Saint-Gobain to sell entire Sika stake to institutional investors

MOSCOW (MRC) -- French building materials group Saint-Gobain (Paris, France), through its subsidiary Schenker-Winkler Holding AG (SWH), has started to dispose of its entire 10.75% stake in the Swiss construction chemicals company Sika (Baar, Switzerland) through a private placement to institutional investors, said Chemweek.

The placement will start immediately and the outcome and final terms will be announced by the end of today. At yesterday’s Sika share price, the transaction, involving approximately 15.2 million Sika shares, would be valued at 2.65 billion Swiss francs (USD2.73 billion). Sika has chosen not to exercise its right of first offer for the Saint-Gobain holding.

The move brings to an end a long-running saga that began in 2014 when Saint-Gobain offered CHF2.75 billion to buy control of Sika from the Burkhard family, descendants of the company’s founder. The family holding company, SWH, owned only 16% of the share capital but enjoyed 53% of the voting rights. Sika’s management objected, supported by public and institutional shareholders, and argued their case through the Swiss courts.

In May 2018 Sika and Saint-Gobain agreed to end their almost four-year legal battle. Under the settlement, Saint-Gobain acquired a 10.75% interest in Sika indirectly through the acquisition of 100% of SWH shares from the family, as part of a comprehensive agreement between Saint-Gobain, the family and Sika, at a cost of CHF3.22 billion. Following expiry of the two-year lock-up period set out in the agreement, Saint-Gobain and SWH decided to dispose of the Sika shareholding.

Citigroup is acting as sole global coordinator on the private placement. Citigroup and Lazard are acting as financial advisers to Saint-Gobain.

As MRC informed earlier, Sika is starting operations at a plant in Doha, Qatar, for the production of concrete admixtures. The country on the east coast of the Arabian peninsula is an attractive market thanks to large-scale infrastructure investment and a number of mega projects.

According to MRC's ScanPlast report, March 2020 estimated consumption of PS and styrene plastics dropped by 2% year on year, totalling 42,130 tonnes. The estimated consumption totalled 121,880 tonnes in the first three months of 2020, down by 2% year on year. Overall, Russian plants produced 42,790 tonnes in March 2020. Overall output of high impact polystyrene (HIPS) and general purpose polystyrene (GPPS) totalled 32,100 tonnes in March 2020. 98,390 tonnes of HIPS and GPPS were produced in January-March 2020. The decrease in Russian plants' output was 3%.

Sika, a specialist in sealants and adhesives with origins dating back to 1910, employs some 25,000 people and has more than 300 plants worldwide. The group reported sales of CHF8.1 billion in the financial year 2019.
MRC

Production at two Vietnamese refineries to rise by 7% in Q2 2020

MOSCOW (MRC) -- The output of Vietnam’s two refineries in the second quarter is expected to rise 7% from the first quarter to 3.03 million tons on recovering demand, according to Hydrocarbonprocessing with reference to Binh Son Refining and Petrochemical.

Binh Son’s 130,000-barrel-per-day Dung Quat refinery will produce 1.53 million tons, while the Nghi Son Refinery will produce 1.50 million tons in the April-June period, the company said.

“Demand for refined fuel products is rising rapidly,” its deputy chief executive, Nguyen Viet Thang, said in a statement.

Traders said demand for fuel in Vietnam is recovering after it started easing coronavirus movement restrictions last month.

As MRC reported earlier, Vietnam’s Binh Son Refining and Petrochemical Co will delay maintenance at its Dung Quat refinery until July 27-September 16 due to the coronavirus pandemic. It was scheduled to conduct maintenance at the 130,000-barrel-per-day refinery from June 12 to August 1.

We remind that Binh Son Refining and Petrochemical took its polypropylene (PP) plant off-stream for a maintenance turnaround in June 2017 for a period of around 7 weeks. The exact date shutdown could not be ascertained. Located in Vietnam,the plant has a production capacity of 150,000 mt/year.

According to MRC's ScanPlast report, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.
MRC

Oil majors promise to maintain clean energy push despite pandemic

MOSCOW (MRC) -- The heads of the world's largest oil and gas producers pledged Tuesday to maintain a strategic focus on producing cleaner energy and helping to mitigate climate change despite reeling from the impact of the coronavirus pandemic on oil and gas prices, reported S&P Global.

Noting "concerns" that the coronavirus crisis could push oil and gas companies and governments to delay climate action, the industry-led Oil and Gas Climate Initiative said it is dedicated to maintaining this mission to help "combating the climate challenge".

"Rather than shifting our priorities, the COVID-19 crisis is further crystallizing our focus on what is essential: health, safety and protection of the environment while providing the energy and vital products that society needs to support economic recovery," OGCI CEO's said in an open letter published Tuesday.

Chaired by former BP boss Bob Dudley, the OGCI was formed in September 2014 to help fund clean-energy ventures and coordinate industry efforts to support the Paris Agreement climate goals.

The OGCI member companies - BP, China's CNPC, Italy's Eni, Spain's Repsol, Saudi Aramco, Shell, Brazil's Petrobras, Exxon, Chevron, Occidental, Norway's Statoil and France's Total - operate about 30% of global oil and gas production in 130 countries.

The International Energy Agency in March expressed concern that sliding fossil fuel prices could discourage spending on energy efficiency measures needed to curb greenhouse gas emissions. At the same time, the massive financial shock of the pandemic could jeopardize policies to support renewable energy and future low-carbon energy systems, market watchers say.

The OGCI said it plans to continue supporting governments as they design efficient policies that can accelerate energy transitions. It also reiterated its commitment to accelerate emissions reductions, such as through continued reductions in methane emissions.

"We will continue to work with others to support economic recovery and to transition to a healthier, lower-carbon future," the CEOs said in the letter.

Speaking to the Financial Times earlier this month, BP's CEO Bernard Looney said global oil demand may have already peaked ahead of the pandemic lockdowns which may leave lasting changes in energy consumption far into the future.

On Monday, however, the head of the IEA Fatih Birol told Bloomberg News he expected global oil consumption to return to pre-crisis levels or above sooner or later given a sustained economic recovery and low oil prices.

Before the crisis, world oil demand growth, which last year stood at around 100,000 b/d, was widely expected to flatline in the next decade as advances in renewable energy and electric vehicles continued to sap the world's need for fossil fuels.

As MRC informed previously, global oil consumption cut by up to a third. What happens next in the oil market depends on how quickly and completely the global economy emerges from lockdown, and whether the recessionary hit lingers through the rest of this year and into 2021.

Earlier this year, BP said the deadly coronavirus outbreak could cut global oil demand growth by 40 per cent in 2020, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.

We remind that, 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 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.
MRC

Iraq oil-rig count tumbles after IOCs ordered to cut spending on oil plunge

MOSCOW (MRC) -- Iraq's oil-rig count has tumbled by almost two-thirds this year after international oil companies were ordered to cut spending because of the oil crash and OPEC's second-largest producer agreed to stringent new OPEC+ cuts, said S&P Global.

The total now averages 32 rigs operated by IOCs this month, down from 88 rigs in December 2019, Iraqi sources told S&P Global Platts. Federal Iraq is averaging 31 rigs this month, compared with 76 in December, while the semiautonomous Kurdish region in the northern part of the country is averaging only one rig in May compared with 12 in December.

Iraq's state-run Basrah Oil Co. in March asked IOCs to cut budgets by 30% and postpone payments to subcontractors due to the oil price crash. Oil prices received by federal Iraq were down to about USD14/b in April, from USD60/b in January, slashing oil revenue to USD1.4 billion from USD6.16 billion. Oil revenue accounts for more than 90% of Iraq's federal budget.

Oil drilling is now the biggest investment expenditure of IOCs, the sources said. The drop in the drilling programs will allow Iraq to cut costs by 30%, sources said. Iraq is currently in the midst of cutting its output in line with the new OPEC+ agreement that will trim a record 9.7 million b/d in May and June. At 4.54 million b/d in April -- according to the latest Platts OPEC survey -- Iraq's production will have to fall by almost 1 million b/d for the country to abide by its quota under the OPEC+ deal.

The politically splintered nation has been a consistent laggard in compliance, drawing the ire of other members, and the government faces challenging negotiations with IOCs and the Kurdish region to fulfill its cut commitment.

The country is fully committed to the new OPEC+ cuts, acting oil minister Ali Allawi said earlier this month. The existing rig count should be sufficient to keep Iraq's production at least within the OPEC+ target, the sources said.

Unlike other producers in OPEC, led by top producer Saudi Arabia which pumped at record levels in April, Iraq was not able to open the taps last month despite the expiry of the old OPEC+ cuts agreement in March. The outbreak of the coronavirus and lockdowns also forced Malaysia's Petronas to evacuate staff in March and stop production from the southern oil field of al-Gharraf, which pumped some 90,000 b/d.

The KRG has its own burdens. According to a report by Deloitte, the KRG last year had to pay $2.20/b to transport crude by pipeline to the Turkish border, USD3/b to the Turkish energy ministry and USD14.80/b to IOCs. The KRG also received USD1.573 billion from traders as an advance payment, and at the end of the year owed USD3.4 billion.

More recently, federal Iraq told the KRG in a May 22 letter that it must develop an oil and budget deal within 30 days before it will approve future salary payments. The KRG is now sending a delegation to Baghdad for talks, the sources said.

As MRC informed earlier, Iraq is cutting its oil output by around 700,000 barrels per day (bpd), a third less than required under an OPEC+ supply pact, after it failed to persuade international oil majors operating its giant fields to agree to deeper reductions.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.
MRC

Japanese refiners facing stagnant market may cut capacity

MOSCOW (MRC) -- Japanese refineries may be forced to shut down capacity once again unless they see a strong recovery from the coronavirus pandemic, reported Reuters.

They’ve been hit by declining use for fuel at home, competition from newer refineries in China and South Korea dominating in other markets, as well.

Idemitsu Kosan on Tuesday reported an annual loss, like its competitors have done in recent days.

Executive Officer Noriaki Sakai said Japan’s second-biggest refiner expects fuel sales to fall 30% in the year through March 2021 while President Shunichi Kito said the company “may need to consider some measures (to consolidate refineries) in the mid-2020s”.

Tsutomu Sugimori, president of JXTG Holdings, Japan’s biggest refiner, told an earnings conference last week: “We have been considering consolidation of refineries since our merger in 2017. We will adjust our production facilities to reflect weakening demand.”

JXTG, which accounts for about half of the market, has already decided to shut a refinery in Osaka with partner PetroChina and shut its Muroran refinery in Hokkaido.

Japan’s oil refining capacity peaked at 5.6 million barrels per day (bpd) in 1982, data from the BP Statistical Review of Energy shows.

It currently has about 3.4 million bpd of capacity in mostly aging refineries and industry ministry estimates suggest that could fall to 2.3 million bpd by the end of the decade.

As MRC wrote before, JXTG Nippon Oil and Energy is in plans to restart its cracker following an unplanned outage. The company is likely to resume operations at the cracker early this week. The cracker was shut owing to technical issues on May 4, 2020. Located at Kawasaki in Japan, the cracker has an ethylene production capacity of 460,000 mt/year and propylene production capacity of 235,000 mt/year.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.
MRC