Saudi Aramco board sees too many risks for New York IPO

MOSCOW (MRC) -- The board of Saudi Aramco has determined that listing the state energy giant in New York would carry too many legal risks to make it a realistic option, five sources said, although they said a final decision lay with Saudi Arabia’s crown prince, reported Reuters.

New York was the exchange favored by Crown Prince Mohammed bin Salman before plans for the initial public offering were put on hold last year, the sources said, even after Aramco’s lawyers and some government advisers had raised legal concerns.

New York offers the largest investor base in the world, vital for an IPO that aims to attract as much as $100 billion, a sum that could prove tough for other exchanges to raise. US President Donald Trump urged the kingdom to list in New York.

One source familiar with the IPO plan told Reuters the board, made up of cabinet ministers and Aramco executives, had concluded at an August meeting that a US listing would not be considered "unless Aramco is offered sovereign immunity that protects it from any legal action."

"This is, of course, hard if not impossible to achieve," the source added.

Like other sources who spoke to Reuters, he asked not to be named because of sensitivities surrounding the fate of the IPO which the crown prince hopes will value the company at USD2 trillion. Some insiders and bankers say that figure is too high.

The move to rule out New York and scale back on the valuation suggests technocrats in Aramco and the government are pushing for a more realistic IPO plan, the sources said.

Alongside New York, exchanges in London, Hong Kong and Tokyo have been keen to woo Saudi officials to secure a deal to trade shares in Aramco, which is expected to have a primary listing in Riyadh.

But Saudi officials say the New York disclosure process and complex regulations might legally interfere with the sovereignty of the Saudi government, which would remain the major Aramco shareholder, probably retaining a 95% stake.

"Listing in New York is no longer an option," one industry source familiar with the IPO process said.

Riyadh and London were now the main options, with the domestic listing first to be followed by an international offering at a later stage, four of the sources said.

"The likelihood of a local listing is increasing, with 1-2% of Aramco being listed locally," another source familiar with the IPO process said, adding that “the other possibility is listing in London".

Three sources said potential litigation risks in the United States included U.S. Justice Against Sponsors of Terrorism Act (JASTA) and proposed US legislation known as NOPEC, which could lead to Aramco being sued in US courts.

"The whole system is highly litigious, but of course Aramco has lots of investments in the U.S. which will continue," said another industry source, who has discussed the IPO process with Saudi officials.

NOPEC legislation would make it illegal for foreign nations to work together to limit fossil fuel supplies and set prices, opening Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries to U.S. legal challenges.

JASTA allows lawsuits against the Saudi government as it says it helped plan the Sept. 11, 2001 attacks on the United States and should pay compensation. Riyadh denies the charges.

Aramco could also become embroiled in existing lawsuits against oil companies in the United States for their role in climate change, the sources said.

Saudi Aramco said in a statement it “continues to engage with the shareholder on IPO readiness activities”, when asked by Reuters if New York had been dropped as a listing venue.

"The company is ready and timing will depend on market conditions and be at a time of the shareholder’s choosing," it added, without elaborating.

Tadawul, the main Saudi stock exchange, has said it expected inflows of USD15 billion to USD20 billion this year after its inclusion in the FTSE Russell and MSCI emerging market indices, helping secure liquidity for Aramco’s local listing.

The crown prince has favored a New York Stock Exchange listing in part because of Riyadh’s longstanding ties with Washington, sources familiar with Saudi thinking have said. Aramco began life in the 1930s as a US-Saudi venture.

Selling a 5% stake in Aramco has been a centerpiece of Vision 2030, a plan to diversify the Saudi economy away from oil. But the IPO, initially slated for 2017, has faced repeated delays.

The IPO is now not expected until Aramco completes its acquisition of a majority stake in petrochemicals giant Saudi Basic Industries Corp (SABIC), pushing it back to 2020 or 2021.

Aramco has already asked major banks to submit proposals for potential roles in the planned IPO, two sources said.

Saudi banks were pitching for various roles in the IPO in late August in the eastern Saudi city of Dhahran, while international banks would be pitching for mandates for the share sale in early September in London, one of the two sources said.

As MRC informed previously, in mid-August 2019, Saudi Aramco unveiled a USD15 billion deal to expand its global refining footprint and held its first-ever earnings call with financial analysts, twin moves that could bolster investor confidence as the state-owned oil giant revs up plans to list shares.

Saudi Aramco, officially the Saudi Arabian Oil Company, is a Saudi Arabian national oil and natural gas company based in Dhahran, Saudi Arabia. Saudi Aramco"s value has been estimated at up to USD10 trillion in the Financial Times, making it the world"s most valuable company. Saudi Aramco has both the largest proven crude oil reserves, at more than 260 billion barrels, and largest daily oil production.
MRC

MOSCOW (MRC) -- Negotiations over September shipments of suspension polyvinyl chloride (SPVC) began in the Russian market in the middle of last week. Not all producers announced price cuts, and the reductions were often quite significant, according to ICIS-MRC Price report.

Prices of Russian PVC reached a historic high in the market in July-August due to strong seasonal demand and scheduled shutdowns for maintenance simultaneously at two major production capacities in Sayansk and Sterlitamak. High prices of domestic material led to a multiple increase in imports. And it was precisely large quantities of imports before the end of the high season that became the main reason for price cuts in September prices of Russian PVC. In some cases, price reductions reached Rb4,000/tonnes.

PVC prices in the Russian market have been constantly growing since the beginning of the year, and already in April-May, some buyers began to purchase resin from the US and China on the back of the upward price dynamics of domestic material. Summer strong demand and upcoming shutdowns for turnarounds led to another increase in resin purchasing in foreign markets in June-July.

Two major Russian PVC producers - SayanskKhimPlast and the Bashkir Soda Company, with a total annual capacity of about 600,000 tonnes, shut down their production capacities on 7 July. But higher imports allowed avoiding a shortage of resin in the market during the maintenance period at domestic plants, with the exception of PVC with K=70.

The launch of Russian plants after scheduled turnarounds was quick, and already in August, the market became balanced with a slight surplus due to growth in production volumes and significant imports. Problems with resin with K=70 were resolved (mainly due to imports).

Demand for PVC was strong from the Russian market in August, and good demand is expected in September. But at the same time, some buyers made their purchases as per their monthly needs without building up additional inventories partially because of expectations of a further price cuts in the coming months.

In some cases, September deals for Russian resin with K64/67 were negotiated in the range of Rb76,000-78,000/tonne CPT Moscow, including VAT, for quantities of up to 500 tonnes.
MRC

MOSCOW (MRC) -- Tullow Oil's plan to sell another stake in its 230,000 barrel per day project in Uganda to France's Total and China's CNOOC has been called off due to a tax dispute with the Ugandan authorities, Tullow said, as per Hydrocarbonprocessing.

The London-listed firm had previously sold about two-thirds of the project to CNOOC and Total for USD2.9 billion, in transactions completed by 2012.

It had planned to sell the two companies around another roughly 22% holding in the project in a deal that had been expected to close in late 2018.

That would have cut Tullow's remaining stake to about 11%, raising USD200 million that would have helped the firm cut its net debt, which stood at USD2.9 billion at mid-year, and reduce its operational commitments to the project by around USD700 million.

Tullow said the firms could not reach an agreement with the Ugandan Revenue Authority on the tax relief on money Total and CNOOC would have paid to Tullow, leading to the majors declining to extend the deadline for the deal to be completed.

Shares in Tullow were down around 3.3% at 210.1 pence at 1157 GMT.

"Tullow will now initiate a new sales process to reduce its 33.33% operated stake in the Lake Albert project, which has over 1.5 billion barrels of discovered recoverable resources," it said.

The firm said the partners in the Uganda project had aimed to reach a final investment decision on development by the end of 2019 but that terminating the stake sale "is likely to lead to further delay".

Chief Executive Paul McDade told Reuters it was too early to give a new timeframe for the final investment decision or to talk about potential new partners in the project. He said Total and CNOOC had not yet indicated their view on a fourth partner coming in.

"Whilst frustrations around the project were clear, the termination of the (sale and purchase agreement) and inevitable further delay to the project was an unlikely scenario," said David Round, analyst at BMO Capital Markets.

"Whilst removal of the deal, resultant delay, and project risking clearly impacts valuation, this also has repercussions for Tullow's growth and deleveraging story, and puts more pressure on the on-going program in Guyana."

Tullow has just made a discovery and is doing further exploration work offshore Guyana, one of the world's most-watched basins.
MRC

MOSCOW (MRC) -- Most of a highly toxic chemical stored at a fire-damaged Philadelphia oil refinery has been rendered inert, clearing the way for closer inspections of the site following a June blaze that led to the plant's closure, officials said, as per Hydrocarbonprocessing.

About 340,000 pounds of hydrofluoric acid (HF) stored at Philadelphia Energy Solutions was chemically neutralized, Philadelphia Fire Commissioner Adam Thiel said in a briefing. HF can burn the skin and form a potentially deadly fog at room temperature.

The process "substantially reduces the risk to the community," Thiel said, noting some HF acid still remained at the site. Initial phases of the fire probe, including data gathering, have largely been completed, Thiel said.

HF is used by more than one-third of U.S. refineries in the alkylation process to make high-octane gasoline. Labor unions and environmentalists have urged it be replaced, particularly in densely populated areas.

PES' alkylation unit was destroyed in a fire and series of blasts on June 21 just minutes after the chemical was dumped into a safety vessel. The HF in that vessel has been neutralized, Thiel said.

Removing the HF will allow investigators, including the U.S. Chemical Safety and Hazard Investigation Board, to physically examine damaged areas of the refinery.

Since the fire, PES has closed the refinery, which was the largest and oldest on the East Coast, and filed for Chapter 11 bankruptcy.

Most of the roughly 1,100 PES workers have been laid off without health benefits, including 640 union employees.

PES on Thursday asked the bankruptcy judge to hire an investigations and crisis management attorney to advise the company on the seven federal, state and local investigations into the cause of the June blasts, court documents show.

The refiner has agreed to retain about 80 union employees as a caretaker group until the last of the HF is neutralized. Afterwards, the number of workers will be reduced, according to an agreement reached last week, which is subject to bankruptcy court approval.
MRC

MOSCOW (MRC) -- Polish oil and gas company PGNiG said Thursday it will resell U.S. natural gas to Ukraine’s Energy Resources of Ukraine (ERU), moving a step closer to becoming a gas exporter in the region, Kallanish Energy reports.

Under the deal, PGNiG will receive a liquefied natural gas (LNG) cargo from the U.S. in early November. The gas will be injected into the Polish transmission system after regasification, from where it will reach Ukraine and ERU via the gas connection in Hermanowice, near the border with Ukraine.

Supplying the Ukrainian company will continue until the end of 2019. The companies didn’t provide further details such as pricing, volumes and suppliers.

PGNiG CEO Piotr Wozniak noted the company has the opportunity to purchase LNG on “competitive terms,” has reserved full capacity at the domestic Swinoujscie LNG terminal and has available capacity in the gas pipeline system in Poland and on its borders.

“This makes PGNiG a natural partner for cooperation in building a modern and secure gas market in our part of Europe,” he said. The only current limitation in the development of large-scale exports to Ukraine is the capacity of gas pipelines in Poland in the direction of Silesia–Podkarpacie. However, such capacity should be expanded by 2021 “at the latest,” Wozniak added.

As Poland continue its campaign to reduce the Russian monopoly concerning European gas supply, LNG imports to the country accounted for 20% of total imports in 2018, compared to an 8.5% share in 2016.

Roughly 7.5 billion cubic meters (Bcm) of gas have been imported in nearly 70 cargos – which include spot deliveries and medium- and long-term contracts.
MRC