Pemex to hire service firms for oil rebound

MOOSCOW (MRC) -- Mexican national oil company Pemex will offer a new set of oilfield service contracts to interested firms, the finance minister said, as it embarks on the challenge of ramping up production by 17% to meet 2020 budget targets, said Hydrocarbonprocessing.

Pemex will open bidding between the end of this year and early next year for 15 so-called integrated exploration and extraction contracts (CSIEE), the same model of service contracts the firm is using to develop another 20 priority projects mostly clustered in the southern Gulf of Mexico.

Finance Minister Arturo Herrera touted the contracts as public-private partnerships in an interview with broadcaster Televisa. But the contracts, which do not offer equity stakes in Pemex projects or a share of production or profits, were greeted with skepticism from industry experts.

"This looks to me like a step backwards,” said Pablo Medina, a Mexico City-based oil analyst with Welligence. He noted that the contracts pay a fixed fee per barrel produced under a base scenario that can rise if more oil is produced. “The competition for capital in Latin America is intense and many countries are offering more attractive terms than before,” he said.

Mexico’s previous government lured a wide range of international oil majors by offering dozens of contracts sharing both risks and rewards, something the service contracts do not do.

President Andres Manuel Lopez Obrador’s 2020 budget blueprint, unveiled on Sunday, forecasts Mexican production, almost all from Pemex, of 1.95 million barrels per day of oil, up 17% from current levels. That target follows 14 straight years of slumping output thanks to a mixture of ageing fields and a lack of investment.

The government says it has already stemmed the decline and is now confident production will quickly rebound thanks to a strategy of investing in easier-to-reach shallow water and onshore fields rather than the longer-term deepwater projects.

"What makes us feel optimistic regarding production?” Herrera asked. “Pemex’s change in strategy wherein it is investing more in shallow waters and on land where it is easier to extract,” he said, referring to tax breaks and a federal government cash injection outlined in the budget.

The budget calls for a $26.8 billion Pemex budget overall, up about 9% compared with this year. Herrera stressed an additional USD4.4 billion in support for the firm, including tax breaks and a capital injection of USD2.35 billion.

However, credit rating agency Moody’s analyst Ariane Ortiz-Bollin said in a statement earlier this week that the budget proposal underestimates the amount of funding that Pemex may require going forward. The nine-month-old Lopez Obrador administration has canceled auctions to pick joint ventures partners for Pemex that would give private companies a greater stake in projects, as well as separate oil auctions that allowed oil majors to operate exploration and production projects on their own.

Both were seen as a way to help reverse the slide in Pemex’s production by attracting significant outside investment from private partners.

A business plan published by Pemex earlier this year says the service contracts could extend up to 20 years, paying a fee set in U.S. dollars that can vary based on the complexity of the project and based on production achieved. In all cases, Pemex would not cede control of the operatorship of the projects.

The world’s most indebted oil company, Pemex is at risk of a second downgrade of its bonds to so-called junk status after Fitch did so in June, which would trigger forced selling of bonds worth billions of dollars. Herrera said the government will “defend the credit rating” of Pemex, assuring the firm has money to invest and managing its debt profile so it is “more adequate."

MRC

HDPE production in Russia decreased by 0.6% in January-August

MOSCOW (MRC) -- Russia's production of high density polyethylene (HDPE) totalled about 648,900 tonnes in the first eight months of 2019, down by 0.6% year on year. Two producers out of four reduced their output, according to MRC's ScanPlast report.

August HDPE production in Russia grew to 84,300 tonnes, whereas this figure was 78,300 tonnes a month earlier. The increase in production volumes was a result of the completion of scheduled maintenance works at Gazprom Neftekhim Salavat facilities. Thus, overall HDPE output reached 648,900 tonnes in January-August 2019, compared to 652,500 tonnes a year earlier. Kazanogrsintez and Stavrolen could not compensate for the lack of output at Nizhnekamskneftekhim and the reduction in production at Gazprom neftekhim Salavat.

The structure of polyethylene (PE) production by plants looked the following way over the stated period.


Russia's August HDPE production at Kazanorgsintez increased to 50,800 tonnes from 49,600 tonnes a month earlier. The Kazan plant's overall HDPE output reached 369,200 tonnes in January-August 2019, up by 3.3% year on year.

Stavrolen produced about 28,200 tonnes last month versus 28,400 tonnes in July. The plant's overall output reached 210,800 tonnes over the stated period, up by 7% year on year. Stavrolen on 6 September shut down its HDPE production for maintenance, which will last until 15 October.


Gazprom neftekhim Salavat resumed the production of HDPE in August after the planned turnaround with a delay ; for an incomplete month of production last month, the output of polyethylene amounted to about 5,400 tonnes. The Bashkir plant's overall HDPE output reached 66,900 tonnes in the first eight months of 2019, up by 16% year on year. We remind that the Salavat producer did not take off-stream its production capacities for maintenance last year.

Nizhnekamskneftekhim produced exclusively LLDPE over the stated period.


MRC

ONGC mulls buying out rest of OPaL

MOSCOW (MRC) -- India’s Oil and Natural Gas Corp Ltd plans to buy out the rest of ONGC Petro additions Ltd (OPaL), majority-owned by ONGC, and launch a public offering if it fails to find a strategic partner for it, as per Plastemart.

ONGC has long tried to bring in a strategic partner in the petrochemical project but failed to strike a deal so far.

ONGC’s stake in the project could rise to 70% if it converts INR 26 billion of share warrants into equity and to about 93% if it also converted INR 77.78 billion of debentures into shareholdings, Kumar said. ONGC owns 49.36% of the project and gas utility Gail (India) Ltd owns another 49.21%. The remaining stake is held by Gujarat State Petroleum Corp Ltd, a state government-owned gas company.

"We are looking at various options. Our first preference is to convert OPaL into a subsidiary by converting share warrants and debenture into equity if we don’t get a strategic partner," Subhash Kumar, ONGC’s director of finance told Reuters. "Another option is to merge OPaL with ONGC.” ONGC will decide by the end of its fiscal year on whether to make OPaL a subsidiary, he said. "After making it a subsidiary, it will take another two years to list the company," Kumar said.

OPaL operates a 1.1m tonne/year ethylene cracker, two 360,000 tonne/year linear low density PE (LLDPE)/high density PE (HDPE) swing units, a 340,000 tonne/year HDPE plant and a 340,000 tonne/year polypropylene line at Dahej, in India’s western state of Gujarat.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,255,800 tonnes in the first seven months of 2019, up by 9% year on year. Shipments of all PE grades increased. At the same time, the estimated PP consumption in the Russian market was 796,120 tonnes in January-July 2019, up by 11% year on year. Shipments of PP block copolymer and homopolymer PP increased.

OPaL is a joint venture between Gujarat State Petroleum Corp (GSPC), Gas Authority of India Ltd (GAIL) and ONGC.
MRC

Shortage of Nizhnekamsk PS did not cause a stir among Ukrainian buyers

MOSCOW (MRC) -- Despite a shortage of Nizhnekamskneftekhim's polystyrene (PS) in September, there was no rush among buyers of material in the Ukrainian market, according to ICIS-MRC Price report.

Most sellers have already increased prices of material for the available at warehouses quantities of Nizhnekamskneftekhim's PS.

Some buyers in the Ukrainian market ordered additional quantities of Iranian material amid limited volumes from the Russian producer.

Thus, high impact polystyrene (HIPS) prices rose to UAH40,000-41,000/tonne, CPT Kiev, including VAT, in the domestic market, whereas general purpose polystyrene (GPPS) prices grew to UAH40,500-42,000/tonne, CPT Kiev, including VAT. Iranian GPPS was offered at UAH41,000-41,500/tonne CPT Kiev, including VAT, in the domestic market.
MRC

Kazanorgsintez to shut its LDPE production for turnaround on 26 September

MOSCOW (MRC) -- Kazanorgsintez (part of TAIF Group) will begin shutting down its low density polyethylene (LDPE) production for a scheduled turnaround on 26 September, according to ICIS-MRC Price Report.

The plant's sources said the outage at some LDPE lines will last until 24 October 2019.

The plant's overall annual LDPE production capacity is 225,000 tonnes.

As reported earlier, Kazanorgsintez gradually took off-stream its 3rd LDPE line on 10-12 April, 2019. The outage was long and lasted for almost one month. Kazanorgsintez began gradually resuming its operations at its 3rd LDPE line since 5 May, and the restart had been fully completed by 12 May. The third line's production capacity is 140,000 tonnes/year.

PJSC "Kazanorgsintez" (part of TAIF Group) is one of Russia's largest plants. Kazanorgsintez produces 40% of overall Russian polyethylene (PE) and is the country's largest exporter. To date, the plant produces PE, polycarbonate (PC), PE pipes, phenol, acetone, bisphenol A. Kazanorgsintez is Russia's only PC producer. It manufactures a total of 170 items of products. Kazanorgsintez's annual output is 1.6 million tonnes. The plant is Russia's largest producer of high density polyethylene (HDPE). The plant's annual HDPE production capacity is 540,000 tonnes and its annual LDPE capacity is 225,000 tonnes.
MRC