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Shell slows refining, takes up to USD800 M hit after oil crash

April 03/2020

MOSCOW (MRC) -- Royal Dutch Shell slowed refining output and will write down up to USD800 million in the first quarter of 2020 after a dramatic drop in oil demand due to the coronavirus, according to Hydrocarbonprocessing.

In an update ahead of first-quarter results, Shell said it expects significant uncertainty over oil and gas prices and demand as a result of falling consumption.

With the global lockdown of 3 billion people - roughly 40% of the worlds population - demand for fuel has been in free fall, forcing Shell to lower its refining output by around 13%.

The sharp drop in demand, which could reduce consumption by 25% compared to 2019, poses a significant threat to Shell, which is the worlds largest petrol retailer with more than 40,000 service stations.

The Anglo-Dutch company lowered its oil and gas price outlook for 2020, resulting in a post-tax impairment charge in the range of USD400 million-USD800 million, it said.

Benchmark Brent crude prices fell by around 65% in the first quarter and were trading at below $23 a barrel on Tuesday as a result of a sharp drop in global demand due to the coronavirus and pledges by Saudi Arabia and Russia to raise output.

Shell shares were up 5% in early trading in London.

Shell said this month it would lower spending by USD5 billion to USD20 billion or less and suspend its vast USD25 billion share buyback plan in an effort to weather the downturn.

Shells first quarter oil production was expected to fall by 4.5% versus the fourth quarter of 2019, while liquefied natural gas (LNG) volumes were set to decline by 2.3%.

Shell, which sells products produced by its refineries and other suppliers, gave a wide range for oil products sales volumes of 6 million to 7 million barrels per day (bpd) for the first quarter of 2020.

At the middle point, the figure is slightly higher than in the fourth quarter of 2019.

Shell slowed down its refining output in the first three months of the year due to weaker demand for fuels.

Refinery utilisation is expected to be between 80% to 84%, while 93% to 96% of its refining capacity is available. Refining profit margins were also expected to be lower, Shell said.

The company said its cash liquidity remained strong after getting a new USD12 billion revolving credit facility commitment, lifting its available liquidity from USD30 billion to USD40 billion.

As MRC informed earlier, Shell Singapore restarted its naphtha cracker in Bukom Island in early December 2019, 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 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.

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.
Author:Margaret Volkova
Tags:PP, PE, LLDPE, crude and gaz condensate, homopolymer PP, propylene, HDPE, ethylene, petrochemistry, Shell, Russia, Singapore, USA.
Category:General News
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