SIBUR reports H1 2020 IFRS results

MOSCOW (MRC) -- PJSC SIBUR Holding, the largest integrated petrochemicals company in Russia, today publishes its operational and financial results for the three and six months ended 30 June 2020 in accordance with International Financial Reporting Standards (IFRS), said the company.

ZapSibNeftekhim continues to increase production volumes. In the first half of 2020, the complex produced 206 thousand tonnes of polypropylene and 507 thousand tonnes of polyethylene. Sales of polypropylene grew by 81.6% compared to the first half of 2019, and sales of polyethylene increased by more than 100%.

Revenue decreased by 11.6% year-on-year on the back of negative price dynamics in most product groups, which was partially offset by a 58.2% increase in the Olefins & Polyolefins segment due to increased sales of polypropylene and polyethylene.

EBITDA decreased by 14.2% year-on-year as the spreads of most product groups narrowed due to negative price dynamics. The EBITDA of Olefins & Polyolefins segment increased by 37.2% as a result of growth in sales volumes of polypropylene and polyethylene from ZapSibNeftekhim which was partially offset by lower prices in the period.

EBITDA margin was 31.4%, remaining at a consistently high level relative to the industry average.

Net cash flow from operating activities amounted to RUB 60.1 billion, up 8.9% compared to the first half of 2019 due to a significant reduction in income tax expenses as a result of a loss on exchange differences stemming from the weakening of the RUB exchange rate.

As it was written earlier, SIBUR diversified its export supplies of polypropylene and polyethylene to China by leveraging Russia’s rail transportation infrastructure. Until 2020, the Company mainly relied on sea transportation to ship its products to the region.

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

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

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 BP’s 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 company’s total petchems production declined slightly YOY in the second quarter to 2.93 million metric tons. BP’s 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 BP’s 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 year’s levels. We also expect significant continued pressure on industry refining margins into the third quarter,” BP says.

BP’s 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.
MRC

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