Sasol warns of big annual loss on $6 billion of impairments

MOSCOW (MRC) -- Sasol has issued a trading statement in advance of releasing its financial results for the fiscal year ended 30 June 2020. The company warns of a large annual loss on impairment charges totaling almost 112 billion South African rand (USD6 billion), reported Chemweek.

Sasol says that its performance in the fiscal year was pressured by the COVID-19 pandemic and “a severe decline in crude oil and chemical product prices.” This was partly mitigated by a strong cash cost, working capital, and capital expenditure performance, the company says.

Sasol expects to post a full-year headline loss per share of between R8.72 and R14.86 compared with headline earnings per share of R30.72 in the previous fiscal year.

Sasol says it is taking the impairments following the decline in the long-term macroeconomic outlook, and a fair value impact following the commencement of partnering discussions for the company’s base chemicals assets in the US. Base chemicals, primarily in the US, account for R71.3 billion of the R111.5-billion impairments. Performance Chemicals account for R27.7 billion of the impairments, primarily related to Sasol’s “share of ethylene-producing assets in the US.” The company’s energy business accounts for the remaining R12.5 billion of impairments “across the portfolio,” Sasol says.

The company expects its full-year adjusted EBITDA to drop by between 17% and 37% from R47.6 billion in the prior year, to between R30.0 billion and R39.5 billion. “This results from a 18% decrease in the rand per barrel price of Brent crude oil coupled with much softer global chemical and refining margins impacting our gross margins adversely, especially during the second half of the 2020 financial year,” Sasol says.

Depreciation of R3.9 billion attributable to the production units at Sasol’s Lake Charles Chemicals Project (LCCP) in Louisiana that have reached beneficial operation will also be included in Sasol’s full-year results, the company says.

Sasol is scheduled to publish its results for the full fiscal year on 17 August.

CPChem, ExxonMobil, Hanwha Solutions, Ineos, and LyondellBasell have each expressed an interest in buying a stake in Sasol's US base chemicals assets, primarily the LCCP, according to press reports.

Thus, as MRC informed before, in late July, 2020, Hanwha Solutions (Seoul), formerly Hanwha Chemical Corp., submitted a bid to acquire a 50% stake in Sasol’s USD12.8 billion Lake Charles, Louisiana petrochemical complex. Sasol announced a few months ago that it is seeking partners for the nearly completed project as part of the company’s asset disposal plan to reduce debt. The stake would raise USD1.7-3.4 billion.

The Lake Charles complex is based on a 1.54-million metric tons/year ethane cracker that started production last year. The ethylene will be used in six downstream plants on site to produce ethylene oxide, ethylene glycol, ethoxylates, and low-density and linear low-density polyethylene, as well as Ziegler and Guerbet alcohols. About 10% of the ethylene will be surplus to requirement and sold on the merchant market as well as supply Sasol’s share of its high-density polyethylene joint venture (JV) with Ineos in Texas. The 50/50 JV is designed to produce 470,000 metric tons/year.

Sasol says that the last remaining production unit to come online at the Lake Charles complex is a low-density polyethylene (LDPE) plant, which is now scheduled to start production in October this year. The 420,000-metric tons/year LDPE plant was damaged during a fire in January 2020.

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.

Sasol is an international integrated chemicals and energy company that leverages technologies and the expertise of our 31 270 people working in 32 countries. The company develops and commercialises technologies, and builds and operates world-scale facilities to produce a range of high-value product stream, including liquid fuels, petrochemicals and low-carbon electricity.
MRC

MOSCOW (MRC) -- German chemicals giant BASF opened its first Footwear Innovation Center in the world in Changhua County, said Taiwannews.

The facility, a 650-square-meter area within a factory run by Longterm Concept Industry Corporation (LTC), includes interactive exhibits and design labs as well as a manufacturing zone, the company said in a news release.

Taiwan was chosen as a location due to its long-standing reputation as a footwear manufacturer and the prevalence of design talent, said Andy Postlethwaite, the company’s senior vice president of performance materials Asia Pacific.

The center’s functions include the faster testing of material innovations and the application of new designs to manufacture brand new products for BASF’s partners and clients, the company said.

As MRC reported earlier, BASF Total's cracker in Port Arthur, Texas, is undergoing maintenance and expected to restart on 23 July, 2020, according to the company's statement in a filing with Texas Commission on Environmental Quality (TCEQ). An unexpected outage occurred at BASF Total Petrochemical’s joint-venture (JV) olefins unit at Port Arthur, Texas, on Thursday afternoon, 11 June, 2020. The cause of the outage is being investigated, with a compressor shutdown cited as a possible factor, according to TCEQ filing. The JV’s steam cracker at Port Arthur has a production capacity of more than 1 million metric tons/year of ethylene and 544,000 metric tons/year of propylene, according to IHS Markit data.

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.

BASF is the leading chemical company. It produces a wide range of chemicals, for example solvents, amines, resins, glues, electronic-grade chemicals, industrial gases, basic petrochemicals and inorganic chemicals. The most important customers for this segment are the pharmaceutical, construction, textile and automotive industries. BASF generated sales of EUR59 billion in 2019.
MRC

MOSCOW (MRC) -- Rebounding petrochemical demand in northwest Europe, following a second-quarter slump amid lockdowns to check the spread of COVID-19, boosted July imports of liquefied petroleum gas (LPG) by 230% compared to the prior month, reported Chemweek with reference to OPIS data.

LPG intake as feedstock in northwest Europe soared to an estimated 650,000 metric tons from 282,000 metric tons in June. By comparison, LPG cargo imports into northwest Europe were as low as 258,000 metric tons in August 2017, according to OPIS data. North Sea LPG supplies entering the feedstock pool totaled 246,000 metric tons, equivalent to 38% of total July intake, compared to 68% in June. Overall northwest European LPG trade was estimated at 980,000 metric tons in July, up 69% from 580,000 metric tons in June.

Demand uncertainty through June from end-user ethylene and propylene markets arising from the pandemic prompted steam cracker operators to run at reduced rates and curb intake. Spot ethylene at the start of July marked a 20% discount to the monthly term price and weakened to a 30% discount by the end of the month, according to IHS Markit PetroChemWire data. Meanwhile, propylene strengthened through July, shifting to parity to the monthly term price in Europe from a 10-12% discount at the start of the month, the data showed.

As demand began to pick up, feedstock intake sprang higher in July. The contango price structure for propane steepened sharply for July/August, with August pegged at USD7/metric ton above July in mid-June, before widening to USD11/metric ton by the end of that month. The propane/naphtha spread for July also broadened quickly, hitting minus USD109/metric ton by the start of July from minus USD38/metric ton in mid-June, supporting the economics for petchem buyers to increase their intake of LPG as feedstock.

The remainder of the feedstock intake in July saw 14% arrive from the US East Coast, down from 23% in June. A key part of the surge in imports though, came from the US Gulf Coast, which provided nearly half of intake at 46%, up from zero in June. Dwindling exports from the Russian Baltic port of Ust Luga provided just 2% of northwest European LPG intake in July, compared to 9% in June. The retail and refining sector saw LPG intake at 183,000 metric tons in July, up from 116,000 metric tons in June, according to OPIS data.

LPG export cargoes from northwest Europe totaled 127,000 metric tons in July, down from 180,000 metric tons in June. Exports moved to the Baltic region, the US East Coast, Spain, Morocco, and Turkey.

OPIS is an IHS Markit company.

As MRC wrote previously, unplanned outages at Sabic's Wilton, UK, cracker and Borealis' Stenungsund, Sweden, cracker may cause availability shortages in the European propylene coastal market. The Wilton cracker, which has an annual propylene capacity of 415,000 mt was shut on June 17 due to technical issues and was not expected to come back online for another two weeks.

Borealis' Stenungsund cracker unit has remained offline longer than initially anticipated, after it was shut following a force majeure declaration at the site on May 11. Sources said that the unit has been offline longer than initially expected with no confirmed startup date. The Stenungsund cracker has a propylene capacity of 150,000 mt/year.

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

MOSCOW (MRC) -- ExxonMobil aims to ease global oil and gas production shut-ins by about 40% to 200,000 b/d of oil equivalent as demand for transportation fuels slowly recovers from a second-quarter plunge, according to S&P Global.

About 70% of the shut-ins expected to persist into Q3 are from government mandates, with the rest being market-based cuts, the company said.

ExxonMobil sees global gasoline and diesel demand returning to year-ago levels by Q4, while jet fuel demand will take much longer to recover.

The driller posted a USD1.1 billion loss in Q2, its largest-ever quarterly loss, as global oil demand sank 20% year on year.

"The demand destruction in the second quarter was unprecedented in the history of modern oil markets," Neil Chapman, senior vice president, said during a July 31 earnings call. "Absolute demand fell to levels we haven't seen in nearly 20 years. We've never seen a decline with this magnitude and pace before."

ExxonMobil's global oil and gas production fell to 3.6 million boe/d, down 10% from the previous quarter and down 7% year on year.

North American production of crude and other liquids fell to 1.1 million b/d, down 11% from Q1 and down 2% year on year.

While output from the US Permian Basin actually rose 9% year on year to 298,000 boe/d in Q2, a sharp reduction in capital expenditures is expected to cap the outlook for the rest of the year.

The driller's Permian rig count fell to 30 in Q2 and will fall further to 10-15 by the end of the year, it said.

"That really is just a short-term to manage our current capital planning," Chapman said of the Permian rig count. "One of the great attractions of short cycle is you can take that capital off quickly and, of course, you can put it back on pretty quickly."

Chapman said the driller's focus in the Permian remains Poker Lake in Eddy County, New Mexico, where it started operations in Q2 at its new Delaware central processing facility to collect oil and gas supply in the basin for delivery to the Gulf Coast export markets.

Asked about the flow rates of Permian wells that were being brought back from shut-ins, Chapman said the wells were returning at or above where they left off on the decline curve.

"We wanted to be sure that when we bring them back online that they come back at what I always describe as the same position on the tight curve," he said. "That's indeed what we've seen."

ExxonMobil expects its Permian output to average 345,000 boe/d in 2020, only 15,000 boe/d below its March outlook and more than 70,000 boe/d above 2019 output.

S&P Global Platts Analytics expects total US oil production to decline around 500,000 b/d year on year in 2020 and more than 1.5 million b/d in 2021. That would put US output about 3.4 million b/d below Platts' pre-price collapse forecast by end-2021.

In Guyana, the first phase of the Liza project demonstrated production capacity of 120,000 b/d, and the second phase is set for 2022 startup, the company said.

In May, ExxonMobil pushed back its Guyana targets by six months to a year as a result of the country's election uncertainty and the challenges of rotating crews to prevent virus spread. It now expects to produce 750,000 b/d by 2026.

ExxonMobil's global refining throughput fell to 3.5 million b/d, down 14% from the previous quarter and down 11% year on year.

US refining throughput fell to 1.4 million b/d, down 8% from Q1 but up steady year on year.

As MRC wrote earlier, Exxon Mobil Corp reported a USD1.1 billion second-quarter loss on sharply lower energy demand and prices from the COVID-19 pandemic, and confirmed plans to make deeper spending cuts.

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.

ExxonMobil is the largest non-government owned company in the energy industry and produces about 3% of the world"s oil and about 2% of the world"s energy.
MRC

MOSCOW (MRC) -- Sinopec-SK Wuhan Petrochemical Co, a subsidiary of state oil and gas group Sinopec Corp, plans to shut down its 170,000 bpd refinery in late October for about 50 days of maintenance, three industry sources said, as per Hydrocarbonprocessing.

Separately, the Wuhan-based company is due to switch off an 800,000 tonne a year ethylene plant from around mid-October for a regular overhaul for a similar duration, according to a report on Sinopec’s website.

The ethylene facility is a joint venture between Sinopec and South Korea’s SK Innovation.

A Beijing-based Sinopec press official said the company does not comment on operational matters.

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