Twelve oil majors to slash capex by USD43.6B amid price collapse, coronavirus

MOSCOW (MRC) -- The massive plunge in oil prices amid the price war between OPEC and Russia and a drastic decline in oil demand due to the global coronavirus pandemic has forced the world's top integrated oil and gas majors to take swift and dramatic measures to preserve cash and protect their balance sheets, reported S&P Global.

As of April 7, 12 of the world's largest public oil and gas companies by market value have announced specific cuts to their 2020 capital spending programs, totaling approximately USD43.6 billion, as global crude prices have tumbled below USD30 per barrel.

In total the announced cuts by the 12 integrated majors represent an approximate 23% decline in capital spending compared to their initial plans and far eclipse announced 2020 capex reductions by independent oil and gas producers.

Thus, Exxon Mobil Corp. announced April 7 that it will cut its capital budget for 2020 by 30%, or USD10 billion, in response to low energy prices caused by collapsing demand. Exxon said it would also cut its cash operating expenses by 15%.

Exxon's new capital investment budget for the year is now about USD23 billion, a decrease from the USD33 billion previously announced, with most of the spending cuts to take place in the US Permian Basin.

BP PLC announced April 1 that it will cut its 2020 capital spending budget by $4 billion, or about 25% of previous guidance, to USD12 billion to navigate the depressed economic and oil price environment amid the coronavirus pandemic. BP, which spent USD15.2 billion in 2019, also said it will write down about USD1 billion in noncash, nonoperating charges in the first quarter.

Brazilian state-run oil company Petroleo Brasileiro SA, also known as Petrobras, said March 26 it will cut 2020 investments by USD3.5 billion to a total of USD8.5 billion, from USD12 billion previously, to soften the blow of the new coronavirus pandemic and the recent oil price downturn on the business. The major has also proposed cutting its operating expenses by the year by USD2 billion and postponing paying out dividends to shareholders.

Italy's Eni SpA said March 25 it plans to cut capital expenditures for 2020 by about EUR2 billion, or 25%, from its previously planned spend of approximately EUR8 billion, to adjust for market conditions caused by the coronavirus outbreak and plunging oil prices.

Eni on March 18 announced it would withdraw its €400 million share buyback proposal. Eni will reconsider relaunching the buyback when the Brent price is equal to at least USD60/bbl, it said.

Spain's Repsol SA said March 25 it will reduce 2020 capital expenditures by more than EUR1 billion, or 26%, due to the oil price crash and the coronavirus pandemic. The company is also looking to decrease operating expenditures by more than EUR350 million.

Embattled oil producer Occidental Petroleum Corp. on March 25 slashed its spending plans for the second time in a month as it tries to navigate a low oil price environment and heat from activist investor Carl Icahn.

The new spending guidance, between USD2.7 billion and USD2.9 billion, is down from the USD3.5 billion to USD3.7 billion range given March 10 and represents a 47% decrease from the midpoint of the company's initial 2020 spending plan of USD5.2 billion to USD5.4 billion.

In addition to trimming its capital spending plan, Occidental said it will cut 2020 operating and corporate costs by at least USD600 million, which includes "significant" salary cuts for the corporation's executive team.

The company also announced March 10 it will cut its dividend - a major selling point for investors from 79 cents per share to 11 cents per share.

Norway's Equinor ASA said March 25 it will slash capital expenditures as well as exploration and operating costs by a total of USD3 billion amid the one-two punch of the coronavirus pandemic and plummeting oil prices.

The major will cut organic capex by USD2 billion to USD8.5 billion, down about 19% from a prior range of USD10 billion to USD11 billion. In addition, it will reduce exploration expenses from USD1.4 billion to USD1 billion and will trim operating costs by about USD700 million from original estimates.

On March 22, Equinor announced it would suspend its USD5 billion share buyback program due to the current oil price crisis.

California-based Chevron Corp. said March 24 it would cut capital expenditures for 2020 by USD4 billion, or about 20%, to USD16 billion and aims to reduce cash capital and exploratory expenditures by USD3.3 billion, to USD10.5 billion. The US supermajor also said it will halt its USD5 billion share buyback program and will slice run-rate operating costs by more than USD1 billion by the end of the year.

Key to Chevron's new capex plan is trimming costs for its expansion in the US Permian Basin. The company has reduced its Permian production guidance by 125,000 barrels of oil equivalent per day, or 20%, since it plans to reduce spending in the region by 50% this year from USD4 billion to USD2 billion.

Canada's Suncor Energy Inc. announced March 23 it would lower its 2020 capital program to between CD3.9 billion and CD4.5 billion, a decrease of CD1.5 billion, or 26%, from the midpoint of the original guidance range of CD5.4 billion to CD6.0 billion.

Suncor also slashed its total operating expenditures by more than CD1 billion, from CD11.2 billion of expenditures in 2019. Suncor decided to extend for up to two years the timelines for the cogeneration facility at the company's oil sands base plant, Forty Mile wind power project and some offshore developments.

In light of the oil price crash, Royal Dutch Shell PLC said March 23 it will slash this year's capex to USD20 billion if not lower, from an initial level of around USD25 billion. The Anglo-Dutch major will also cut underlying operating costs by USD3 billion to USD4 billion per year over the next 12 months, and will suspend the next USD1 billion tranche of its massive USD25 billion share buyback program.

France's Total SA said March 23 it will trim organic capital expenditures this year by more than USD3 billion and will suspend its USD2 billion buyback program. The revised capex will reduce net investments for this year to less than USD15 billion, with savings mostly in the form of short-cycle flexible capex.

Saudi Arabian Oil Co. said March 15 that its capital expenditures for the current year will run anywhere from USD25 billion to USD30 billion, down from USD32.8 billion in 2019. The midpoint of the company's new range is down by an average of

We remind that as MRC wrote previously, in October 2019, McDermott International announced that it had been awarded a contract by Saudi Aramco and Total Raffinage Chimie (Total) for their joint venture (JV) Amiral steam cracker project at Jubail, Saudi Arabia. Amiral is a JV in which Aramco holds 62.5% and Total the rest. The plant, designed to produce 1.5 million metric tons/year (MMt/y) of ethylene, will be one of the world's largest mixed-feed crackers.

Aramco and Total launched their USD5-billion Amiral JV project in October 2018. The steam cracker will be fed with a mixture of 50% ethane and refinery off-gases. It will supply ethylene to a downstream 1 MMt/y polyethylene manufacturing complex and other petrochemical products. The project aims to fully exploit operational synergies with the adjacent refinery, owned by Satorp, another JV between Aramco and Total. Third-party investors, including Daelim and Ineos, will locate plants at the value park adjacent to Amiral with a combined investment of USD4 billion. A final investment decision is expected in 2021.

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

According to MRC's ScanPlast report, estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.
MRC

MOSCOW (MRC) -- Canadian oil and gas producer Husky Energy cut its 2020 capital expenditure by an additional CSD700 million (USD496.31 million), citing a hit to oil prices from the coronavirus outbreak, said Reuters.

The Calgary, Alberta-based company said it now expects to spend between CSd1.6 billion and CSD1.8 billion, about half its earlier estimate of CSD3.2 billion to CSD3.4 billion.

Husky Energy also said it would also reduce production by more than 80,000 barrels per day, most of which is heavy oil.

Oil and gas producers have been slashing spending, trimming output and rolling back share buybacks and dividends as oil demand slumped due to the coronavirus outbreak that has hampered travel.

Husky had previously cut its 2020 capital spending budget by C$900 million in March, citing challenging global market conditions.

Smaller-rival Crescent Point Energy Corp also slashed its capital expenditure forecast for 2020 by another C$75 million, or 10%, to a range of CSD650 million to CSD700 million. Earlier in March, Crescent had lowered its estimates by 35%.

As MRC informed earlier, Cambridge, AVEVA, a global leader in engineering and industrial software, has signed an agreement with Calgary-based integrated oil and gas company Husky Energy to deliver an end-to-end supply chain management solution for Husky’s downstream business.
MRC

MOSCOW (MRC) -- Rather than cutting back on imports, China pushed crude oil into storage tanks at almost double the rate in the first quarter of this year than it did in the same period in 2019 as the new coronavirus hit domestic consumption, reported Reuters.

China doesn’t release official data on flows into strategic and commercial stockpiles, but an estimate can be made by subtracting the amount of crude processed by refineries from the total volume of oil available from both imports and domestic output.

China’s crude oil imports were 10.2 million barrels per day (bpd) in the first three months of the year, according to customs data.

Domestic output was 3.74 million bpd, giving a total of available crude for the quarter of 13.94 million bpd.

Refinery throughput for the first quarter was the equivalent of 11.96 million bpd, meaning of the total available crude 1.98 million bpd wasn’t processed by refineries.

Doing the same calculations for the first quarter of last year shows imports of 9.83 million bpd, domestic production of 3.84 million bpd, and refinery processing of 12.6 million bpd, leaving a gap of 1.07 million bpd.

The numbers suggest that China almost doubled the rate at which it put oil into storage in the first quarter of 2020, in order to deal with the loss of consumption as the coronavirus caused much of the country to be placed in some form of lockdown.

It’s also worth noting that China’s exports of refined fuels also rose in the first quarter of this year, reaching 18.02 million tonnes, up 9.7% from the same period last year.

A breakdown by type of refined product isn’t yet available, but it’s likely the bulk of the increase was in gasoline and in middle distillates such as jet kerosene and diesel.

Overall, the picture that emerges from the first quarter is that China decided to increase crude storage flows rather than cut back on imports.

The other factor in dealing with the loss of demand from the coronavirus was that refinery throughput did drop and exports of refined fuels increased, but not by huge margins.

However, rather than being a template for the rest of the world as it battles to contain the coronavirus, China is likely to be something of an outlier.

Other major crude importing countries lack the ability to simply divert oil into storage on the scale that China can, meaning they will have to lower the amount of crude being imported.

Even countries with large commercial and strategic storages, such as the United States, will find that the volume of crude available is so much that it will overwhelm available tank space within weeks, rather that months.

China’s ability to double storage flows to almost 2 million bpd over an entire quarter makes it unique, not a model.

To put China’s storage flows in perspective, at about 2 million bpd they are 25% higher than the total crude consumption of the United Kingdom, the world’s sixth-largest economy.

It’s also likely that China will continue to suck up crude oil for its stockpiles, especially given the collapse in prices since the coronavirus caused much of the developed world to put their economies into some form of lockdown.

China is on track to import at least 9.35 million bpd of seaborne crude in April, up from 8.8 million bpd in March, according to Refinitiv vessel-tracking data, filtered to show only cargoes already discharged, awaiting discharge or underway and due to offload prior to the end of the month.

Seaborne imports exclude pipeline volumes from Russia and central Asia, which were around 843,000 bpd in March.

China’s appetite for imported crude for storage is probably one of the few bright spots for the embattled oil industry currently, although by itself it’s nowhere near enough to compensate for the loss of an estimated 30 million bpd of global consumption.

We remind that, as MRC informed earlier, Asia’s top refiner China Petroleum Chemical Corp, or Sinopec, expects its full-year 2020 refining runs will be lower than in 2019 because of a contraction in Chinese fuel demand caused by the coronavirus outbreak.

We also remind that Sinopec Qilu Petrochemical, a subsidiary of Sinopec Corporation, plans to shut the cracker unit in Tianjin in northeast China for scheduled repairs on 15 June, 2020. This cracking unit with a capacity of 900,000 tonnes of ethylene per year and 480,000 tonnes of propylene tons per year will be closed for scheduled repairs until 24 June, 2020.

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

According to MRC's ScanPlast report, estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.
MRC

1. ConocoPhillips cuts production, buybacks, spending again

MOSCOW (MRC) -- ConocoPhillips said it would cut gross production by 225,000 barrels of oil per day while also suspending its share repurchase program and cutting back further on capital spending to weather the collapse in oil prices, said Hydrocarbonprocessing. Oil and gas producers have sunk deep into crisis mode over the past month as the slump in demand caused by coronavirus lockdowns left the world’s big producers producing far more than current needs and crude prices falling below USD30.


MRC

MOSCOW (MRC) -- Asia’s top refiner China Petroleum Chemical Corp, or Sinopec, expects its full-year 2020 refining runs will be lower than in 2019 because of a contraction in Chinese fuel demand caused by the coronavirus outbreak, according to Hydrocarbonprocessing.

The fall in demand will last for the first half of this year and lead to lower full-year demand but refined oil consumption is expected to return to normal in the third and fourth quarters, said Ling Yiqing, vice president of Sinopec, during an earnings call in late March.

"Due to the impact of the first and second quarters, our expectation of full year consumption of oil products will be negative growth," said Ling.

"In terms of refining utilization rates in the full year 2020, due to the impact of coronavirus outbreak and exports, our whole year number will be affected," he said.

State-backed Sinopec lowered the utilization rates at its crude oil refineries to 66% in February amid the outbreak, which was first detected in the central Chinese city of Wuhan and prompted the government to impose stringent travel bans.

The average utilization rate at Sinopec’s oil refineries was 91.3% in 2019.

Ling also said the spread of coronavirus overseas will impact oil product exports, negatively affecting Sinopec’s oil refining in the second quarter.

Inventory of refined oil products was seen at a high level in February at Sinopec, Ling said, but it is expected to fall back to a normal level by end-March.

The company, which will trim 2020 capital expenditure by 2.5%, was making a detailed plan to reduce capex and would report this in April during first-quarter earnings, said Zhang Yuqing, chairman of Sinopec.

Zhang expects that oil prices will fluctuate around USD42 per barrel, and the low price scenario might remain for a longer-than-expected period.

He added that coal-to-liquids (CTL) and coal chemical projects will not have any competitiveness when oil prices fall below USD35 per barrel.

Sinopec, which has three coal-chemical projects, will strive to lower costs this year and work on future planning, Zhang said.

Asia’s largest oil refiner also warned about lower petrochemical output in the coming months as it expects a notable decline in global consumption in the next one to two months.

Sinopec, which had lowered operation rates by 10% at its petrochemical plants in February, has resumed operations to nearly 100%, but it still sees a high level of inventory of petrochemical products, Yu Baocai, also said a vice president at Sinopec.

We remind that, as MRC wrote before, Sinopec Qilu Petrochemical, a subsidiary of Sinopec Corporation, plans to shut the cracker unit in Tianjin in northeast China for scheduled repairs on 15 June, 2020. This cracking unit with a capacity of 900,000 tonnes of ethylene per year and 480,000 tonnes of propylene tons per year will be closed for scheduled repairs until 24 June, 2020.

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

According to MRC's ScanPlast report, estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.

Sinopec corp. is one of the world's largest integrated energy and chemical companies. Business Sinopec Corp. includes oil and gas exploration, production and transportation of oil and gas, oil refining, petrochemical production, production of mineral fertilizers and other chemical products. In terms of refining capacity, Sinopec Corp. ranks second in the world, in terms of ethylene capacity - fourth.
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