Petrobras forges ahead with downstream, midstream divestments

MOSCOW (MRC) - Brazilian state-run oil firm Petroleo Brasileiro SA expects to conclude negotiations on the sale of its RLAM refinery in northeastern Brazil in the near future and is pushing ahead with the IPO of a gas pipeline unit, executives said Reuters.

Speaking to analysts following the company's second quarter results release, Chief Executive Roberto Castello Branco said the firm expects to seal a sale agreement for the refining unit within the next "one to two months."

Abu Dhabi's investment fund Mubadala Investment Co is in exclusive negotiations with Petrobras, as the Brazilian company is commonly known, after presenting the highest bid for the asset during a competitive bidding process in June.

During the same call, Petrobras downstream chief Anelise Lara said Petrobras is pushing ahead with plans announced in 2019 to sell of a clutch of offshore natural gas pipelines via an initial public offering. She said the IPO would not occur until 2021, though the company expects to seal an agreement with partners such as Repsol SA and Galp Energia SGPS SA that would be needed to go forward with the deal by the end of the third quarter.

As MRC reported previously, Petrobras may need more than a year to divest its stake in Braskem, said Andrea Almeida, Petrobras CFO, in early July. She said during the company’s recent webinar that Petrobras plans to give more time for potential investors to make offers for the company's assets, including for its refineries and stakes at its petrochemical and fuel distribution affiliates. The divestment of Petrobras's stake in Braskem in 2020 would be desirable but "might not be possible" as the COVID-19 pandemic has changed market conditions, she said. The company plans to close part of its refinery sales in 2021. In December, Roberto Castello Branco, CEO of Petrobras, said that he wants to sell the company’s stake in Braskem within a year. Petrobras owns 32.15% of Braskem.

We remind that Braskem is no longer pursuing a petrochemical project, which would have included an ethane cracker, in West Virginia. And the company is seeking to sell the land that would have housed the cracker. The project, announced in 2013, had been on Braskem's back burner for several years.

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.
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1. PQ Group earnings fall as COVID-19 dings demand

MOSCOW (MRC) -- PQ Group today reported second-quarter net income down 48.0% year-on-year (YOY), to USD15.9 million, on sales down 16.7%, to USD359.5 million, said Chemweek. Adjusted earnings totaled 22 cents/share, ahead of analysts’ consensus estimate of 19 cents/share, as reported by Refinitiv (New York, New York). The declines were “largely on lower volume from COVID-19 impacts related to stay-at-home mandates and demand disruption for industrial applications,” PQ says. Performance chemicals segment sales declined 19.8% YOY, to $142.6 million, while segment adjusted EBITDA was down 17.5%, to USD34.0 million. Demand from industrial applications declined during the quarter, but demand from personal care applications generally held up well.


MOSCOW (MRC) -- Total has swung to a net loss for the second quarter of 2020 of USD8.37 billion from a profit of USD2.76 billion in the prior-year period, due largely to a USD8.1-billion impairment after lowering its future oil and gas price assumptions and cutting the value of some of its upstream oil and gas assets, said Chemweek. On an adjusted earnings basis it reports income of USD126 million, 96% lower year-on-year (YOY) but beating analysts’ consensus expectations for a net loss of about USD520 million, as reported by Refinitiv (New York). The company says the lower adjusted earnings were due to lower Brent crude oil and natural gas prices, reduced refining margins, and the impact of the COVID-19 pandemic on demand. Net cash flow fell to USD226 million in the second quarter from USD3.3 billion a year earlier, with group sales plunging by over 50% YOY to USD25.7 billion.



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MOSCOW (MRC) -- Depressed demand for jet fuel could cap refinery utilization rates across the entire industry, according to executives at PBF Energy, the fourth-largest U.S. oil refiner by capacity, said Hydrocarbonprocessing.

Demand for gasoline and distillates has recovered by 80% to 90% since the worst of the coronavirus pandemic, but jet fuel demand has only rebounded 30%, according to the Energy Information Administration. Because refineries cannot make products like diesel without producing jet fuel as well, they will restrain output, PBF Chief Executive Thomas Nimbley said on Friday.

"I'm not convinced that we could get to full utilization in this industry if jet demand is where it is today," Chief Executive Thomas Nimbley said on an earnings call. Running refineries at full tilt would reduce the ability for refiners to contain the production of jet fuel.

Other independent U.S. refiners are running near 80% utilization, but PBF is still operating below that and will continue to do so until it sees demand return in key markets, Nimbley said.

Executives defended the company's acquisition of Shell's refinery in Martinez, California, despite reporting gross margins of only USD1 million in the second quarter in the West Coast.

"We had negative cracks in April, which severely impacted our earnings on the West Coast," Nimbley said. Gasoline demand rebounded in recent weeks in California, he said, and physical crack spreads were approximately USD13 in San Francisco and Los Angeles earlier this week.

Nimbley disagreed with the idea that California has too much refinery capacity. "I think we're going to be fine in California over the long haul," he said. However, he noted that the pandemic will result in a permanent reduction in U.S. refining capacity.

As MRC informed earlier, PBF Energy, the fourth-largest U.S. oil refiner by capacity, is holding processing near 70% of throughput even as more states relax stay-at-home orders, boosting demand for motor fuel. The gasoline crack spread RBc1-CLc1, which drifted negative in March as the coronavirus pandemic sharply cut air and road travel, has recovered to USD11.42 per barrel this week. However, fuel demand is off 23% in the United States over the last four weeks.

As MRC informed previously, global oil consumption cut by up to a third in Q1 2020. 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.

And 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 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.
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MOSCOW (MRC) -- China Sinochem Group’s Quanzhou 32.5 billion yuan (USD4.64 billion) petrochemical expansion project is aiming to start trial operations in late August, the company said, later than the May-June time-scale previously expected, reported Reuters.

The state-backed oil and chemical group is adding 60,000 barrels per day (bpd) of crude processing capacity at an existing 240,000 bpd refinery in Fujian province, as well as 1 million tonnes ethylene and 800,000 tonnes aromatic capacity per annum.

“There are less than 100 days until the trial production of ethylene units on August 30. Workers are striving to catch up with the deadline while meeting quality requirements,” a statement from Sinochem Quanzhou refinery on its Wechat said on Monday, 13 july.

Reuters reported in January, citing sources, that the Quanzhou project was expected to start in mid-2020.

Sinochem did not give reasons for the delay in its statement on Monday.

But Sinopec Group, whose engineering subsidiary was in charge of the construction of the Quanzhou project, said in late June the work had faced delays of as much as six months.

It cited “a tight schedule, overwhelming tasks and delays of drawings as well as arrivals of equipment”.

Construction at the Quanzhou expansion project began in September 2018.

In June, 2020, Sinopec Corp started a new refinery, comprising a 200,000 bpd crude oil refining unit and 800,000 tonnes ethylene facility, in the neighbouring province Guangdong.

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.
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MOSCOW (MRC) -- Formosa to deepen run cut, reduce refinery propylene output at Mailiao, Taiwan, said Chemweek.

Will reduce propylene production by up to 50,000 metric tons in August from normal monthly operational rate of over 80,000 metric tons.

As MRC informed earlier, Formosa Petrochemical slashed runs at its 540,000-bpd Mailiao oil refinery to about 68%, down from 80%, following last week’s shutdown of a secondary unit due to a fire. Even before the fire, Formosa had previously said that its gasoline exports this year would be about half of its 2019 volumes as the pandemic has hit demand from overseas markets. Any impact from a reduction in Formosa’s gasoline shipments would be mitigated by ample supplies in the region, said a trader who tracks petrol. Two of the units with a total capacity of 1.73 million tons per year (MMtpy) are operating at full capacity and the largest unit at 1.2 MMtpy is running at about 90% of its capacity, said Lin. The 1.2 million tpy cracker is scheduled to undergo maintenance in August.

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.

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