Chevron leads another wave of massive oil-industry spending cuts

MOSCOW (MRC) -- Chevron Corp cut its capital spending budget by $4 billion, leading a wave of cost-cutting announcements across the reeling oil-and-gas industry as the coronavirus pandemic has slashed demand and triggered a dramatic slide in oil prices, reported Reuters.

Crude oil prices have crashed by 60% since January as Saudi Arabia and Russia pump full bore to grab share in a dwindling market, and gasoline and jet fuel use has slumped. Demand worldwide is expected to fall by more than 12 million barrels per day, more than 10% of daily demand.

The reset is being felt across the industry, as Chevron was joined on Tuesday in reducing expenses by Schlumberger, the world's largest oilfield services company, independent refiner Phillips 66, and Canada's Suncor.

"This is as unprecedented an oil price environment as I can recall seeing,” Chief Executive Michael Wirth said in an interview.

Chevron shares jumped 21% on Tuesday to USD65.73 as investors cheered the company's budget cut, which was twice as big as analysts expected, as a sign it would not incur debt to finance operations. Shares were also buoyed by a higher US stock market that was lifted by central bank stimulus measures.

Chevron will spend USD16 billion this year, down from a planned USD20 billion, halving its spending in the Permian Basin, the top US shale field. It is the lowest spending level for the company since 2005.

Chevron now expects to pump about 125,000 fewer barrels of oil and gas per day in the Permian Basin by the end of this year, down 20% from its 600,000 barrel per day target.

The field is its "most flexible" for spending reductions. Chevron has 16 drilling rigs at work in the field now, down from 20 last year, and will drop to fewer than 8, Wirth said.

This is the first indication from an oil major of how sharply it would pull back in the Permian, which has made the United States the world’s largest oil producer.

Dozens of other US shale companies have curtailed spending, and analysts at Goldman Sachs expect a roughly 35% drop in capital expenditure in 2020.

Chevron will cut USD2 billion from its Permian spending, from an expected pace of about USD4 billion per year.

Exxon Mobil, the largest US oil company, has vowed to make significant cuts this year, while Norway’s Equinor also reduced its share buyback program.

Chevron's reductions were "much deeper than expected," RBC Capital Markets analyst Biraj Borkhataria said.

Its USD5 billion annual share repurchase program was halted after USD1.75 billion of shares were bought back during the first quarter.

"Our focus is on protecting the dividend, prioritizing capital that drives long-term value, and supporting the balance sheet," said Chief Financial Officer Pierre Breber.

The cuts do not "completely close the post-dividend outspend," wrote analysts at Tudor, Pickering, Holt & Co.

The company would not consider an acquisition now, said Wirth, adding: "There will be a day when opportunities may present themselves. If we do the right things today we'll be in a position to consider that."

Chevron was already in the middle of a reorganization when oil prices plummeted, but Wirth would not say how many jobs it may cut.

As MRC informed earlier, 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 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).

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

BPCL defers turnaround of units at refineries on shortage of labor

MOSCOW (MRC) -- India Bharat Petroleum Corp has deferred the shutdown of secondary units at its Kochi and Mumbai refineries due to shortage of manpower and material to carry out the turnaround job, its head of refineries R. Ramachandran said, as per Hydrocarbonprocessing.

“At this point of time we are not having the wherewithal to take any shut down because simply men power is not there material will not be available so we will be reviewing the shutdown plans as the situation evolves.. there will be no turnaround in the month of April,” Ramachandran told Reuters.

India imposed a sweeping lockdown of its 1.3 billion people on Wednesday for 21 days, and is only allowing the supply of essential commodities. The move prompted several industries to shut operations and some ports in the country to declare force majeure.

He said BPCL had plans to shut the continuous catalytic cracker and some other units at its 240,000 barrels per day (bpd) Mumbai refinery in western India and vacuum gasoil de-sulphuriser and some other units at 310,000 bpd Kochi refinery for two to three weeks in April.

Falling fuel demand has already prompted Indian refiners to reduce crude processing.

As MRC informed earlier, Bharat Petroleum Corporation Ltd (BPCL) will invest about Rs25,000 crore to set up an ethylene cracker plant at Rasayani, 50 kilometres from its Mumbai refinery, as the firm pushes further into the petrochemicals business to fuel growth.

BPCL will commission its Rs5,236 crore Propylene Derivative Petrochemical Project (PDPP) at Kochi refinery for manufacturing niche petrochemicals in the next six months. To expand its product portfolio further, BPCL is investing Rs11,130 crore to set up a facility in Kochi refinery for manufacturing Polyols, Propylene Glycol and Mono-Ethylene Glycol.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,904,410 tonnes in the first eleven months of 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments increased from both domestic producers and foreign suppliers. The PP consumption in the Russian market was 1,161,830 tonnes in January-November 2019, up by 7% year on year. Deliveries of all grades of propylene polymers increased, with the homopolymer PP segment accounting for the largest increase.

Bharat Petroleum Corporation Limited (BPCL) is an Indian state-controlled oil and gas company headquartered in Mumbai, India. Bharat Petroleum owns refineries at Mumbai, Maharashtra and Kochi, Kerala (Kochi Refineries) with a capacity of 12 and 9.5 million metric tonnes per year.
MRC

Xinneng Fenghuang shut methanol units for unplanned turnaround

MOSCOW (MRC) -- Xinneng Fenghuang (Tengzhou) Energy Company has taken off-stream its all methanol units in Tengzhou, Shandong province, reported Apic-online.

A Polymerupdate source in China informed that, the company has halted operations at the units on March 24, 2019 owing to technical issues. The units are expected to remain off-line for about 2-3 days.

Located in Shandong province, China, the units have a combined capacity of 920,000 mt/year.

We remind that, as MRC informed earlier, Sinopec Zhongyuan Petrochemical restarted its methanol-to-olefins (MTO) plant in China in mid-February 2019, following an unplanned outage. The was shut on November 5, 2018 owing to bearish market conditions. Located at Henan in China, the MTO plant has an ethylene and propylene capacity of 100,000 mt/year each.

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

Trump EPA decides not to appeal court ruling limiting biofuel waivers

MOSCOW (MRC) -- The U.S. Environmental Protection Agency will not appeal a court ruling that would sharply reduce its use of waivers exempting refineries from the nation’s biofuels regulation, a big win for the Corn Lobby, according to a Reuters case docket review, said Reuters.

The EPA had until the end of March 24 to file a challenge, but by early March 25, no such filing had been entered in a case docket on the U.S. government’s electronic public access service for court records.

A decision by the administration of President Donald Trump not to appeal the ruling marks a big win for the U.S. corn lobby and a blow to the oil industry.

Oil refiners say the waivers have been crucial to keeping small refineries afloat, but the agriculture industry counters that they have been overused and have cut into demand for corn-based ethanol.

Under the U.S. Renewable Fuel Standard, refiners are required to blend billions of gallons of ethanol into their gasoline every year, a boon for corn farmers. But the EPA can give out waivers to small facilities that prove that compliance would put them in financial straits.

The waiver program was cast into question in January after the 10th Circuit Court of Appeals ruled that the Trump administration had been too free with the waivers and set a standard for the exemptions that would greatly reduce the numbers of waivers the EPA can grant.

The American Fuel & Petrochemical Manufacturers, a group that represents merchant refiners, said the administration’s decision to not file an appeal by the deadline effectively ends the small-refinery exemption program.

“It is astonishing that President Trump has abandoned our country’s small-refinery workers and the communities that rely on these critical facilities in this time of national crisis and economic uncertainty,” AFPM President Chet Thompson said.

The biofuels industry cheered the decision and called for the administration to apply the ruling broadly.

“Requesting a re-hearing would have only prolonged uncertainty in the marketplace and exacerbated the pain and frustration already being experienced in the Heartland,” said groups including the Renewable Fuels Association in a statement.

As MRC informed earlier, US Senators Chuck Grassley and Joni Ernst of Iowa have asked the Trump administration not to appeal a court ruling that would slash the use of small refinery biofuel waivers, but have not heard back yet on its decision.

President Donald Trump said the United States would take advantage of low oil prices and fill the nation’s emergency crude oil reserve, in a move aimed to help energy producers struggling from the price plunge.

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

EU coronavirus lockdowns disrupting plastics converter logistics, output: sources

MOSCOW (MRC) -- The coronavirus-related lockdowns imposed across Europe are beginning to disrupt chemical logistical systems, impacting plastics converters' planning and operational capabilities, reported S&P Global with reference toresin buyers' statement.

Although it is normally the monthly contractual resin price development that is usually their main concern, the buyers said their focus this week has switched to more basic operational questions.

A number of countries - including France, Spain, Germany and Austria - unilaterally imposed full or partial border closures this week and a continent-wide shutdown was confirmed by the EU on Wednesday.

The effect of this has been to strain supply chains and logistical systems with it potentially affecting production and the delivery of resins and finished plastics.

"We are still taking deliveries but production (supply chain) is closing down bit by bit due to people that are absent, [and] that we cannot guarantee production. Day by day we assess. We are still up and running and we have lines closing due to a lack of people. If we close lines, we have no consumption, so we have (to be ready)," a plastics converter said Wednesday.

The impact of the coronavirus outbreak and the measures taken to limit its spread have meant that the situation in Europe is a fast changing one. On Tuesday, and prior to the border closures, converters indicated they were struggling to secure trucks to enable deliveries, in particular to food suppliers.

"We are struggling to get the logistics to get the trucks. It's no longer a question of price. In the France situation, every day there's new restriction. Our business is not impacted, but we are already in the food industry for a long time. We are confident to continue for a few days. We are going to the Italian model - a very restricted mode," another plastics converter said Tuesday.

"I make film for the food and pharma industries. But if I have one guy sick it may impact my system and my extrusion, so this is a daily check. How can I supply ... goods to the customers [with these potential issues] or [with] restrictions to supplying resins ... it seems quiet complicated to find trucks," the converter added.

"Sometimes it's not a time to be difficult. Today we need food, packaging for food, and it's not time to make money. Today we cannot think about making money and it's a huge cost. The company that makes benefit this year, we hope that they don't suffer. We are lucky. Let's be human," the same converter said.

Meanwhile, long-haul trucking remains a tricky endeavor due to the greater risk of supply interruptions. "What I hear today for Long haul in Eastern Europe, having drivers going across border without being quarantined. It's a day by day. It pushes up costs," a linear low density polyethylene producer said.

"So far it's not that bad for my business. Flex packaging is more, ... (there is) more of an increase in demand as there ... is more demand from supermarkets. I'm still receiving orders," the same LLDPE producer said.

However, the impact of any plant closure could be costly. "The only thing that I am looking at is how to keep my supply chain going. Closing the asset costs money. The flexible (packaging) business is still good. Good demand and I can get good orders then I will continue," the producer added.

Similarly, logistical issues have come to the forefront of both the virgin polyethylene terephthalate and the recycled PET markets this week, as borders close and travel becomes increasingly restricted.

"Now it is a disaster, huge queues, late arrivals," one producer said.

As the situation continues to change, market participants are monitoring transportation costs on a daily basis.

"We have not yet encountered logistics costs going up. We aren't yet in a situation where we see issues with deliveries, but this develops day by day," one recycler said. The human element of logistics is also a concern for market participants as they prepare for potentially large numbers of employees being absent due to illness and a reduction in the number of available drivers.

As per MRC's ScanPlast report, the estimated consumption of polyethylene terephthalate (PET) in Russia increased in January 2020 by 9% year on year. Totally, Russia recycled 55,390 tonnes of PET chips in January (excluding shipments of Russian material to the countries of the Customs Union). PET chips production in Russian in January 2020 totalled 43,200 tonnes.
MRC