BPCL privatization may be delayed to 2022

MOSCOW (MRC) -- India's efforts to privatise refiner Bharat Petroleum Corp. Ltd. could spill over into the next fiscal year, according to a government document and sources, hurting New Delhi's efforts to rein in a ballooning fiscal deficit, reported Reuters.

The privatisation of key companies, including BPCL, is a key part of government plans to pare the fiscal deficit, which has breached its target level just four months into the current fiscal year. Industry sources last year estimated the government's 53.29% stake in BPCL could fetch USD8 billion to USD10 billion.

With India's economy contracting by a record 23.9% in the June quarter due to COVID-19, a delayed sale of BPCL could hinder the government's ability to generate funds for stimulus efforts aimed at restoring growth.

New Delhi's plan to sell its stake in BPCL was first announced in November 2019, and is part of a broader program to spin off or sell stakes in dozens of state-owned companies.

The sale has been targeted for completion in the current fiscal year at end-March, but the deadline for initial expressions of interest was pushed out by two months due to pandemic-related movement restrictions that have prevented potential buyers from inspecting the facility.

A sale status report issued last month and reviewed by Reuters showed the sale was only due to complete the third step of a 25-step process established for government divestments this month. The document suggests it could take as long as another 21 months for the sale to be completed, although some stages could be carried out concurrently. Potential buyers still needed to attain security clearance, conduct valuation assessments and agree financial terms.

"This looks challenging. But we are doing our best to complete the transaction in this financial year," a senior government official familiar with the sale told Reuters.

A second official said the process could take at least 7-8 months more, which would delay completion until at least the end of April, and mean that the proceeds of any sale would only hit government coffers next fiscal year, which begins on April 1

"It may not be possible for overseas companies to do due diligence as air travel is restricted," added a third official involved in the privatisation process.

All three officials declined to be named because of the sensitivity of the issue.

The sale also faces domestic opposition. The state government of Kerala, where BPCL's 310,000 barrels per day Kochi refinery is located, fears job losses and plans to challenge the privatisation in the Supreme Court, its industry minister EP Jayarajan told Reuters.

Companies including Saudi Aramco and Rosneft have indicated they would look at BPCL since the privatisation plan was announced.

BPCL shares have fallen more than 20% since November last year. Interest may be dampened as the industry looks to shift to greener energy investments.

The government had budgeted collections of over USD27 billion from privatisations and minority stake sales of state-owned companies this fiscal year, but had raised only about USD775 million after the first 6 months.

As MRC informed before, in January 2020, BPCL said it would invest about Rs25,000 crore to set up an ethylene cracker plant at Rasayani, 50 kilometres from its Mumbai refinery, as the firm pushes further into the petrochemicals business to fuel growth.

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.

Bharat Petroleum Corporation Limited (BPCL) is an Indian state-controlled oil and gas company headquartered in Mumbai, India. Bharat Petroleum owns refineries at Mumbai, Maharashtra and Kochi, Kerala (Kochi Refineries) with a capacity of 12 and 9.5 million metric tonnes per year.
MRC

1. Shale bankruptcies pile on, Lonestar latest to succumb to weak demand

Lonestar Resources US Inc filed for Chapter 11 bankruptcy protection on Thursday, joining a clutch of shale companies that have succumbed to weak crude prices as COVID-19 pandemic crimps fuel demand, said Hydrocarbonprocessing. Lonestar, which operates in Texas’ Eagle Ford basin and produced roughly 14,000 barrels of oil equivalent per day, had a total debt of USD546.3 million as of June 30 and made the move after defaulting on two debt payments. Shares of the company fell 13% to 20 cents, shrinking its market capitalization to just over USD5 million from nearly USD350 million at its peak in 2014. Weak crude demand due to the pandemic has proved to be a double-whammy for shale companies, which grew rapidly early in the decade but in the process amassed a large pile of debt. Through the end of August, 36 oil and gas producers with USD51 billion debt have filed for bankruptcy this year, according to the law firm Haynes and Boone. It includes Chesapeake Energy, Chaparral Energy, Whiting Petroleum Corp., and Oasis Petroleum Inc filed for Chapter 11 on Tuesday.



MRC

MOSCOW (MRC) -- Optimism over the recovery of US President Donald Trump from a coronavirus infection boosted crude oil futures at the Oct. 5 Asia open, rebounding from Oct. 2's more than 4% slide, when news of his coronavirus diagnosis threw the oil market into disarray, reported S&P Global.

At 10:39 am Singapore time (0239 GMT), ICE Brent December crude futures were up 71 cents/b (1.81%) from the Oct. 2 settle at USD39.98/b, while the NYMEX November light sweet crude contract was 80 cents/b (2.16%) higher at USD37.85/b.

Both international crude benchmarks had dived 4.05% and 4.31% on the day on Oct. 2, with the ICE Brent settle at USD39.27/b and NYMEX at USD37.05/b.

"Oil prices nudged higher at the [Asia] open, tracking broader markets, after the (US) president's medical staff offered up an optimistic healthcare prognosis," AxiCorp's Chief Global Market Strategist Stephen Innes said in an Oct. 5 note.

The drop in crude futures on Oct. 2 came as the oil markets, which were already reeling from the continuing onslaught of bearish demand and supply factors, were further rattled by news that Trump had tested positive for coronavirus.

ANZ analysts in their Oct. 5 note said: "Futures have been under pressure for several weeks, as rising infection rates of coronavirus in Europe and the US have raised concerns about the continued rebound in economic activity. However, the announcement that President Trump and several other White House officials had contracted the virus reinforced this view, with Brent and WTI crude falling sharply in late trading on Friday."

However, with Trump's medical team giving increasingly optimistic assessments on his health Oct. 4, crude futures rebounded at Asia's open Oct. 5.

The outlook for oil remains bleak as the prospect of renewed lockdown restrictions amid a resurgence of the pandemic threatens to stall global economic recovery and depress oil demand, all while the OPEC+ alliance struggles to reduce supply through compliance with its production quotas.

Amid these unsupportive fundamentals, the trajectory of crude futures this week is expected to be sensitive to news flows on the status of coronavirus cases as well as the US stimulus package.

House speaker Nancy Pelosi said in an MSNBC interview on Oct. 2 that Trump's positive coronavirus diagnosis could encourage the Republicans to extend further support to a stimulus bill, with Trump himself calling for the approval of the bill in an Oct. 4 tweet.

As MRC informed earlier, global oil refiners reeling from months of lackluster demand and an abundance of inventories are cutting fuel production into the autumn because the recovery in demand from the impact of coronavirus has stalled, according to executives, refinery workers, and industry analysts. Refiners cut output by as much as 35% in spring as coronavirus lockdowns destroyed the need for travel. As lockdowns eased, refiners increased output slowly through late August. But in top fuel consumers the United States and elsewhere, refiners have been decreasing rates for the last several weeks in response to increased inventories, a sustained lack of demand, and in response to natural disasters.

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.
MRC

MOSCOW (MRC) -- Formosa Petrochemical Corporation (FPCC) has restarted its No.3 cracker in Mailiao after a planned shutdown, according to Chemweek.

The company started maintenance at the cracker on August 11, 2020. The cracker was brought on-line on 29 September, 2020.

Located at Mailiao in Taiwan, the No. 3 cracker has an ethylene production capacity of 1.2 million mt/year and propylene production capacity of 600,000 mt/year.

FPCC will run all three crackers at full capacity, expects favorable olefins market conditions in October, November.

As MRC wrote previously, Formosa took off-stream its No.2 cracker in Taiwan on 1 June, 2020. No reason for unplanned closure was given. The cracker was idle until 4 June. Located at Mailiao in Taiwan, the No.2 cracker has an ethylene production capacity of 1.03 million mt/year, propylene production capacity of 515,000 mt/year and butadiene production capacity of 162,000 mt/year.

Formosa, Asia's top naphtha importer, operates three naphtha crackers in Mailiao. These units have a total capacity of 2.93 million tpy of ethylene.

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.

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

MOSCOW (MRC) -- Major Taiwanese producer, ), is planning to shut its acrylonitrile (ACN) plant in Kaohsiung on October 20 for a planned maintenance, according to S&P Global.

The turnaround at this plant with the capacity of 240,000 mt per year is expected to be conducted during one month.

ACN is a feedstock for the production of acrylonitrile-butadiene-styrene (ABS).

According to MRC's ScanPlast report, the estimated consumption decreased in January-June 2020 by 18% year on year in the Russian ABS sector, totalling 19,360 tonnes. 2,680 tonnes of ABS plastics were processed in Russia in June 2020.

China Petrochemical Development Corporation (CPDC) was established in 1969 as a state-owned enterprise under the supervision of the Ministry of Economic Affairs. In 1991, CPDC was listed on the Taiwan Stock Exchange, and in 1994 the company was privatized. CPDC is one of the business units of the Core Pacific Group. Its core business is in the production of petrochemical intermediates and related engineering plastics, synthetic resins, raw materials for chemical fiber and other derivative products.
MRC