SABIC CEO warns about demand as Q2 prices slumped 27%

MOSCOW (MRC) -- Saudi Basic Industries Corp., the petrochemicals giant 70%-owned by Saudi Aramco, saw average petrochemical prices in the second quarter plunge by 27% year-on-year as it posted a third consecutive quarterly loss, reported S&P Global with reference to CEO Yousef al-Benyan's statement Aug. 6.

Although there has been some improvement in performance during July and August, the CEO of the Middle East's biggest petrochemicals producer said the second half could be impacted by a second or third wave of COVID-19.

"Our view is that the second half is going to be more or less an average of the first half or a little bit better," Benyan said during a webcast press conference after reporting a Riyal 2.2 billion (USD586.6 million) loss for the second quarter. "There is improvement on prices but current indications of a second or third wave of COVID-19 has put more pressure on demand. There is a potential implication on future demand driven by uncertainty we are seeing in the energy market."

Average petrochemical prices were 27% lower in the second quarter from the year-earlier period and down 18% from the first quarter, he said.

Saudi Aramco, the world's biggest oil producing company, was due to report earnings on Aug. 9.

SABIC's second-quarter loss compared with a Riyal 2.03 billion profit in the year-earlier period, it said in a statement to the Saudi stock exchange, or Tadawul. It posted a Riyal 1.05 billion loss in the first quarter.

The second-quarter loss was mainly attributable to lower average selling prices and sales along with impairments provisions, it said. Impairment provisions in the second quarter equaled Riyal 1.18 billion for investments related to Saudi Petrochemical Co. (Sadaf) and Saudi Methanol Co. (Arrazi), SABIC said.

The second-half outlook will be "subject to any impairment that needs to be taken in third quarter and fourth quarter, given the market conditions," the CEO said.

SABIC and Aramco are looking at joint investments and could pursue other opportunities if it fits its strategy, Benyan said.

"Aramco being a major investor, we are looking at alignments on certain investment opportunities in major markets that will take place during the second half of this year," he said, without elaborating.

Aramco on June 17 said it completed the share acquisition of a 70% stake in SABIC from the Public Investment Fund, the sovereign wealth fund of Saudi Arabia, for a total purchase price of Riyal 259.125 billion.

The acquisition of the SABIC stake is part of Aramco's strategy to build its downstream footprint by growing its integrated refining and petrochemicals capacity to add value across the hydrocarbon chain.

It specifically enhances Aramco's chemicals strategy by transforming Aramco into one of the major global petrochemicals players.

Combined, in 2019 Aramco and SABIC recorded petrochemicals production volume of nearly 90 million mt, including agri-nutrient and specialty product.

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.

Saudi Basic Industries Corporation (Sabic) ranks among the world"s top petrochemical companies. The company is among the world"s market leaders in the production of polyethylene, polypropylene and other advanced thermoplastics, glycols, methanol and fertilizers.

Saudi Aramco, officially the Saudi Arabian Oil Company, is a Saudi Arabian national oil and natural gas company based in Dhahran, Saudi Arabia. Saudi Aramco"s value has been estimated at up to USD10 trillion in the Financial Times, making it the world"s most valuable company. Saudi Aramco has both the largest proven crude oil reserves, at more than 260 billion barrels, and largest daily oil production.
MRC

Petron swings to H1 net loss on pandemic-hit demand

MOSCOW (MRC) -- Philippine refiner Petron swung into a net loss in the first half of the year due to fuel demand destruction brought on by the coronavirus pandemic, said the company.

Petron Corp. incurred a consolidated net loss of P14.2 billion in the first half of 2020, reversing the P2.6 billion net income it posted in the same period a year ago.

In a disclosure on Tuesday, the listed oil company blamed the net loss on the “combined slump in demand, poor refining margins and collapse in prices” and reported that its consolidated revenues fell by 40 percent to P152.4 billion from P254.8 billion.

Consolidated sales volume from its Philippine and Malaysian operations decreased by 19 percent to 41.9 million barrels from 51.9 million amid a sharp decline in fuel demand because of the impact of the coronavirus disease 2019 (Covid-19) pandemic.

Local sales volume declined by 28 percent because of reduced consumption, particularly in aviation and retail, with the implementation of stricter quarantine measures in the country to contain the coronavirus’ spread.

“The worldwide lockdowns resulted in an unprecedented demand destruction, which led to a sustained drop in oil prices, reaching record low levels in 26 years,” Petron said.

Dubai crude plunged by almost 70 percent or USD44 per barrel from Januarya to April, when oil prices fell to as low as USD13 barrel in daily trading.

As MRC informed earlier, Russia's output of chemical products rose in June 2020 by 2.6% year on year. However, production of basic chemicals increased year on year by 4.9% in the first six months of 2020. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the output in January-June. Production of benzene was 106,000 tonnes in June 2020, compared to 110,000 tonnes a month earlier. Overall output of this product reached 721,000 tonnes over the stated period, up by 3.9% year on year.
MRC

Cepsa petchem earnings rise on rebound in phenol, acetone margins, high LAB demand

MOSCOW (MRC) -- Cepsa (Madrid, Spain) reports a 30% rise year on year (YOY) to EUR86 million (USD101 million) in clean EBITDA on a current cost of supply (CCS) basis for its chemicals business in the second quarter, due to a rebound in margins and volumes in the phenol/acetone segment and “high demand” in the detergents sector, said Chemweeek.

"The resilient nature and strong performance of this business managed to partially offset lower earnings in other business units,” it says. Overall group clean CCS EBITDA was down 66% YOY to €180 million, while Cepsa reported a clean CCS net loss of EUR93 million, impacted by non-cash asset impairments of certain upstream assets and a negative inventory valuation.

Demand for oil products was severely hit by the pandemic and subsequent lockdowns in Spain, including jet kerosene, which suffered a 92% decline YOY, it says. The decrease was partly offset by higher internal consumption at Cepsa’s chemical plants, with the product used as a raw material to produce linear alkylbenzene (LAB), which the company says has been in high demand as a raw material for detergents as a result of the COVID-19 pandemic.

Chemical product sales declined 3% to 691,000 metric tons compared with the prior-year quarter. Sales in the LAB segment rose by 11% YOY, lifted by the COVID-19-related demand increase, while sales in the phenol/acetone and solvents segments declined by 7% and 8%, respectively, compared with the equivalent period last year. A decrease in demand globally was partly countered by improved margins, particularly in Asia, due to shutdown of several competitors’ plants, it says.

Growth capital expenditure (capex) of EUR6 million in the quarter was spent mainly on the revamp of Cepsa’s LAB plant at Puente Mayorga, Spain, with a further EUR5 million of expenditure mainly on maintenance work at the same site. The company is investing a total of EUR100 million in the chemical plant in an ongoing program to increase its LAB capacity from 200,000 metric tons/year to 250,000 metric tons/year.

Cepsa says a contingency plan launched earlier this year in response to the pandemic to deliver savings of EUR310 million has been revised upward to EUR500 million for 2020, including EUR120 million in operating cost reductions and EUR380 million in capex cuts, it says. A total of EUR275 million in savings had been captured by the end of June, it says.

As per MRC, Cepsa Quimica (Shanghai) stopped the phenol and acetone plant in Shanghai for 5 days from December 10 of last year due to the repair work on the gas pipeline in the Shanghai Caojing Chemical Industry Park, where the plant is located.

Phenol is the main raw material for bisphenol A (BPA) production, which in turn is used to produce polycarbonate (PC).

According to MRC's ScanPlast, in the first half of 2020, the total estimated consumption of PC granulate in the Russian Federation (excluding imports and exports to Belarus) amounted to 47,300 tonnes against 40,700 tonnes in 2019. Total demand increased by 16%.
MRC

BP Whiting, Indiana, refinery starts up new hydrotreater

MOSCOW (MRC) -- BP Plc started up a new naphtha hydrotreater (NHT) last week at its 435,000 barrel-per-day Whiting, Indiana, refinery, reported Reuters with reference to company spokeswoman Sarah Howell's statement.

The 85,000-bpd NHT took three years and cost more than USD300 million to build, Howell said.

“The NHT allows the refinery to produce the full slate of US Environmental Protection Agency Tier 3 fuels, which require gasoline to have an average sulfur content of no more than 10 parts per million,” she said.

Hydrotreaters use hydrogen to remove sulfur from motor fuels.

As MRC informed before, 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. 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.”

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 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

Formosa Plastics declares force majeure on PP from Point Comfort in Texas

MOSCOW (MRC) -- US polymer producer Formosa Plastics Corp., part of Formosa Petrochemical, announced a force majeure on polypropylene (PP) products from its Point Comfort, Texas, petrochemical complex effective August 8, the company said in a letter obtained by S&P Global Aug. 10.

"As a result of this production outage and pursuant to Formosa's General Terms and Conditions of Sale, Formosa is declaring Excuse of Performance (force majeure) on its Formolene polypropylene products effective Aug. 8, 2020," the letter said.

A call to Formosa seeking further information about the outage and the force majeure was not returned by the time of publication.

The letter stated they were evaluating the impact of this event and their ability to produce and supply material.

As MRC reported earlier, Formosa Plastics' new 1.5 million mt/year cracker in Point Comfort, Texas, came online in H1 January, 2020, and was seen ramping up through January.

According to MRC's DataScope report, 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.

Formosa Petrochemical is involved primarily in the business of refining crude oil, selling refined petroleum products and producing and selling olefins (including ethylene, propylene, butadiene and BTX) from its naphtha cracking operations. Formosa Petrochemical is also the largest olefins producer in Taiwan and its olefins products are mostly sold to companies within the Formosa Group. Among the company's chemical products are paraxylene (PX), phenyl ethylene, acetone and pure terephthalic acid (PTA). The company"s plastic products include acrylonitrile butadiene styrene (ABS) resins, polystyrene (PS), polypropylene (PP) and panlite (PC).
MRC