Chevron charge points to billions more in gas writedowns

MOSCOW (MRC) -- Oil and gas producers could wipe billions of dollars more off the value of US natural gas assets in the months ahead, analysts said, after Chevron Corp became the fourth oil major to slash its estimates for sector values, reported Reuters.

A long, steady increase in US gas production - much of it a byproduct of the shale oil boom - has pushed prices for the fuel heading toward a 25-year low and a number of analysts have already forecast that the oversupply will worsen in 2020.

Prior to Chevron’s impairment, BP PLC, Repsol SA and Equinor ASA had written down billions worth of North American shale assets in recent months.

Chevron on Tuesday said it expects to take writedowns to the tune of USD10 billion to USD11 billion in the fourth quarter, more than half of which is related to its Appalachia gas shale assets. Shares of the company were down 0.7% at USD117.04 in early trading.

It also flagged a cut to its longer-term commodity price outlook without specifying numbers, and said it was planning to sell some natural gas projects.

"It ... highlights that many companies are still carrying assets on their balance sheet that were acquired or developed with cost structures that are materially higher than today’s levels," Berenberg analysts Henry Tarr and Ilkin Karimli said.

BP Plc said in its 2018 annual report that it determines the size of its recoverable oil and gas reserves based on a long-term Brent oil price of USD75 a barrel and a Henry Hub natural gas price of USD4 per mmbtu.

European peer Shell has also long expected improvement in prices and forecast in its 2018 annual report that Henry Hub natural gas prices would rise to USD3.50 in 2020 and 2021 from USD3.25 per mmbtu in 2019.

Benchmark gas prices are currently around USD2.28 and Morgan Stanley analysts on Wednesday lowered their forecast for next year to USD2.25 from USD2.50.

Spain’s Repsol last week recorded a 4.8 billion euro (USD5.29 billion) asset loss, primarily on its North America assets. BP took a USD3.3 billion charge in the third quarter with USD2.3 billion relating to heritage shale assets from the BHP portfolio it acquired last year for USD10.5 billion.

Norway’s Equinor wrote off USD2.8 billion in the third quarter, while Exxon Mobil Corp took a USD2 billion charge in 2017 against the value of natural gas reserves from its buyout of XTO Energy.

"The pricing companies have to use for reporting their proved reserves are on pace to be around 15% lower than last year, so I’d expect reserve write-downs to be prolific," Edward Jones analyst Jennifer Rowland said.

As MRC wrote oreviously, in March 2018, Chevron Phillips Chemical Company LP, a subsidiary of Chevron Corporation, successfully introduced feedstock and commenced operations of a new ethane cracker at its Cedar Bayou facility in Baytown, Texas. At peak production, the unit will produce 1.5 million metric tons/3.3 billion lbs. per year.

We also remind that US-based Phillips 66 remains open to developing another ethane cracker for its Chevron Phillips Chemical (CP Chem) joint venture, the refiner's CEO said in March 2018.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,724,670 tonnes in the first ten months of 2019, up by 7% year on year. Shipments of all PE grades increased. The estimated PP consumption in the Russian market in January-October 2019 totalled 1,066,520 tonnes, up by 7% year on year. Supply of block copolymers of propylene (PP block copolymer) and homopolymer of propylene (homopolymer PP) increased, demand for statistical copolymers (PP random copolymer) decreased.

Headquartered in San Ramon, California, Chevron Corporation is the the second-largest integrated energy company in the United States and among the largest corporations in the world. Chevron is involved in upstream activities including exploration and production, downstream activities including refining, marketing and transportation, and advanced energy technology. Chevron is also invested in power generation and gasification processes.
MRC

MOSCOW (MRC) -- Royal Dutch Shell Plc cut back production on the crude distillation unit (CDU) and shut the coker at its 225,300-barrel-per-day (bpd) Norco refinery in Louisiana, reported Reuters sources familiar with the plant operations said.

Three workers were also injured on the same day after the release of hot condensate from the gasoline-producing residual catalytic cracking unit (RCCU) at the Norco refinery, the sources said late Wednesday.

It was unclear if the two events were related, the sources said.

Shell spokesman Ray Fisher declined to discuss the status of operations at the refinery.

The three contract workers were taken to a local hospital and are expected to recover completely, Fisher said.

Production at the 240,000-bpd DU-5 CDU was reduced to repair a leak, the sources said. The cut in CDU production stopped residual crude going to the 25,000-bpd coker and it had to be shut, the sources said.

The CDU does the primary refining of crude oil into feedstocks for all other production units at the refinery.

Cokers convert residual crude oil supplied by distillation units into feedstock for motor fuels or petroleum coke - a coal substitute.

As MRC informed before, in mid-October 2019, Royal Dutch Shell Plc restarted the hydrocracker at its 225,300 barrel-per-day (bpd) Norco, Louisiana, refinery. The 40,000 bpd hydrocracker was shut on Sept. 9 for a planned month-long overhaul. A longer than expected restart of the unit stretched the outage to six weeks.

We also remind that Shell Singapore restarted its naphtha cracker in Bukom Island on 7-10 December, following a two months maintenance shutdown since the beginning of October 2019. Thus, this cracker was taken off-stream for the turnaround on 1 October 2019. The cracker is able to produce 960,000 tons/year of ethylene and 550,000 tons/year of propylene.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polyprolypele (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,724,670 tonnes in the first ten months of 2019, up by 7% year on year. Shipments of all PE grades increased. The estimated PP consumption in the Russian market in January-October 2019 totalled 1,066,520 tonnes, up by 7% year on year. Supply of block copolymers of propylene (PP block copolymer) and homopolymer of propylene (homopolymer PP) increased, demand for statistical copolymers (PP random copolymer) decreased.

Royal Dutch Shell plc is an Anglo-Dutch multinational oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the biggest company in the world in terms of revenue and one of the six oil and gas "supermajors". Shell is vertically integrated and is active in every area of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading.
MRC

MOSCOW (MRC) -- Firefighters have put out a fire caused by a pipeline leak at a refinery in northeastern China operated by PetroChina, reported Reuters with reference to media reports on Thursday.

The fire broke out at 9:39 pm local time on Wednesday after an oil pipeline leak at No.2 oil plant PetroChina’s Fushun Petrochemical Corp in northeast China’s Liaoning province, People’s Daily reported.

The fire was put out around midnight after more than 40 fire trucks were dispatched to the site. There were no injuries, the report said.

A PetroChina spokesman said he was not aware of the accident and couldn’t immediately comment.

As MRC informed earlier, in the second half of 2012, a subsidiary of PetroChina - Fushun Petrochemical - started production of basic petrochemical products at its new plant in Fushun, Liaoning Province, China. The design capacity of the petrochemical complex is 300,000 tonnes per year of polypropylene (PP), 350,000 tonnes per year of high density polyethylene (HDPE) and 450,000 tonnes per year of linear low density polyethylene (LLDPE).

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,724,670 tonnes in the first ten months of 2019, up by 7% year on year. Shipments of all PE grades increased. The estimated PP consumption in the Russian market in January-October 2019 totalled 1,066,520 tonnes, up by 7% year on year. Supply of block copolymers of propylene (PP block copolymer) and homopolymer of propylene (homopolymer PP) increased, demand for statistical copolymers (PP random copolymer) decreased.

PetroChina Company Limited is a Chinese oil company and is the listed arm of state-owned China National Petroleum Corporation (CNPC), headquartered in Dongcheng District, Beijing. It is China's biggest oil producer and the most profitable company in Asia.
MRC

MOSCOW (MRC) -- December prices of Iranian polystyrene (PS) went down for Ukrainian buyers last week, according to ICIS-MRC Price report.

Thus, this month's reduction in prices of Iranian material, including delivery to the port of Odessa, was USD20/tonne.

Thus, import prices of Tabriz's injection moulding general purpose polystyrene (GPPS) fell to USD1,025-1,035/tonne CIF Odessa, excluding VAT, in the Ukrainian market, whereas high impact polystyrene (HIPS) could be purchased at USD1,060-1,065/tonne CIF Odessa, excluding VAT, in December.

Petropaak's material was offered by USD10/tonne lower than Tabriz's one.

As reported earlier, prices of Iranian PS remained the same for Ukrainian buyers in late November, whereas they fell by USD20/tonne for supplies to this region earlier last month.
MRC

MOSCOW (MRC) -- Baltic Chemical Plant LLC (BCP), a wholly-owned subsidiary of RusGasDobycha, has selected Univation Technologies’ UNIPOL PE Process for six reactor lines to be located at the Ust-Luga marine port located in Leningradsky Region, Russia, according to Kemicalinfo.

With maximum product flexibility in mind, each UNIPOL PE Reactor line is designed for a world-scale capacity of 500,000 TPY, yielding a total design capacity of 3,000,000 TPY.

BCP will access Univation’s most advanced product technology platforms including ACCLAIM Technology for unimodal HDPE, PRODIGY Technology for bimodal HDPE grades, and XCAT Technology for advanced metallocene LLDPE. These technologies enable BCP with capabilities to serve a wide range of HDPE and LLDPE applications including LLDPE for blown and stretch film, MDPE for rotomolding, and HDPE for pipe, injection and blow molding products.

Additionally, BCP elected to incorporate Univation’s latest process control system, PREMIER APC+ 3.0, across all production lines. APC+ 3.0 delivers state-of-the-art process control capability designed to maximize production rates, facilitate product transitions and enhance overall economic performance of the UNIPOL PE Process.

Mr. Konstantin Makhov, General Director of Baltic Chemical Plant LLC, added his comments, "We know that we can depend on Univation to deliver the technology, the know-how, and the experience required to achieve the necessary safety, technical, and economic objectives for this substantial new capacity build project. We will be working closely with the Univation teams on all aspects of this truly world-scale project as we expectantly look ahead to delivering this new significant source of PE resins supply to the marketplace."

We remind that, as MRC wrote before, in May 2019, Hyundai Chemical Co. selected Univation Technologies' Unipol PE technology for a new high-density polyethylene (HDPE) facility to be built in South Korea. The 300,000-t/y HDPE plant, which will be located at Hyundai's site in Daesan, will utilize Univation's broad range of HDPE product technology portfolio, including the Acclaim K-100 Catalyst series for advanced HDPE products. An expected completion date for the project was not given.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,724,670 tonnes in the first ten months of 2019, up by 7% year on year. Shipments of all PE grades increased.
MRC