Total to book USD8.1 bil Q2 impairment on lower prices, stranded Canadian oil sands assets

MOSCOW (MRC) --Total has revised downward its oil price assumptions and slashed the value of its Canadian oil sands assets, it said July 29, adding it would book an USD8.1 billion impairment in its second quarter of 2020 results, with a knock-on effect on its debt, reported S&P Global.

In a statement a day before publishing its Q2 results, Total lowered the oil price at which it would deem assets financially impaired from USD50/b Brent crude to USD35/b in 2020, followed by USD40/b in 2021, USD50/b in 2022 and USD60/b in 2023. The company added that it expected a supply shortfall and price rebound by 2025, followed by a peak in oil demand in 2030, leading to a long-term price of USD50/b.

The revision would contribute USD2.6 billion in asset impairments, of which USD1.5 billion relates to the French major's Fort Hills and Surmont oil sands projects in Canada, and USD800 million to LNG assets in Australia, it said.

Noting the company's target of reaching net-zero emissions from its operations by 2050, Total said this could leave a portion of its Canadian oil sands assets "stranded," and it would therefore book an additional USD5.5 billion impairment, and make no further investments in capacity additions.

"Total will only take into account for its proven and probable reserves in Canada the proved reserves. And the proved and probable reserves life of the group is thus reduced from 19.0 to 18.5 years. In addition, Total will not approve any new project of capacity increase on these Canadian oil sands assets," it said.

It added it was withdrawing from the Canadian Association of Petroleum Producers, "considering the misalignment between their public positions" and its own.

The result of the impairments would be to increase the company's debt gearing ratio by 1.3 percentage points, Total said. The French major had the lowest debt gearing among the European oil and natural gas majors at the end of the first quarter of 2020.

"Total maintains its analysis that the weakness of investments in the hydrocarbon sector since 2015, accentuated by the health and economic crisis of 2020, will result by 2025 in insufficient worldwide production capacities and a rebound in prices," Total said.

"Beyond 2030, given technological developments, particularly in the transportation sector, Total anticipates oil demand will have reached its peak and Brent prices should tend toward the long-term price of USD50/b," it added.

As MRC informed before, Total has recently disclosed that it is evaluating construction of a new gas cracker at its Deasan, South Korea, joint venture (JV) with Hanwha Chemical.

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

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.

Total S.A. is a French multinational oil and gas company and one of the six "Supermajor" oil companies in the world with business in Europe, the United States, the Middle East and Asia. The company's petrochemical products cover two main groups: base chemicals and the consumer polymers (polyethylene, polypropylene and polystyrene) that are derived from them.
MRC

Neste develops new solutions to decrease the use of crude oil

MOSCOW (MRC) -- Neste launches a new research project which aims at developing sustainable and globally scalable raw materials and technology solutions for transportation fuels and the production of chemicals and polymers, according to Hydrocarbonprocessing.

These new solutions decrease the use of crude oil and tackle climate change. The new technologies will be based on scalable renewable and circular raw materials that have been difficult to utilize so far, such as forestry or agricultural residues, municipal waste, algae, waste plastics and carbon dioxide.

The commercialization of these raw materials requires long-term research and development of novel value chains with partners. Neste receives support for the project from Business Finland and works closely with companies, research institutes and universities.

“Neste’s target is to become a global leader in renewable and circular solutions. Innovation is an important enabler to strengthen our ambitious growth strategy. Our innovation activities focus on renewing the existing businesses and developing new raw materials and technology solutions for transportation fuels as well as chemicals and polymers,” says Lars Peter Lindfors, Senior Vice President, Innovation at Neste.

In the next few years, Neste will increase its investments in research and development as well as create new jobs in innovation in Finland to secure the company’s long-term growth targets. Increasing innovation promotes the competitiveness of Finnish research institutes and industry, and creates opportunities for new start up’s.

“We are developing waste carbon sources to substitute crude oil with a 5, 10 or 20 year horizon for significant commercial scale. Lignocellulosics could potentially provide a large pool of sustainable feedstock from agricultural and forestry waste and residues. Municipal solid waste and waste plastic are also interesting raw material sources, and could be a relatively short-term solution,” says Lindfors.

Further down the road are algae-based solutions, renewable hydrogen and Power-to-X, which use CO2 and renewable electricity as raw material sources.

The new raw materials have high potential globally and could replace a significant amount of the world’s crude oil use for transportation fuels by 2040.

As MRC reported earlier, Neste and Jokey, a leading international manufacturer of rigid plastic packaging, have started collaborating with a target to develop the market for rigid packaging from sustainable renewable and recycled materials for food and non-food applications.

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC

LyondellBasell earnings plummet on weak demand, pricing

MOSCOW (MRC) -- LyondellBasell (Houston, Texas) reports second-quarter net income of USD314 million, down 69% year-over-year (YOY) from USD1.003 billion as the pandemic weighed on volume and pricing, reported Chemweek.

Revenue totaled USD5.546 billion, down 39% YOY from USD9.048 billion. Adjusted earnings per share dropped 74% YOY to 71 cents while beating the average analyst estimate of 65 cents as compiled by Refinitiv (New York).

The quarter included an $88-million non-cash inventory valuation benefit and USD11 million in integration costs.

Demand is improving, says Bob Patel, CEO. “In June and July, we raised operating rates and prices in response to increased demand for North American polyethylene exports to Asia. With increased mobility and reductions in fuel inventories, we expect improving demand for our refining and oxyfuels & related products businesses. Similarly, our advanced polymer solutions segment is benefiting from rebounding demand for our plastics used in automotive manufacturing."

The olefins & polyolefins – Americas segment turned in adjusted EBITDA of USD210 million, down from $635 million in the year-ago period. Olefins results declined about USD235 million YOY as lower co-product prices cut into ethylene margin, and lower demand cut into ethylene volume. Polyolefin results dropped USD185 million YOY driven by lower margins, partially offset by a small increase in polyethylene (PE) volume. The polyethylene-ethylene spread dropped by about USD280/metric ton, and the polypropylene (PP)-propylene spread by about USD120/metric ton.

The olefins & polyolefins – Europe, Asia, International segment turned in adjusted EBITDA of USD219 million, down from USD331 million in the year-ago period. The olefins contribution declined about USD90 million. Lower ethylene prices were partially offset by lower feedstock costs, while lower demand pulled down volume. Combined polyolefins results decreased about USD25 million, mainly on lower margins, partially offset by increased PE volume.

The intermediates and derivatives segment reported adjusted EBITDA of USD121 million, down from $448 million. The contribution from propylene oxide & derivatives dropped about $40 million on reduced demand and lower margins. Intermediate chemicals results dropped USD130 million on lower margin, primarily in styrene, and lower volumes, owing to planned maintenance and reduced demand. The contribution from oxyfuels & related products decreased about USD145 million as lower gasoline prices cut into margin. Demand declined, but the YOY difference was muted by the impacts of a third party terminal incident during the year-ago period.

The advanced polymer solutions segment turned in adjusted EBITDA of USD23 million. Costs related to the integration of A. Schulan were relatively unchanged YOY. Compounding & solutions results decreased $85 million YOY on lower automotive demand. Advanced polymers results decreased approximately USD10 million on reduced demand.

The refining segment reported adjusted EBITDA of a USD14 million loss, compared to a USD66 million loss in the year-ago period. Coke and sulfur co-product prices kept up with crude price and hedge gains, while the Maya 2-1-1 industry benchmark crack spread declined USD5.73/bbl. Crude throughput decreased by 24,000 b/d owing to unplanned maintenance in the first weeks of April 2020 and second-quarter rate reductions tied to to low demand for refined products.

The technology segment turned in adjusted EBITDA of USD112 million, up YOY from USD107 million. Catalyst volumes and margins increased on customer inventory stocking early in the pandemic; licensing revenue declined.

As MRC informed previiously, cash-strapped Sasol (Johannesburg) has received offers from companies including CP Chem, LyondellBasell, and Ineos for a large stake in Sasol’s Lake Charles, Louisiana, petrochemical complex. The companies are among those moving into a second round of bidding for a stake in the nearly completed complex, which could raise more than 29 billion South African rand (USD1.68 billion) for Sasol.

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

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.

LyondellBasell is one of the largest plastics, chemicals and refining companies in the world. Driven by its 13,000 employees around the globe, LyondellBasell produces materials and products that are key to advancing solutions to modern challenges like enhancing food safety through lightweight and flexible packaging, protecting the purity of water supplies through stronger and more versatile pipes, and improving the safety, comfort and fuel efficiency of many of the cars and trucks on the road. LyondellBasell sells products into approximately 100 countries and is the world's largest licensor of polyolefin technologies.
MRC

Dow Polyurethanes set up a partnership with uwith French mattress recycler Eco-mobilier

MOSCOW (MRC) -- Dow Polyurethanes (Horgen / Switzerland) has set up a partnership with used furniture collection and EPR organisation Eco-mobilier (Paris / France) for the supply of post-consumer PU foam, said the company.

The “Renuva” mattress recycling programme transforms discarded mattress foam back into a polyol feedstock via chemical recycling. The resultant “Renuva” polyols can be used in rigid, semi-rigid or flexible foam products, including insulation boards and mattresses, says Dow.

Eco-mobilier is an organisation created in 2011 and approved by the French public authorities to be in charge of used furniture and mattress collection, sorting, recycling, energy recovery and reuse nationwide. It brings together more than 5,000 furniture element manufacturers and retailers in France, and an “eco-participation” fee is included in the price of new furniture. In 2019, this generated over EUR 175m.

The French organisation has been collecting mattresses since 2013 – 66,000 t were collected in 2019. In the partnership with Dow, it will employ its mattress collection and dismantling capabilities to supply post-consumer PU foam to an industrial facility operated by Orrion Chemicals Orgaform (Semoy / France) in Semoy. The European plant dedicated to PU foam chemical recycling is being set-up through a collaboration with Dow.

Installation of the chemical recycling system is expected to take place during the second half of 2020. Initial production of the Renuva polyols is anticipated in the first half of 2021. Dow’s Renuva programme aims to recycle up to 200,000 mattresses a year in France as a way to address the problem of waste landfilling and incineration as well as to validate work towards creating a market for polyols and a circular economy for polyurethanes, according to Neil Carr, president of Dow Europe, Middle East, Africa and India.

As MRC reported earlier, Dow Chemical restarted three polyethylene (PE) plants it shut in April on improving demand after widespread economic shocks in April and May, confirmed a company spokeswoman July 23.

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports.

The Dow Chemical Company is an American multinational chemical corporation headquartered in Midland, Michigan, United States. Dow is a large producer of plastics, including polystyrene (PS), polyurethane, polyethylene, polypropylene, and synthetic rubber.
MRC

Lotte Chemical Titan posts slightly lower net profit in Q2

MOSCOW (MRC) -- Lotte Chemical Titan posted a lower second-quarter net profit on a year-on-year basis due to lower selling prices of products, but the number represented a sharp reversal of first-quarter losses, said Bernama.

The lower profit was dampened by continuation of operating margin compression as a result from the lower average selling prices (ASP) year-on-year, it said.

“The fall in product ASPs was mainly due to heightened economic uncertainties following the outbreak of the COVID-19 pandemic which has disrupted global business activities and weakened overall manufacturing demand in 2020,” the olefins and polyolefins producer said in a statement today.

LOTTE said its revenue fell 25.9 per cent to RM1.58 billion during the reviewed month from RM2.13 billion previously, owing to a decrease in average product selling price.

The company said demand was weak in early Q2 20 as regional countries continued to impose lockdowns and restrictions in their attempts to curb the COVID-19 pandemic.

However, following the gradual easing of restriction to spur economic activity from May 2020, the group managed to increase its sales volume by 1.4 per cent compared to Q2 2019, it said.

President and chief executive officer Dr Lee Dong Woo said the improving business outlook would be dependent on the global economic recovery pace.

“Moving forward, our company will continue to focus on operational and financial performance optimisation initiatives.

“We will also be undertaking a strategic review on the timing and progress for our LOTTE chemical Indonesia new ethylene (LINE) project in light of the pandemic impact on the global economy,” he said.

Notwithstanding the external environment, Lee said the company would continue to maintain its strong financial resilience with its net cash position of more than RM3.8 billion, as well as optimise its operations to ride through the highly volatile business environment.

As MRC informed earlier, Lotte Chemical has delayed the restart of its fire-hit naphtha-fed steam cracker in Daesan for the second time to mid-November, from October. It had initially planned to restart the cracker in September.

We remind that Lotte Chemical shut down its Deasan cracker for maintenance turnaround on October 14, 2019. The cracker resumed production on November 10, 2019.

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

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.

Lotte Chemical runs two naphtha crackers in South Korea. One cracker is located in Daesan county in Seosan which can produce 1.1 million tonnes per year of ethylene with the other 1.2 million tonnes per year cracker in the
MRC