Chemical and oil companies to slash capital spending, slowing investment wave

MOSCOW (MRC) -- In the wake of the coronavirus and collapse in crude oil prices, chemical, oil and gas, and midstream companies will all slash capital spending (capex) for growth projects to preserve cash. As a result, the U.S. and global chemical investment wave looks to slow considerably in the years ahead, said Canplastics.

While major U.S. chemical projects under construction should continue, the fall in Brent crude oil prices and the shrinking of the Brent/US Henry Hub natural gas ratio from the 30s to the mid-teens “puts into question the economics long term”, said Kevin Swift, chief economist of the American Chemistry Council (ACC) speaking on an ICIS webinar on the economic outlook on March 19. “This creates an awful lot of uncertainty, and decision-makers don’t like uncertainty,” he added.

This year, US-based Dow had already taken down its capex plan to USD1.5bn for 2020 from USD2bn in 2019. However, on a March 16 appearance on CNBC’s Mad Money program with Jim Cramer, CEO Jim Fitterling said the company would struggle to meet even the lowered USD1.5bn capex target because of limitations on the movement of contractors and engineers given the coronavirus outbreak.

On March 18, Shell announced the temporary suspension of work on its 1.5m tonne/year cracker under construction in Monaca, Pennsylvania to prevent the spread of the coronavirus. No timeframe was given for when work would resume. For Dow, after having paid down around USD2bn in debt in 2019, it would like to pay off another USD500m-USD1bn in debt in 2020, said Fitterling. At the end of 2019, Dow had net debt of USD14.6bn.

Dow is in the process of starting up its Texas-9 cracker expansion adding 500,000 tonnes/year of ethylene capacity in Freeport by mid-Q2. Among other project plans are a 130,000 tonne/year ethylene expansion in Western Canada by H1 2021 and a 600,000 tonne/year polyethylene (PE) plant on the U.S. Gulf Coast for an H2 2022 start-up.

Canada-based Methanex on March 16 said it is evaluating all capital and operating spending, including its planned Geismar 3 project in Louisiana which would add 1.8m tonnes/year of methanol capacity. Construction on the plant started in late 2019 with planned start-up for mid-2022.

In late January, Methanex announced it was broadening its search for a strategic partner for Geismar 3.

As MRC informed earlier, operations at Italian petrochemical producer Versalis (part of Eni) have not affected by emergency quarantine measures in the country. Italian Prime Minister Giuseppe Conte extended its emergency coronavirus measures Wednesday evening and announced the closure of "non-essential" commercial businesses. This follows the announcement of a nationwide lockdown on Monday, limiting movement for around 60 million people. Under these measures people will only be allowed to leave their homes for work or health reasons. Versalis has three steam crackers in Italy, capable of producing 1.675 million mt of ethylene, 750,000 of propylene and 285,000 mt of butadiene a year.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 215,390 tonnes in the first month of 2020, up by 23% year on year. Shipments of all grades of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) increased due to higher capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 127,240 tonnes in January 2020, up by 33% year on year. ZapSibNeftekhim's homopolymer PP accounted for the main increase in shipments.
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Ultrapar looking for strategic partner for Petrobras refineries

MOSCOW (MRC) -- Brazil’s Ultrapar Participacoes SA is looking for a strategic partner to bid for refineries put on the block by state-controlled oil company Petroleo Brasileiro SA, CEO Andre Dias told analysts in a conference call, said Hydrocarbonprocessing.

Dias said the conglomerate, with activities ranging from retail to fuel distribution, is attentive to all opportunities in Petrobras’ divestiture program.

As MRC wrote previously, in October 2017, Petrobras’s minority stakes in Braskem and Deten Quimica was excluded from Petrobras’s divestment program, according to a government decree published in Brazil’s Official Gazette. The decree prevented Petrobras from immediately selling its minority stake in Braskem, which had been announced last year. A new decree will be required to release the stock sale.

As MRC wrote earlier, the chief executive of Brazilian state-run oil firm Petroleo Brasileiro said in December 2019 he wants to sell the company's stake in petrochemical company Braskem within 12 months.

We also remind that Braskem is no longer pursuing a petrochemical project, which would have included an ethane cracker, in West Virginia. And the company is seeking to sell the land that would have housed the cracker. The project, announced in 2013, had been on Braskem's back burner for several years.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 215,390 tonnes in the first month of 2020, up by 23% year on year. Shipments of all grades of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) increased due to higher capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 127,240 tonnes in January 2020, up by 33% year on year. ZapSibNeftekhim's homopolymer PP accounted for the main increase in shipments.

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.

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Saudi Aramco to cut 2020 capital spending; 2019 net profit falls 21%

MOSCOW (MRC) -- State oil giant Saudi Aramco will cut its spending this year due to the coronavirus pandemic, while it increases its dividend, the company said Sunday, as its share price continued to decline amid the Saudi regime’s price war with Russia, said The Wall Street Journal.

Saudi Arabia's decision last year to float shares in its state oil company - the most profitable company in the world - was one of the central elements in Crown Prince Mohammed bin Salman's program for economic and political reform.

The record-setting IPO was touted as making the world's biggest energy exporter more professional and transparent.

The 21% decline in net profit for last year means it fell short of analysts' forecasts for the period that culminated in the share sale, months before the coronavirus pandemic became a factor for oil prices.

In recent weeks, Riyadh has announced that it is ramping up production in an oil price war with Russia that has sent global prices plunging and contributed to the coronavirus rout on international financial markets.

The company said it expects capital spending for 2020 to be between USD25 billion and $30 billion in light of current market conditions and recent commodity price volatility, compared to USD32.8 billion in 2019.

Aramco has already taken steps to "rationalize" its planned 2020 capital spending, CEO Amin Nasser said in a statement. "The recent COVID-19 outbreak and its rapid spread illustrate the importance of agility and adaptability in an ever-changing global landscape," he said.

Aramco listed its shares in Riyadh in December in a record USD29.4 billion initial public offering that valued it at $1.7 trillion. Its shares fell below the IPO price last week for the first time, as oil prices crashed after the collapse of an output deal between OPEC and non-OPEC members. Oil prices have fallen nearly 50% from highs reached in January and had their biggest one-day decline on March 9 since the 1991 Gulf War.

As MRC informed before, in October 2018, Saudi Aramco and Total launched engineering studies to build a giant petrochemical complex in Jubail. Announced in April 2018, the world-class complex will be located next to the SATORP refinery, operated by Saudi Aramco (62.5%) and Total (37.5%), in order to fully exploit operational synergies. It will comprise a mixed-feed cracker (50% ethane and refinery off-gases) - the first in the Gulf region to be integrated with a refinery - with a capacity of 1.5 million tons per year of ethylene and related high-added-value petrochemical units. The project represents an investment of around $5 billion and is scheduled to start-up in 2024.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 215,390 tonnes in the first month of 2020, up by 23% year on year. Shipments of all grades of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) increased due to higher capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 127,240 tonnes in January 2020, up by 33% year on year. ZapSibNeftekhim's homopolymer PP accounted for the main increase in shipments.
MRC

Neste to delay Porvoo refinery turnaround due to the coronavirus

MOSCOW (MRC) -- Finnish refiner Neste said it would delay the scheduled major turnaround at its Porvoo refinery due to the coronavirus outbreak, and can do only the most business critical maintenance works as planned, reported Reuters.

The company said maintenance works would hit its second-quarter comparable operating profit by 85 million euros (91 million). It had earlier estimated the major turnaround would dent its 2020 profits by 220 million euros.

"The rest of the turnaround works are expected to be finalised in 2021 and their related negative impact on the company’s comparable operating profit will be estimated in February 2021, at the latest," Neste said.

As MRC informed earlier, Neste, together with several European Union Member States and forerunner companies representing different parts of the European plastics sector, have signed the European Plastics Pact in Brussels, Belgium. The European Plastics Pact aims to accelerate cross-border exchange and collaboration on a pan-European scale to supplement and support the already existing European and global commitments as well as the existing national and company initiatives on the circularity of plastics value chain.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 215,390 tonnes in the first month of 2020, up by 23% year on year. Shipments of all grades of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) increased due to higher capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 127,240 tonnes in January 2020, up by 33% year on year. ZapSibNeftekhim's homopolymer PP accounted for the main increase in shipments.
MRC

Asahi Kasei to discontinue styrene resins business

MOSCOW (MRC) -- Asahi Kasei has decided to discontinue its business for the styrenic resins SAN (Styrene-acrylonitrile resin), ABS (Acrylonitrile butadiene styrene), and ACS, according to Kemicalinfo.

According to the company, the operations of SAN plant at Kawasaki Works will be closed in March 2021.

The business to be discontinued began with the 1962 start-up of the SAN plant in Kawasaki, now part of Asahi Kasei’s Kawasaki Works, followed by the 1964 start-up of the ABS plant at the same site (function transferred to Mizushima in 1978). The ACS business began in 1995.

The ABS plant at Asahi Kasei’s Mizushima Works, which started up in 1967, was closed in 2015 due to deteriorating profitability as domestic Japanese demand decreased significantly.

As per the company, the decision for business discontinuation was based on a judgment that there were no clear prospects to establish the superiority of Asahi Kasei’s products in the expanding global ABS market and that it would be difficult to formulate a future expansion strategy.

Under its Cs+ for Tomorrow 2021 medium-term management initiative, Asahi Kasei is prioritizing and allocating management resources to develop a business portfolio of sustainable and high value-added businesses.

The company said that the resources of the discontinued business will be reallocated to other businesses of Asahi Kasei.

We remind that, as MRC informed earlier, Asahi Kasei Mitsubishi Chemical Ethylene Corp, a joint venture of Asahi Kasei Corp and Mitsubishi Chemical Corp ,delayed the restart of a naphtha cracker in Mizushima, western Japan, to Jan. 28 from Jan. 24, 2020. The delay was due to a glitch in the steam system, which is operated in case of an emergency, Asahi Kasei said in a statement. The company shut the naphtha cracker on Jan. 14 after a malfunction in the refrigerant system. The naphtha cracker has a production capacity of 567,000 tonnes a year without any turnaround and 496,000 tonnes with turnaround, the firm said.

According to MRC's ScanPlast report, January 2020 estimated consumption of polystyrene (PS) and styrene plastics in Russia dropped by 10% year on year, totalling 41,420 tonnes. Russian plants' overall output also decreased (by 3%) year on year in January 2020 to 43,260 tonnes.
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