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BP warns coronavirus could hit global oil demand growth by 40%

February 05/2020

MOSCOW (MRC) -- BP said the deadly coronavirus outbreak could cut global oil demand growth by 40 per cent this year, putting pressure on Opec producers and Russia to curb supplies to keep prices in check, reported Financial Times.

Brian Gilvary, the UK oil majors chief financial officer, said 300,000-500,000 barrels a day were at risk this year - a big chunk of 1.2m b/d growth initially expected by the company and global energy agencies. 

Mr Gilvary added that BP was closely watching "whether Opec balances or not" by enacting production cuts with allies including Russia to bring Brent crude prices "back to the USD65 a barrel range".

His remarks come as Opec and Russia discuss emergency cuts in oil production after the crude price entered a bear market by falling more than 20 per cent in recent weeks to below USD55 a barrel.

The falling price presents an additional challenge for BP just as Bernard Looney, its head of exploration and production, takes over as chief executive on Wednesday from Bob Dudley, who leaves the company after nearly 10 years at the helm.

BPs earnings - like its rivals in the US and Europe - have been under pressure as increased production failed to offset lower energy prices, leading to a 26 per cent drop in fourth-quarter profits.

In the three months to December 31, underlying replacement cost profits - BPs definition of net income and the measure tracked most closely by analysts - were USD2.6bn, versus USD3.5bn in the same period in 2018. However, the results exceeded analysts estimates of slightly less than USD2.1bn.

However, BPs confidence about its ability to generate more cash grew after the completion of a USD1.5bn share buyback programme, new asset disposal targets and falling debt levels led it to raise its dividend by more than 2 per cent to 10.50 cents. 

Its shares rose nearly 5 per cent in early London trading.

"Its a relief for me that we have got the balance sheet trajectory to where we want it to go, which sets us up with a strong foundation for a new chief executive," Mr Gilvary said.

BP reported full-year profits of nearly USD10bn in 2019, down from USD12.7bn the year before.

The companys results followed disappointing earnings from Royal Dutch Shell, ExxonMobil and Chevron, as an energy price slump and contracting chemicals industry margins hit the oil and gas sector. Frances Total will report on Thursday.

BP is reconfiguring its portfolio of assets as part of a broad USD10bn divestment programme to strengthen its balance sheet after a blockbuster deal to acquire mining group BHPs shale assets in 2018. 

Divestment proceeds tallied USD800m in the fourth quarter and BP said it was ahead of its USD10bn target for the end of 2020. It planned a further USD5bn in sales by mid-2021, which it said would enable it to pay down debt after the BHP deal.

Gearing - which BP defines as net debt divided by the sum of net debt plus equity - fell to nearly 31 per cent in the fourth quarter, from close to 32 per cent in the previous three months. BP said it would move towards the middle of the 20 to 30 per cent range in 2020.

Oil and gas production for the quarter was up nearly 3 per cent compared with last year at 2.7m barrels of oil equivalent a day. 

Operating cash flow was USD7.6bn in the fourth quarter, excluding Gulf of Mexico oil spill payments. These payouts are expected to be less than USD1bn in 2020.

BPs capital expenditure is expected to remain towards the lower end of its USD15bn-USD17bn range for 2020, in line with 2019.

As MRC informed before, in September 2019, six world's major petrochemical companies in Flanders, Belgium, North Rhine-Westphalia, Germany, and the Netherlands (Trilateral Region) announced the creation of a consortium to jointly investigate how naphtha or gas steam crackers could be operated using renewable electricity instead of fossil fuels. The Cracker of the Future consortium, which includes BASF, Borealis, BP, LyondellBasell, SABIC and Total, aims to produce base chemicals while also significantly reducing carbon emissions. The companies agreed to invest in R&D and knowledge sharing as they assess the possibility of transitioning their base chemical production to renewable electricity.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).

BP is one of the world's leading international oil and gas companies, providing its customers with fuel for transportation, energy for heat and light, retail services and petrochemicals products for everyday items.
Author:Margaret Volkova
Tags:Europe, PP, PE, PP random copolymer, propylene, ethylene, BASF, Borealis, BP Plc, Chevron, Exxon Mobil, LyondellBasell, Sabic, Shell, Total Petrochemicals, China, Russia, USA.
Category:General News
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