oil companies are reaching out to them. Both companies recently acquired Petrobras assets.

As MRC informed earlier, in june 2019, Petroleo Brasileiro SA said it signed a deal with local antitrust regulator CADE regarding the proposed sale of some of its refining installations.

Headquartered in Rio de Janeiro, Petrobras is an integrated energy firm. Petrobras' activities include exploration, exploitation and production of oil from reservoir wells, shale and other rocks as well as refining, processing, trade and transport of oil and oil products, natural gas and other fluid hydrocarbons, in addition to other energy-related activities.
MRC

MOSCOW (MRC) -- Milliken & Company, recognized as a worldwide leader of plastic additives and colorants, has unveiled plans to construct a new, state-of-the-art chemical manufacturing plant and knowledge center in Asia, as per the company's press release.

Expected to begin operations in Q1 2021, the facility expands Milliken’s chemical manufacturing footprint to support increasing demand across Asia, including rapidly growing markets in India and China. The company currently operates an applications lab and technical service and sales office in Singapore, and recently celebrated its 20-year presence in the region.

"Milliken’s commitment to our growing markets in Asia is unwavering. With this investment, we hope to expand the positive impact innovative chemical manufacturing can contribute to the region and to the world," said Allen Jacoby, senior vice president of the Plastics Additives business within Milliken’s Chemical division.

The new plant will have the capability to manufacture several integral Milliken plastic additives that bring sustainability and production benefits to the global plastics industry. Primarily, the location will produce the company’s Hyperform family of nucleating agents for polypropylene (PP) and polyethylene (PE); as well as specialty colorants for a broad range of product applications, including home and laundry care, personal care, industrial and institutional cleaners, and polyurethane foams.

The Singapore plant will be staffed with a skilled workforce including research and development chemists, chemical engineers, and technical support.

As MRC wrote before, at this spring’s Hispack 2018 trade fair in Spain, Milliken Chemical showcased containers of NX UltraClear polypropylene made using its Millad NX 8000 clarifier, and highlighted why that material is the preferred solution for packaging.

According to MRC's ScanPlast report, Russia's estimated PE consumption was 1,081,100 tonnes in the first half of 2019, up by 8% year on year. Deliveries of all PE grades increased. Meanwhile, the estimated consumption of PP in the Russian market totalled 694,210 tonnes in January-June 2019, up by 14% year on year. The supply of propylene block copolymers (PP-block) and propylene homopolymers (PP-homo) increased.

Milliken is an innovation company that has been exploring, discovering, and creating ways to enhance people’s lives since 1865. The company creates coatings, specialty chemicals, and advanced additive and colorant technologies that transform the way we experience products from automotive plastics to children's art supplies.
MRC

MOSCOW (MRC) -- President Andres Manuel Lopez Obrador had accused private companies of taking unfair advantage of the country when the contracts were signed under previous administrations, in part because some contracts required the government to pay whether it received gas or not. He had ordered the contracts suspended, but started talks with the firms, reported Reuters.

Lopez Obrador acknowledged that the dispute with companies from the US, Canada and Mexico could potentially harm Mexico's reputation among investors.

"We avoided a dispute that would have implied going to international tribunals, a dispute that would have taken years to resolve and which would have generated an atmosphere of mistrust toward the government and toward Mexico at a time when we need investment," Lopez Obrador said.

In June, former Canadian Ambassador Pierre Alarie wrote, "I am deeply concerned by the actions of the CFE (Federal Electricity Commission) and the signal they send that ... Mexico will not respect the gas pipeline contracts."

The dispute involves seven pipelines, some of which are completed and some of which are blocked by court appeals or protests. In some cases, those projects have been blocked for months or even years. Mexico already had a reputation of being a place where rights of way are hard to secure, making infrastructure projects in general more expensive and difficult.

On Tuesday, Lopez Obrador welcomed business magnate Carlos Slim, Mexico's richest man, to his daily morning news conference and praised the companies for taking what he claimed were 30% lower profits, in exchange for changing fee structures to a flat rate. The term of the contracts will also be extended, apparently in some cases from 25 to 30 years.

Lopez Obrador said the deal would save Mexico - especially the CFE, the national electricity utility, the biggest single consumer of gas - as much as USD4.5 billion over the next three decades.

Slim suggested that more up-front income in the contracts would allow the companies financing advantages. Slim's Carso Energy was one of the builder-operators of the pipelines. The rest included companies like Canada's TCEnergia (TCEnergy, formerly TransCanada) and IEnova, a subsidiary of US Sempra Energy. An agreement with a fourth Mexican company is still pending.

In a statement, IEnova said that "the agreement would not have been possible without the direct and personal intervention of the president."

"This agreement is the result of compromises on both sides, to take advantage of infrastructure that is essential to bring natural gas to millions of Mexicans and the country's industry."

While pipeline construction has sparked confrontations in many countries, in Mexico such conflicts are particularly intractable. As a result, Mexican electricity rates and gas prices are much higher than in the United States, despite the proximity of the two markets.

In the northern border state of Sonora, for example, a group of Yaqui Indian residents have blocked the last kilometers of a pipeline for the last three years. The 518-mile (835-kilometer) line is practically finished, and other Yaqui communities have reached agreements to allow it to pass through their lands, but one 500-member community has stopped the entire project, saying it doesn't want a about 2.5-mile (4-kilometer) stretch that passes through their land.

Also Tuesday the Mexican peso lost value against the US dollar to close over 20 to the greenback for the first time since Dec. 19, 2018, according to Banco BASE. The financial group said there is nervousness over the global economy amid the US-China trade war.
MRC

MOSCOW (MRC) -- Marlboro maker Philip Morris International Inc said it was in talks to reunite in a merger with Altria Group Inc (MO.N) following its 2008 spin-off, as the tobacco giants seek to pool resources in the fast growing e-cigarette market, said Reuters.

The merger between the two companies, the biggest ever in the consumer sector and the fourth-largest deal of all time, would create a tobacco giant with a market capitalization of approximately USD200 billion.

It would come two years after British American Tobacco Plc (BATS.L) bought out Reynolds American Inc for USD49 billion, underscoring how the decline in cigarette smoking globally is pushing tobacco companies to seek scale and pool resources in their development of alternative products.

Under the terms of the all-stock merger being discussed, Altria shareholders would receive no premium and own between 41% to 42% of the combined company, with Philip Morris shareholders owning the remainder, according to a source familiar with the matter who was not authorized to discuss the details publicly.

The board of the combined company would be split evenly between Philip Morris and Altria directors, the source said. If the deal negotiations prove successful, an agreement could be reached by the end of September, the source added.

The two U.S.-headquartered companies separated 11 years ago to focus on different geographic markets, at a time when tobacco stocks generated steady yields. Since then, the industry has been disrupted by a move away from traditional smoking into e-cigarettes and vaping.

The two have responded with new offerings. Philip Morris, which operates outside the United States, has developed a heated tobacco product called iQOS. Altria, which operates in the United States and still sells Marlboro in the country, acquired a 35% stake in vaping company Juul Labs Inc last year for USD12.8 billion.

Some analysts and investors fretted that the lack of geographic overlap between the two companies could limit the value of operational synergies. Philip Morris and Altria shares ended trading on Tuesday down 7.8% and 4%, respectively, giving the companies market capitalizations of USD112 billion and USD84.5 billion.
MRC

MOSCOW (MRC) - Aramco Trading Company (ATC) sold its first-ever cargo of U.S. West Texas Light (WTL) crude, with a South Korean refiner the buyer, as the Saudi Aramco unit expands its U.S. oil dealings to boost trade volumes, four people familiar with the matter said, as per Reuters.

ATC is key to Saudi Aramco’s strategy as it expands its refining and petrochemical operations to boost global sales. The trading unit has been buying U.S. crude from Texas refinery Motiva to re-sell in Asia, the people said.

ATC has been shipping U.S. oil such as West Texas Intermediate (WTI) Midland crude, Eagle Ford condensate and sour grade Mars to refiners in Japan, South Korea, Taiwan, Thailand and the United Arab Emirates since last year, they said.

It expanded that selection of U.S. crudes earlier this month, loading its first-ever 1 million-barrel cargo of WTL, the people said. The shipment is expected to arrive at Hyundai Oilbank’s refinery in Daesan in October, they said.

This was also Hyundai Oilbank’s first WTL crude purchase, two of the sources said. The sources declined to be named as they were not authorized to speak to the media. Saudi Aramco and Motiva did not respond to a request for comment. Hyundai Oilbank declined to comment.

The shipment follows an agreement this year for Saudi Aramco to take a 17% stake in Hyundai Oilbank, South Korea’s smallest refiner by capacity. The firms also signed two 20-year contracts for Aramco and its trading arm to supply 250,000 barrels per day (bpd) of crude from January 2020.

ATC was set up in 2012 initially to market refined products, base oils and bulk petrochemicals, but it has expanded into crude, competing with trading and international oil companies.

The company is using Motiva’s expertise in sourcing and pricing U.S. crude to expand its trade volume, the people said. Because of its experience as a refiner, Motiva is able to get good prices for U.S. oil, one person said.

In return, ATC buys Iraqi Basra crude for Motiva when the market is favorable, the people familiar with the matter said.

The United States has become the world’s biggest oil producer as shale oil discoveries have pushed its output above 12 million bpd, sending U.S. exports to a record above 3 million bpd since a crude oil export ban was lifted in 2015.

Over the past year, more of the output from the Permian Basin, the biggest U.S. shale field, has been of a super light oil known as WTL with an API gravity - a measure of density - similar to condensate.

ATC has especially stepped up condensate sales to refiners in South Korea and the United Arab Emirates after they stopped importing the petrochemical feedstock from Iran due to U.S. sanctions, trade sources said.

Besides supplying U.S. Eagle Ford condensate, ATC’s WTL shipments could increase as more of the light oil becomes available for export after new pipelines connect shale oil production from the Permian Basin to U.S. Gulf Coast terminals, one of the people said.

Plains All American’s 670,000-bpd Cactus II pipeline began commercial deliveries this month. The pipeline segregates WTL barrels to maintain quality from the oilfield to the dock, which is vital to Asian refiners, the people said.

“Asia should have demand for it with their (condensate) splitters and capabilities to run ultra light crudes,” one source said. South Korea surpassed Canada to become the biggest buyer of U.S. oil in June.
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