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PES lowers price of refinery site citing pandemic disruption

June 23/2020

MOSCOW (MRC) -- Economic uncertainty caused by the COVID-19 pandemic has trimmed 11% off the price of the now-closed Philadelphia Energy Solutions (PES) refinery site, said Chemweek.

In papers filed with the US Bankruptcy Court in Delaware on 18 June, PES has requested approval of an agreement that would reduce the initial USD240 million purchase price by USD27.5 million. Court approval would mean the sale to Chicago real estate developer Hilco could close by 26 June.

COVID-19 "has led to unprecedented economic uncertainty, resulting in many counterparties abandoning acquisitions that were agreed upon prior to the pandemic, with others significantly retrading on economic terms," PESТs submission states.

While the refiner believes "that all conditions to the purchaser's obligations to close other than closing deliverables have been satisfied, the purchaser has taken the opposite position," the motion said. "Under these circumstances it would be challenging to compel the purchaser to close the sale transactions as reflected in the original agreement, and that the debtors would face a challenge to their retention of the deposit."

In the request, Hilco cites difficulties created by COVID-19 as well as increased environmental remediation costs and expenses.

Under the terms of the amendment, if the deal doesn't close by 26 June, the purchase price will increase by USD357,143 for each calendar day during the period starting on June 1 and ending on the closing date. If the closing doesn't occur by June 26 or one business day after the court approves the amendment, PES will keep the USD15 million of Hilco's deposit in escrow and reserve its right to seek further relief.

In addition, PES will retain the emission reduction credits it owns instead of transferring them to the liquidating trust at closing, as stipulated by the original agreement. As previously reported by OPIS, the bankruptcy court approved on 3 June a settlement agreement between EPA and PES that would require the refiner to buy and retire USD10 million worth of third-party verified Renewable Identification Number (RIN) credits.

That agreement resolved PES's Renewable Fuel Standard compliance obligation under a deal it struck with EPA in 2018 after it first filed for Chapter 11 bankruptcy protection. PES shut its 335,000-b/d refinery and again filed bankruptcy in 2019 after a fire on June 21 destroyed parts of the two-plant facility.

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 721,290 tonnes in the first four month of 2020, up by 4% year on year. Low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) shipments grew partially because of the increased capacity utilisation at ZapSibNeftekhim.  At the same time, PP shipments to the Russian market totalled 347,440 tonnes in January-April 2020 (calculated by the formula production minus export plus import). Supply exclusively of PP random copolymer increased.


mrcplast.com
Author:Anna Larionova
Tags:petroleum products, crude oil, PP, PE, ethylene, petrochemistry.
Category:General News
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