Shell launches major cost-cutting drive to prepare for energy transition

MOSCOW (MRC) -- Royal Dutch Shell is looking to slash up to 40% off the cost of producing oil and gas in a major drive to save cash so it can overhaul its business and focus more on renewable energy and power markets, reported Reuters.

Shell’s new cost-cutting review, known internally as Project Reshape and expected to be completed this year, will affect its three main divisions and any savings will come on top of a USD4 billion target set in the wake of the COVID-19 crisis. Reducing costs is vital for Shell’s plans to move into the power sector and renewables where margins are relatively low. Competition is also likely to intensify with utilities and rival oil firms including BP and Total all battling for market share as economies around the world go green.

“We had a great model but is it right for the future? There will be differences, this is not just about structure but culture and about the type of company we want to be,” said a senior Shell source, who declined to be named.

Last year, Shell’s overall operating costs came to USD38 billion and capital spending totalled USD24 billion.

The company’s integrated gas division, which runs Shell’s liquefied natural gas (LNG) operations as well as some gas production, is also looking at deep cuts, the sources said.

For downstream, the review is focusing on cutting costs from Shell’s network of 45,000 service stations - the world’s biggest - which is seen as one its “most high-value activities” and is expected to play a pivotal role in the transition, two more sources involved with the review told Reuters.

Besides cutting costs at its downstream retail business, Shell is pressing ahead with plans to reduce the number of its oil refineries to 10 from 17 last year. It has already agreed to sell three.

The review of refining operations also includes finding ways to sharply increase the production of low-carbon fuels such biofuels, chemicals and lubricants. That could be done by using low-carbon raw materials such as cooking oil, one source said.

As MRC wrote previously, Shell has recently announced that it will replace the ethylene steam cracker furnaces at its Moerdijk petrochemicals complex, The Netherlands, in a move that will reduce its greenhouse gas emissions.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's overall PE production totalled 1,712,400 tonnes in the first seven months of 2020, up by 58% year on year. Linear low density polyethylene (LLDPE) accounted for the greatest increase in the output. At the same time, overall PP production in Russia increased in January-July 2020 by 24% year on year to 1,063,700 tonne. ZapSibNeftekhim accounted for the main increase in the output.

Royal Dutch Shell plc is an Anglo-Dutch multinational oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the biggest company in the world in terms of revenue and one of the six oil and gas "supermajors". Shell is vertically integrated and is active in every area of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading.
MRC

MOSCOW (MRC) -- The Alberta Court of Appeal has ordered a recalculation of a decision that awarded USD1.4 billion in damages to Dow Chemical Canada in a dispute with Nova Chemicals Corp, said Canplastics.

As is being reported by The Canadian Press, the appeal court agreed with the original judge who ruled that Dow was correct in its interpretation of an operating agreement for a jointly owned ethane cracker at the Joffre petrochemical complex in central Alberta.

The cracker, one of three at the complex and dubbed E3, was built by Nova and Union Carbide through a 1997 joint venture agreement and designed to supply ethylene feedstock for a new polyethylene plant being built by Union Carbide. In 2001, Dow merged with Union Carbide in 2001 and took over its half ownership of the ethane cracker.

Dow argued that the Joffre petrochemical complex had been operated by Nova at less-than-agreed-upon volumes for a 10-year period until 2012.

"The Court of Appeal of Alberta affirmed the trial court’s ruling that E3 must be run to its full productive capability, and that Nova committed gross negligence and wilful misconduct in failing to do so,” Dow spokeswoman Ashley Mendoza said in an email to The Canadian Press. "The trial court’s finding in Dow’s favour on Nova’s liability has been affirmed, as has its ruling on the great majority of Dow’s damages through 2012."

The appeal court found that the trial judge’s inclusion of lost polyethylene profits from the lack of ethylene production was improper and Dow should only be compensated for direct damages, to be calculated by the trial court.

"We are pleased with the appellate court’s decision on our appeal, and we look forward to continuing to improve the ongoing operations and relationships at our world-class Joffre facility," Nova spokeswoman Jennifer Nanz said in an emailed statement to The Canadian Press.

According to MRC's ScanPlast report, Russia's overall PE production totalled 1,712,400 tonnes in the first seven months of 2020, up by 58% year on year. Linear low density polyethylene (LLDPE) accounted for the greatest increase in the output. At the same time, overall PP production in Russia increased in January-July 2020 by 24% year on year to 1,063,700 tonne. ZapSibNeftekhim accounted for the main increase in the output.

MRC

MOSCOW (MRC) -- Thyssenkrupp group inaugurated its newest engineering office in Pune, India, in a bid to keep pace with its steady growth and accommodate its workforce in a more advanced state-of-the-art facility, said Themachinemaker.

Dr. Sami Pelkonen, CEO thyssenkrupp Business Unit Chemical & Process Technologies Germany (tkIS- CPT) and P D Samudra, CEO & MD and Member of Board, thyssenkrupp Industrial Solutions India attended the inauguration ceremony. thyssenkrupp Industrial Solutions (India) Pvt Ltd, is one of the leading engineering companies in India for chemical plants and projects.

According to Dr. Pelkonen, thyssenkrupp’s operations have been a unique success story over the last four decades in the chemical process sectors. thyssenkrupp is playing a significant role for Indian and international projects covering fertilisers, polymers, petrochemicals, refinery units, electrolysis, cryogenic storages etc. in the chemical sectors and plants for metallurgical sectors among others.

Thyssenkrupp Industrial Solutions India is the largest subsidiary of thyssenkrupp Industrial Solutions – Chemical Process & Technologies globally. It has a track record of over 750 large, medium, and small size projects in India and abroad. The company has implemented EPCM services as well as EPC projects in the past 20 years.

“In addition to our initiatives at our Head Office in Mumbai, we had made a small beginning with our Pune operations in 1997 at Bibwewadi on the outskirts of Pune City with less than 50 engineers. This means we are relocating our Pune office after growing steadily over two decades”, Mr Samudra said. He added that Pune Operations have been independently executing projects with minimum support from the Head Office in Mumbai and have several successfully-implemented projects to their credit.

The new ultra-modern engineering office will accommodate approximately 350 engineers out of the total strength of 1,400 employees of thyssenkrupp Industrial Solutions India.

As MRC informed earlier, Thyssenkrupp Industrial Solutions said it has won an order from Turkish packaging producer Koksan Pet Packaging Ind Co to build a polyethylene terephthalate (PET) plant in Gaziantep, in the southeast of the country. Thyssenkrupp will supervise the construction and commissioning of the plant and provide the main equipment, engineering works, licence and staff training, the German company said in a statement.

As per ICIS-MRC Price Report, demand continued to subside in the Russian polyethylene terephthalate (PET) market. Some sellers reported a decrease in spot market activity compared to the beginning of the month. Some Russian factories have free volumes of PET chips. On the other hand, a large PET preform producer reported that he had met its target sales of finished products in the current month and that consumption of finished products was quite high.
MRC

MOSCOW (MRC) -- BASF says it is investing EUR16.0 million (USD18.9 million) into Pyrum Innovations (Dillingen, Germany), a technology company specialized in the pyrolysis of waste tires, said Chemweek.

The investment will support the expansion of Pyrum’s pyrolysis plant at Dillingen and the further rollout of the technology, the company says. BASF and Pyrum anticipate that production capacities of up to 100,000 metric tons of pyrolysis oil derived from waste tires could be built up within the coming years together with additional partners. BASF will use the pyrolysis oil from end-of-life tires as an additional raw material source next to oil from mixed plastic waste, the use of which is the long-term focus of the company’s ChemCycling project, it says.

Pyrum is currently running a pyrolysis plant for end-of-life tires that can process up to 10,000 metric tons/year of tires and it will add two more production lines by the end of 2022, BASF says. Most of the pyrolysis oil produced by Pyrum’s plant will be used by BASF to make chemical products for mainly the plastics industry, it says. Pyrum intends to build additional tire pyrolysis plants together with interested partners, to accelerate the path toward the use of Pyrum’s technology in serial production.

"With the investment, we have taken another significant step towards establishing a broad supply base for pyrolysis oil and towards offering our customers products based on chemically recycled plastic waste on a commercial scale,” says Hartwig Michels, president/petrochemicals at BASF.

The company says that according to a life-cycle assessment carried out by the consulting company Sphera (Chicago, Illinois) on behalf of BASF, products made from pyrolysis oil by using a mass balance approach have the exact same properties as products manufactured with primary fossil resources. In addition, they have a lower carbon footprint than conventional products.

As MRC reported earlier, BASF has restarted its No. 1 steam cracker in Germany following a maintenance turnaorund. Thus, the company resumed operations at the plant on September 30, 2019. The plant was shut for maintenance in mid-August, 2019. Located at Ludwigshafen in Germany, the No. 1 cracker has an ethylene production capacity of 235,000 mt/year and a propylene production capacity of 125,000 mt/year.

Ethylene and propylene are feedstocks for producing PE and polypropylene (PP).

According to MRC's ScanPlast report, Russia's overall PE production totalled 1,712,400 tonnes in the first seven months of 2020, up by 58% year on year. Linear low density polyethylene (LLDPE) accounted for the greatest increase in the output. At the same time, overall PP production in Russia increased in January-July 2020 by 24% year on year to 1,063,700 tonne. ZapSibNeftekhim accounted for the main increase in the output.

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) -- Reliance Industries Ltd (RIL) released a detailed plan to carve out its oil-to-chemicals business into a separate entity for a potential stake sale, said Chemweek.

As per the scheme, RIL’s oil-to-chemicals (O2C) assets, including its refining, petrochemicals, fuel retail (majority interest only) and bulk wholesale marketing businesses, along with its assets and liabilities, will be transferred to a new unit. The new unit will include the refining and petrochemical plants and manufacturing assets at RIL’s Jamnagar, Dahej, Hazira, Nagothane, Vadodara, Patalganga, Silvassa, Barabanki and Hosiarpur locations.

It will also include all assets relating to RIL’s ongoing refinery and petrochemical projects that are being commissioned or near completion, the company said. RIL had officially announced its proposal to transfer its oil-to-chemicals (O2C) business to a separate entity in April.

“The nature of risk and returns involved in the O2C business are distinct from those of the other businesses of RIL and the O2C business attracts a distinct set of investors and strategic partners,” it said in the statement detailing its plan to create the new subsidiary. "RIL being a listed company cannot issue shares with differential rights (i.e. equity shares with interest linked only to O2C business) therefore, the O2C undertaking has to be transferred into a wholly-owned subsidiary of RIL in which the investors will invest,” it added.

Accordingly this scheme is being proposed for transfer of the O2C business to the subsidiary on a slump sale basis. In a slump sale, assets are transferred or sold without considering the values of the individual assets or liabilities contained within the undertaking.

"The scheme will become effective from the appointed date…means opening business hours of 1 January 2021 or such other dates as may be approved by board of the parties,” the company said on its website. The separation of the assets was planned as part of RIL’s target to sell 20% in its refining and chemicals business to Saudi Aramco.

The USD15bn deal with Aramco was initially scheduled to be completed by March 2020, but has been delayed/ At the company’s Annual General Meeting in July, RIL chairman Mukesh Ambani had said that the company expected to complete the deal with Aramco by early 2021.

As MRC informed earlier, in August last year, RIL announced initial agreements to sell a 20% stake in the oil-to-chemical business to Saudi Aramco for an asking of USD15 billion. The deal covers all of Reliance’s refining and petrochemicals assets as well as the remainder of stake the firm has in fuel retailing business after selling 49% to BP Plc of UK for Rs 7,000 crore (USD924.2 million).

And in late April 2020, it became known that Saudi Aramco’s plan to buy USD15-billion stake in Reliance Industries hydrocarbon business may not go through due to the rising risk of collapsing oil prices, US-based brokerage Bernstein has warned. The unique combination of excess crude oil global supply, 30% drop in demand due to coronavirus crisis and continuous price fall weighed heavily on Aramco’s investment plans.

According to MRC's ScanPlast report, Russia's overall PE production totalled 1,712,400 tonnes in the first seven months of 2020, up by 58% year on year. Linear low density polyethylene (LLDPE) accounted for the greatest increase in the output. At the same time, overall PP production in Russia increased in January-July 2020 by 24% year on year to 1,063,700 tonne. ZapSibNeftekhim accounted for the main increase in the output.

Reliance Industries is one of the world's largest producers of polymers. Thus, the company produces among others polypropylene, polyethylene and polyvinyl chloride.
MRC