Nigeria to privatize NNPC, amend royalties under draft oil reform bill

MOSCOW (MRC) -- Nigeria’s long-awaited oil reform bill would privatize the Nigerian National Petroleum Company, amend changes to deep water royalties made late last year and scrap key regulatory agencies in favor of new bodies, according to a copy of the bill, said Reuters.

President Muhammadu Buhari has sent the bill to the Senate, which along with the House of Representatives must sign off on it before it can become law. Nigeria is Africa’s largest crude exporter.

The closely watched legislation has been in the works for the past 20 years, and the main laws governing Nigeria’s oil and gas exploration have not been fully updated since the 1960s because of the contentious nature of any change to oil taxes, terms and revenue-sharing within Nigeria.

As MRC informed earlier, Nigerian National Petroleum Corporation (NNPC) has fired 850 workers, many of them from refineries, amidst the coronavirus pandemic, an oil union said. The workers are both skilled and unskilled contractors, including technicians who helped maintain Nigeria’s oil refineries, said Lumumba Okugbawa, general secretary of the Petroleum and Natural Gas Senior Staff Association of Nigeria, speaking on the phone.

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.
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1. China oil hub urges refiners to make payments to government risk fund

MOSCOW (MRC) -- The tax office in China’s Shandong province has urged refiners in the oil hub to make payments to a government risk reserve fund to cover periods when oil prices fell below USD40 a barrel this year, in line with government policy, said Hydrocarbonprocesing. Global oil prices held below that level for more than three months and the payments due are estimated to be in the billions of yuan. Beijing set a policy in 2016 that required refiners to pay their profit margins to the central government fund whenever crude fell below USD40 a barrel, which is the floor price for retail gasoline and diesel.


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MOSCOW (MRC) -- DSM says it has reached an agreement to sell its resins and functional materials, and associated businesses, including DSM Niaga, DSM additive manufacturing, and the coatings activities of the DSM advanced solar business, to Covestro for an equity value of EUR1.6 billion (USD1.9 billion), said Chemweek.

Completion of the transaction is expected in first half 2021, subject to customary conditions and approvals. The businesses included in the transaction represented EUR1.01 billion of DSM’s 2019 total annual net sales and EUR133 million of DSM’s 2019 total EBITDA, the company says. DSM will provide re-stated figures for its materials cluster ahead of its third-quarter results, it says.

Meanwhile, DSM anticipates a book profit on the transaction to be recognized on closing. It expects to receive approximately €1.4 billion net in cash following closing, including repayment of the net debt of the businesses being sold to Covestro, and after transaction costs and capital gains tax.

“This sale builds on our approach of actively managing our businesses, as DSM continues to evolve as a purpose-led, science-based company operating in the fields of nutrition, health, and sustainable living. The deal delivers strong value to DSM and is strategically attractive for all parties,” say Geraldine Matchett and Dimitri de Vreeze, co-CEOs of DSM.

Covestro says that the acquisition creates one of the leading suppliers in the field of sustainable coating resins. The integration of DSM’s resins and functional materials businesses is a substantial opportunity to expand annual revenue at Covestro’s coatings, adhesives, and specialties segment by more than 40% to about EUR3.4 billion, on a 2019 pro-forma basis, Covestro says. The company expects permanent synergy effects to build up to about EUR120 million on an annualized basis from full integration by 2025.

“This acquisition is an important step for our corporate strategy. [It] enhances the growth trajectory of our business. By combining our strong innovation capabilities, sustainable product portfolios, as well as complementary technologies and customer industries, we will unlock significant value. At the same time, it is also a key step to drive innovation for the transition towards a circular economy,” says Markus Steilemann, CEO of Covestro.

Covestro says the transaction will be financed with a combination of equity, debt instruments, and own cash generation, consistent with the company’s commitment to maintaining a solid investment-grade rating. For this purpose, Covestro is planning to utilize its existing, authorized share capital for an equity issuance to raise approximately EUR450 million, it says.

According to MRC's ScanPlast, in Russia, following the results of the first two quarters, the total estimated consumption of PC granulate in the Russian Federation (excluding imports and exports to Belarus) amounted to 47.3 thousand tonnes against 40.7 thousand tonnes in 2019. Total demand increased by 16%.
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MOSCOW (MRC) -- Rosneft and Saudi Aramco are unlikely to bid in the privatisation of Indian refiner Bharat Petroleum Corp, sources familiar with the matter said, as low oil prices and weak demand curb their investment plans, said Indiatimes.

Russia's Rosneft had expressed an interest in buying the federal government's 53.29 per cent stake in Bharat Petroleum (BPCL) when its chief executive Igor Sechin visited New Delhi in February, while India's trade minister has said that Saudi oil giant Aramco was enthusiastic about the stake sale.

A Rosneft source, however, said it will not buy BPCL, while another said the Russian oil major would only be interested in BPCL's marketing business, which is comprised of fuel depots and more than 16,800 fuel stations.

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.

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MOSCOW (MRC) -- Shell says it will cut up to 9,000 jobs worldwide as part of a major restructuring that will enable cost savings of USD2.0–2.5 billion per year by 2022, while outlining plans to grow its chemicals business and further integrate it with a more streamlined downstream refining business, said Chemweek.

Shell’s CEO Ben van Beurden outlined the restructuring today as part of the company’s ongoing response to the challenge of dealing with the impact of COVID-19 and the slump in oil demand, as well as its longer-term stated goal of achieving net-zero carbon emissions by 2050. Shell says it will reduce its refining footprint to less than 10 sites, keeping those that have “flexibility to adapt and further integrate with the growing chemicals and trading businesses."

The refining business “will be smaller but smarter. We will keep only what is strategically essential to us and integrate those refineries with our chemicals business, which we plan to grow. We will keep sites in key locations which have the flexibility to adapt,” says van Beurden. “It is also worth noting that, if we want to be a large player in biofuels, a lot of the biofuel capability will be built within our refining infrastructure. We will end up with fewer than 10 refineries, compared to 55 around 15 years ago, but they will be set up to serve the changing needs of society,” he says. No details were given on which assets it will keep.

Shell’s traditional oil and gas business will be more focused, according to van Beurden, with its upstream segment to be run “to ensure a strong flow of cash to Shell… so we have the financial strength to invest further in our lower-carbon products.” The company intends to focus on continued growth of its integrated gas and liquefied natural gas (LNG) business, he says. Shell’s 2050 carbon-neutral goal means it has to be “net zero in all our operations, which means major changes at refineries, chemicals sites, on-shore and offshore production facilities,” he says. The company will still have some oil and gas in the mix of energy it sells by 2050, but it will be predominantly low-carbon electricity, low-carbon biofuels, hydrogen, and other solutions, he adds.

The restructuring is aimed at reducing organizational complexity, with the annual cost savings of up to $2.5 billion by 2022 to partially contribute to previously announced underlying operating cost reductions of USD3.0–4.0 billion by the first quarter of 2021, according to Shell.

The expected job cuts will range between 7,000 and 9,000, including around 1,500 employees through voluntary redundancy by the end of 2022, van Beurden says. The cuts were “the right thing to do for the future of the company” as it strives to become a net-zero emissions energy business, he says. “We have had to act quickly and decisively and make some very tough financial decisions to ensure we remained resilient, including cutting the dividend,” says van Beurden. “But as hard as they were, they were entirely the appropriate choices to make."

Shell employs 83,000 people worldwide, and reported a 46% decline in first-quarter net income year on year (YOY) to USD2.9 billion, while second-quarter net income dropped 82% YOY to $638 million. Third-quarter earnings are expected to be “at the lower end of the USD800–875 million range,” it says.

In an updated chemicals outlook for the third quarter to that issued with its second-quarter results in July, Shell says chemicals manufacturing plant utilization is expected to be 79–83%, with sales volumes of 3.7–4.0 million metric tons. Compared with second quarter 2020, adjusted earnings for its chemicals business are expected to be negatively impacted by around USD100 million due to “increased activity, provisions, and phasing of maintenance activities,” it says. Group post-tax impairment charges of USD1.0–1.5 billion are expected for the third quarter, it adds. In June, BP said it would cut 10,000 jobs as it moved into cleaner energy.

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.

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.
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