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BP petchem earnings decline, sale to Ineos on schedule for completion before end of year

August 05/2020

MOSCOW (MRC) -- BP reports a 43% year-on-year (YOY) decline to USD47 million in second quarter earnings for its petrochemicals business, which remains on schedule to be sold to Ineos for USD5 billion before the end of the year, reported Chemweek.

BP says it received proceeds from divestments and other disposals in the quarter of USD1.1 billion, including the first payment from the agreed sale of BPs petrochemicals business to Ineos.

The oil and gas major reports a group net loss of USD16.8 billion for the second quarter, compared with a profit of USD1.8 billion in the prior-year period, including a net post-tax charge of USD10.9 billion for non-operating items. This includes USD9.2 billion in post-tax non-cash impairments, arising mainly from revisions to its long-term oil and gas price assumptions, and USD1.7 billion of post-tax non-cash exploration write-offs, according to the company. Group sales plunged to USD31.67 billion, down from USD72.68 billion a year earlier.

Underlying replacement cost profit before interest and tax of USD47 million for its petchems segment in the quarter reflected a weaker margin environment and the impact of COVID-19, partly offset by lower turnaround activity, according to BP. For the first six months of 2020, the petchems business reported earnings of USD112 million, down 55% YOY. BP does not include results from its Gelsenkirchen and Mulheim sites in Germany in its petchems earnings and is not selling these facilities.

BP announced the sale of its petchems business to Ineos in June, with the net assets now classified as held for sale in the group balance sheet and the transaction expected to complete before the end of the year, subject to approvals, it says.

The companys total petchems production declined slightly YOY in the second quarter to 2.93 million metric tons. BPs US petchems output fell to 410,000 metric tons from 584,000 metric tons a year earlier, while its European production rose slightly to 1.25 million metric tons. Petchems output in its other facilities worldwide also increased marginally to 1.27 million metric tons.

In BPs downstream segment, which includes its petchems business, it says the second quarter saw the weakest industry refining environment in over 15 years, and an unprecedented fall in product demand driven by COVID-19. While refining operations in the quarter were strong, with BP-operated refining availability of 95.6%, demand destruction resulted in lower utilization, it says. Downstream replacement cost profits before interest and tax for the quarter and half year were $594 million and USD1,258 million, respectively, down from USD1.29 billion and USD3.05 billion for the equivalent periods last year.

Looking to the third quarter of 2020, we expect higher product demand, albeit still significantly below last years levels. We also expect significant continued pressure on industry refining margins into the third quarter, BP says.

BPs CEO, Bernard Looney, says the company aims to pivot to a low-carbon energy and customer focus, with a 10-fold increase in low-carbon investments to about USD5 billion by 2030. It will reduce its oil and gas production by 40% (about 1 million boe/d) to 1.5 million boe/d by 2030 through active portfolio management, with refining throughput expected to fall from 1.7 million b/d in 2019 to about 1.2 million b/d. No upstream exploration will be carried out in new areas and it will reduce its operations emissions by up to 35% by the end of the decade.

Energy markets are fundamentally changing, shifting towards low carbon, driven by societal expectations, technology and changes in consumer preferences, says BP chairman, Helge Lund.

As MRC wrote previously 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.


mrcplast.com
Author:Margaret Volkova
Tags:Europe, PP, PE, crude and gaz condensate, homopolymer PP, propylene, HDPE, ethylene, petrochemistry, BASF, Borealis, BP Plc, Ineos, LyondellBasell, Sabic, Russia.
Category:General News
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